CHAPTER 2: APPOINTMENT OF TRUSTEES

1.0 INITIAL TRUSTEES

 A trustee may be appointed by settlor (inter vivos trust) or testator (testamentary
trust). The rule is that anyone capable of holding property in law can become a
trustee, and it is at settlor or testator’s discretion to decide who will become trustees.
Phua Chiu Har v Amanah Raya Bhd
 In this case, it was held that the court is under no duty to determine the reasons why
particular person appointed as trustee.

 The settlor or testator may declare himself or herself as a trustee. Alternatively, the
trust instrument may specify someone to appoint trustees.
 A person could also be a trustee by implication of law such as resulting trust or by
operation of law such as constructive trust.
 Generally, if the will or trust instrument did not have provisions to appoint trustees,
the court may make the necessary appointment in order to save the trust because
equity will not allow a trust to fail for want of trustees.

Re Lysaght
 In this case, the court held that if there is an express provision in the instrument that
only those person mentioned shall be trustee, in that situation, the court cannot
appoint the trustee.

Limitation of number for trustees [Private Trust: 4 persons]

S.39(1) of TA 1949: In the case of settlements and dispositions on trust of property,
whether movable or immovable, made or coming into operation on or after the material
date--
(a) the number of trustees shall not in any case exceed four, and where more than four
persons are named as such trustees, the four first named (who are able and willing
to act) shall alone be the trustees, and the other persons named shall not be trustees
unless appointed on the occurrence of a vacancy; and
(b) the number of the trustees shall not be increased beyond four.

S.39(2) of TA 1949: The restrictions hereby imposed on the number of trustees do not
apply in the case of property vested in trustees for charitable, religious, or public purposes.
[If the trust is in nature of charitable, religious or public purpose, the number of trustees
could exceed 4 persons]
 2.0 APPOINTMENT OF TRUSTEES: SUBSEQUENT APPOINTMENTS
 Subsequent appointments of trustees may be made in a number of ways.

First Way: Express Provisions

 The trust instrument may make specific provisions in respect of the subsequent
appointments of trustees.

Second Way: Statutory Provisions

S.40(1) of TA 1949: Where a trustee, either original or substituted, and whether appointed
by a Court or otherwise, is dead, or remains out of Malaysia for more than twelve months,
or desires to be discharged from all or any of the trusts or powers reposed in or conferred
on him, or refuses or is unfit to act therein, or is incapable of acting therein, or is a minor,
then, subject to the restrictions imposed by this Act on the number of trustees—[6
circumstances where to appoint new or additional trustees]
Person who
(a) the person or person nominated for the purpose of appointing new trustees by the
may exercise instrument, if any, creating the trust; or
the power to
appoint. (b) if there is no such person, or no such person able and willing to act, then the
surviving or continuing trustees or trustee for the time being, or the personal
representatives of the last surviving or continuing trustee,
may, by writing, appoint one or more other persons (whether or not being the persons
exercising the power) to be a trustee or trustees in the place of the trustee so deceased,
remaining out of Malaysia, desiring to be discharged, refusing, or being unfit or being
incapable, or being a minor, as aforesaid.

S.40(2) of TA 1949: Where a trustee has been removed under a power contained in the
instrument creating the trust, a new trustee or new trustees may be appointed in the place
of the trustee who is removed, as if he were dead, or, in the case of a corporation, as if the
corporation desired to be discharged from the trust, and this section shall apply accordingly,
but subject to the restrictions imposed by this Act on the number of trustees. [The new
trustee will replace the place where the previous trustee has been removed]

S.40(3) of TA 1949: Where a corporation being a trustee is or has been dissolved, either
before or after the commencement of this Act, then, for the purposes of this section and of
any written law replaced thereby, the corporation shall be deemed to be and to have been
from the date of the dissolution incapable of acting in the trusts or powers reposed in or
conferred on the corporation. [If the trustee is a corporation but such corporation has been
dissolved, then the corporation is no longer able to continue his position as trustee]
S.40(4) of TA 1949: The power of appointment given by subsection (1) or any similar
previous written law to the personal representatives of a last surviving or continuing
trustee shall be and shall be deemed always to have been exercisable by the executors for
the time being (whether original or by representation) of the surviving or continuing
trustee who have proved the will of their testator or by the administrators for the time
being of such trustee without the concurrence of any executor who has renounced or has
not proved.

