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APPOINTMENT AND REMOVAL OF TRUSTEES “A trust will not fail for want of a trustee”. Explain the maxim, and its exception. _"A trust will not fail for want of a trustee" Just because there is an absence of trustees, this does not mean that the trust should fail and cannot exist. The courts will not al...

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LAW 556 : TUTORIAL QUESTIONS

MARCH 2016

APPOINTMENT AND REMOVAL OF TRUSTEES 1)

“A trust will not fail for want of a trustee”. Explain the maxim, and its exception. "A trust will not fail for want of a trustee" - Just because there is an absence of trustees, this does not mean that the trust should fail and cannot exist. - The courts will not allow a trust to fail merely because there are no existing trustees. - Here the court will invoke Sec. 45 and appoint a new trustee. - However, there is an exception to this maxim. - As per Buckley J in Re Lysaght: If it is of the essence of a trust that the trustees selected by the settlor and no-one else shall act as the trustees of it and those trustees cannot or will not undertake the office, the trust must fail. - Therefore, if the settlor has insisted that the trust should only be managed by those that he has appointed and no one else, and under some circumstance, such trustees are unable to do so or has chosen to not do so, the trust must then fail.

2) What powers do the following have in appointing a new trustee? a) The settlor The first appointment of a trustee is usually done by the settlor, testator or the person whom such power was given to under the trust instrument. - Sec. 39(1): The number of trustees should not exceed four. Any other persons named shall not be trustees unless a vacancy arises. - Sec. 39(2): However, the limit does not apply to trusts for charitable, religious or public purposes. b) The existing trustees - Sec. 40(1)(b): If there is no such person nominated or no such person able or willing to act, as in - Re Sheppard’s ST: The persons nominated were a husband and wife who were living apart at the time and were unable to agree on who should be appointed - Cradock v Witham: The person nominated could not be found - Statutory power to make the appointment is given to - The surviving or continuing trustees, or - The personal representatives of the last surviving or continuing trustee - Sec. 40(4) & (5): Such personal representatives include executors or administrators of the last surviving or continuing trustee, as well as executors intending to renounce. Page 1 of 8

NORLIZA ABDUL HAMID / FUU

LAW 556 : TUTORIAL QUESTIONS

MARCH 2016

c) The beneficiaries. No power . They only receive benefit. d) The court. - Where no such persons under Sec. 40(1)(a) or (b) are available, the court may exercise its power to appoint a trustee. - Sec. 45(1)(a): The court has statutory jurisdiction to appoint a new trustee if it is found to be inexpedient, difficult or impracticable to do so without the assistance of the court. - The court will not make a new appointment unless it is necessary to do so - Re Hodson’s Settlement: The court will not interfere if an express or statutory power to appoint a trustee could be exercised and there is someone able and willing to do so

3)

Compare s.40(1) and s.40(6) Trustee Act 1949. s. 40(1) , if the trustee being removed , can replace. s.40(6) , if T is sole beneficiary , can add but not up to 4 trustees.

4) Explain s.43 - Sec. 43(1): Retirement without new appointment - If no new trustee is required to be appointed, the trustee wishing to retire may do so under this provision. However, this is only allowed where - The trustee wants to be discharged and states this in writing - After he has been discharged, there will be a trust corporation or at least 2 other existing trustees, and they consent in writing to the discharge and agree that the trust property will be vested in them alone - If any person has been given power to appoint a trustee, he too must consent in writing 5) Discuss the facts and legal principles stated in the following cases: a) Ligar Fernandez v Eric Clarke Cooke [2002] 5 MLJ 177 The 12 month-rule must be observed strictly, in that the absence must be continuous or else the trustee cannot be removed under this ground. In this case, the defendant was absent from Malaysia for over 12 months, and thus, the court rendered him legally incapable of acting as a trustee and ordered for his removal. A trustee is considered to be refusing to act when his conduct or inability to perform an act is endangering the interest of the trust by hindering his discharge of duty as a trustee. Page 2 of 8

