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Wills (GIFT)
JUNE 2014 PART C
Jack executed a will in 2003 in which he made the following dispositions:
“To my wife, Rose, my house in Petaling Jaya;
 To my daughter, Julia, RM100000 in RHB Bank;
 To my son, Robert,  all the monies i possess;
 To my sister, Jane, my antique vases;
 To my nephew, Bill, my Toyota Vios; and
 To my brother , a gold watch.”
Jack died on 10 March 2013.
With reference to relevant authorities, answer the following questions:
1. Advise the executors on the validity if the gifts in the light of the following facts:
i) On the date the will was executed, Jack owned  semi-detached house in
Petaling Jaya. However, five months later, he sold the semi-detached house in
Petaling Jaya and bought two units of condominium in Petaling Jaya from the
proceeds of sale.
Issue :
Whether the gift of the condominium in Petaling Jaya to his wife Rose is valid?
The types of gift stated in the will must firstly be determined.There are five types of
gift namely specific gifts, general gifts, demonstrative gifts, pecuniary legacy and
residuary gifts. Specific gift is a gift of a specific or particular item or property. While
specific devise is a gift of a specified real estate or of a particular part of the testator’s
real estate. The testator is generally taken to refer to his particular property at the date
of will. It can be easily identified and distinguished from all other properties where
the used of the word “my” indicates that it is a specific gift. In Bothamley v Sherson,
the testator gave “all my stock in Midland Railway company” to legatee. The court
held that the gift is specific though it would not be fully ascertained until his death.
Specific legacy must be a severed or distinguished part of estate.
Doctrine of ademption occurs when the property or asset bequeathed under a will is
no longer part of the testator’s estate at the time of the death. This doctrine only
 applies to specific gift. The general rule is that if the testator has sold/given
away/replaced the subject matter of the gift, then the gift has been adeemed. Thus, the
beneficiary would receive nothing under the will as the testator cannot give that which
he does not have. In Re Sykes, a gift referred as ‘’my piano’’ was made. However,
the testatrix then sold the one she owned at the date of the will and replaced it with a
more expensive one. It was held that the gift failed as the piano at the date of her
death was not the one referred to in the will. Where her intention was to give the
original piano, by replacing it, the gift was adeem. Section 19 of Wills Act - a gift
which has failed shall be included in the residuary gift.
The gift which is the House in Petaling Jaya falls under specific gift since there is
possessive words such as “my house in Petaling Jaya”. However, Jack has sold the
house in Petaling Jaya and bought two units of condominiums instead. It can be seen
that the subject matter has been replaced because the subject matter is not the same as
stated in the will anymore. Thus, the gift can be said to have been adeemed. As two
units of condominium is not the one referred to in the will, the gift failed as his
intention was to give a house in Petaling Jaya, the gift was adeemed as per Re Sykes.
As the gift of house in Petaling Jaya has been adeemed, the gift shall be included in
the residuary gift as per section 19 of Wills Act.For the two units of condominium in
Petaling Jaya which is not mentioned in his will, section 8 of Distribution Act should
be apply for that property. In conclusion, the gift of his house in Petaling Jaya for
Rose has failed based on the doctrine of ademption.
ii) on the date of Jack’s death, the balance of his account in RHB Bank stood at RM10,000.
Issue : whether the gift of an amount RM 100,000 towards Julia in RHB Bank is valid?
The type of gifts must first be determine.There are five types of gift namely specific
gifts, general gifts, demonstrative gifts, pecuniary legacy and residuary
gifts. demonstrative gift is a shares of characteristics of both general and specific gift.
It is in the nature of a specific gift in that it is a gift of a specified amount or quantity
which is directed to be satisfied primarily out of a particular fund or asset. It is in the
nature of a general gift, in that it could be paid out of the general estate if the specified
fund falls short. An example of a demonstrative gift is: “I give 100 pounds to be
raised out of the sale of my Surrey properties”
 Ashburner
 Re Webster - the testator bequeath 3000 pounds ‘out the share of my capital
and loans’ in a specified family business in meat trade. When the testator died,
 his share’s worth is less than 3000 pounds. The court held that this is
demonstrate ive legacy as it was paid primarily out of his business share and
the legatee was entitled to be reimbursed from the residuary share. If the
testator’s intention for the legatee to be payable only out of the business share,
then the gift is no longer demonstrative.
The gift which is the House in Petaling Jaya falls under specific gift since
there is possessive words such as “my house in Petaling Jaya”. However, Jack
has sold the house in Petaling Jaya and bought two units of condominiums
instead. It can be seen that the subject matter has been replaced because the
subject matter is not the same as stated in the will anymore. Thus, the gift can
be said to have been adeemed. As two units of condominium is not the one
referred to in the will, the gift failed as his intention was to give a house in
Petaling Jaya, the gift was adeemed as per Re Sykes. As the gift of house in
Petaling Jaya has been adeemed, the gift shall be included in the residuary gift
as per section 19 of Wills Act.For the two units of condominium in Petaling
Jaya which is not mentioned in his will, section 8 of Distribution Act should
be apply for that property.
In conclusion, the gift of his house in Petaling Jaya for Rose has failed based
on the doctrine of ademption.
iii) Robert and jane both predeceased Jack, each leaving two sons who were alive at the date
of Jack’s death.
Issue : whether the gift of the antique vases and monies to the sons of Robert and Jane are
valid?
The types of gift stated in the will must firstly be determined. There are five types of gift
namely specific gifts, general gifts, demonstrative gifts, pecuniary legacy and residuary
gifts.A general gift is a gift not of a particular item, but of something to be provided out of
the testator’s general estate. Words indicating possession ‘my’ is specific without the word, it
becomes a general gift. If it is a specific gift, it will become void ab initio due to uncertainty
of subject matter. This can be seen in the case of Bothamley v Sherson.
The beneficiaries of the gift must be determine  since robert and jane predeceased Jack.Other
than subject matter, object must also be certain to render a trust valid.
section 19 of the Wills Act 1959 -unless a contrary intention appears by the will, such
property as is comprised or intended to be comprised in any devise or bequest in such will
contained, which fails or is void by reason of the death of the devisee or legatee in the
lifetime of the testator or by reason of such devise or bequest being contrary to law or
otherwise incapable of taking effect, shall be included in the residuary devise or bequest
respectively, if any, contained in the will. This basically means that a gift which has failed
shall be included in the residuary gift. In Re Whorwood ,the testator wrote in the will “to
Lord Sherborne and his heirs my ‘Oliver Cromwell’ cup presented to our common
ancestor…, for an heirloom.” However, Lord Sherborne died after the testator made the will,
and his eldest son became the new Lord Sherborne. It was held that the gift lapsed as the
bequest was intended for whoever fulfilled the description at the appropriate time, despite the
fact that the gift was to continue as an heirloom.
Section 25 of Wills Act 1959-  where any person, being a child or other issue of the
testator, to whom any property shall be devised or bequeathed for ant estate or interest
not determinable at or before the death of such person shall die in the lifetime of the
testator leaving issue, and any such issue of such person shall be living at the time of
the death of the testator, such devise or bequest shall not lapse, but shall take effect as
if the death of such person had happened immediately after the death of the testator,
unless a contrary intention shall appear by the will. This means that the gift to the
beneficiary (child or other issue of the testator) who predeceased the testator will not
lapse, if the beneficiary leaves an issue (lineal descendants) who will then be the
donee to the gift.
Exceptions :
1)the beneficiary must be the testator’s child or issue, and not a person related by any
other means.
2)the beneficiary must leave an issue to be the donee and not a person related by any
other means
3)the issue must be alive at the time of the testator’s death.
The gift to Jane which is vases falls under specific gift while Robert gift falls
under general gift.Applying the law to the fact of case, under the doctrine of lapse, the
general rule is that Jane and Robert both predeceased Jack and the gift will lapse and
give effect.However, there are exceptions to the doctrine which is anti-lapse. As for
the first exception, the beneficiary must be the testator’s child where Robert fulfilled
the first exception because he is Jack’s son. While Jane does not fulfilled the first
exceptions because she is Jack’s sister.As for the second requirements, Robert and
Jane both leave a son but since Section 25 stated that the donee must be from a lineal
descendants, thus, Jane failed to fulfilled this requirement, but Robert who is the
 lineal descendant successful in fulfilling the requirement.Lastly, both of Robert and
Jane’s son are alive during the death of Jack. Both of them fulfilled the requirement.
As a conclusion, the gift made for Robert will not fail although Robert predeceased.
However, the gift made for Jane will fail.
iv) Jack had two nephews named Bill.
Issue : whether the gift of Toyota Vios made to Bill is valid? 
The types of gift stated in the will must firstly be determined. There are five types of
gift namely specific gifts, general gifts, demonstrative gifts, pecuniary legacy and
residuary gifts. Specific gift is a gift of a specific or particular item or property. While
specific devise is a gift of a specified real estate or of a particular part of the testator’s
real estate. The testator is generally taken to refer to his particular property at the date
of will. It can be easily identified and distinguished from all other properties where
the used of the word “my” indicates that it is a specific gift.Bothamley v Sherson
- testator gave “all my stock in Midland Railway company” to legatee. The court held
that the gift is specific though it would not be fully ascertained until his death.
Specific legacy must be a severed or distinguished part of estate.
The gift of toyota vios falls under specific gifts since there are possesive words such
as “my toyota vios” which it specifically shows that Jack is the owner of the Toyota
Vios. Equivocation applied here. The intention of the testator must be determined.
v) Jack never owned a gold watch
issue : whether the gift of gold watch made to Jack’s brother is valid? 
The types of gift stated in the will must firstly be determined. There are five types of gift
namely specific gifts, general gifts, demonstrative gifts, pecuniary legacy and residuary gifts.
A general gift is a gift not of a particular item, but of something to be provided out of the
testator’s general estate. Words indicating possession ‘my’ is specific without the word, it
becomes a general gift. If it is a specific gift, it will become void ab initio due to uncertainty
of subject matter. Bothamley v Sherson : a general bequest may or may not be the part of
the testator’s estate. When the gift is not the part of estate, the executor must raise the money
or to buy a stock from the estate. Words indicating possession “my” is specific but without
the word it becomes a general gift.
The gold watch falls under general gift since there are no possesive words indicating that the
gold watch was possess by Jack.  By the virtue of the case Bothamley v Sherson, since the
gold watch is not part of the estate, the executor have two choices whether to purchase the
gold watch or give money equivalent to the price of the gold watch to Jack’s brother.
TRACING
DECEMBER 2013, (PART B, QUESTION 2)