S.40(5) of TA 1949: But a sole or last surviving executor intending to renounce, or all the
executors where they all intend to renounce, shall have and shall be deemed always to
have had power, at any time, before renouncing probate, to exercise the power of
appointment given by this section, or by any similar previous enactment, if willing to act for
that purpose and without accepting the office of executor. [Renouncement from the
executor]

S.40(6) of TA 1949: Where a sole trustee, other than a trust corporation is or has been
originally appointed to act in a trust, or where, in the case of any trust, there are not more
than three trustees (none of them being a trust corporation) either original or substituted
and whether appointed by the Court or otherwise, then and in any such case—
(a) the person or persons nominated for the purpose of appointing new trustees by the
instrument, if any, creating the trust; or
(b) if there is no such person, or no such person able and willing to act, then the trustee
or trustees for the time being,
may, by writing, appoint another person or other persons to be an additional trustee or
additional trustees, but it shall not be obligatory to appoint any additional trustee, unless
the instrument, if any, creating the trust, or any written law provides to the contrary, nor
shall the number of trustees be increased beyond four by virtue of any such appointment.
[Appointment of additional trustee is not compulsory unless the instrument stated it clearly]

S.40(7) of TA 1949: Every new trustee appointed under this section, as well before as after
all the trust property becomes by law, or by assurance, or otherwise, vested in him, shall
have the same powers, authorities, and discretions, and may in all respects act as if he had
been originally appointed a trustee by the instrument, if any, creating the trust. [New
trustee is entitled to same powers]

S.40(8) of TA 1949: The provisions of this section relating to a trustee who is dead include
the case of a person nominated trustee in a will but dying before the testator, and those
relative to a continuing trustee include a refusing or retiring trustee, if willing to act in the
execution of the provisions of this section.
S.40(9) of TA 1949: Where a person who is mentally disordered or of unsound mind, being
a trustee, is also entitled in possession to some beneficial interest in the trust property, no
appointment of a new trustee in his place shall be made by the continuing trustees or
trustee, under this section, unless leave has been given by the Court to make the
appointment. [A trustee who is mentally disordered or unsound mind is entitled to take
beneficial interest in the property and there shall be no appointment of new trustee to
replace him unless the leave has been granted by the Court]

Third Way: Appointment by the Court

S.45(1)(a) of TA 1949: The Court may, whenever it is expedient to appoint a new trustee or
new trustees, and it is found inexpedient, difficult or impracticable so to do without the
assistance of the Court, make an order appointing a new trustee or new trustees either in
substitution for or in addition to any existing trustee or trustees, or although there is no
existing trustee. [Court may appoint new trustee either in substitution/ in addition to
existing trustee/ whenever there is no existing trustee]

S.45(1)(b) of TA 1949: In particular and without prejudice to the generality of the foregoing
provision, the Court may make an order appointing a new trustee in substitution for a
trustee who is sentenced to a term of imprisonment or is mentally disordered or is a person
of unsound mind or is a bankrupt or is a corporation which is in liquidation or has been
dissolved. [Without prejudice to S.45(1)(a), there are 5 circumstances where the Court may
appoint new trustee]

Re Tempest
 In this case, one of the two trustees appointed predeceased testator. No consensus
was reached for appointing a new trustee.
 When the court makes the appointment of trustee,
a) The court will regard to the wishes of the settlor or the testator.
b) The court will not appoint a person interested under the trust for any other
purposes but not for the execution of trust.
c) The court will look into whether the appointment of that person will give rise to
any difficulty in executing the will.
 RETIREMENT OF TRUSTEES
 Retirement of trustees may be made in a number of ways.

First Way: Express Provisions

 The trust instrument may make specific provisions in respect of the retirement of
trustees.