NORLIZA ABDUL HAMID / FUU

LAW 556 : TUTORIAL QUESTIONS

MARCH 2016

b) Re Tempest (1866) 1 Ch App 485 Re Tempest (referred to in Bhikku Daeng): In exercising its discretion to appoint a new trustee, the court would have regard to: - i) The wishes of the settlor - ii) Should not appoint a person with a view to the interests of some of the beneficiaries in opposition to the interests of others - iii) Should consider whether the appointment would promote or impede the execution of the trust c) Bhikku Daeng & Anor v Maung Shwe Tyn & Anor [1980] 1 LNS 5 In this case the trust instrument provided that a temple in Penang should be managed by four trustees, two to be elected and appointed by the Burmese community and two to be elected and appointed by the Thai community. A vacancy having arisen in the position of Burmese trustee, a meeting of the Burmese community in Penang was held which elected the second respondent. Consent was given by the Attorney-General for proceedings to be taken for the appointment of the second respondent as trustee. The surviving Thai trustees, the appellants in this case, objected to the appointment of the second respondent and an application was therefore made to court by the first respondent the surviving Burmese Trustee and the second respondent for the appointment of the second respondent as Trustee. The appellants objected to the appointment on the grounds : (a) that the meeting called for the election was called by the Chief Monk who was on a visit pass; (b) that the notice of meeting was published in the National Echo which was not addressed specifically to the Burmese Community in Penang and (c) that the second respondent was not an inhabitant of Penang. The second respondent was an Assistant Super intendant of Police and was of Penang origin. The learned trial judge rejected the objections and approved the appointment of the second respondent. The appellants appealed. Held: (1) there could not be any valid objection of any substance against the appointment of the second respondent who was duly elected by the Burmese Community of Penang as a trustee to represent its interests in accordance with the terms of the Grant under which the trust was constituted and the appeal must therefore be dismissed; (2) the appellants had assumed an over-officious and ultra-crepidarian role in things that were no concern of theirs and therefore must bear the costs on appeal and in the court below.

e) Yusof Bin Ahmad Bin Talib & Ors v Hongkong Bank Trustee (Singapore) Ltd & Ors [1989] 3 MLJ 84 Any acts or omissions sufficient for the removal of trustees must be such as to endanger the trust property to show a want of honesty, a want of proper capacity to execute the duties or a want of reasonable fidelity. Page 3 of 8

NORLIZA ABDUL HAMID / FUU

LAW 556 : TUTORIAL QUESTIONS

MARCH 2016

A trustee who failed to comply with a testator’s directions may be removed even if no harm has been done to the beneficiary.

6) Amin, Bob and Chan have been appointed as trustees. a) After a year, Chan does not want to continue being a trustee. What are his possible courses of action?

b) If he retires, what are the actions that the remaining two trustees can take?

c) Amin is a businessman who often travels abroad. Bob wishes to appoint another trustee in his place. Can this be done?

7) Joe Jones died of a heart attack in July last year. He left a will which, among others, contains the following provision: “RM250,000 to my friend, Thomas, in trust for the benefit of my sons, Rex and Roy, in equal shares.” Rex and Roy are 17 year old twins. When the will was read, they refused to accept Thomas as the trustee as they knew him to be a strict man. Instead, they wanted their older brother, Steven, to be the trustee.With reference to relevant authorities, advise Rex and Roy as to the circumstances that may make it possible for Steven to replace Thomas as the trustee. Page 4 of 8

NORLIZA ABDUL HAMID / FUU

LAW 556 : TUTORIAL QUESTIONS

MARCH 2016

8) January 2013 – Part A Question 1 Ethan is the trustee of a fund settled by Betty for the benefit of Stacy. Ethan has been away for the last ten months, attending a course of study in England and it is uncertain when he will be back. Betty wishes to appoint another person as trustee in case Ethan is away much longer, to the detriment of the trust. Betty has been told by friends that a trust requires two trustees to validate it and she wants to appoint herself as the other trustee. Advise Betty.