        The issue is whether Rosey can recover the trust money from the trustees.

        The judge in the case of Boscawen v Balwa defined tracing as the process “by which the
plaintiff traces what has happened to his property, identifies the person who has handled or
received it, and justifies his claim that the money which they handled/ received can properly
be regarded as representing his property.” In the case of Foskett v McKeon, Lord Millet
stated that the beneficiaries would be able to trace the trust’s property because of their
equitable rights/ interest in the property and if the beneficiaries succeed, then they would be
entitled to the remedy.

        There are 3 conditions for equitable tracing. Firstly, there must be a fiduciary
relationship. The case of Sinclair v Brougham established that a fiduciary relationship is
necessary in order to trace in equity.  Based on the recent dispute, there is a fiduciary
relationship exists between Rosey and John hence Rosey as the beneficiaries for this trust has
the right to trace the trust’s property used by John.

        Next, the property must still in a traceable form. The general rule is that the property
must be traceable because if there is no property to trace, then the right is lost. For example,
if the property or the money was spent on services rather than goods, the property is deemed
to be dissipated and hence it can no longer be traced. For this condition, it can be applied in
two situations which are unmixed funds and mixed funds. The relevant situation for this
question is mixed funds.

        Mixed funds can be defined as when the trustee mixed trust’s money with his own
money into his personal account. In the case of Re Hallett’s Estate, the court said that where
trust money has been mixed with the trustee’s money, the beneficiaries can no longer elect to
take the property, because it is no longer bought with trust money simply and purely, but with
a mixed fund. However, the beneficiaries are “entitled to a charge on the property purchased
for the amount of the trust money laid out in the purchase, and that charge is quite
independent of the fact of the amount laid out by the trustee.”
        There are four situations and legal provisions provided for mixed funds which are “the
mixed fund rule”, “the rule in Re Hallett’s Estate”, “the rule in Re Oatway”, and “the rule in
Clayton’s case”. The relevant situation which suitable for the recent dispute is the rule in Re
Oatway. In the case of Re Oatway, the court preferred a sophisticated analysis and refused to
allow the trustee in breach to have priority over the beneficiaries’ claim. In this case, the
principle is that when mixed funds happen, the trustee’s account has been exhausted first, by
withdrawals to acquire assets (unit trusts). Next, by withdrawals which are dissipated for
example on living expenses, a holiday, etc, the tracing will the become physically impossible.
        The fact of this case is, a trustee had an account of his own money £ 4,077 and the added
trust money £ 3,000 to the account. Later he bought shares out of a mixed account amounting
to £ 2.137. At the time of the purchase of the shares, the remainder money in the account (£
4,740) is enough to meet the claims of the trust beneficiaries, but later the balance in the
account was dissipated. The court held that because of the breach, the beneficiaries were
entitled to an equitable charge on the shares which were then worth £ 2,474 for their £ 3,000
trust money and interest. In addition, if the value of the shares increased the court in the case
of Hayton v Marshall stated that the beneficiaries could elect to adopt the unauthorized
investment as if they were purchased with the trust money so the whole of £ 5,000 became
trust property. Therefore, in this case, the alleged trust money used to purchase the share was
£ 2,137 and the amount of trust money being put in the trustee’s account is £ 3,000. Hence,
there is balance amounted to £ 863. According to the decision made in this case, the
beneficiaries can claim the £ 5,000 worth of shares and a claim of £ 863 against the trustee.

        Based on the recent situation, we can see that the only property that can be traced back is
the RM 100,00 withdrawn by John to invest in a unit trust in his own name. According to the
Re Oatway’s principle, the unit trust can be traced back and the beneficiaries is entitled to it.
By referring to the decision in the Re Oatway, Rosey is entitled to an equitable charge on the
unit trust which worth RM 100,000 for the RM 250,000 trust money and interest. However, it
was stated in the question that the unit trust’s value has increased to RM 120,000. Hence, by
referring to the case of Hayton v Marshall, Rosey can claim the RM 120,000 and she can also
make a personal claim of RM 130,000, Therefore, Rosey can end up with RM 120,000 worth
of trust unit and a claim of RM 130,000 against John.