Second Way: Statutory Provisions

S.40(1) of TA 1949: Where a trustee, either original or substituted, and whether appointed
by a Court or otherwise, is dead, or remains out of Malaysia for more than twelve months,
or desires to be discharged from all or any of the trusts or powers reposed in or conferred
on him, or refuses or is unfit to act therein, or is incapable of acting therein, or is a minor,
then, subject to the restrictions imposed by this Act on the number of trustees—[A trustee
can discharged if he or she desires to be discharged and to be replaced by one or more
person]
Person who
(a) the person or person nominated for the purpose of appointing new trustees by the
may exercise instrument, if any, creating the trust; or
the power to
appoint. (b) if there is no such person, or no such person able and willing to act, then the
surviving or continuing trustees or trustee for the time being, or the personal
representatives of the last surviving or continuing trustee,
may, by writing, appoint one or more other persons (whether or not being the persons
exercising the power) to be a trustee or trustees in the place of the trustee so deceased,
remaining out of Malaysia, desiring to be discharged, refusing, or being unfit or being
incapable, or being a minor, as aforesaid.

S.43(1) of TA 1949: Where a trustee is desirous of being discharged from the trust, and
after his discharge there will be either a trust corporation or at least two individuals to act
as trustees to perform the trust, then, if such trustee as aforesaid declares in writing that
he is desirous of being discharged from the trust, and if his co-trustees and such other
person, if any, as is empowered to appoint trustees, consent in writing to the discharge of
the trustee, and to the vesting and shall, by the instrument, be discharged under this Act,
without any new trustee being appointed in his place. [This section provides for the
retirement of a trustee without a new appointment but subject to prescribed conditions.
Where a trustee declares in writing that he desires to be discharged. If his co-trustees
consent in writing, the trustee desirous of being discharged shall be deemed to have retired
from the trust and there is no new appointment]
S.43(2) of TA 1949: Any assurance or thing requisite for vesting the trust property in the
continuing trustees alone shall be executed or done. [Things to do before retirement]

Third Way: Consent of All Beneficiaries

 If all the beneficiaries who are of full age consent, a trustee may retire.

Fourth Way: Court Order

Under S.45 of TA 1949, the court may make an order appointing a new trustee(s), in
substitution, in the prescribed circumstances.
The court also enjoys an inherent jurisdiction to allow a trustee to retire.

S.45(1)(a) of TA 1949: The Court may, whenever it is expedient to appoint a new trustee or
new trustees, and it is found inexpedient, difficult or impracticable so to do without the
assistance of the Court, make an order appointing a new trustee or new trustees either in
substitution for or in addition to any existing trustee or trustees, or although there is no
existing trustee. [Court may appoint new trustee either in substitution/ in addition to
existing trustee/ whenever there is no existing trustee]

S.45(1)(b) of TA 1949: In particular and without prejudice to the generality of the foregoing
provision, the Court may make an order appointing a new trustee in substitution for a
trustee who is sentenced to a term of imprisonment or is mentally disordered or is a person
of unsound mind or is a bankrupt or is a corporation which is in liquidation or has been
dissolved. [Without prejudice to S.45(1)(a), there are 5 circumstances where the Court may
appoint new trustee]
 REMOVAL OF TRUSTEES
 Removal of trustees may be made in a number of ways.

First Way: Express Provisions

 The trust instrument may contain express provisions that authorizing the removal of
trustees.

Second Way: Statutory Powers

S.40(1) of TA 1949: Where a trustee, either original or substituted, and whether appointed
by a Court or otherwise, is dead, or remains out of Malaysia for more than twelve months,
or desires to be discharged from all or any of the trusts or powers reposed in or conferred
on him, or refuses or is unfit to act therein, or is incapable of acting therein, or is a minor,
then, subject to the restrictions imposed by this Act on the number of trustees— [4
circumstances where a trustee may be removed]
Person who
(a) the person or person nominated for the purpose of appointing new trustees by the
may exercise instrument, if any, creating the trust; or
the power to
appoint. (b) if there is no such person, or no such person able and willing to act, then the
surviving or continuing trustees or trustee for the time being, or the personal
representatives of the last surviving or continuing trustee,
may, by writing, appoint one or more other persons (whether or not being the persons
exercising the power) to be a trustee or trustees in the place of the trustee so deceased,
remaining out of Malaysia, desiring to be discharged, refusing, or being unfit or being
incapable, or being a minor, as aforesaid.

