EQUITY & TRUST II (LAW 3711) Sem 1, 2020-21

TUTORIAL QUESTIONS

a) Introduction, Types and Definition

1. Give two reasons why the concept of use was resorted to in the early 14 th Century and
what are the advantages of the use?
2. Made a comparison of the followings:
a) Trust and contract
b) Trust and bailment
c) Trust and agency
d) Trust and loans
.
3. Define the following terms:
a) Private and Public trust
b) Family Trust & Commercial Trust
c) Islamic Trust & Malaysian Trust

4. Explain the distinction between Legal and Equitable Title in relation to the institution
of trust.

b) Creation of Trust and Modes of Creation

1. Roger’s trustee comes to seek your advice relating to the following bequest in Roger’s
wills;
a) RM 1 million for the benefit of those diehard fans of Adele who are wearing
red shirt every Thursday and his estate to his wife Jennifer “to be at her
disposal in any way she may think best, for the benefit of herself and her
family.” After her death, Jennifer gave part of the estate to persons outside the
family.
b) Roger has transferred to his trustee RM 100,000 to be distributed to all the
inhabitants of Sungai Pusu and a bulk from his residuary estate to the person
who helped him.
c) Roger leaves 2.5 million to his wife Jennifer, “secure in the knowledge that
upon her death, any amount she holds that came from me, she will leave to
such of my relatives and such of those persons she knows to be my old friends
as she should think fit.”
2. Why there is a need to distinguish between fixed trust and a discretionary trust in
discussing certainty of object and explain the nature of these two trusts.

3. Explain the case of Mc Phail v Doulton [1971] AC 424 and Re Baden Deed Trust(No
2) [ 1973] Ch 9 and illustrate and explain the following terms based on these cases;
a) conceptual uncertainties
b) evidential difficulties
c) administrative workability.

1
c) Completely Constituted and Incompletely Constituted Trust and Resulting Trust.

1) Adam told Alberta that he wanted her to hold some shares in a private company on
trust for Ally and Aiwa. He then telephoned the director of the company asking him to
carry out the details of the transfer. The next day Adam was involved in an accident at
his office. When Ally and Aiwa visited him at the hospital, he told them of his
conversation with Alberta and handed the share certificates to them. Unexpectedly,
Adam died that night from his injuries.
Advise Ally and Aiwa.

2) Review and compare the cases of Choithram International v S.A Pagarani [2001]
2 All ER 492 and Pennington v Waine [2002] 1 WLR 2075

3) What is the significance of the maxim that ‘Equity shall not assist a volunteer.” in
relation to the constitution of trust. Explain and differentiate between the first two
exceptions.

4) Robert made a declaration of a trust whereby he settled $60,000 for the purposes of
education of his two sons George and Tom who are completing their SPM
examination. He also made a proposition whereby $20,000 is to be used for the
wedding ceremony of his daughter Janet which is scheduled to be held in March
2021, $20,000 for the maintenance of his wife Nicole and on her death to his two sons
George and Tom and on their death to the issues of their marriage. The trustees of the
above trust seek your legal advice:

a) George and Tom having completed their SPM decided to get a job because they are
not very keen to further their studies at the college. They claim that the balance of
$20,000 from the trust fund is to be divided equally among them. The trustee
disagreed on the ground that since they are not interested to further their education
they should not be entitled to the balance of the trust fund.

b) Janet who was supposed to get married in January 2020, met an accident and died.
Upon her death Nicole claimed that the $10,000 should be given to her as she has the
duty to maintain George and Tom but the trustees refused her request.

5) James bought a house near Tasik Perdana and registered it in his sister’s name. Five
years later, James wished to sell the house as he needed money for his business. His
sister refused to sign the necessary documents and claimed that she is the owner of the
said property. He approached his lawyer friend and was told him of a principle, that a
resulting trust is presumed in favour of a person who has made a contribution to the
actual purchase price.
Explain to James the above principle together with its exceptions, if any.

6) Presumption of advancement works in the opposite direction to presumed resulting

trust. Explain the statement with the support of decided cases.