        The RM 50,000 withdrawn by John to pay down payment in a house for his family shall
be considered as dissipated. However, as the house has become his property because by
paying the down payment it indicates that he has owned the house, hence Rosey can put a
charge over the house.

        Next, we shall look at the trust money used by John which is RM 30,000 where he spent
it on family vacation in Paris. This is clearly has been dissipated and can no longer be traced
back. Lastly, on February 2013 John has donated RM 20,000 to a children’s home in his
hometown to help finance a much-needed renovation of the home. According to Re Oatway,
the said trust money will be considered as dissipated.

        The third condition of tracing is there must be no inequitable results. By this it means
that the tracing will not be granted by the court if it causes an inequitable result which causes
an injustice. This can be applied in cases where it involves an innocent third party/volunteer
(donee). In Re Diplock, the court stated that in a situation where a volunteer already owns the
property but the trust money has been used to renovate/ improve it, then it is inequitable to
charge the property because it will be inequitable to ask him to sell it after all the property is
originally belonged to the volunteer. There are several situations where tracing would bring
inequitable result which are bona fide purchaser for value without notice, dissipation,
unascertained goods and inequitable to trace.

        In the recent dispute, the transactions which fulfils this third condition is the RM 10,000
withdrawn by John to invest in the unit trust as it will not cause any inequitable result it does
not involve any third party. Next, the RM 50,000 used by John to pay for the down payment
of his family’s house can also be traced by putting the charge over the house. This is because
this situation will not cause any injustice as the owner of the house is John, the trustee
himself.

        In conclusion, Rosey can only recover the trust money used to purchase the trust unit by
John and also a personal claim of RM 70,000 and she is entitled to the money obtained
through the sale of the John’s family house where she has put charge over it.
DUTIES OF TRUSTEE
DECEMBER 2015, PART B
                The first issue in this question is whether Mark is liable for breach of trust
committed by his co - trustee, Harry, early last year.
                The breach of trust done by Harry can be seen through the fact that he had
transferred the trust money into his personal account and used it for his own benefit.  His
action had causes conflict of interest where the money obtained was ultimately to be convert
into a something beneficial to the beneficiaries as it is his duty as a trustee to do so.
According to Keech v Sandford, the court expressed concern on this matter because it is
possible for the trustee to use his position for his own benefit rather than to protect or invest
the trust for the benefit of the beneficiaries. Harry’s action where he had deposited the trust
money into his personal account had conflicted with his duty as a trustee and thus considered
as breach of trust.
                A trustee shall only be liable for his own breach and it does not vicariously liable to
other trustees. This matter was provided in section 35 (1) of the Trustee Act 1949 where the
general rule is that the trustee is liable for his own act and would not be liable for act of other
trustees unless there is wilful default. Wilful default can be defined as a consciousness of
negligence or a breach of duty, or recklessness in the performance of a duty, as stated in the
case of Re City of Equitable Fire Insurance.
                In determining whether Mark is liable for the breach committed by his co – trustee,
Harry, section 35 (1) of the Trustee Act 1949 should be taken into consideration. This
provision stated that, a trustee should be liable for his own acts and omissions which means
that the liabilities is personal. However, Mark can still be made liable for his co – trustee
breach of trust if wilful default exist. The beneficiaries of the trust may not believe that Mark
is not involve in such breach of trust as it is hard to prove that he had no knowledge upon
such matter. This is also supported with principle mentioned in the case of Booth v Booth
where the learned judge stated that, a trustee who stands by and sees a breach of trust
committed by his co – trustee, becomes responsible for that breach of trust. If such situation
occur, Mark has to find a way to replace the loss suffered by the beneficiaries.
                In conclusion, for the first issue, Mark would not be liable for the breach committed
by his co – trustee, Harry, by referring to the rulings stated in section 35 (1) of the Trustee
Act 1949. However, Mark can be made liable for the breach of his co – trustee if it can be
proven that there is wilful default on his part in performing his duty as trustee.
The second issue is whether the trust money which had been used by Harry, can be
recoverable by using remedies under the law of trust.
Remedies under the law of trust is the right of beneficiaries to make trustee
accountable for his action. As stated in by the learned judge in the case of Armitage v Nurse,
the beneficiaries have the right to force the trustees upon their obligation. If the beneficiaries
have no rights to so, there is no trust exist. In this situation, Mark, the trustee, can assist the
beneficiaries to recover the trust money which had been used by Harry, the co – trustee, by
using tracing.
 According to the case of Boscawen v Balwa, tracing is a process where the plaintiff
(beneficiary) traces the situation of the trust property and identifies the person who handled
of received such property. Tracing also is used for the purpose to claim the property handled
by the person (which can still be retained) as his property.
In order to claim the property using tracing, three conditions must be fulfilled which
are fiduciary relationship, property was still in traceable form and no inequitable result. The
fiduciary relationship in this matter is regarding to the trust and confidence relationship
between the trustee and the beneficiary. Basically, the trustee was entrusted to maintain the
trust property for the benefit of the beneficiary. Meaning that, trustee must obtain profit using
the trust property for the benefit of the trust. It is important to have fiduciary relationship
between the trustee and beneficiary so that the trace can be used to recover the trust property.
This is based on the principle established in the case of Sinclair v Brougham where the
fiduciary relationship is necessary in order to trace equity.
Referring to the situation, the fiduciary relationship between the trustees and the
beneficiary can be assumed to exist by looking to the fact that the trustees has the authority
over the trust property which amounted to RM200, 000. Both Mark and Harry is said to have
fiduciary relationship with the beneficiary as they were trusted to protect and convert the said
property for the benefit of the beneficiary. Thus, first condition is fulfilled.
Moving on to the second condition, the property was still in traceable form. The
general understanding here is that the property must be traceable and if it is untraceable, the
right to trace is no longer exist. To trace the said property, there are two different rules which
are mixed fund rule and unmixed fund rule. The most relevant rule in this situation is mixed
fund rule. Here, there are several situations may arise due to the usage of the trust property. In
tracing the property in the said situations, the ruling stated in the case of Re Hallet’s Estate,
Re Oatway and Re Clayton can be referred to.
The ruling in Re Hallet involving a situation where the trustee mixes trust money into
his personal account and it was presumed that the trustee used his own money when making
unauthorized trust investment. The remaining money is subjected to the beneficiaries because
the trustee is not allowed to claim the money as his first action was deemed to have used his
own money.
 Referring to the question, the trust property in this question is RM200, 000 monies
which was deposited into the trustee personal account which already has RM50, 000 in it. For
the first situation, where Harry withdrew RM50, 000 to be used as down payment in a house
for his parents, according to the ruling in Re Hallet’s Estate, the money spent was presumed
as the trustee’s own money. This is because the down payment was paid for his parents’
house, so it can be assumed that the trustee would rather use his own money rather than the
trust money.  Thus the remaining money in his account is subjected to the beneficiaries and
the trustee has no right to claim the remaining money. However, the ruling in Re Hallet may
not relevant in the current situation as it would give injustice result towards the beneficiaries
as it would give advantage to the trustee. Thus, the ruling in Re Oatway shall be applied.
As for the Re Oatway’s ruling in tracing the trust property, the trust fund is credited
into the trustee’s bank. Later, the trustee withdrew some amount of money and invested in
unit trust. The remaining money was then withdrawn and spent by the trustee. The court in
this case decided to not referring to the principle upheld in Re Hallet, but instead, the court
held that the beneficiaries are entitled over the shares with an equitable charge. Besides that,
the additional value obtained from the investment of the shares would belong to the
beneficiaries since they were entitled to the shares as it were purchased with the trust money
as mentioned by Hayton & Marshall. However, if the trust property was used up or
dissipated, the tracing is impossible to be done as it is no longer traceable.
Applying to the question, the down payment paid by the trustee in the house for the
trustee had caused the beneficiaries to be entitled with equitable charges over the house. This
is based on the principle held in the case of Re Oatway where the beneficiaries were entitled
with the units shares to recover the trust money used in purchasing the shares. Although the
down payment can no longer be converted into a monetary value, the beneficiaries is still
entitled to the said property with equitable charge where the trust money can be obtained
through the sale of the property in the future. Thus, the trust property can still be traceable.
On 1st August, the trustee, had withdrew RM50, 000 to purchase shares in his wife’s
name. By referring to the ruling stated in the case of Re Oatway, the purchased shares were
entitled to the beneficiaries with equitable charge. Meaning that the RM50, 000 value of
shares belong to the beneficiaries in order to recover the loss trust money done by the trustee.
In addition, since the shares value had increased up to RM80, 000, according to Hayton &
Marshall, the whole shares now became the trust property which belong to the beneficiaries.
Thus, the trust property which was used to purchase unit shares is still traceable.
 Later, the trustee had spent RM30, 000 on a family vacation in Italy and months later
he donated RM10, 000 to an old folks’ home. In these situation, by referring to the ruling
stated in Re Oatway, the said trust money was dissipated and can no longer be traced. Thus,
the beneficiaries had lost RM40, 000 because tracing is physically impossible to be applied in
such situation.
The only traceable property which can be claimed by the beneficiaries is the down
payment in house amounted to RM50, 000, unit shares amounted to RM80, 000 and the
remaining money existing in the trustee’s personal account which is RM110, 000.
The third condition is there is no inequitable result. Inequitable result means that the
remedy will not be granted if it would give an injustice result. To illustrate, if the trust money
was used to renovate as innocent party’s (for example, parents) house, it would be injustice if
tracing is applied in such situation as the innocent party has owned the house before the
renovation occur. There are several situations where tracing would give inequitable result,
firstly is bona fide purchaser for value without notice, dissipation and unascertained good.
Bona fide purchaser is where the purchaser had purchase the property without intention to
deceive the trust property. The purchaser knows nothing about the involvement of the trust
money over the purchased items or property.
The second situation is dissipation. Dissipation here means that the trust property had
been used up until there is no longer asset or money which representing the trust property.
This situation usually occurs when it involves the usage of the trust money for holiday,
services, or to clear debt. As stated in the case of Re Diplock, it was held that it is impossible
to trace the trust money which had been transferred to two charities who used the money to
discharge debt.
Referring to the situation, tracing on the trust money used for down payment in house
for the trustee parents’ house is said to cause inequitable result because the trustee parents is a
bona fide purchaser. Here, the parents know nothing about the trust property and believed
that the house was given by his son. Due to the fact that the parents is bona fide purchaser,
the beneficiaries will loss his equitable charge over the property and receives absolute
ownership. Claiming upon such property would cause an injustice result towards the innocent
party which in this case is the trustee parents. Thus, the beneficiaries can no longer trace the
money used for the down payment of the house.
As for the unit shares, the unit shares were purposely purchased on behalf of his
wife’s name. According to Hyde v Hyde, spouse was considered as constructive trustee
which means that husband and wife (spouse) is a single entity. Tracing on such shares would
not give an unequal result as investment is part of a trustee duty. It can be presumed that
investment on spouse’s name was done for the benefit of the trustee himself. The trustee was
supposed to invest in the name of the trust so that it would give profit to the trust and the
beneficiaries. Thus, the unit shares can be claimed by applying tracing.
The same situation applies to the remaining money in the trustee personal account
because the money belongs to the trust. Claiming the remaining money would not cause any
injustice towards other third party.
In conclusion, beneficiaries can claim the trust property by using tracing upon the unit
shares amounted RM80, 000 and remaining money in Harry personal account amounted to
RM110, 000.
DUTY OF TRUSTEE
DECEMBER 2016
Bella and her two sisters are beneficiaries of a trust created by their late grandmother. The
trust instrument authorize the trustees to distribute the income to all the beneficiaries "as
they think fit". Bella is very disappointed as she receives a smaller portion from the trust. She
demands the trustees to disclose a copy of the minutes of their meeting to her as she wants to
know the reason why she should receive only a smaller portion than her sisters.
With reference to the relevant authorities, advise Bella
                
