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LLS3153 Law of Trust


By Karen Christine
A person whom has property or rights which he holds or
is bound to exercise for or on behalf of another or others
Purely equitable obligation and enforceable in the High
General Principle
1. It was the trustee discretion whether or not he
will exercise a power, however he must come
upon the decision in good faith.
Armitage v Nurse [1998] Ch 241
A trustee acts dishonestly if he pursues a particular
course of action, either knowing that it is contrary to the
interests of the beneficiaries or being recklessly
indifferently whether it is contrary to their interests or not
General Principle
2. A decision which was made honestly and in good faith
shall not be interfere by the court
Watling v. Watling, 27 F.2d 193
(6th Cir. 1928)
the court will review the trustees exercise of her duties
to ascertain whether the trustee has abused her
discretion in making the decision to act or not
Wiedenmayer v. Johnson, 106
N.J. Super. 161 (1969)
When evaluating the trustees decision-making powers,
the court will not substitute its judgment for that of the
trustee, unless there is an abuse of discretion on the
trustees part.
Where does trustee got their
power from?
Categories of power of trustee
Administrative Power

a) Section 16
b) Section 18
c) Section 24
Power Of Sale
By Nur Mawaddah
This power is not automatic, but it needs to be
conferred by the trust instrument.
It can be conferred either expressly, or impliedly.
Scenarios where a power of sale will be implied
(i) In the case of successive beneficiaries where the
trustee is under a duty to convert the property.
(ii) Once there is a direction to distribute:
In exercising their power of sale, trustee has the duty to
obtain the best price on behalf of beneficiaries.
Altson v Equity Trustees,
Executors and Agency
A testator by his will gave the whole of his real and personal estate to a
trustee upon trust to sell his sheep and all his other personal estate and to
invest the moneys to arise there from upon real securities. The trustee is to
possessed the said trust moneys, securities, rents and all other premises in
trust for the testators daughter and if the said daughter married and have
children, they shall entitled for the said trust money. However, the trustee
shall stand possessed thereof in trust for the testators brothers and sister if
the said daughter died without having any children.

The court in this case held that: in the events which had happened, the
testators brothers and sister or their legal personal representatives were
entitled to the testators real estate, and that there was a power of sale of
the real estate given to the trustees which had arisen.
Section 16 of Trustee Act 1949
The trustees have the power of sale to sell by way of

(1) Where a trust for sale or a power of sale of property is vested

in a trustee, he may sell or concur with any other person in
selling all or any part of the property, either subject to prior
charges or not, and either together or in lots, by public
auction or by private contract. Trustee may imposed
conditions respecting title or evidence of title or other matter
as the trustee thinks fit, with power to vary any contract for
sale, or to rescind any contract for sale and to resell, without
being answerable for any loss.
Section 17 of Trustee Act 1949
The power of trustee to sell will be subjected to depreciatory conditions.

(1) No sale made by a trustee shall be impeached by any beneficiary upon the
ground that any of the conditions subject to which the sale was made may have
been unnecessarily depreciatory, unless it also appears that the consideration
for the sale was thereby rendered inadequate.

(2) No sale made by a trustee shall, after the execution of the conveyance, be
impeached as against the purchaser upon the ground that any of the conditions
subject to which the sale was made may have been unnecessarily depreciatory,
unless it appears that the purchaser was acting in collusion with the trustee at
the time when the contract for sale was made.