Liger Fernandez v Eric Claude Cooke

 In this case, the court had restated the circumstances where a trustee can be
removed as under S.40(1) of TA 1949.

S.45 of TA 1949 provides the court is empowered to appoint new trustee to

substitute a trustee who is sentenced to imprisonment; mentally disordered; of
unsound mind; bankrupt; or a corporation in liquidation or has been dissolved.
S.45(1)(a) of TA 1949: The Court may, whenever it is expedient to appoint a new trustee or
new trustees, and it is found inexpedient, difficult or impracticable so to do without the
assistance of the Court, make an order appointing a new trustee or new trustees either in
substitution for or in addition to any existing trustee or trustees, or although there is no
existing trustee. [Court may appoint new trustee either in substitution/ in addition to
existing trustee/ whenever there is no existing trustee]
S.45(1)(b) of TA 1949: In particular and without prejudice to the generality of the foregoing
provision, the Court may make an order appointing a new trustee in substitution for a
trustee who is sentenced to a term of imprisonment or is mentally disordered or is a person
of unsound mind or is a bankrupt or is a corporation which is in liquidation or has been
dissolved. [Without prejudice to S.45(1)(a), there are 5 circumstances where the Court may
appoint new trustee]

Third Way: Inherent Powers of Court

 The Court enjoys certain inherent jurisdiction to remove trustees in the execution of
trusts. But, this power has been used cautiously.

Re Wrightson
 In this case, it was held that whoever make the application to the court to remove
the trustee, he must make the court to satisfy that the trust property will not be safe
in the hands of trustee or the trust will not be properly executed in the interest of
beneficiaries.

Letterstedt v Broers
 In this case, it was held that unsubstantial allegation of misconduct on the part of the
trustees will not be sufficient for the court to remove the trustee.

Titterton v Oates
 In this case, upon the death of Mr. Titterton, the 1st Defendant, his daughter became
the sole trustee of his estate. The plaintiff, the sister of the Defendant, make
application to remove 1st D as a trustee on the basis that she had no distributed the
income efficiently, guilty of a conflict of interest and failed to understand the nature
of discretion in dealing with 2nd Defendant.
Held: Court must take into account the wishes of the testator or settlor but it must not limit
the courts’ jurisdiction as primacy must be given to the welfare of the beneficiaries. As such,
the court had removed the 1st Defendant since the present arrangement would inimical to
the interest of all concerned.

Halsbury’s Laws of Malaysia: The Court will remove a trustee if the person refuses to
execute, mismanage the trust or has disqualified himself from continuing to hold the office
and his continuance in office would be likely to be detrimental to the trust as a whole.
However, a trustee will not be removed based on pecuniary embarrassment.
DEATH OF TRUSTEE
S.23(1) of TA 1949: Where a power of trust is given to or imposed on two or more trustees
jointly, the same may be exercised or performed by the survivors or survivor of them for
the time being. [Where a power of trust is given to 2 or more trustees and one passed away,
the remaining trustee may fulfill his obligation until another trustee is appointed or act
solely without a new appointment.]

S.23(2) of TA 1949: Until the appointment of new trustees, the personal representatives or
representative for the time being of a sole trustee, or, where there were two or more
trustees, of the last surviving or continuing trustee, shall be capable of exercising or
performing any power or trust which was given to, or capable of being exercised by, the
sole or last surviving or continuing trustee, or other the trustees or trustee for the time
being of the trust. [If sole trustee passed away, the personal representatives that appointed
by the court shall exercise the power given to the sole trustee – He can act as trustee or act
temporarily until the appointment of a new trustee]

S.23(3) of TA 1949: In this section "personal representative" does not include an executor
who has renounced or has not proved.