The first issue in this question is whether Bella can challenge the small portion of
income received from the trust.
                To answer the question on whether the distribution of the said trust can be
challenge or not, we must first identify the duty of the trustee and the most relevant one in
this situation is the duty to distribute.
                Duty to distribute is a duty of  trustees to distribute the trust property to the
beneficiary which was provided in the trust instrument. Failure to properly distribute the trust
would render to breach of trust. Thus, to prevent any possible problems in distributing the
trust property, trustees must ensure that the receiver of the said property is the exact
beneficiaries as listed in the instrument. Otherwise, trustees must pay for the wrongful
distribution in order to replace the loss suffered by the beneficiaries as illustrated in the case
of Eaves v Hickson. In this case, the trustee had to pay the loss suffered by the beneficiary for
paying the wrong person on a forged document.
                Under the duty to distribute, trustees are given discretion to pay or not to certain
beneficiaries. This is based on the decision made by the Lord Reid in the case of Re
Gulbenkian’s Settlement Trust where Lord Reid stated that trustees, in good faith, are given
absolute discretion in distributing the trust property to any of the beneficiaries, even if the
trustees in good faith, decided that certain beneficiary will only receive small amount of
income from the trust property, the court will not review their decision.
                Referring to the situation, the challenge made by Bella upon the portion of income
received may not success as the trustees had the discretion to distribute the property, in good
faith, as what they seem fit to do so. The small portion received by Bella may be distributed
by the trustees as they, in good faith, believe that it is the best portion to be given to Bella. As
stated in the case of Re Gulbenkian’s Settlement Trust, the court would not review or
pronounce the distribution to be bad as trustees had absolute discretion to distribute the
property. Bella can still challenge the distribution if she can prove that the trustees act not in
good faith in distributing the trust property.
                In conclusion for the first issue, Bella may not succeed in challenging the portion of
the trust’s distribution among the beneficiaries as the trustees had the absolute discretion to
distribute the trust property as they seem fit.
                Moving on to the second issue, the second issue is whether Bella can retrieve the
copy of minute of the trustees’ meeting to know the reason of receiving small portion of trust
property.
                To obtain the minute of the meeting, the duty to provide information to
beneficiaries can be raised. Trustees are obliged to provide the beneficiaries with complete
information regarding to the trust fund and if it is needed, trustees must follow the
beneficiaries to inspect documents related to the trust. As stated by Lord Wrenbury in the
case of O’Rourke v Darbishire, beneficiaries have right of access to the documents which
they desire to inspect and see all trust documents with the reason that they are the beneficiary
as they are entitled to it.
                However, there are several situations where the access is limited and the
beneficiaries have no right to obtain the trust related documents. One of the situation is the
beneficiaries cannot access to the documents which records the reason for the trustees’
decision. This is supported with the principle upheld in the case of Re Marquess of
Londonderry’s Settlement. In this case, trustees were authorized to distribute trust fund to 22
beneficiaries, and trustees had the absolute discretion to distribute according to whatever
proportion they think fit. Upon the distribution, one of the beneficiaries complained that she
received too little. She wanted to inspect all documents which would have stated the reason
for the trustees to distribute in such way. It was held that she was not allowed to access to the
documents as the beneficiaries had distributed the trust fund as they think fit and they had the
discretion to do so.
                Referring to the situation, by upholding the principle stated in the Re Marquees
case, Bella may not have the chance to obtain the minute of meeting to understand the reason
of why she only receives smaller portion of income as compared to other beneficiaries. The
trustees had fulfil their duty by distributing the trust property, in good faith, as they seems fit.
Thus, Bella had no access to the minute of the meeting as she is not allowed to do so.
                In conclusion for the second issue, Bella may not access to the minute of the
meeting even though she may raise the issue of a trustees’ duty to provide complete
information to the beneficiaries. This is because Bella’s action falls under the exception
stated in Re Marquess and thus restricted her from obtaining access to the document.
APPOINTMENT
 
