Trustee Law and Management

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Questions and Answers

What types of trusts are managed by trustees according to the Trustee Act 1949?

EPT

Charitable

NCT

All of the above (correct)

What is the age requirement for someone to have the capacity to be a trustee under Malaysia law?

majority

A trust will fail if there is no trustee appointed.

False

Failure to discharge a trustee's duties personally and delegation to others is known as delegatus non potest _______.

delegare Signup and view all the answers

What is the meaning of BoT when related to a trustee's responsibilities?

Breaches of Trust Signup and view all the answers

Trustees will only be liable for a loss to the trust fund if the loss is caused by their breach of duty.

True Signup and view all the answers

The primary duty of a trustee is to keep __________ separate from their own and to keep the trust accounts.

trust rights Signup and view all the answers

What can beneficiaries do if a trustee falsifies the trust account?

Surcharge the account Signup and view all the answers

Match the following terms with their definitions:

Account falsified = Trust no longer had a particular asset and trustee must reverse the transaction or compensate Personal liability = Trustee pays money out of own pocket for breach of trust Specific enforcement = Court orders trustee to carry out duties or replace with compliant trustee Liability to account = Trustees compensate beneficiaries by paying into trust account to restore losses Signup and view all the answers

Under Section 28 of the Trustee Act 1949, what type of work can be delegated by the trustee?

transaction of any business including the payment and receipt of money Signup and view all the answers

A trustee is not liable if the agent appointed in good faith defaults. (True/False)

True Signup and view all the answers

What is Section 35 of the Trustee Act 1949 in pari materia with?

Section 30(1) English Trustee Act 1925 Signup and view all the answers

Section 28(2) allows agents to exercise their discretion in relation to trust property outside ________.

Malaysia Signup and view all the answers

Match the following power with its description:

Power of maintenance = Discretion to apply trust income for the benefit of an infant beneficiary Power of advancement = Ability to pay or apply capital for the benefit of a beneficiary who is an infant or has a future interest Power of investment = Dependent on the trustee's duty to invest trust property appropriately Signup and view all the answers

What is the basic rule mentioned by Lord Browne-Wilkinson in the case?

At common law, the defendant's wrongful act must cause the damage complained of. Signup and view all the answers

The House of Lords held that Redferns had to repay £1,490,000 to the trust.

False Signup and view all the answers

In Target Holdings v Redfern, what was the key principle regarding the award of damages?

The plaintiff must be put in the same position as if the breach had not occurred. Signup and view all the answers

The law does not recognize the principle of a ‘sleeping trustee’, who does _____ in the administration of the trust.

nothing Signup and view all the answers

Match the situation with the corresponding outcome: 1. Trustee makes unauthorised investments and suffers losses. 2. Trustee makes unauthorised investments and gains profits. 3. Improperly sells authorized investments and re-invests proceeds in an unauthorized investment.

<ol> <li>Trustee is liable to compensate for the difference in value = A. Beneficiary may adopt the breach and ask for reinvestment.</li> <li>Beneficiary has no loss from the breach = B. Trustee is liable to replace authorized investments or their money equivalent.</li> <li>Trustee is liable to replace authorized investments or their money equivalent = C. Trustee compensates the estate for the difference in value of assets. = D. Trustee gains profits from the unauthorized investment.</li> </ol> Signup and view all the answers

Who was the sole trustee of the Bartlett trust?

Barclays Bank Signup and view all the answers

What was the sole asset of the Bartlett trust?

Company shares Signup and view all the answers

The trustee in Barlett v Barclay’s Bank Trust Co Ltd was found to have adequately supervised the new ventures of the company.

False Signup and view all the answers

Clause 15 of the trust deed stated that no trustee shall be liable for loss or damage to the fund/income unless caused by ‘actual’ __________.

fraud Signup and view all the answers

In Ong Soo Keok & Ors v Ong Soo Kwee, what was the result regarding personal liability exemption for the co-trustees?

