Duties
Upon appointment
The trustee shall
1. Familiarise, inspect and comply with the trust instrument
2. Ensure that all trust properties are duly and properly vested in him
3. Investigate any prior breach of trust by any retired or removed trustees
and take the necessary legal action to claim back the property or have
any sum of money repaid to the trust.
Re Brogden: Previous trustee did not take action against the debtor
(bankrupt) who owed money to the trust. New trustee take action
against the previous trustee. CH the retired trustees were found
liable as they should have taken steps to claim the money earlier.
4. Act fairly between the beneficiaries
5. Act unanimously and jointly with his co-trustees
Provide information to the beneficiaries
ORourke v Darbishire: Beneficiaries have a right of access to the document
they desire as they are beneficiaries to the trust.
Re Marquess of Londonberrys Settlement: One of the beneficiaries
complained that she received too little and thus wanted to inspect all the
documents which indicated the reasons which led the trustees to act as they
did. Held: The beneficiary was not allowed to see the documents as the reason
documents are not in beneficiary interest.
Keep accounts
Pearse v Green: Trustee must allow the beneficiaries or their solicitors to
inspect accurate record of his management when requested to do so.
Section 28: A trustee may employ an agent for the purpose of maintaining
accounts.
Wroe v Seed: A trustee who was illiterate and therefore could not keep
accounts himself was justified in employing an agent to keep accounts.
Section 27(4): Trustees may from time to time have the accounts of the trust
property examined or audited by an independent accountant.
Act in the best interest of the beneficiaries in all matters
Cowan v Scargill: The trustees refused to approve an annual investment place
for 200 unless certain clauses were amended which affects his personal
interest. Held: The trustees must treat beneficiaries interest as paramount.
Eg: When the purpose of the trust is to provide financial benefits for the
beneficiaries, as is usually the case, the best interests of the beneficiaries are
normally their best financial interests.
The rule in Howe v Dartmouth: In acting in the best interests of the
beneficiaries, the trustees have a duty to convert the trust property into
something valuable, subject to the trust instrument.
 Duties
Distribute
Arise in three circumstances:
1. Payment of income to the beneficiary, or the capital share of one of the
several beneficiaries who has fulfilled the requirements under the trust.
Re Gulbenkians Settlement Trusts: Trustees were given the discretion to
pay or not pay income to certain beneficiaries. CH: If the trustees decide
in good faith and at appropriate times to give none of the income to any
of the beneficiaries, the court will not review their decision.
2. Distribution of the whole of the trust fund when all the beneficiaries have
reached their full age and are absolutely entitled to the trust property
between themselves.
The rule in Saunders v Vautier: Where all the beneficiaries of a trust are
of full age and capacity who together are entitled to the full beneficial
interest of the trust, the beneficiaries can call upon the trustees to convey
the trust property to them and bring the trust to an end.
3. Distribution of trust property when the trust requires immediate distribution
Failure to distribute trust property to those rightfully entitled
Eaves v Hickson: The trustees were held liable for breach of trust when
they made payment to the wrong person on the faith of a forged marriage
certificate
Hilliard v Fulford: The trustees were held liable for breach of trust for
distributing the trust property based on an erroneous but bona fide
interpretation of the trust deed.
Protection for trustees
Section 32(1): Trustees may advertise their intention to distribute the trust
property in order for any person interested to send particulars of his claim to
the trustee.
Section 32(2): When the time has reached its limit, the trustees may distribute
the property to the persons entitled to. The trustees will not then be liable to
any person who did not have notice at the time of the distribution.
Section 32(3): It is applicable regardless of any contrary provision in the trust
instrument.
Re Aldhous: Where no beneficiaries responded to the advertisement, the
executor then paid the estate money to the Crown.
Benjamin Order
Re Benjamin: David Benjamin left his residuary estate to all children equally.
However, a year before he died, one of his children disappeared in France.
Held: In the absence of any contrary evidence, the court presumed that the
beneficiary had died, and thus his share of the property was to be allocated
accordingly. Thus, the trustee can allocate the trust fund as though the
beneficiary had died. However, if the beneficiary turns up, he may then trace
his share of the property from the recipients. The trustees cannot be held
liable for any breach of trust where distribution is made after the court order.
 Duties
Fiduciary
Bray v Ford: It is an inflexible rule that a person in a fiduciary position is not
entitled to make a profit, unless expressly provided
Duties under fiduciary duties
Duty to not allow his interest and duties to conflict.
Bray v Ford: A trustee is not allowed to put himself in a position where his
interest and duty conflict.
Keech v Sanford: The trustee applied and received such a grant for his
own benefit although the lessor refused to renew it. CH: Where it is the
trustees duty to hold the lease on trust for the beneficiary, the trustee
should have let the lease expire rather than have it renewed in his favour.
Mustnt take any secret profit, unless authorised. Such circumstances are:
i) Receiving bribes
AG of Hong Kong v Reid: Reid accepted bribes amounting to $2.5
million to obstruct the prosecution of criminals. The money was
then used to purchase three properties in New Zealand. CH Reid
was found liable to account for the bribe money he accepted.
ii) Purchase of trust property (self-dealing rule)
General rule: Trustees cannot purchase trust property for himself.
Campbell v Walker: Any trustee purchasing the trust property is
liable to have the purchase set aside, if in any reasonable time, the
beneficiary choose to say that he is not satisfied with it.
Re Mulhollands Will Trusts: The rule remains applicable where the
trustee has retired and intends to purchase the property.