DISCLAIMER

Re Lister
 In this case, it was held that a person nominated as a trustee is not obliged to accept
office and may disclaim it. But once he or she accepted the office, he cannot disclaim
it as a trustee.
VESTING OF TRUST PROPERTY

S.44(1) of TA 1949: Where by an instrument a new trustee is appointed to perform any

trust, then- [New trustee is appointed to perform any trust. The property in the hand of old
trustee shall be transfer to the new trustee]
(a) if the instrument contains a declaration by the appointor to the effect that any
interest in any movable property in the States of Johore, Kedah, Kelantan, Negeri
Sembilan, Pahang, Perak, Perlis, Selangor and Terengganu, or in any land or chattel in
the States of Malacca, Penang, Sabah and Sarawak, subject to the trust, or the right
to recover or receive any debt or other thing in action so subject, shall vest in the
persons who by virtue of the instrument become or are the trustee for performing
the trust, that declaration shall operate, without any conveyance or assignment, to
vest in those persons as joint owners and for the purposes of the trust the interest or
right to which the declaration relates; and
(b) if the instrument is made on or after the material date and does not contain such a
declaration, the instrument shall, subject to any express provision to the contrary
therein contained, operate as if it had contained such a declaration by the appointor
extending to all the interests and rights with respect to which a declaration could
have been made.

S.3(1) of TA 1949: "Material date" means--

(a) in respect of Peninsular Malaysia (other than Malacca and Penang), the 9th day of
September 1932;
(b) in respect of the States of Malacca and Penang, the 1st day of September 1929;
(c) in respect of the State of Sabah (other than Labuan), the 30th day of April 1953;
(d) in respect of Labuan, the 1st day of September 1929; and (e) in respect of the State
of Sarawak, the 30th day of June 1965.

S.44(2) of TA 1949: Where by an instrument a retiring trustee is discharged under the

statutory power without a new trustee being appointed, then— [Matter related to a
retiring trustee is discharged by instrument pursuant to statutory power but without a new
trustee being appointed]
(a) if the instrument contains such a declaration as aforesaid by the retiring and
continuing trustees, and by the other person, if any, empowered to appoint trustees,
that declaration shall, without any conveyance or assignment, operate to vest in the
continuing trustees alone, as joint owners, and for the purposes of the trust, the
interest or right to which the declaration relates; and
 (b) if the instrument is made after 1st day of September 1929, in the States of Malacca
and Penang, or after 9th day of September 1932, in the States of Johore, Kedah,
Kelantan, Negeri Sembilan, Pahang, Perak, Perlis, Selangor and Terengganu, and does
not contain such a declaration, the instrument shall, subject to any express provision
to the contrary therein contained, operate as if it had contained such a declaration
by such persons as aforesaid extending to all the interests and rights with respect to
which a declaration could have been made.

S.44(3) of TA 1949: An express vesting declaration, whether made before or after the
commencement of this Act, shall, notwithstanding that the interest or right to be vested is
not expressly referred to, and provided that the other statutory requirements were or are
complied with, operate and be deemed always to have operated (but without prejudice to
any express provision to the contrary contained in the instrument of appointment or
discharge) to vest in the persons respectively referred to in subsections (1) and (2), as the
case may require, such interests and rights as are capable of being and ought to be vested
in those persons. [Vesting order is automatically]

S.44(4)(a) of TA 1949: This section does not extend—[Exclusion of S.44]

i. to land conveyed by way of charge for securing money subject to the trust, except
land conveyed on trust for securing debentures or debenture stock;
ii. to land held under a lease which contains any covenant, condition or agreement
against assignment or disposing of the land without licence or consent, unless, prior
to the execution of the deed containing expressly or impliedly the vesting declaration,
the requisite licence or consent has been obtained, or unless, by virtue of any
written law or rule of law, the vesting declaration, express or implied, would not
operate as a breach of covenant or give rise to a forfeiture;
iii. to any share, stock, annuity or property which is only transferable in books kept by a
company or other body, or in manner directed by or under any written law.