(3) No purchaser, upon any sale made by a trustee, shall be at liberty to make
Fry v Fry (1859) 28 LJ Ch 591
A testator, who died March 1834, directed his trustees
to sell a house as soon as convenient after his death
and for the most money that could be normally
obtained. In April 1836, the trustees advertised the
house for 1,000. In 1837 they refused an offer of 900.
In 1843, a railway was built near the property which
caused it to depreciate in value. The property remained
unsold in 1856, by which time both the original trustees
had died.
The court held that: the executors/trustees were
liable to make up, out of their own pocket money, the
By Muhammad Zafran
Trustee Act 1949 provides general powers upon the
Section 18(1)
Section 18(3)
Section 18(1) of Trustee Act
The receipt in writing of a trustee for any money,
securities, or other personal property or effects payable,
transferable, or deliverable to him under any trust or
power shall be a sufficient discharge to the person
paying, transferring, or delivering the same and shall
effectually exonerate him from seeing to the application
or being answerable for any loss or misapplication
Interpretation of section 18(1)
The above section gives power to a trustee to give a
receipt. The receipt in writing of a trustee is effective
to discharge a purchaser from any obligation to see
that the sale proceeds are well applied by the
Section 18(3) of Trustee Act
Notwithstanding anything to the contrary in a disposition
on trust for sale of land or in the settlement of the net
proceeds, the proceeds of sale or other capital money
arising under the disposition shall not be paid to or
applied by the direction of fewer than two persons as
trustees of the disposition, except where the trustee is a
trust corporation, but this subsection does not affect the
right of a sole personal representative as such to give
valid receipts for or direct the application of the proceeds
of sale or other capital money aforesaid; nor, except
where capital money arises on a transaction, render it
Interpretation of Section 18(3)
That a receipt given by a single trustee is invalid if there
are two or more trustee as a valid receipt can only be
given by all of them jointly. However, a sole personal
representative can give a valid receipt.
Case of Booth and Southend On
Sea Estates Cos Contract, Re
The trust deed of a charity placed the entire
management and control of its property, which includes
land or investments and all revenue in the hands of a
sole trusteein whom it was vested with full powerto
sell and give receiptsfor the purchase money.
The issue is whether the sole trustee may sell the
property and give receipts for the purchase money?
The Court held that the trusteecould sell the land under
his trust deed and givea receipt for the purchase
money without resorting to his life tenant powers.
A purchaser should get a valid receipt for his money paid
on the trust property so that the purchaser will not be
answerable for any loss or accused of misapplication of
the property he purchased.
Power To Insure
By Muhammad Asif
Section 24, Trustee Act 1949 (Act 208)
(1)A trustee may insure against loss or damage by fire any
building or other insurable property to any amount, including
the amount of any insurance already on foot, up to the full
value of the building or property, and pay the premiums for
the insurance out of the income thereof or out of the income
of any other property subject to the same trusts without
obtaining the consent of any person who may entitled wholly
or partly to the income.

(2) This section does not apply to any building or property

which a trustee is bound forthwith to convey absolutely to
any beneficiary upon being requested to do to.
The section explain that:
Unless there is an express provision in the trust
instrument, a trustee is not under duty to insure the trust
property, and accordingly will not be liable if the trust
property is destroyed by fire.
This Section allows a trustee to insure the property up to
its full value and pay the insurance premiums from any
income arising from the property.
However, this Section does not apply to property which the
trustee is duty bound to convey outright to a beneficiary.
In other words:
Trustees are under no duty to insure the trust property.
They will not be liable for failure to insure if subsequent
damage or loss occurs.
Unless the power to insure is stated in any express
provision in the trust instrument.
Re McEacharn (1911) 103 LT 900.
It had been the view of some people, unless the trust
instrument gave some express or implied direction
concerning insurance of the trust property, the trustee
was not under a duty to insure.

Davjoyda Estates Pty Ltd v National Insurance Co of NZ

Ltd [1965] NSWR 1257.
The nature of the trust property and whether some
power to insure might be implied as part of the settlors
Pateman v Heyen (1993) 33 NSWLR 188
A claim was brought against the trustee of a deceased estate
seeking compensation for the loss resulting from a fire which
destroyed the house which was the major asset of the estate.
The deceased was a fisherman living on the North South Wales.
He appointed defendant as his executor. The sole beneficiary was
the plaintiff who was aged 13 at the death of the deceased.
After giving consideration to selling the house, the Defendant
leased it for the purpose of preserving the assets while waiting for
the Plaintiff to come of age.
The defendant insured the property initially but later overlooked
a renewal of the insurance with the result that the insurance
lapsed in 1 September 1985.
The property was not insured when it was destroyed by
a fire in July 1987.
It was held that the trustee must insure the trust
property as a prudent would be expected to act if he
owned the trust property. In other words, the court
employs an objective standard and determines whether
the conduct of the trustee in insuring the trust property
fell below that of the prudent person.
The powers of the Trustee are usually specified in the
trust agreement. Those powers will usually include a
description of how the creator of the trust desires the
property, including both principal and interest to be
administered, invested, and distributed. Also, the trust
instrument will typically contain a list of standard powers
granted a Trustee.
Therefore, that document needs to be studied carefully to
determine what the Trustee is or is not empowered to do
in administering the trust property.