Exemption granted Signup and view all the answers

Study Notes

Trust Law: Trustees and their Responsibilities

A trustee is anyone who manages a trust, including Executor's Trust, Charitable Trust, Non-Charitable Trust, and Resulting Trust.
The Trustee Act 1949 is applicable to these types of trusts.
A corporation can be a trustee.
Capacity: A trustee must have the capacity to hold property, which means they must be of the age of majority (as defined in the Age of Majority Act 1971) and must not be bankrupt or convicted of a crime.

Appointment of Trustees

The number of trustees is limited to four (Trustee Act 1949, s39).
In the case of charitable, religious, or public trusts, the number of trustees is not limited.
A person is not a trustee unless they accept the office (Moey Yoke Lai v Ivan Ho Tiong Yin).
A trustee can accept the office explicitly or impliedly.

Vacation of the Office of Trustees

A trustee can resign (Trustee Act 1949, s40) or be removed by the court (Trustee Act 1949, s45).
A trustee's office becomes vacant upon their death.
A trustee can also be removed by the court if it is necessary for the welfare of the beneficiaries.

Standard and Duty of Care

A trustee has a duty to act with a degree of care and skill expected from a trustee (Re Speight).
The trustee must consider and explore a better offer (Buttle v Saunders).
The paramount consideration is the best financial interest of the beneficiaries.
A paid trustee has a higher duty of care (Bartlett v Barclays Bank).
Exclusion clauses may limit a trustee's liability, but minimum duties cannot be excluded (Armitage v Nurse).

Powers and Duties of a Trustee

Powers: administrative, dispositive, and mandatory.
Duties: mandatory obligations to perform a duty.
A trustee has the power to delegate certain responsibilities, but not discretionary powers (Trustee Act 1949, s28).

Investment and Maintenance

A trustee has a duty to invest trust property prudently and safely (Learoyd v Whiteley).
The trustee's duty is to seek the highest available return for the beneficiaries (Cowan v Scargill).
A trustee must act as a prudent person of business would when investing on behalf of others (Cowan v Scargill).

Malaysia's Trustee Act 1949

Sections 28, 30, and 35 of the Trustee Act 1949 relate to delegation, maintenance, and investment powers.
Section 36 of the Trustee Act 1949 relates to the power of maintenance.
Section 37 of the Trustee Act 1949 relates to the power of advancement.### Duties of a Trustee
A trustee has a duty to seek advice on matters they do not understand, such as making investments, and to act with the same degree of prudence.
A trustee is not entitled to reject advice merely because they sincerely disagree with it, unless they are acting as a prudent person would.

Trustee's Duty to Diversify Investments

It is desirable for trustees to diversify their investments, so that if some investments fail to yield dividends, others will. (s. 6 of the Trustee Act 1949)
The trustee has a duty to obtain proper advice on the suitability of an investment. (s. 6(2))

Non-Commercial Considerations

A trustee should not be guided by non-financial considerations, except in exceptional cases.
Example: Harries v The Church Commissioners for England, where a charitable trustee was allowed to restrict investments to those that promoted Christian faith and excluded investments in armaments, tobacco, and gambling.

Duty to Act in the Best Interests of Beneficiaries

A trustee has a duty to act in the best financial interests of the beneficiaries, without regard to underlying ethical implications. (Buttle v Saunders)

Rights of Beneficiaries

Beneficiaries have the right to require the trustee to carry out the trust properly according to its terms.
Beneficiaries have the right to sue the trustee for breach of trust or third parties who knowingly receive trust rights.
Beneficiaries have a right to be informed of their interests under the trust and to access trust documents. (O'Rourke v Darbishire)

Confidentiality

A trustee has the right to assert confidentiality in relation to trust documents, except where disclosure is necessary to resolve disputes or to carry out the trust. (Schmidt v Rosewood Trust)

Breach of Trust

A trustee will be liable for a loss to the trust fund or to a beneficiary if the loss has been caused by their breach of duty.
The beneficiaries must show that the loss was caused by the breach. (Re Chapman)