S.44(4)(b) of TA 1949: In this subsection "lease" includes an underlease and an agreement

for a lease or underlease.
VESTING ORDERS IN RESPECT OF LAND
 The Court may make vesting order in particular situations. Effect of vesting order is that
it vests property to new trustee without need for transfer, conveyance and assignment.
 Example, UMBC become CIMB, then if the property wants transfer to UMBC, need put
CIMB name as CIMB is consider new trustee, cannot put UMBC name anymore.

S.48 of TA 1949: In any of the following cases, namely—

(a) where the Court appoints or has appointed a trustee, or where a trustee has been
appointed out of court under any statutory or express power;
(b) where a trustee entitled to or possessed of any land or interest therein, whether by
way of charge or otherwise, or entitled to a contingent right therein, either solely or
jointly with any other person--
i. is under disability;
ii. is out of the jurisdiction of the Court; or
iii. cannot be found, or being a corporation, has been dissolved;
(c) where it is uncertain who was the survivor of two or more trustees jointly entitled to
or possessed of any interest in land;
(d) where it is uncertain whether the last trustee known to have been entitled to or
possessed of any interest in land is living or dead;
(e) where there is no personal representative of a deceased trustee who was entitled to
or possessed of any interest in land, or where it is uncertain who is the personal
representative of a deceased trustee who was entitled to or possessed of any
interest in land;
(f) where there is no personal representative of a deceased chargee who was entitled
to or possessed of any interest in land, or where it is uncertain who is the personal
representative of a deceased chargee who was entitled to or possessed of any
interest in land, or where it is uncertain whether any chargee entitled to or
possessed of any interest in land is living or dead, or where any chargee entitled to
or possessed of any interest in land is out of the jurisdiction of the Court or cannot
be found or, being a corporation, has been dissolved;
(g) where a trustee jointly or solely entitled to or possessed of any interest in land, or
entitled to a contingent right therein, has been required, by or on behalf of a person
entitled to require a conveyance of the land or interest or a release of the right, to
convey the land or interest or to release the right, and has wilfully refused or
neglected to convey the land or interest or release the right for twenty-eight days
after the date of the requirement; or [For purpose of (g), a refusal by trustee to
convey may not necessarily be willful if this is on account of doubt as to the title]
 (h) where land or any interest therein is vested in a trustee whether by way of charge or
otherwise, and it appears to the Court to be expedient,
the Court may make an order (in his Act called a vesting order) vesting the land or interest
therein in any such person in any such manner and for any such interest as the Court may
direct, or releasing or disposing of the contingent right to such person as the Court may
direct:

Provided that—[S.48 of TA 1949 subject to A & B]

(A) where the order is consequential on the appointment of a trustee the land or interest
therein shall be vested for such interest as the Court may direct in the persons who on
the appointment are the trustees; and
(B) where the order relates to a trustee entitled or formerly entitled jointly with another
person, and such trustee is under disability or out of the jurisdiction of the Court or
cannot be found, or being a corporation has been dissolved, the land, interest or right
shall be vested in such other person who remains entitled, either alone or with any
other person the Court may appoint.

OTHERS SPECIFIC PROVISIONS

S.50 of TA 1949: Vesting order in place by conveyance by minor.

S.51 of TA 1949: Vesting order consequential on order for sale of land.

S.52 of TA 1949: Vesting order consequential on judgment for specific performance, etc.

S.55 of TA 1949: Vesting order as to stock and thing in action.

S.56 of TA 1949: Vesting order of charity or society property.

S.57 of TA 1949: Vesting order in relation to minor’s beneficial interest.

FIDUCIARY NATURE OF TRUSTEESHIP

1.0 REMUNERATION

General Rule
 A trustee cannot expect remuneration for performing duties in relation to the trust
because trustee is the person held by the settlor to act for the best interest of
beneficiary.
 If trustee is remunerated, it will defeat the whole purpose of having a trust.
Barrett v Hartley
 In this case, it was held that a trustee must not make a profit from his trust unless it
has been authorized in trust deed or approved by all beneficiaries. Even a solicitor,
can only charge for his out-of-pocket expenses.