Dec 2016: Part A Question 1
Sam is a trustee of a fund set up by Bruce for the benefit of Dony. Sam has been away for the
last ten months, attending to his sick mother in Australia and it is uncertain when he will be
back. Bruce wishes to appoint another person as a trustee in the event Sam is away much
longer and to the detriment of the trust. Furthermore, Bruce wants to appoint himself to assist
the new trustee that he is going to appoint.
Advise Bruce.                                                         (6 marks)
The issue is whether Bruce may appoint another person and himself as a trustee.
First appointment of trustee usually done by settlor whom such power given to under the trust
instrument. The general rule in appointing is stated under Section 39(1) of the Trustee Act
1949 which is the number of trustee should not exceed four and any other person named shall
not be trustee unless vacancy arises. The exception to this rule is if the trust is for charitable,
religious or public purpose. This exception mention in Section 39(2) of the same act.
There are four method of appointment may be made. First is appointment by using trust
instrument. Next, appointment stipulated in the Trustee Act 1949 which are in Section 40(1)
(a) and Section 40(1)(b) of the act. Last but not least, is appointment made by court under
Section 45(1)(a) of Trustee Act 1949. The method need to be done step by step. In Section
40(1)(a) stated that any person nominated in the trust instrument which have express power.
The power of appointment must only be exercised by the person whose power has been
reserved under the trust instrument. The condition of appointing new trustee is under Section
40(1) of the Trustee Act 1949 where it must be made in writing. Next, such person may only
exercise his power to appoint new or additional trustees within the maximum limit of four
appointed trustees provided under Sec. 39 of the act. In Re Whitehead’s Will Trust the court
affirmed that he appointer’s choice must not be capricious or manifestly unreasonable and
inappropriate.
Applying to the situation of Bruce, as a settlor he may made appointment if he stated
his name in the trust instrument as a trustee. If not, he may not appoint a new trustee.
Assuming that there are other trustee named in the trust instrument besides Sam, appointment
of new trustee must be made by the remaining trustee. The power to appoint new trustee had
been given to them under Section 40(1)(a). Remaining trustee may appoint new trustee
provide that they have reasonable reason on appointing. The ground that is reasonable to be
used in this situation is remain out Malaysia for more than 12 month. However, it may not be
used in this situation as Sam was away for only 10 month. The trustee may appoint new
trustee if Sam do not break the period stipulated.
In conclusion, Bruce may appoint new trustee if his name himself as a trustee in the trust
instrument. If not only remaining trustee may appoint Bruce or any other person as a new
trustee
December 2015
Part B
1.
        The issue involved is whether Thomas as the sole trustee is able to appoint Sonny as his
replacement and that Steven and Bonnie is able to remove Thomas from the trust and appoint
Donald as his replacement.
        According to Section 40(1) of the Trustees Act, appointments of new trustees in
substitution or in addition can be made in writing by the persons provided under subsection
(a) and (b) of the stated section. In addition to that, such appointments are subject to the
limited number of trustees in which only four trustees are to be appointed in a trust as stated
in Section 39(1) of the Trustees Act. It should also be noted that, Section 40(6) of the
Trustees Act states that the persons who is nominated for the purpose of nominating new
trustees as provided by the trust instrument will perform the task of appointing new trustees.
If the trust instrument is silent onto the matter, or there is no identifiable person to act, then
the available trustees or trustees will appoint new trustees. This was mentioned under Section
40(1)(b) of the Trustees Act whereby if there are no nominated person to elect new trustees,
then the existing trustees in the trust will have the responsibility to elect new trustees for the
time being.
        In application of the situation given, Thomas is the sole trustee to the Steven’s trust. In
the appointment of new trustees, Section 40(1)(a) and Section 40(6)(a) of the Trustees Act
states that the appointment will be made by persons appointed or nominated in the trust
instrument. However, none is made known to who is exactly is the person who is nominated
or appointed in Steven’s trust to carry out the task of electing new trustees. Therefore, by
virtue of Section 40(1)(b) and Section 40(6) of the Trustee Act such power would be
bestowed upon the surviving trustees which is Thomas who is the sole trustee in Steven’s
trust. Therefore, Thomas has the power to appoint Sonny as a second trustee to the trust and
his appointment would be within the limited number of trustees in a trust mentioned in
Section 39(1) of the Trustees Act.
        Nevertheless, the issue arises of when Bonnie and Steven are unhappy with Thomas’s
suggestion to appoint Sonny as a second trustee in which both of them seeks out for
Thomas’s removal and appointing Donald as trustee to replace them.
        It should be noted that Steven is the settlor to the trust. As settlor, it is not stated in
Section 40(1)(a) and (b) that a settlor has the statutory power to appoint new trustees.
Nevetheless, a settlor may have the power to appoint new trustees to the trust if there is a
specific provision on in the trust instrument which allows the settlor to exercise such power.
Only then Steven can appoint Donald or any person as trustee to the trust replacing Thomas,
provided that Thomas falls within the grounds of removal stated under Section 4(1) of the
Trustees Act. However, none is stated or mentioned in Steven’s trust instrument which has
allowed and given Steven power as a settlor to appoint new trustees. Hence, Steven is
completely powerless and is unable to do anything in such matter.
        On the other hand, a beneficiary and settlor to the trust are able to remove Thomas as
sole trustee. Such can be done by beneficiaries or settlor by applying to the courts and relying
on the courts inherent jurisdiction and power to remove and appoint new trustees. This is
envisaged in Section 45(1) of the Trustees Act where the court may appoint new trustees
when it is made expedient but it is found inexpedient, difficult or impracticable to do so
without the assistance of the court. As stated in Section 45(1)(b) of the Trustees Act, the court
may make an order in appointing new trustees in substitution for a trustees who has sentenced
to imprisonment, is of unsound mind, bankrupt or is a corporation which is in liquidation.
Nevertheless, the courts appointment of a new trustee must be made subject to the criteria
laid down in Re Tempest where the courts must look into the settlors wishes, the interests of
the beneficiaries and consider either the appointment would promote or impede the execution
of the trust. Additionally, another criteria which the court consider is the fact if there is a
conflicting interest arising out of the trustees personal interest and duties when appointed as
stated in Re Parsons. However, as decided in Re Hodson’s Settlement, the court will not
interfere if an express or statutory power to appoint a trustee could be exercised and that there
is someone available who is able and willing to carry out such power.
        In application to the situation given, Bonnie as beneficiary can apply to the courts and
rely on their inherent jurisdiction to remove Thomas as sole trustee to Steven’s trust by
referring to Section 45(1) of the Trustee Act. However, in reference to Re Hudson’s
Settlement, the court would not be able to exercise their inherent jurisdiction under Section
45(1) of the Trustee Act. This is because the court would not interfere in such matters due to
the fact that Thomas is still a valid trustee who has the legitimate power to appoint new
trustees as envisaged under Sections 40(1)(a) and 40(6)(a) of the Trustees Act. Therefore, it
cannot be said that the situation is too inexpedient, impracticable or impossible to appoint a
new trustee without the courts aid under Section 45(1) of the Trustees Act.
        In conclusion, Thomas would be able to appoint Sonny as a new trustee in the trust.
 
