Void and Voidable Trusts

VOID TRUSTS
Void – does not fulfill the requirement of private express trust (must have enough
parties, set law, trustee, beneficiaries), something that is not part of trust
 A trust is considered void in any one of the following circumstances
- Where it accumulates beyond the perpetuity period
- Where if offends the rule against inalienability
- Where it is against public policy
If it fulfills any 1 of these 3, it is a void trust.
1. Where is accumulates beyond the perpetuity period
- This perpetuity period means forever. Thus, we assume that there is a
foreverness to it.
- However, this principle is that a trust cannot go on forever.
- If a trust says that it is to go on forever and ever, it is void.
- The perpetuity period of a turst has to adhere to two rules :
 The rule against remoteness of vesting (the rule against
perpetuities) – cannot transfer the property, forever or further away
to the point where the trustee is further away from its original
source.
 The rule against inalienability
- England : Perpetuities and Accumulations Act 1964
- The future trust interest must be certain to vest within a defined period of
time, it cannot last forever and must have a specific time. If defined, the
intention of set law is to last forever, then it is beyond the perpetuity
period.
 Goi Wang Firn and Ors v Chee Kow Ngee Ping
 By requiring that any interest must be within the perpetuity period,
the rule here is to prevent the settlor from controlling who should
be entitled to his property too far into the future, thereby obviating
control by ‘the dead hand’.
 Who will get the property into the future is limited. If it is to go on
forever, then the property will continue to move from one trustee
to another. Thus this property will never settle down.
 Foo Jee Seng and others v Foo Jhee Tuang
  The rule prevents property being tied up in a trust, with a trustee,
and hence kept outside the economy for long periods. As a results
it can never be solved, and just be sold to people to buy the land.
 At common law, if the property might vest outside the perpetuity
period, the gift would be void.
 State of Johor v Tunku Alam Shah ibni Tunku Abdul Rahman
 An interest become vested when :
a. The person or person or corporation or body of person to whom
or to which it is limited is or are ascertained and in existence
and capable of taking ownership of the property. (person,
corporation, one or several human beings)
b. The quantum of the interest in ascertained (subject matter of
trust)
c. All other events have happened to enable the interest to come
into possession at once, subject to the determination at any time
of the prior interests. (everything that is necessary to transfer
the trust, has taken place)
 The British Malaya Trustee Executor Co Ltd, the Present Trustees of
the Will of Khoo Cheng Teow Deceased) v Khoo Seng Seng (The
Administrator of the Estate of Khoo Kok Oon Deceased)
 The devise is ‘during the lives of Her Majesty Queen Victoria and
her descendants now in being and during the lives and life of the
survivors and survivor of them and during the period of 21 years
after death of such survivor, to let the premises and to apply the
balance of such rents from time to time in the performance of the
religious ceremonies according to the custom of the Chinese called
Sin Chew to perpetuate my memory’.
(the trust created explains how long the property will be vested,
which is 21 years after death of settlor. From here, the perpetuity
period which cannot be forever, is said to be for 21 years)
 Re Chin Sem Lin’s Settlement
 Clause 7(3) – 60& shall be paid to and devided amongst the sons,
adopted sons and grandsons and the sons of grandsons of the
settlor and who shall either be living at the time the property
directed by the settlor’s ill shall be distributed or who shall be
born thereafter, in equal shares, should any of the sons, adopted
 sons or grandsons living at the time the said income is distributed
as aforesaid be aged 30 years.
 Clause 13 – the corpus of the trust property and residuary trust
property shall be converted and turned into money by the trustees
at the time when the youngest of the said grandsons or adopted
grandsons of the settlor, shall have attained the age of 21 years.

(In this settlement, there is a limitation, a stop period. When one

has turned 30 age, and another when grandsons turn 21 years old.
The settlor here is specific on when the trust will come to maturity)
 Re Lee Moey Chye
 The testator directed that ‘the remaining 15 shares and the money
in cash under my name shall be reserved as the ancestral property
of my family. The money in cash must be sent back to china in
order to form ancestral property. If and when my property is
disposed of must be remitted back to china in order to form
ancestral property’.
 The plaintiff brought action for a declaration that :
a. The trust infringed the rule against perpetuities (it seems to be
going on forever and ever)
b. It was void for uncertainty
c. It failed for impracticality of performance (it is not impossible
to transfer cash back to china, but it will not be done until we
find his family members back at China.)
d. To form an ancestral property, must first see whether a trust is
going to be formed. If there is going to be a trust, then we need
to find that the trust will reach its maturity. Otherwise, it would
be against the concept of perpetuity.
 Ng Eng Kiat v Goh Lai Mui
 Chartered Bank (Malaya) Trustees Ltd Singapore v McKern & Ors
 Directions on accumulations of 30% of income were void for
infringing rule against perpetuity.