The principle of non-remuneration is closely related to the principle that a trustee

is not allowed to put himself in a position where his or her personal interests
would conflict with his duties as a trustee.

Re Syed Ahmad Alsagoff (deceased)

 In this case, it was held that equity will disallow a trustee to enter into arrangement
where his interest will conflict with the interest of those he is required to protect.

Exception 1: Recover Costs and Expenses in Executing the Trust [Reimbursement]

 This does not preclude him or her from recovering the cost and expenses in
executing the trust.

S.35(2) of TA 1949: A trustee may reimburse himself or pay or discharge out of the trust
premises all expenses incurred in or about the execution of the trusts or powers.

Vacumn Oil Co Pty Ltd v Wiltshire

 In this case, it was held that the expenses incurred in performing a business as
authorized by trust instrument are recoverable.

Tan Soo Lock v Tan Jiak Choo

 In this case, it was held that the expenses incurred in defending the trustee as legal
owner of trust property are recoverable.
Exception 2: Remuneration Authorized by Legislation
S.46 of TA 1949: The Court may allow any trustee, other than Public Trustee, such
remuneration for his services as trustee as the Court may think fit.

Exception 3: Remuneration is Provided for in the Trust Instrument

Public Trustee v IRC

 In this case, it was held that the charges paid ought to be reasonable and may take
the form income from part of the estate.

Re Chapple
 In this case, it is a clause in the trust instrument saying that trustee can charge for
usual professional charges which is a remuneration for solicitor’s professional
services and not trustee remuneration.

Exception 4: Remuneration Authorized by the Court

a) The court has inherent jurisdiction to authorize remuneration for fiduciaries.

Boardman v Phipps
 In this case, it was held that Boardman and Phipps were liable for the profits earned
since they have putted themselves in a conflict of interest. However, they put in a lot
of effort in their services. Thus, the court allowed them to retain a generous
remuneration for the services he performed.

Brown v Litton
 In this case, it was held that since the mate took over command of vessel upon
captain’s death and made considerable profit, hence, he was entitled to receive a fair
remuneration for his diligence.

b) The court may allow remuneration even if a contract could be set aside on account of
undue influence.
O’ Sullivan v Management Agency and Music Ltd
 In this case, it was held that the rescission of a contract due to undue influence did
not stop the court from recognizing the agent’s contribution to the singer’s success
justifying fair remuneration.
c) The court may authorize a trustee to increase the remuneration instrument rate.
Re Duke of Norfolk’s Settlement Trusts
 In this case, the English Court of Appeal was held that the court could under its
inherent jurisdiction increase the level of remuneration.

Exception 5: With Consent of All the Beneficiaries

 The trustee may contract for remuneration with the beneficiaries who are full age
(sui juris) and absolutely entitled to the trust property.

Exception 6: Under the rule in Cradock v Piper {Professional charge}

Cradock v Piper
 A solicitor-trustee had done the work in his professional capacity and he has acted
for a co-trustee and himself in respect of an action or matter in court. Then, he is
entitled to be remunerated.

Exception 7: Overseas Trust Assets

Re Northcote’s Will Trusts

 It was held that if trust asset located in oversea and the law in that country permits
trustees to receive remuneration, then the trustee is entitled to be remunerated
under the law of that country where the assets are located.
2.0 SECRET PROFITS
 If a trustee being in a fiduciary relationship had secure a benefit for himself by taking
advantages of the trust, equity will not allow him to retain the same and he or she
shall hold the benefit under a constructive trust. The purpose is not to make them
enjoy the profit instead they hold on trust.

 The fundamental fiduciary obligation of loyalty, (a) prohibits a fiduciary from acting
in a situation where there is a conflict between the fiduciary duties and his or her
interest and (b) prohibits the fiduciary from making a profit out of his or her fiduciary
position.

Bristol & West Building Society v Mothew

 A fiduciary is someone who has undertaken to act on behalf of another in a
particular matter in circumstances which give rise to a relationship of trust and
confidence.

