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1) Administration of Trust (Settlor: create trust while alive, testator: create and takes effect after die) A. When a person dies, 3 scenarios may exist 1. Died creating a trust in his will (He died testate) 2. Intervivos trust: Die...

1) Administration of Trust (Settlor: create trust while alive, testator: create and takes effect after die) A. When a person dies, 3 scenarios may exist 1. Died creating a trust in his will (He died testate) 2. Intervivos trust: Died creating trust during his lifetime 3. Died without leaving behind a will B. Executor and administrator (Personal Representative) - Executor named by owner of property - Administrator appointed by court - 4 Duty: Gather, manage, check liabilities, distribute C. Types of trustees 1. Ordinary usual by: Trust instrument, Sec 39, Constructive Trust, Resulting trust 2. Corporate (companies appointed as trustee) 3. Amanah Raya Berhad MAS (Sec 3) D. Number of trustees - 39(1)(a): Max 4 (normal trust 2, immovable properties trust 4) - 39(1)(b): Can’t be increased more than 4 - 39(2): Not apply to charitable, religious or public purpose trust E. Who can be appointed - Factors: Capacity to hold prop, enter contract, give valid receipt F. Who may appoint trustees 1. Original trustees: Settlor, testator (Trust deed/will, inter vivos trust, Sec 45 (court), any docs to prove) 2. New or add trustees: Sec 40 in pari materia Sec 36 English Trustees Act - 40(1): May appoint if ori trustees has died - 40(2): May appoint to replace ori who been removed - 40(6): (Not obligatory) May appoint cukupkan quorum 4 trustees if ori ada 3 or less je - 40(7): New trustees have same power/discretion as ori - P/s: Settlor have no power to appoint new/add trustees unless in trust instrument states he have power G. Who can appoint: - 40(1)(a): Person nominated in doc (settlor/not) - 40(1)(b): surviving/continuing trustee, personal rep (last surviving trustee) - 40(4); - 40(5): - 45(1)(a): Court appoint if necessary (Re Hodson: usually not interfere, only if its unsuitable not bcs it wud be better) - 45(1)(b): Minor, imprison, unsound, bankrupt, company dissolved liquid, All trustee dies bfr settlor, no trustee named - Re tempest: wishes of settlor, conflict of interest, if trust will be executed, spouses, existing solicitor/partner - Re Whitehead: It's appropriate to appoint trustees who resides at same place with beneficiaries/ trust property - If ada trustee object appoint new one, they will be removed sebab trust instrument kasi je but dia yang selekkk - Smith: "A trust will not fail for want of a trustee" but not apply if instrument kata trustee appointed je can execute H. Reasons for subsequent appointments 1. 40(1): Ori continuous uninterrupted 12 successive month outside (Re walker: broken by 1 week, Liger: 12 month) 2. 40(8): Trustee dies before settlor trust still valid, trustee ady dead before trust created settlor was still alive, invalid 3. Ori want to discharge 4. Ori refuse to act/disclaim: - Re lister: disclaim and disclaimer is refusal to claim - Ligar: inability to perform is refusing by conduct - Re tyron: disclaim must by deed - Re clout: Inaction is disclaimer by conduct  - Re lord: Accept part/half considered as accept whole - Re Montford: Accept may be express/implied 5. Ori is unfit to act (Re Barker and Re Roche: Bankrupt=unfit=inability=no legal capacity=must be removed) 6. Ori incapable of acting - 40(9): bcs unsound and mentally ill (Re lemann 79 years old memory failure and infirmity= remove) - 40(3) Company dissolved= incapable (Re sichel: enemy alien incapable to protect trust, Re May: /) 7. Ori minor (Re vindargoff: Can’t if RT or CT but can if express or land trust) 8. Ori is removed - 40(1): Removal in this apply if new appoint to replace ori - 40(2): if ori removed as if he was dead) I. Modes of appointment: Settlor, RT, CT, Court, trust deed (settlor), will (testator), S40, S45, other docs J. Effects of appointment - Sec 44: Legal title go to trustees (Land: trustee’s name, Shares: Trustee’s, Bank balance: Bank Book) K. Acceptance of trusteeship - Re tyron: Boleh appoint TS w/o his knowledge but orang tu ada hak untuk accept or not - Mountford: Acceptance can be made expressly or impliedly - Re lister: Boleh disclaim gitu je before accept but if nak disclaim after, kena retire ikut procedure L. Termination of trusteeship (instrument may contain express power to retire) - 40(1): (Retire with replacement) Done in writing, get approval from co-trustees or court, find replacement - 43(1): (Retire w/o replacement) Done in writing, leave atleast 2 trustees, get consent from both if fail refer 40(1) - 45: (Apply to court) Nak retire but didnt get consent from co-trustees and tak nak cari replacement - 23(1): If power is given to trustees tgt, remaining trustee(s) can still carry out that responsibility if some ori died. - 40(8): If last surviving trustee dies, trust property pass to trustee's personal rep but dont have to take their duty - Re smirthwaite: Personal rep will hold property until court appoint new trustee under Sec 45 M. 5 factors removal of trustees by court 1. Dishonest/ incompetent (Best interest of BF comes first) 2. Breach of trust (Even if there's no misconduct done but he’s in position to breach or misapply trust fund= remove!) 