Duties of Trustee

DUTIES OF
TRUSTEES
LAW556
norliza abdul hamid/october 2012
1) DUTY TO ACT IN
ACCORDANCE WITH TRUST
DEED
The trustee must act in accordance
with the terms of the trustee deed
and general law.
The trust instrument may make the
duties more or less strict.
Example
Settlor cannot exclude the duties
which are the essence of a trust
relationship.
Eg Settlor cannot state that the
trustees do not have to provide
accounts to the beneficiaries.
Armitage v Nurse [1998], the court
said if the beneficiaries have no
rights against the trustees there are
no trusts.
2) DUTY ON APPOINTMENT
Duty to familiarize himself with the terms
of the trust, ie he should read and
understand the provisions of the trust
instrument.
Duty to ensure that all trust properties are
duly and properly vested in him
Duty to act impartially between the
beneficiaries, especially when there are
beneficiaries with life interest (life tenant)
and those with residual interest.
Duty to act unanimously / jointly.
Duty to comply with the terms of the trust.
3) DUTY TO CONVERT
This is connected to trustees duty to
be fair & impartial to all the different
categories/classes of beneficiaries
(life tenants and remaindeman, if
any).
Refer to rule in Howe v Earl of
Dartmouth [1802]
Trustees are required to sell:

(i) Speculative, wasting, hazardous and
unauthorized investments. Eg royalties,
copyright.
Assumed that these investments produce
income which exceeds what a life tenant
should reasonably have.
Trustees are under duty to apportion the
property fairly between the beneficiaries.
Life tenant receives income from
authorized investment and the balance
will be added to the capital.
(ii) Future, reversionary and other

properties which do not produce
any income.
Must be sold to produce income.
Proceeds will be apportioned
between the life tenant and
remainder man.
Comments
The rule in Howe v Dartmouth has
limited application. Does not apply to
inter vivos trust.
Rule is considered to be out-dated.
Modern wills generally exclude these
duties.
4) DUTY TO APPORTION
When there is a duty to convert, the courts have
developed rules regarding apportionment which
depends on trust properties. Unless theres
specific provisions in trust instrument regarding
apportioning trust properties.
If there is no duty to convert, then theres no duty
to apportion. The life tenant gets the income from
trust fund, and the remainderman gets the
capital.
Relevant cases:
Howe v Dartmouth
Re Earl of Chesterfields Trusts.
5) DUTY TO DISTRIBUTE
Trustees have a duty to distribute the trust
property to those entitled to receive them as
provided by the trust instrument. Otherwise, if
the trustees fail to properly distribute, it is a
breach of trust.
Linked to this is the duty of the trustee to
properly identify and determine the right
beneficiaries.
In Eaves v Hickson (1861), the trustees had to
make good the loss for paying the wrong person
based on a forged document.
10
Protection in s.32 TA 1949

s.32(1) trustees may give advertise of
their intention to distribute. Give notice
in the Gazette, and similar notices,
including those outside Malaysia. In
notice give time limit of not less than 2
months. If there are several notices, then
not less than 2 months of last notice.
Purpose is for any person interested to
send to trustees particulars of his claim
in relation to the property stated in the
notice.
11
s.32(2) When the time period is

up, then trustees may convey or
distribute the property to or
among the persons entitled thereto,
having regard only to the claims, ,
of which the trustees had
notice. They then will not be
liable to any person who they did
not have notice at the time of
distribution. Thus, trustees are
protected.
12
Re Aldhous [1955], where no

beneficiaries responded to the
advertisement. The executor then paid
estate money to the Crown.
Held: Executor not liable.
The section shall apply, regardless of

any contrary provision in the trust
instrument s.32(3)
13
See also : Benjamin Order

Re Benjamin [1902] 1 Ch 723.
Facts: David Benjamin left his residuary
estate to all 12 children equally.
However, a year before he died, one of
his children had disappeared in France.
Held: In the absence of contrary
evidence, the court presumed that
Benjamins beneficiary had died. His
share was to be allocated accordingly.

14
a Court Order which presumes that a

beneficiary had pre-deceased the settlor. If so,
trustees can then allocate trust fund as if the
beneficiary has died. The order is used in cases
where the beneficiaries whereabouts are
unknown.
If he eventually turned up, then he may trace
his share from the recipients. The trustees
would not be liable for breach of trust when
they distributed after the court order.
However, before the order is made, the court
must be satisfied that all possible / reasonable
inquiries have been made to locate the
beneficiaries.
15
6) DUTY TO PROVIDE
INFORMATION TO
BENEFICIARIES
To provide the beneficiary with

complete and accurate information
relating to the trust fund and also to
allow them to inspect documents
relating to the trust.
16
ORourke v Darbishire [1920] AC 581