 There are numerous ways secret profit could happen.

First Way: Under the rule in Keech v Sandford

Keech v Sandford
 In this case, it was held that a trustee must not use his position as a trustee to enrich
himself. No matter how, the fiduciary has to account for the profit.

Second Way: Use of Confidential Information

Lac Minerals Ltd v International Corona Resources Ltd

 In this case, the trustee had misused the confidential information. In the end, the
Court held that the appropriate remedy for breach of confidence would be the
imposition of constructive trust.
Third Way: Purchase of Trust Property by Trustee

Campbell v Walker
 In this case, it explained that the general position that a trustee cannot involved in
self-dealing with property belonging to the trust.

Re Mulholland’s Will Trusts

 In this case, it was held that there is no defense for the trustee to plead that he or
she had paid the market price for the property, or was the highest bidder at an
auction. The rule remains applicable even the trustee retires and intending to
acquire the property.

Holder v Holder [Slightly relax rule founded in this case]

 In this case, the son was an executor of his father’s will. He had discharged himself
and later, one of the trust properties was available and purchase by son.
Held: The court had allowed such transaction on the basis that the son had not interfered
with the administration of estate, there was no conflict of interest as he is no longer
appointed as trustee.

Fourth Way: Purchase of Beneficial Interests by Trustee

Coles v Trecothick
 In this case, it was held that a trustee may purchase beneficial interests from the
beneficiary provided that there is a distinct and clear contract. Besides, it should not
have contained any fraud, any concealment or any advantage taken, by the trustee
due to the information acquired by his position as a trustee.
Fifth Way: Director’s Fees

Re Madacam [General Rule]

 In this case, it explained that if the trustees are appointed as directors of companies
because of the trust’s shareholdings in the related companies, the trustee cannot
received any directors’ because a trustee cannot profit from the trusteeship.

Exceptions

1. But the rule does not apply if the trustee secures directorship not by virtue of his
position as a trustee.
Re Dover Coalfield Extension Ltd
 In this case, it was held that if an appointment of a director was made before the
person’s appointment as trustee, he or she is entitled for the director’s fees received.

2. But the rule does not apply if it is granted by the Court.

Re Duke of Norfolk’s Settlement Trusts
 In this case, it was held that the court also possess power under its inherent
jurisdiction to allow trustee-directors to retain their remuneration either in full or
part.

3. A trust instrument may in any event provide for a trustee to appoint himself as a
director and be remunerated.
Re Llewellin’s Will Trusts
 In this case, the court held that the trustees could lawfully retain the fees received
because there is a clause in the will that permitting them to appoint himslef as a
director and be remunerated.

Sixth Way: Competing with the trust

 A trustee is prohibited from competing with any business belonging to the trust
especially in a specialized business.
 However, the rule does not apply to ordinary businesses where the element of
competition is not in issue.

Re Thomson
 In this case, one of the trustees set up a similar business with the testator’s estate
and the court held that this was amount to breach of fiduciary duty. This is because
there might possibly conflict with the interest of those he was bound to protect.
Seventh Way: Receiving Bribes [There are 2 views]

AG of Hong Kong v Reid

 In this case, it was held that a constructive trust may be imposed on a trustee who
had received bribes.
Facts: This case involving bribe received by a public prosecutor in respect of certain
prosecutions. A portion of money was used to purchase three properties in New Zealand.
The court held that the imposition of constructive trust would allow the Crown to follow
the bribery money which had been converted in the form of properties.

Lister & Co v Stubbs [Contrast to Reid’s Case]

 In this case, the English Court of Appeal had adopted the position that a fiduciary
who had received bribes was bound to pay it over to his principal, but not subject to
a constructive trust. This is because in reality, the principal had no prior proprietary
interest in that money. As such, it was not under constructive trust.

Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [Followed Lister’s case]
 In this case, the Court of Appeal also refused to follow Reid’s case because the
principal had no prior proprietary interest in that money. As such, it was not under
constructive trust.