Remedies for Breach of Trust

Specific enforcement: the court orders the trustee to carry out the trust duties.
Personal liability: the trustee must compensate the beneficiary for any loss caused by their breach of duty.
Falsifying the trust account: the beneficiary can apply to the court to falsify the account and make the trustee liable for the loss.
Surcharging the trust account: the beneficiary can apply to the court to surcharge the account and make the trustee liable for the loss.### Trustee's Liability
Trustees are jointly and severally liable when they act together or ought to have acted together in doing something they should not have done or failing to do what they should have done.
However, where a breach is committed by a trustee clearly acting alone, their co-trustees will not be liable.
One trustee may seek an indemnity from another trustee when the latter alone misappropriated trust rights or exercised a controlling influence over the trust and is essentially responsible for the breach.

Case: Bahin v Hughes (1886)

The trustees were liable to the beneficiaries for breach of trust.
The court held that Miss Hughes, as an active trustee, was liable jointly with the other trustees, and Mr. Edwards was not entitled to an indemnity from Miss Hughes.

Remedies for Unauthorised Investments

Situations:
- Trustee makes unauthorised investments, suffers losses.
- Trustee makes unauthorised investments, gains profits.
- Trustee improperly sells authorised investments, reinvests proceeds in unauthorised investments.
Cases:
- Knott v Cottee (1844): Trustee was liable to compensate the estate for the difference in value of the assets between the date of the declaration and the sale proceeds.
- Nestle v National Westminster Bank Plc (Target Holdings v Redfern): Beneficiary may adopt the breach and ask the trustee to re-invest.
- Re Massingberd's Settlement (1875): Trustees are liable to replace the authorised investments if they have risen in value or the proceeds of sale of the unauthorised investments.

Exclusion of Trustee's Liability

Consent of Beneficiaries:
- A beneficiary who is sui juris (of full age and of sound mind) can consent to a trustee acting in a way that departs from the terms of the trust.
- If all beneficiaries are sui juris and consent to an action that departs from the trust terms, there is no breach of trust.
Trustee exemption clauses:
- A trust instrument may contain a clause that exempts trustees from personal liability for breach of trust.
- Case: Armitage v Nurse (EWCA Civ 1279) - The exemption clause was effective, and the trustee was not liable.
Section 63 of the Malaysian Trustee Act 1949 and Section 61 of the English Trustee Act 1925:
- Empower the court to relieve a trustee of all or part of their liability for breach of trust if they have acted honestly and reasonably and ought fairly to be excused for the breach of trust.

Case: Evans v Westcombe (1987)

The act of the administrator taking out a missing beneficiary policy was sensible and an allowable expense of administration.
The defendant was allowed relief from liability.

Case: Barlett v Barclay's Bank Trust Co Ltd (1980)

The trustee had not discharged its duty as trustee in failing to supervise the new ventures of the company.
The trustee was not entitled to relief from liability.

Case: Armitage v Nurse (EWCA Civ 1279)

The exemption clause was effective, and the trustee was not liable.
Millet LJ stated that there is an irreducible core of obligations owed by the trustees to the beneficiaries, but the duty of skill and care is not part of this core.

Case: Ong Soo Keok & Ors v Ong Soo Kwee (suing as executor of the state of Loh Ah Moy @ Loh Siew Keng (P) 5 MLJ 389 (CA))

The court granted relief from personal liability to the co-trustees who had acted in the best interests of the beneficiary and had fulfilled all the elements of Section 63 of the Malaysian Trustee Act 1949.

Personal Liability of Third Parties/Strangers

Third parties may be personally liable to pay money from their own pockets to make up the loss to the trust fund caused by a breach of trust in two cases:
- Where they have dishonestly assisted in the breach of trust by the trustee (dishonest assistance).
- In certain cases where they have received trust rights dissipated in breach of trust (knowing receipt).

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Description

This quiz covers the basics of trustee law, including the appointment and duties of trustees, and the management of different types of trusts.