3. Hostility 4. Lack of trust and confidence (Beneficiary didn't trust trustees even he have high capacity and integrity) 5. Conflict of interest (Passingham: Removal may be made even when the conflict of interest was authorised) 2) Duties of trustees A. Duty = legal obligation to do sth, fail to do=breach=liable, Power = not mandatory, refers to ability to do something B. Duty upon appointment (Familiarize w terms, understand inspect compy w instrument, ensure transfer hold property, investigate prior breach, claim back trust fund, act impartially w BF and unanimously w TS) C. Fiduciary duty - Not entitled to receive any benefit from his position as a trustee and make profit out of trust fund - 1) Must ensure his interest and BF’s interest conflict - 2) Must not take any secret profit unless instrument/ BF/ court give - Self-dealing rule: Can't buy trust property for himself even retired, 3rd party, auction higher price = voidable - Fair dealing rule: Can (no advantage, full disclosure to BF, no fraud concealment, honest transaction by BF) - Director’s fee: If dapat incidental profit while being director cant keep but if ady director bfr appointed can - Competition: Liable if gain profit for trust by competing/ make similar bisnes with trust to compete/ 3rd invol - Misuse of oppo info: Liable if nak beli shares for trust that increase in value - Receive bribes - Full disclosure of material facts: Liable if tak disclose interest in transcation D. Duty to distribute - Trust pays income or capital to a beneficiary who meets certain conditions, like reaching a specific age (depends) - Trust fund is fully distributed once all beneficiaries reach the required age and are fully entitled to the property. - Distribution of trust property when the trust requires immediate distribution. - If buat mistake as to distribute will liable, even if made payment to wrong person pun liable - 32(1): To protect diri sendiri by advertise their intention to distribute trust property (after give, not less than 2 months) - 32(2): When the time has reached its limit, the trustees may distribute, not liable for who didnt have notice - 32(3): Applicable regardless of any contrary provision in the trust instrument - Benjamin order: 12 children, 1 gone before settlor diedi, court order presumed he died and distribute to 11 - If missing person turn up, may claim but TS not liable if court ady give the order E. Duty to act in the best interest of the beneficiaries in all matters - Must invest in high-yielding portfolios, put their own personal views aside, prioritize the best interest of BF - Howe v Dartmouth: 1. Duty to convert property into sth valuable, apply to personal gift not real property 2. Apply to compensate remainderman by converting property (if specifically mention the detail of gift, rule not apply but if didn't then apply) F. Duty to keep accounts - duty to provide his beneficiaries with a full and accurate record of his management of the trust property. - Allow the beneficiaries or their solicitors to inspect such accounts when requested to do so - 27(4): Trustee must have account examined or audited from time to time by independent ACCA - 28: Trustee may employ agent to maintain account - No duty to have the accounts audited, unless specifically required under the trust instrument G. Duty to provide information to the beneficiaries - to provide information relation to the trust fund to the beneficiaries and allow them to inspect trust documents. - Rationale: BF has beneficial interest on property - Exceptions: The right does not extend to: i) Documents which the beneficiaries have no beneficial interest in. ii) Documents belonging to the trustees. iii) Documents which record the reasons for the trustees’ decisions. - H. Duty to invest - Re wragg: ‘To invest’ includes to apply money in purchase of some property from which interest or profit is expected - Trustees may choose to make investments approved under S. 4 provided t not in contrary to trust instrument - Tan soo lock: Breach to leave trust funds lying idle and uninvested, but will not call for any penalty. - Factors to consider: Trustees must be fair to the income of the beneficiaries & act in the best interests ii) Trustees must be honest and avoid risky and speculative investments. iii) May include the duty to get appropriate advice. iv) Investments should result in profit/ income to the trust fund. v) Moral, ethical, religious factors - 3: "authorised investments" = investments authorized by the trust