RETIREMENT
 JUNE 2013: PART C QUESTION 1(B)
ii) In April 2013, Kusco decides that she does not want to be a trustee  anymore because she
wants to migrate to Alaska.
Advise her on whether she can retire from being a trustee and whether she can ask for any
remuneration for all the services that she has rendered to the trust.                (10 marks)
 
The issue is whether Kusco can retire from being a trustee.
There are several way a trustee could retire which are by statutory power, consent of
beneficiaries and court order. Firstly, retirement by statutory power can be referred to Section
40(1) of the Trustee Act 1949. In this section it stated on the ground rules for a trustee to
retire which is first it must be done in writing with the approval from the co-trustee or court
and the trustee must find a replacement. It has been strengthen in Cockburn’s Will Trust
when the court stated that any trustee that wishes to retire must find a replacement for his
office so as not to affect the operation of the trust. It is mandatory for a trustee who desires to
retire find a replacement.
However, in the case that retirement made without new appointment, Section 43(1) of the
same act must be referred. In this section it stated that if there is no new trustee is required to
be appointed the trustee may still retired with conditions that the trustee wants to be
discharged and states this in writing. Next, after he has been discharged, there will be a trust
corporation or at least 2 other remaining trustee and they consent in writing to the discharged
and agree that the trust property will be vested in them alone. If any person has been given
power to appoint a trustee, he too must consent in writing.
Last but not least is by court order. This is govern in Section 45(1) of the Trustee Act 1949.
In the situation where the trustee failed to obtain consent of his existing co-trustee or does not
wish to find himself a new replacement, the court will the exercise its power to appoint a new
trustee in his place.
Kusco may retire from being a trustee by first using the law govern under Section 40(1)
where she need to find a replacement and consent in writing of her co-trustee or the court. If
she cannot find a replacement or refuse to do so then she may use law govern under Section
43(1) where this can only be used if she is not a sole trustee or if there is trust corporation
appointed before. Not only has that she also needed consent from all her co-trustee by
writing. If all the method fail than Kusco may apply to the court to removing himself.
June 2016
Part A
1.
Three situations where the courts has exercised its jurisdiction to remove trustee from a trust:
        Section 45(1)(a) of the Trustees Act states that the court has statutory jurisdiction to
appoint new trustees if it is to be found that it is inexpedient, difficult or impracticable to do
so without the assistance of the court. In other words, this Section bestows inherent
jurisdiction to the courts in removing trustee or trustees to the trust when asked by a
beneficiary or settlor to the trust. The courts may only exercise such power if it is
inexpedient, difficult or impracticable to appoint a new trustee. Nevertheless, the courts will
not interfere in such matters if an express or statutory power to appoint a trustee can be
exercised and that there is someone who is able and willing to do so as mentioned in Re
Hodson’s Settlement Trust.
        There are a few instances where the court may exercise their power under Section 45(1)
(a) of the Trustees Act. Firstly, in situations where the trustee was found to be incapable of
acting due to old age or is unsound mind. This was illustrated in Re Lemann’s Will Trusts
where the courts invoked their inherent jurisdiction and removed the trustee to the trust who
was found to be incapable to act and carry out his duties as trustee due to the fact of his old
age and physical infirmity. Secondly, in situations where a minor was appointed as a trustee.
As seen in Re Parsons, the courts removed a trustee through Section 45 of the Trustees Act
due to the fact that the appointed trustees was only an infant. Thirdly, when the named
trustees had predeceased the testator or settlor as seen in Re Smirthwaite.
 
 
 
 
 
 
 
 
NON FIDUCIARY DUTIES OF TRUSTEES
June 2015: Part B Question 1
Tham has been appointed as one .of the trustees of a trust created for the benefit of Ruby,
Jade and Violet. The trust instrument authorises the trustees to distribute the income to all the
beneficiaries “as they think fit”. Early this year, the trustees gave 80% of the income to Jade
and Violet, in equal distribution. Ruby was given the balance of 20%. Ruby is disappointed
and dissatisfied with the distribution. She wants to know how and why such distribution was
made. She claims that the trustees have been biased because they do not like her. She
demands an explanation for the unequal distribution and also any documents stating the
reasons for their decision. In addition, Ruby wants to have access to the trust accounts. She
claims that the trustees have been in breach for not auditing the trust accounts for the last two
years.
Tham has come to you for advice on the matter. He wants to know whether he has to agree to
Ruby's requests. Tham also claims that, since his appointment, he has put in a lot of time and
effort and has incurred expenses in carrying out his duties. Thus, he wants to be paid for his
services. He added that Jade and Violet have agreed to the payment.
With reference to relevant authorities, advise Tham.                                                             (20
marks)
 