Wright v Morgan: A trustee, who had resigned, purchased trust
property at a price that had been fixed by independent valuers.
However, where it was discovered that the arrangements for the
transaction were made while he was still a trustee, the Privy
Council ordered for it to be set aside.
Parker v McKenna: A trustee cannot sell trust property to a third
party with the intention of repurchasing such property from that
person. - Campbell v Walker: It is immaterial that the sale was
made at an auction and that the trustee paid well above the
reserve price as the rule is based on his status as a trustee and not
on his conduct.
iii) Full disclosure of material facts
Re Thompson: If a trustee concurs in a transaction in which he has
an interest, failure to disclose such interest will cause him to be
liable for any profits received.
 Duties
iv) Purchase of beneficial interest (fair-dealing rule)
Tito v Waddell: The rule is that if a trustee purchases the beneficial
interest of any of his beneficiaries can be set aside, unless the
trustee can show that he has taken no advantage of his position
and has made full disclosure to the beneficiary, and that the
transaction was fair and honest.
Coles v Trecothick: A trustee may purchase from the beneficiary
provided that there is a clear and distinct contract proving that the
beneficiary intended for the trustee to make the purchase. There
can be no fraud, concealment, or taking of advantage by the
trustee.
v) Directors fees
Any directors fees obtained is regarded as an incidental profit, which
is subjected to the rule that a trustee must not take any profit
obtained from his position as a trustee.
Re Macadam: The trustees used their position to appoint
themselves as directors of a company so that they will get
directors fee. Held: The trustees had purposely put themselves
in a position where their duty and interest conflicted, and thus
the fees shall be put into the trust back.
Re Dover Coalfield Extension Ltd: The trustee was already a
director before he became a trustee.
vi) Competing with trust.
IDC v Cooley: A trustee will be liable to account for profits made
by him from a business which competes with the business of the
trust.
Re Thompson: One of the trustee set up a business similar to the
testator. CH this amounted to a breach of the trustees fiduciary
duty as his personal interest was in conflict with his duty of
protecting the beneficiarys interest.
Plus Group v Pyke: The rule also applies to situations where the
trustee becomes involved with a competing third party without
the beneficiarys consent.
vii) Misuse of opportunities and information
Boardman v Phipps: A solicitor took the opportunity to reorganise
the company in which the trust had a minority shareholding by
purchasing more shares for the trust. As the shares increased in
value, so did the shares which he purported to purchase for
himself, thus resulting in a profit. However, a purchase of more
shares for the trust was in fact prohibited unless authorised by the
court. CH the solicitor was liable to account for the profit he made
in breach of his duty.
 Duties
Invest
Re Wragg: To invest includes to apply money in the purchase of some
property from which interest or profit is expected.
Tan Soo Lock v Tan Jiak Choo: If it can be inferred from the will that the trustee
is to collect income from the trust property, there is a duty to invest.
Section 4: Trustee may decide where to invest provided that they are not
contrary to authorised investment clause in the trust instrument.
Re Hararis Settlement: Any express power of investment under the trust
instrument should not be interpreted restrictively.
Re Lake: Where a trustee makes an unauthorised investment, they will be
liable for any loss incurred.
Choosing an investment
Section 6(1): In exercising the power of investment, a trustee must consider
1. The need for variation of the investments of the trust
Lian Neo: The court may direct to variant the investment.
2. The degree of risk involved in the particular investment
3. The suitability of the investment to the trust
Section 6(2): A trustee whose power of investment is limited to that
authorised under Sec. 4, shall, before exercising such power to invest, obtain
proper advice on whether the investment is satisfactory.
Section 6(3): Proper advice is the advice of a stockbroker obtained through
the trustees bank manager or the advice of an authorised accountant.
Section 6(4): It is up to the trustee to decide when it would be desirable to
obtain the advice and consider it.
Section 6(5): Such advice must be given or confirmed in writing
Section 28(1): If the investment is made through an agent, the trustee will
not be liable for the default of the agent, provided that he was employed in
good faith and in absence of the trustees own wilful default.
Standard of care required
From trustees in making an investment
Speight v Gaunt: Trustees must exercise the standard of care of an
ordinary prudent businessman acting in his own affairs.
From professional trustees (trust corporations or banks)
Bartlett v Barclays Bank Trust: Where professional trustees view
themselves as having expertise which would be unrealistic to expect a
prudent man to have, they must be judged by the standard of skill and
expertise that they profess to have.
 Duties
Sell land
Trustees can sell land under the trust property in order to buy another piece
of land or other shares.
Section 16: Trustee may sell land for benefit of the trust if the land does
not provide any income
Section 59(1): If the trust instrument does not expressly provide the
trustees with power to sell or deal with the trust property, the trustee or
beneficiary can apply to the court under for such power to be granted,
where the court considers it expedient.
Invest on approved companies
Section 4(1) (e): Make investment by giving loan to approved companies
Definition of approved company
Section 3: An approved company is a company incorporated in Malaysia,
or if incorporated prior to Malaysia day, in Sabah or Sarawak and having
a place of business in Malaysia.
It is subjected to requirement
Section 4(2) (a): Approved company must have a paid-up ordinary share
capital of not less than five million ringgit.
Sec. 4(2) (b): The approved company must have paid a dividend at the
rate of not less than 5% during each of the last three years prior to the
time of investment.
Sec. 4(2) (c): The total amount of the borrowings of the approve company
from all sources, shall not exceed two-thirds of the amount excluding
prospective interest, for the time being secured to the approve company
from its borrowers.