9) April 2010 – Part B Question 1 (a) and (b). a) Idris, Aman and Shaber are trustees of a trust fund. The trust was created under the will of Dato Sri Kemat, who died in 2008. Shaber was adjudicated a bankrupt a year ago. He is at present undergoing treatment for mental disorder in Hospital Bahagia. Shaber has been removed as trustee of the trust. Idris and Aman are desirous of appointing Zaman, their friend, to replace Shaber. However Hana and Dora are not in favour of this and wish to have their cousin, Huzir, appointed instead. With reference to the relevant statute and decided cases, advise the trustees on the appointment and whether they are actually bound to replace the removed trustee at all. (8 marks)

b) State the guidelines enunciated by Abdool Cader J in Bhikku Daeng v Maung Shwe Tyn (1980) 2 MLJ 184 to decide the jurisdiction of the court in the matter of appointment of trustees.(6 marks)

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NORLIZA ABDUL HAMID / FUU

LAW 556 : TUTORIAL QUESTIONS

MARCH 2016

10) April 2009 Part A Question 3 Discuss the various reasons for the discontinuance of a trustee from his post and the methods of appointment of a new trustee in substitution, with particular reference to the provisions of section 40(1) of the Trustee Act 1949.

11) December 2013 Part C Question 1 (iii) Adelaide suffered heart attack and decided to retire from the trust. Discuss the various ways in which Adelaide can retire as a trustee.

DUTIES & POWERS OF TRUSTEES 1) Trustees have a duty to invest. What are the investments allowed to trustees? 2) Discuss the standard of care expected of a trustee when exercising his duty to invest. Is the standard of care the same for professional and non-professional trustees? Why? 3) Discuss the significance of Cowan v Scargill [1984] in relation to the trustees’ duty of investment.

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NORLIZA ABDUL HAMID / FUU

LAW 556 : TUTORIAL QUESTIONS

MARCH 2016

4) How does a trustee avoid a financially lucrative investment due to his personal views without being in breach of trust? 5) April 2011 Part A Questions 1 and 4 6) April 2010 Part A Question 5 7) Define ‘fiduciary’. Give examples of relationships which give rise to fiduciary duties. 8) How are trustees’ fiduciary duties different from trustees’ other duties? 9) 10) 11) 12)

June 2014 Part A Question 1 June 2013 Part A Question 4 December 2013 part B Question 1(b) June 2012 Part A Question 4

13) What were the documents under discussion in the case of Re Marquess of Londonderry Settlement [1964]? What was the court’s decision relating to those documents? What was the court’s definition of ‘trust documents’? 14) Discuss the maxim delegates non potest delegare. With reference to the Trustee Act 1949, explain the exceptions to the rule. 15) Amin has recently been appointed as a trustee. Describe to Amin his immediate duties on appointment. 16) Why are trustees required to act unanimously? 17) Are duties of original trustees the same as duties of replacement/additional trustees? 18) June 2012 Part A Question 4 19) June 2012 Part C (a) 20) June 2012 Part A Question 1 21) April 2011 Part A Question 5 22) Oct 2009 Part A Question 1 23) Dec 2013 Part B Question 2 RIGHTS OF A BENEFICIARY 1) Identify and explain the rights of a beneficiary under the law of trust. 2) What, if any, are the liabilities of a beneficiary? BREACH OF TRUST & REMEDIES 1) Explain the facts and discuss the legal principles of: Page 7 of 8

NORLIZA ABDUL HAMID / FUU

LAW 556 : TUTORIAL QUESTIONS

MARCH 2016

Head v Gould [1898] Re Haji Ali [1933] 2) Definition and consequences of “wilful default” 3)

Ani is a trustee of a trust fund set up by Azie. Ani gave Linda, a stockbroker, RM50,000 to buy some shares in Wide World Holdings listed on the Stock Exchange. Linda put the money into her own bank account which had a balance of RM30,000 of his own money. The account remained inactive for two months. Linda then withdrew RM35,000 to buy office furniture for her business and RM15,000 to pay for shares for another client. Advise Ani on the possible claims and remedies against Azie.

4) 5) 6) 7) 8)

June 2012 Part C April 2011 Part B Question 2 (a) October 2010 Part A Question 1 April 2010 Part B Question 2 December 2013 Pt B Qn 2

DEFENCES 1) June 2014 Part B Question 2 2) April 2009 Pt B Qn 2 3) December 2013 Pt A Qn 1 4) April 2011 Part B Question 2 (b)

MISC 1) January 2013 Pt B Qn 1 2) April 2010 Pt B Qn 2

nlz/1603

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NORLIZA ABDUL HAMID / FUU...