         The first issue in this question is whether Ruby can sue Tham on portion of income
received from the trust.
                To answer the question on whether the distribution of the said trust can be
challenge or not, we must first identify the duty of the trustee and the most relevant one in
this situation is the duty to distribute.
                Duty to distribute is a duty of trustees to distribute the trust property to the
beneficiary which was provided in the trust instrument. Failure to properly distribute the trust
would render to breach of trust. Thus, to prevent any possible problems in distributing the
trust property, trustees must ensure that the receiver of the said property is the exact
beneficiaries as listed in the instrument. Otherwise, trustees must pay for the wrongful
distribution in order to replace the loss suffered by the beneficiaries as illustrated in the case
of Eaves v Hickson. In this case, the trustee had to pay the loss suffered by the beneficiary for
paying the wrong person on a forged document.
                Under the duty to distribute, trustees are given discretion to pay or not to certain
beneficiaries. This is based on the decision made by the Lord Reid in the case of Re
Gulbenkian’s Settlement Trust where Lord Reid stated that trustees, in good faith, are given
absolute discretion in distributing the trust property to any of the beneficiaries, even if the
trustees in good faith, decided that certain beneficiary will only receive small amount of
income from the trust property, the court will not review their decision.
                Referring to the situation, the Ruby may not success in suing Tham or any other
trustees as the trustees, they had the discretion to distribute the property, in good faith, as
what they seem fit to do so. The twenty percent received by Ruby may be distributed by the
trustees as they, in good faith, believe that it is the best portion to be given to Ruby. As stated
in the case of Re Gulbenkian’s Settlement Trust, the court would not review or pronounce the
distribution to be bad as trustees had absolute discretion to distribute the property. Ruby can
still challenge Tham and other trustees on the distribution if she can prove that the trustees act
not in good faith in distributing the trust property.
                In conclusion for the first issue, Ruby may not succeed in challenging the portion
of the trust’s distribution among the beneficiaries as the trustees had the absolute discretion to
distribute the trust property as they seem fit.
                Moving on to the second issue, the second issue is whether Tham need to retrieve
the copy of minute of the trustees’ meeting upon the request of Ruby.
                To obtain the minute of the meeting, the duty to provide information to
beneficiaries can be raised. Trustees are obliged to provide the beneficiaries with complete
information regarding to the trust fund and if it is needed, trustees must follow the
beneficiaries to inspect documents related to the trust. As stated by Lord Wrenbury in the
case of O’Rourke v Darbishire, beneficiaries have right of access to the documents which
they desire to inspect and see all trust documents with the reason that they are the beneficiary
as they are entitled to it.
                However, there are several situations where the access is limited and the
beneficiaries have no right to obtain the trust related documents. One of the situation is the
beneficiaries cannot access to the documents which records the reason for the trustees’
decision. This is supported with the principle upheld in the case of Re Marquess of
Londonderry’s Settlement. In this case, trustees were authorized to distribute trust fund to 22
beneficiaries, and trustees had the absolute discretion to distribute according to whatever
proportion they think fit. Upon the distribution, one of the beneficiaries complained that she
received too little. She wanted to inspect all documents which would have stated the reason
for the trustees to distribute in such way. It was held that she was not allowed to access to the
documents as the beneficiaries had distributed the trust fund as they think fit and they had the
discretion to do so.
                Referring to the situation, by upholding the principle stated in the Re Marquees
case, Ruby may not have the chance to obtain the minute of meeting to understand the reason
of why she only receives twenty percent of the trust property. The trustees had fulfil their
duty by distributing the trust property, in good faith, as they seems fit. Thus, Ruby had no
access to the minute of the meeting as she is not allowed to do so.
                In conclusion for the second issue, Ruby may not access to the minute of the
meeting even though she may raise the issue of a trustees’ duty to provide complete
information to the beneficiaries. This is because Ruby’s action falls under the exception
stated in Re Marquess and thus restricted her from obtaining access to the documents.
                
 
The third issue is whether Tham need to give Ruby an access to the trust accounts.
A trustee has a duty to provide his beneficiaries with a full and accurate record of his
management of the trust property. It is affirmed by the court in the case of Pearse v Green.
The court stated that trustees are required to keep and render proper, clear and accurate
financial accounts, with supporting vouchers, receipts and other documents. Trustee must
allow the beneficiaries or their solicitors to inspect such accounts when requested to do so.
Not only that, in trustee duty to keep account, they employ an agent for the purpose of
maintaining accounts. This had been govern in Section 28 of Trustee Act 1949. Illustration of
Section 28 may be seen in Wroe v Seed where a trustee who was illiterate and therefore could
not keep accounts himself was justified in employing an agent to keep accounts.
Nevertheless, trustee has no duty to have the accounts audited, unless specifically required
under the trust instrument. Even though there is no duty to have the account audited, trustee
may from time to time have the accounts of the trust  property examined or audited by an
independent accountant under Section 27(4) of the Trustee Act 1949.
In applying to the situation of Tham, as a trustee, he has a duty to provide beneficiaries with a
full and accurate record of their management of the trust fund as mention in the case of
Pearse v Green. Tham required to keep and render proper, clear accurate financial accounts.
However, Tham has no duty to have the account audited unless there is specific requirement
under the trust instrument. He may from time to time to have the accounts of the trust
property examined or audited by an independent accountant.
In conclusion, Tham need to give Ruby access to the trust account. However, Ruby may not
sue Tham and other trustee on breach for not auditing as it is not include in the duty.
 