instrument or by law. - 4(2)(a): Before make investment, company must have a paid-up ordinary share capital of not less than RM5M - 4(2)(b): Company must have paid a dividend not less than 5% during each last 3 years prior to investment. - 4(2)(c): The total amount borrowings of company from all sources, musnt exceed ⅔ we borrow from company - 59(1): If instrument does not expressly provide trustees with power to sell/deal with property, TS/BF can apply - All types of investment must be made according to standard of a prudent businessman, if not expert just ordinary - 6(1): must consider: need for diversification of the investments, degree of risk, suitability of investment - 6(2): If power to invest limited under Sec 4, must get advice before make investment - 6(3): Proper advice: from stockbroker through TS’S bank manager/ authorised ACCA - 6(4); Up to trustee to get the advice - 6(5): Advice must be confirmed in writing - 28(1): TS will not be liable if agent hired make prob provided they are hired in good faith and not TS’s fault - 9: Discretion must be exercised as an active mental process and not result merely through inaction - 19: Only protects TS who had actively exercise their discretion in good faith 3) Power of trustees A. Power of maintenance - Apply only when BF is minor - Maintenance of all beneficiaries who have yet to reach adulthood: - Genreal Rule: No power to give a minor, income arising out of the trust fund unless instrument allowed.expressly - 36(1)(a): Instru silent, own discretion give minor before 21, whollypart of income, give to parent/ directly pay for them - 36(2): The residue of income accumulate and not given yet to minor will be given once they turn 21 - 36(2)(a)(ii): Parents must give valid receipt to TS (if not married yet) - 57: Court has power to order diposal of mior’s beneficial interest for maintainance B. Power of advancement: - Apple to BF at whichever age - To take capital out of a trust fund and pay it for the benefit of the beneficiaries. - 37: Have an absolute discretion to make an advancement 1. Absolutely (where the beneficiary has a vested interest) or 2. Contingently (upon BF attained specific age or occurrence of an event (when he graduates). - 37(a) The money advanced shall not exceed RM10k/ half of the share of BF/ depends on istrument - 37(b): The money advanced to BF will be recognised as part of his share of the trust property (entitled) - 37(c): [Remainderman] No advancement would prejudice BF, unless such person has consented to it in writing - Other valid advance: Discharge BF’s debt, paying BF’s husband debt, to avoid tax - Invalid: Give to BF’s parents for theirselves not son (ike to discharge father’s debt) C. Delegation of trustees - 28(1):TS may employ agent in good faith to transact or execute the trust - 28(2) May employ agent on behalf of them to handle TP outside Malaysia - 30: TS can use POA if wanna be abroad more then 14 days, POA only last for 3 years - Functions TS may delegate to agent: i) Execution of decisions taken by TS. ii) Delegation of TS’ discretion. - 35: Wilful default’ is a consciousness of negligence, breach of duty, or recklessness in performance of a duty - Supervision test: From time to time, If TS have oppo to supervise but did not=liable, otherwise=not liable D. Remuneration of trustees - A trustee acts voluntarily and is therefore, not entitled to receive any remuneration for his work - Barett:: The profits he made whilst managing the trust was part of his duty on acceptance as a trustee. - Entitled if: remuneration expressly authorized in instrument, court (46), statute (46) if thins fit - Re duke: trust bagi chance below market + TS work increased: court ordered for increasing of payment E. Breach of trust - Serious: leave/avoid trust fund, minor: fail to follow directions to appoint new/add trustees - Can occur: Bfr: not liable bfr but must inquire, During; liable own act/ jointly, after: liable upon (foresaw wud happen) - Re Haji Ali: Passive TS liable if didn't take reasonable step to prevent active TS from commit breach F. Defenses - 63: Court relieve wholly/part if TS acted honestly, fairly (to both BF TS), and reasonably (degree of prudence) - 64: TS get compensation if breach happen with consent and request of BF in writing (BF sui juris before consented) G. Remedies 1. Tracing:Follow property- Claim (via charge/lien)- court - Cannot claim: TP destroyed (used money for food), Given to next kin, bona fide purchase without notice - Elements: initial fiduciary relay (not necessarily), TP traceable (not if dissipated), tracing not inequitable - Mixed fund: If cant be separate then all bcm TP, Unmixed fund: Can separate then take amount used - Traceable: given to 3rd, improvement increasing in value TP, Tangible property, services payment 2. Injunction: To stop trustee from distributing it inconsistent w instru and sell prop at lower price than market value