2. Where it offends the rule against inalienability

- It wants alienation to take place. ( no one will be able to receive the
property in the future)
 - Alienation : transfer of the ownership or property rights.
- The rule prevents property from being rendered incapable of transfer
within the perpetuity period.
 Re Brown
 Testator devise property among 4 sons subjected to conditions, similar
to forfeiture.
 If any of the son mortgage or sell the interest to others other than the
brother, the father tried to stop the sons from mortgaging or selling it
to others.
 It was held that this condition is equivalent to general restraint on
alienation, hence the trust is void.

 Goi Wang Firn and Ors v Chee Kow Ngee Sing

 The name to the rule has unfortunately become a trap for the
unwary and created confusion through the years. The name serves
as ‘a constant temptation to treat it as aimed against restraints on
the alienation of present interests when, in truth, it is only
concerned with the vesting of future interests’. (it is looking to
transferring in the future, not now)
 Being concerned with the commencement of interests rather than
with their duration, though by restricting the time within which
future interests must vest, the rule will commonly have the effect
of limiting the life of a trust. (both principles wants the trust to
have a stop and have a maturity period which it will come to an
end. This principle looks forward to other people enjoying the
land. We don’t want the land to not be owned by other people
who may need the land. If your trust does not come to an, then the
trust could be void.

3. Where is it against public policy (goes towards morality)

- A trust tending to prevent the carrying out of parental duties because
parents should perform their parental duties.
 Re Sandbrook
- A trust designed or tending to induce a future separation of husband and
wife
 Re Lovell
  Re Johnson’s Will Trusts

VOIDABLE TRUSTS (able to make void)

- On the face of the trust, it look perfectly fine and there is a trust. But
when we look back, there will be one layer which will make us decide
whether to make it void or to keep it as it is)
- Trusts that when we look at it , it is sham trust. Sham is pretend, lies,
cheat, fake, just to put on a show, for the sake of doing it.
- Transactions designed to keep property from creditors – sham trusts
- ( Tuto ques where husband transfers prop to wife just to avoid creditors
coming after prop in case business goes down)
 Snook v London and West Riding Investments Ltd
 Sham means acts done or documents executed by the parties to the
‘sham’ which are intended by them to give to 3rd parties or to the court
the appearance only of creating between the parties, legal rights and
obligations different from the actual rights and obligations (if any)
which the parties intend to create.
 National Westminster Bank plc v Rosemary Doreen Jones
 A sham is a provision or agreement which the parties do not really
intend to be effective, but have merely entered into for the purpose of
leading the court or a third party to believe that it is to be effective.
 Hitch v Stone
 The test of intention is subjective ;
a. The parties must have intended to create rights and obligations
other than those appearing on the face of the document. (what
appears on the face of document and intention of parties have to
differ)
b. Must have intended to give 3rd parties a false impression of what
the rights and obligations created were. (it is to deceive others to
show that intention is what on the document and not what they
planned in mind)
 The mere fact that the act or document is uncommercial does not
mean that it is a sham.
  The fact that parties subsequently depart from the terms set out in an
agreement does not necessarily mean that they never intended that it
should be effective and binding.
 A trust deed is not a sham unless both the settlor and the trustee
intended that the true arrangement should be different from that
appearing in the trust deed.
 Midland Bank plc v Wyatt
 In December 1981, the defendant and his wife bought a property
which was registered in their joint names. They executed a charge
with the plaintiff bank to secure a housing loan. Then, the defendant
decided to set up his own company. He claimed that in order to
protect his family from long-term commercial risk, and acting on his
solicitor’s advice, he entered into a trust arrangement with his wife
giving the equity in their home to the wife and their 2 daughters. The
trust deed was executed on 17th June 1987 by the defendant and his
wife, though the wife was not aware of its importance.
 Then, the defendant negotiated further loans with the bank to finance
his business on the security of his interest in the property. He
separated from his wife in 1989, and in 1991, the business went into
receivership. Neither the bank nor his business partners nor the
solicitors acting for his wife in the separation arrangements were
made aware of the declaration of the trust. and all the dealings were
entered into on the basis that the husband and wife were the beneficial
owners of the property.
 Later on, the bank obtained a judgement sum of about 63,000 pounds,
against the defendant on his interest in the property but that was
resisted by the defendant relying on the declaration of trust.
 The bank claimed that the trust was a sham intended to defraud
creditors.
 There is intention to make is a sham.