2
 d) Constructive Trust, Secret & Protective Trust

1) Louisa is married to Michael and in order to ensure that their properties will be dealt
properly, they agreed to make a will in identical terms, in the event one of them
predeceases the other. When Michael died, Louisa revoked the first will and created a
new will. Whether Louisa is entitled to do so? What if Louisa and Michael have
agreed not to revoke the will? Discuss.
2) George is the sole trustee of deceased Teo’s estate which consists of two houses, one
towing lorry, one car and cash funds in a bank. The trust instrument provides that the
trustee would take steps to sell the towing lorry and that all other property would be
used for the benefit of Teo’s two daughters. George sold the car to Tommy for
RM60,000 (the market value for the car now is not less than RM150,000) The two
beneficiaries file a suit against George for breach of trust and Tommy for knowingly
inter-meddling with trust property. Explain Tommy’s position.
3) Personal liability to account on the basis of knowing assistance of trust property
applies to strangers who assisted a nominated trustee in committing a breach of trust.
With reference to decided cases especially the decision of Privy Council in the case of
Royal Brunei Airlines, comment on the importance of the above statement.
4) By Clause 10 of his will Cheng left his Port Dickson holiday villa to his cousin Mark
‘for the purpose I will communicate to him’. By clause 11 he directed RM 100,000 to
be given to his brother James. A week later he wrote by registered post to Mark
directing him to hold the villa on trust for Cheng’s only daughter Ying, who is 15
years old. Mark called Cheng and acknowledged receipt of the letter. Cheng invited
James to dinner and informed him that the legacy of RM 100,000 under the will was
for someone special. He handed James a portable electronic storage device which
contained the instructions but he warned him that the code for opening the device was
in a sealed envelope left with Azlan & Co, Cheng’s solicitors with instructions to
hand over the envelope to James after Cheng’s death. The following year Cheng died
of an accident. James obtained the code and the instructions were to hold the RM
100,000 on trust for Ms Yen for life, thereafter for Ms Yen’s daughter Chi Chi,
absolutely. Cheng left nothing to his wife Lilly who has called both Mark and James
to the house and conveyed to them that she intends to challenge the validity of clauses
10 and 11 of the will. Advise Mark and James.
5) Michael stated in his deed of trust that “Nick can use the car until either he or I
become bankrupt, whereupon the car goes to his sister Mary Jane”.
Explain the status of the above trust and what type of trust created by Michael. Use
your own creativity in explaining the concept of the above trust.

e) Charitable Trust, Non Charitable Purpose Trust And Cypres

1. What is your understanding on charitable trust? Elaborate on its distinctive feature.

2. How do you differentiate between charity under English law and Islam?
3. Ruby is a member of Karisma Club of International Islamic University Malaysia, she
asked her father to allocate some fund for the club. Michael then allocated RM 20,000
for the purpose of promoting the students to be active in union involvement at

3
 university level. Whether, the trust created by Michael is exempted form tax or not?
Elaborate this concept as defined in the Statute of Elizabeth.

4. Determine on the nature of the trust;

i) Mee Lan left RM 3000 for the maintenance of aged and poor people at
Gunung Ledang
ii) RM 888K to be applied for the benefit of the widows and orphaned children of
deceased officers and deceased ex-officers of Polis DiRaja Malaysia (PDRM).
iii) All my residuary to all Kelab Burung Malaysia in Puchong and to my
favourite donkey at my ex-boyfriend’s house.
iv) RM450,000 to David Siggam Society to be used for the annual celebration of
Deepavali at Batu Caves.

5) Elaborate on the Doctrine of Cy Press. Discuss on the two elements of the doctrine of
Cy- pres, namely initial failure and subsequent failure. Why do you think that such
doctrine is very important under Charitable Trust?
6) Ben stated in the deed of trust that he allocated RM 100,000 to residents of Kuala
Muda for purpose of education of their children. However the area has been
vanished by Tsunami. Discuss the status of the above trust?

f) Trustee.

1. What are the maximum numbers of trustees that can be appointed in a trust deed?
2. Discuss on the removal of trustees by the court. Support your answer with authorities
3. What relationships are fiduciary and what is their nature?
4. Can a trustee be paid? Give your reasons.
5. A trustee must not set himself up in competition with the trust. Explain.
6. As a fiduciary, a trustee may not purchase trust property. Distinguish between self-dealing
and fair-dealing as stated in the case Holder v Holder [1968] Ch 353.
7. What is your understanding on these terms relating to the duty and power of trustee;
i) Maintaining equality between two sets of beneficiaries
ii) Duty to distribute
iii) Power of advancement
8. Jenkins J in Re Harari’s Settlement Trust [1949] 1 All ER 430 said, “. . . I see no
justification for implying any restriction. I think trustees have powers . . . to invest in any
investments which, they honestly think are desirable investments.”
Based on the above quotation explain the duty of trustee to invest.
9. Anita and Aneela are trustees of two trust Auntie Trust and Uncle Trust. Early 2001,
Anita migrated to Canada, leaving the management of the trust to Aneela. In 2003,
Aneela’s dealing with the trust property was as follows,
i) In March, she received a cheque for Rm 100,000 representing dividends payable to
Auntie Trust. She banked the cheque in her personal account.
ii) She sold the trust property for RM60,000 and bought herself a set jewellery and went
for holidays for 4 months around the world.
Discuss the right of the beneficiaries and the liabilities of the trustees in the
light of the breach of trust committed by the trustee.