Lord Wrenbury: a beneficiary has
a right of access to the documents
he desires to inspect upon what has
been called in the judgments in this
case a proprietary right. The
beneficiary is entitled to see all trust
documents, because they are trust
documents, and because he is a
beneficiary. They are, in this sense,
his own.
17
Exceptions:
(i) The right does not extend to documents which
the beneficiaries have no beneficial interest.
(ii) It also does not apply to documents which
belong to the trustees.
(iii) It also does not apply to documents which
records the reasons for the trustees decisions
eg in relation to the exercise of trustees
discretions.
18
Re Marquess of Londonderrys Settlements

Facts : Trustees were authorized to
distribute the trust fund according to
whatever proportion they think fit. One of
the beneficiaries complained that she
received too little. So she wanted to
inspect all documents which would have
stated the reason for the trustees to
distribute that way.
Held: beneficiary was not allowed to do so.
19
Re Gulbenkians Settlement Trusts (No 1)

[1970] AC 508
Facts: Trustees were given discretion to
pay or not pay income to certain
beneficiaries.
Lord Reid: They are given an absolute
discretion. So if they decide in good faith
at appropriate times to give none of the
income to any of the beneficiaries the
court cannot pronounce their reasons to
be bad. And similarly if they decide to
give some or all of the income to a
particular beneficiary the court will not
review their decision.
20
(iv) Beneficiaries have no access to confidential documents
Hartigan Nominees Pty Ltd v Rydge (1992)29 NSWLR 405

Mahoney JA, ..there are documents and, no doubt, there is
information which have been given to the trustee upon the
basis that they be treated as confidential. It is not every
aspect of confidentiality which need be, for the present
purpose, examined It is possible to envisage documents
communicated to a trustee which, though the property of
the trust, are confidential and for that reason should not be
disclosed to beneficiaries. The settler may communicate
confidential information about a beneficiary as a reason for
not exercising a discretionary power in his favour; a
beneficiary may communicate to the trustee information as
to his assets which he desires to keep confidential; and
information may be communicated in the context of personal
family affairs the disclosure of which would be abrasive or
distressing. As the judgments in the Re Londonderry case
[1965] Ch 918 indicate, that is a proper reason for not
requiring disclosure of documents of information which
otherwise should be disclosed to a beneficiary.
21
7) DUTY TO KEEP
ACCOUNT
Required to keep and maintain

accurate accounts. The accounts must
be made available for the
beneficiaries inspection on demand.
Pearse v Green (1819)1 Jac & W 135.
Plummer MR said, the first duty of an
accounting party whether an agent,
trustee, a receiver or an executor to
be constantly ready with his accounts.
22
Chan Chin Cheung v Chan Chak Cheung

& Anor [2005]1LNS89.Court of Appeal
Facts: The plaintiff was one of the
beneficiaries of an estate. The defendants
were the trustees. At all material times
the defendants resided in Singapore. The
plaintiff was not satisfied with the
defendants ' conduct of the affairs of the
estate. So he filed an action in the KL
High Court to obtain an order for an
investigative audit of the accounts of the
estate.
23
CA Held : A trustee is obliged to render accounts of

the trust property to a beneficiary. In this regard
reference is made to Halsbury's Laws of Malaysia
Vol 5 which says at p 720: "A trustee must furnish to a beneficiary, or to a
person authorised by him, on demand, information
or the means of obtaining information as to the
mode in which the trust property or his share in it
has been invested or otherwise dealt with, and as
to where it is and full accounts respecting it,
whether the beneficiary has a present interest in
the trust property or only a contingent interest in
remainder, or is only an object of a discretionary
trust. If the trustee neglects or fails to do so, he is
liable for the costs of proceedings to compel
production of information or accounts. He must also
allow a beneficiary to inspect the trust accounts
and all documents relating to the trust, and has a
duty to explain to a beneficiary what his rights are."
24
And at p 855:
"One of the remedies available against the
personal representative of a deceased
person for those seeking information about
the deceased person's estate is to be
supplied with an account of it. It is the
imperative duty of the personal
representative to keep proper accounts from
the time he begins to administer the estate
so as to render proper account to any
beneficiary who demands the same
throughout the administration of the estate."
25
there is no duty to have the accounts

audited, unless there is a specific
requirement under the trust instrument.
However, s.27(4) states:
Trustees may, in their absolute
discretion, from time to time, but not
more than once in every year unless the
nature of the trust or any special dealings
with the trust property make a more
frequent exercise of the right reasonable,
cause the accounts of the trust property
to be examined or audited by an
independent accountant,
26
When fulfilling this duty, trustees may

appoint an agent.
Wroe v Seed
Held: A trustee who was illiterate and
therefore could not keep accounts
himself was justified in employing an
agent to keep the accounts.