10. By her will Annie settled a trust of RM 800,000 cash on trustees for the benefit of her
nephew Bill and her niece Carla, in equal shares upon their attaining the18 years of age.

4
When Annie died in 2013 Bill was 15 and Carla 14. At the date of Theresa’s death Bill was
13 and Barbara was 14. Theresa has also made a gift of RM100, 000 in her will to her
youngest cousin Estelle. There was no express investment clause in the trust instrument.
Tom, an accountant and Larrie, a self employed artist have accepted to become trustees. They
both shared the same flat during their undergraduate study at Unifinance. At a meeting Tom
persuaded Larrie to invest half the trust money in the shares of Globeoil Sdn Bhd, a private
limited company, as he has received information that it will be awarded lucrative contract to
supply oil to a major shipping company. Larrie was hesitant at first but Tom suggested that
RM 50,000 could be used to purchase “Impianku” a prize winning oil painting on canvas by
Larrie. Tom acquired 100,000 shares in Globeoil at RM4/share and received a secret
commission of RM 25,000. He then issued a trust cheque of RM 50,000 in favour of Larrie.
The painting was valued at RM 30,000 a month ago. Tom is the sole signatory to the cheque.
The share price of Globeoil rose significantly on acquisition but due to the slump in oil price
since late 2014, it is currently worth only RM1/share. The outlook for companies in this
sector is poor for the next few years. Larrie was convinced by Tom to keep on holding the
shares.
Carla who is now 16 years of age has decided not to further her education beyond SPM. She
intends to pursue a career in baking and dreams of owning her own bread speciality shop. She
has approached the trustees to help her with fees for baking classes which is conducted every
Saturday 9am to 12 pm. The bakery course runs for 10 sessions and each session costs RM
50. She was advised by the trustees to forget the bakery course and they refused to sponsor
the fees.
The balance of the trust money was left in an ordinary bank account until last month when
Tom withdrew the whole amount and applied for shares in Mondesir Sdn Bhd which is
conducting an IPO [Initial Public Offer] of half its share capital on the KLSE. Tom’s
application was successful and the shares increased have since appreciated by50% in value.
Ben, the beneficiaries’ children requested an account of the trust property on behalf of the
children but received no response from the trustees. He engaged a forensic accountant to
conduct an investigation after which the above facts were communicated to him.
Advise Ben, the representative of the beneficiaries on the liability of the trustees.

11. Wendy Wang, a tax expert is the sole trustee of Zain Family Trust [ZFT] and the
executrix of her uncle Wong’s estate[WE]. She has convinced Zain that the introduction of
GST will negatively impact investments in Malaysia and it was time to venture into tax
efficient offshore schemes. She had already spoken to Daniel who runs Tresor Fiscalle,[TF]
an offshore investment service in Seychelles. After examining brochures of TF, Zain agreed
to liquidate all the trust assets in Malaysia and the proceeds to be invested equally in the top
five securities recommended and managed by TF. The following events took place:
In January 2014 she received RM 200,000 as compensation for the compulsory acquisition of
one acre of estate land which was banked into her personal account, which at that time had a
balance of RM 100,000
In February 2014 after liquidation of ZFT assets, Wendy credited the total proceed of RM 5
million into the same account pending transfer to TF in Seychelles..
In March she withdrew RM 100,000 which was paid as a deposit for a condominium.
In April she withdrew RM 1million which was invested equally in the shares of Innofarm
Sdn Bhd and Innocap Sdn Bhd.
In May she withdrew RM 400,000 to go on a luxury tour of the Pacific Islands with her
fiancé Tom. She paid RM 100,000 to the tour company, gambled away RM 200,000 in a

5
floating casino, bought herself a diamond ring costing RM 50, 000 and a gold watch priced
RM 50,000 for Tom.
The shares of Innofarm have doubled in value but Innocap shares are lower by 50%.
Jennifer, the main beneficiary of WE and Zain have become aware of the above facts. Advise
them on the equitable remedies available to them and their respective claims against Wendy.