See s.28 TA 1949 which states that as
long as the act of employing the agent
is done in good faith, then the trustees
will not be liable for breach of duty
27
8) NON-DELEGATION OF
DUTIES
The general rule is that a trustee
cannot delegate his duties relating to
the management of the trust to
another person.
Maxim: delegates non potest
delegare
28
Lord Westbury in Robson v Flight

(1865)
such trust and powers are supposed
to have been committed by the
[settlor] to the trustees he appoints
by reason of his personal confidence
in their discretion, and it would be
wrong to permit them to be exercised
by [another].
29
Exceptions:
Lord Radcliffe in Pilkington v IRC
[1964]
the law is not that trustees cannot
delegate; it is that trustees cannot
delegate unless they have authority
to do so.
30
i) Delegation under s.28(1) TA

1949.
ie, delegation is allowed where to do any act or
transaction in executing the trust ,
eg receipt and payment of money.
If so, the agent can be paid for his charges &
expenses incurred.
If the trustee did employ an agent to act for
him, then the trustee is still liable to the
beneficiaries.
Eg If the agent failed to perform his task and
breached his duty as agent.
Unless, trustees acted in good faith see
s.28(1) and shall not be responsible for the
default of any such agent if employed in good
faith.
31
In Re Vickery [1931], the court said:

(i) delegation is allowed regardless of whether
there is any real necessity for the employment
(ii) trustee should use his discretion when
choosing an agent.
(iii) agent should be employed only to do acts
within the scope of the usual business of the
agent.
(iv) if any loss occur due to the employment of
agent, the trustee will not be liable unless he
has been guilty of wilful misconduct. The court
referred to Re City Equitable Fire Insurance Co
[1925] and said that wilful conduct means either
a consciousness of negligence or a breach of duty,
or a recklessness in the performance of a duty.
32
Courts have accepted that

delegation may be necessary for
commercial practicality.
Learoyd v Whiteley (1887)
per Lord Watson ...whilst trustees
cannot delegate the execution of the
trust, they may ... avail themselves of
the service of others wherever such
employment is according to the usual
course of business.
33
(ii) Delegation under s.28(2)

Trustee may appoint agent to sell,
convert, collect, manage or
administer any movable/immovable
property outside Malaysia.
and shall not, by reason only of
their having made such appointment,
be responsible for any loss arising
thereby.
34
(iii) Delegation under s.28(3)

(a)(i)
Trustee may appoint a solicitor as his

agent eg to receive/give discharge
any money/property on behalf of the
trustee
35
iv) Delegation under s.28(3)

(a)(iii)
Trustee may appoint a
banker/solicitor as agent to
receive/give discharge for any money
payable to trustee under an
insurance policy.
36

v) Delegation under s.30(1)
where trustee intends to be out of
Malaysia for more than 14 days, he
may delegate his power and discretion
as a trustee to any person. By power
of attorney.
s.30(3) effective when trustee is out
of Malaysia and revoked on his
return/entry to Malaysia.
s.30(9) valid for not longer than 3
years.
37
NOTE:
Even when delegation is allowed, the
trustee can still be liable if he failed
to exercise reasonable care in
choosing, appointing and supervising
the agent. If he failed to properly
supervise the agent in performing his
duty, he can still be held liable Re
Briers (1884) 26 Ch D 238.
38
The End
39

Duties of Trustee

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Duties of Trustee

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DUTIES OF

norliza abdul hamid/october 2012

norliza abdul hamid/october 2012

norliza abdul hamid/october 2012

Trustees are required to sell:

(ii) Future, reversionary and other

norliza abdul hamid/october 2012

norliza abdul hamid/october 2012

Protection in s.32 TA 1949

s.32(2) When the time period is

Re Aldhous [1955], where no

The section shall apply, regardless of

See also : Benjamin Order

a Court Order which presumes that a

To provide the beneficiary with

norliza abdul hamid/october 2012

ORourke v Darbishire [1920] AC 581

norliza abdul hamid/october 2012

Re Marquess of Londonderrys Settlements

norliza abdul hamid/october 2012

Re Gulbenkians Settlement Trusts (No 1)

(iv) Beneficiaries have no access to confidential documents

Hartigan Nominees Pty Ltd v Rydge (1992)29 NSWLR 405

norliza abdul hamid/october 2012

Required to keep and maintain

Chan Chin Cheung v Chan Chak Cheung

CA Held : A trustee is obliged to render accounts of

norliza abdul hamid/october 2012

there is no duty to have the accounts

When fulfilling this duty, trustees may

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Lord Westbury in Robson v Flight

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i) Delegation under s.28(1) TA

In Re Vickery [1931], the court said:

Courts have accepted that

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(ii) Delegation under s.28(2)

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(iii) Delegation under s.28(3)

Trustee may appoint a solicitor as his

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iv) Delegation under s.28(3)

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norliza abdul hamid/october 2012

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