The last issue is whether Tham can claim payment for his services.
General rule for remuneration is a trustee acts voluntarily and is therefore, not entitled to
receive any remuneration for his work nor can he keep any profits as a form of remuneration.
In Section 35(2) of Trustee Act 1949 trustees may only be entitled to reimbursement for their
out of pocket expenses incurred in carrying out the provisions of the trust. For example,
where an agent is employed to assist the trustee, and the trustee pays the agent using his own
money first, he will be entitled to reimbursement. However, there are exceptions to the
general rule where trustees are entitled to be remunerated. The first exception is when
remuneration is expressly authorized by the trust instrument. The charges to be paid ought to
be reasonable. The illustration may be seen in Re Chapple.  A clause to “make the usual
professional charges” was held to limit the trustee’s remuneration for professional services
only, particularly the solicitor work which he performed. Other tasks which could be
performed without him being a solicitor could not be claimed. It must be note that if the
trustee claims excessively, this may give rise to a breach of trust. Next, where remuneration is
authorised by the court. In Section 46 of Trustee Act 1949 it states that the court may, if it
thinks fit, authorise remuneration to a trustee, but it will usually be given when the
beneficiaries who is sui juris and have impliedly or expressly promised to pay for the services
of the trustee. It is necessary to obtain the services of a particular kind of trustee and obtain a
particular trustee whose services are of special value to the trust. In Re Duke of Norfolk’s
Settlement Trusts, where a trust’s charging clause provided payment well below the market
standard, and the changes in the nature of the trust’s holdings caused a significant increase in
the trustee’s work, the court ordered for the payment to be increased.  The court’s inherent
jurisdiction covers power to allow remuneration for past services or work done, power to
allow remuneration for future services and power to increase level of remuneration beyond
those fixed or stated in the trust instrument. In exercising its jurisdiction, the court must
balance the beneficiaries’ interest to keep the trust expenses to a minimum with their interest
to well administer the trust. Other exceptions include where remuneration is authorised by the
statute. Under Section 46 of the Trustee Act 1949, it stated that the court has the discretionary
power to allow remuneration if it thinks fit.
In the situation of Tham, according to the general rule, Tham not allow or entitle to receive
any remuneration for his work. However, he may claim for reimbursement if any out of
pocket expenses incurred in carrying out the provisions of the trust Tham may also claim
payment for his service if it fall under any exceptions. First, if the trust instrument provided
on paying remuneration to the trustee then Tham may claim under this exception. Next,
exception for payment under the court jurisdiction. Besides, he may claim by applying to the
court under Section 46 of the Trustee Act 1949 where the court has the power in giving
remuneration. Tham also may get his remuneration if he get consent from all beneficiaries
who is sui juris. In the situation, Tham already gain consent from Jade and Violet but not
from Ruby. If he can gain consent from Ruby, the, Tham may claim payment under this
exceptions.
INVESTMENT AND FIDUCIARY DUTY
June 2015: Part B Question 2
QUESTION 2
In 2012, Madam Vee set up a trust for the benefit of Rita, Rosa, Ricky and Roy, her beloved
nieces and nephews. Ricky and Rosa are minors whereas Rita and Roy have attained the age
of majority. Madam Vee appointed her old friends, Vincent and Vicky, as trustees.
In 2014, Vincent was approached by his friend, Lobo, to invest the trust money in Lason Bhd.
Vincent told Lobo to give him some time to think over the matter. Vincent then conducted an
investigation into Lason Bhd. He discovered that Lason Bhd has a good track record and
fulfilled all the statutory requirements for the trust to invest in, except that, in 2012, Lason
Bhd declared a 4.5% dividend. The dividends for 2013 and 2014 were 5.5% and 5%
respectively. However, Vincent assured Vicky that, based on his experience as a bank
manager, economic situations such as recessions could have influenced the dividend declared
by the company for that particular year. Vincent reminded Vicky that the trust instrument
gives them the discretion to invest provided they get the consent of all the beneficiaries.
Two weeks later, Vincent, Vicky and Lobo met at a dinner organised by Gala Bhd. Mr Gala
is the director of Gala Bhd. He offered Vincent, Vicky and Lobo to become the directors in
one of his subsidiary companies. He promised them a remuneration of RM10,000 per month
each. Unknown to Gala, Vincent and Vicky are the trustees of a trust which currently owns
40% share in that particular subsidiary company. Both Vincent and Vicky accepted the offer.
When Lobo asked the trustees their decision regarding investment in Lason Bhd, both
Vincent and Vicky gave an affirmative answer.
Rita has since discovered the facts that Vincent and Vicky have been appointed as directors
in the subsidiary company of Gala Bhd and that they have invested the trust money in Lason
Bhd. Rita wants to know whether the trustees have breached any of their duties and if so,
whether she can take any legal action against them.
Based on the Trustee Act 1949 and decided cases, advise Rita. In your answer, consider also
the remedies that are available to the beneficiaries, should they succeed in their claim.           
(20 marks)
The first issue is whether Rita can take action against Lobo and Vincent on breach of
trust under investment.
Investment is define in the case of Re Wragg which is to invest includes to apply
money in the purchase of some property from which interest or profit is expected in which
the property is purchased in order to be held for the sake of the income which will yield.
Every trustee have duty to invest and they need to done their duty with standard of care
provided in the case of Tan Soo Lock v Tan Jiak Choo and Anor. The standard of care for
investment were classified into two which professional trustee have different standard of
care. The standard of care for trustee who is not a professional is stipulated in the case of Re
Speight which is a trustee ought to conduct the business of the trust in the same manner that
an ordinary prudent man of business would conduct his own. Honesty, sincerity and good
faith are not the same as prudent and reasonableness as mention in Cowan v Scargill.
Next, the trustee may make an authorized investment under trust instrument or Trust
Act 1949. This were given in Section 3 of TA 1949. The general rule investment under trust
instrument were provided in Section 9 of TA 1949, the trustees power to invest is at their
discretion but they must follow Settlor express provisions if any. Investment under Trust Act
were provided under Section 4 of the same act. One of the investment provided under Section
4(1) of TA 1949 is investment in securities. Securities define in Section 3, including stocks,
funds and shares. In Section 4(2)(a) of the Trustee Act 1949 stated that no trust fund is to be
invested unless the paid-up ordinary share capital of an approved company is not less than
five million ringgit.  Before making any investment, the approve company must have a paid-
up ordinary share capital of not less than five million ringgit. Next, in Section 4(2)(b) of the
Trsutee Act 1949, the approved company must have paid a dividend at the rate of not less
than 5% during each of the last three years prior to the time of investment.
In addition in choosing suitable investment authorized under TA 1949, is to obtain
proper advice on whether the investment is satisfactory. However, if trustees have power in
the trust instrument, then Section 6(2) does not apply to them. The advice must be obtained
before he invests. Proper advise were defined in Section 6(3) which is the advice of a
stockbroker obtained through the trustee’s bank manager or the advice of an authorized
accountant and it must be given or confirmed in writing stipulated in Section 6(5) of TA
1949.         
Rita may take action against Vincent and Vicky as they had breach their duty by not
followed the standard of care provided in the case of Re Speight is the same manner that an
ordinary prudent man of business would conduct his act. This is because both of them know
that there are inconsistency in the percentage of divenden’s of Larson Bhd but they still
choose to invest in this company. This is inconsistent with Section 4(2)(b) of the Trustee Act
1949 where the approved company must have paid a dividend at the rate of not less than 5%
during each of the last three years prior to the time of investment. This show that Larson’s
Bhd is a risky company. Besides, Vincent and Vicky need to follow any express condition
stipulated under Trust Instrument provided in Section 9. In the trust instrument, it stated that
the trustees need to get consent from all the beneficiaries which in this situation Rita and Roy
since they are the beneficiaries who is sui juris. Both Vincent and Vicky failed to get the
consent as Rita does not know about the investment to Larson Bhd.
Not only that, Vincent and Vicky also had failed to choose suitable investment. In
choosing suitable investment lay down in Section 6 of TA 1949, Vincent and Vicky had
choose to invest in company that is have high degree of risk as they know the company did
not have consistent dividend and not fulfilled the criteria under Section 4 of TA 1949. Not
only that, the fact they had made decision to invest based on Vincent experience as a bank
manager show that they had failed to follow the rule stated in Section 6(2), (3) and (5) where
proper advise need to be obtained and it must be given and confirmed in writing show that
they had breach of trust in investment.
 
The second issue is whether Rita can take action against Vicky and Vincent under
breach of fidicuary duty.
Fiduciary is defined in Bristol and West Building Society v Mothew which is
someone who has undertaken to act for or on behalf of another in a particular matter in
circumstances which given rise to a relationship of trust and confidence. One of the fiduciary
duty of a trustee is must not make any secret profit. This include on the issue of director’s
fees. This issue applies to where trustees are appointed as directors of a company due to the
trust’s shareholding in the company. This is illustrate in the case of Re Macadam. In this
case, trustees used their position to appoint themselves as directors of a company. Court held
that this is regarded as incidental profits of their position as trustees and they must account
them to the trust. It must be note that there must be link between the position and the profit
made. The rule does not apply if the trustee obtained the position not because of the trust, for
instance, in the case of Re Dover Coalfield Extension where the trustee was already a director
before he became a trustee. This rule also would not apply if the trustee only had minority
shares since even if the trust shares had been voted against trustee, he would still have won
the vote. This had been explained in Re Gee.
Applying to the situation of Vincent and Vicky, first, based on the case Re Macadam
we must look whether they are a link between their position as director and the profit made if
they will be made. There will be link if Vincent and Vicky are appointed as director the
subsidiary’s company due to the shares in the company. The fact that Mr. Gala offered them
the position without knowing that they have shares in that company had showed that they
obtained the position not because of the trust. Therefore, they are not liable to account the
remuneration to the trust fund as mention in Re Gee.
In conclusion, Rita may take action against Vicky and Vincent on breach of trust as
they breach by investing in Larson bhd but Rita may not sue for breach of fiduciary duty.
 
 
 QUESTION: DECEMBER 2015 PART A Q2
Eddie is a trustee to a trust. Six month ago, Eddie and his co-trustees invested in Sunshine
Bhd. Last week, Eddie who owns a construction company, was offered a RM50, 000 contract
to renovate a nursery owned by Sunshine Bhd.
        
The issue is whether Eddie who is a trustee to a trust can accept the contract to renovate a
nursery owned by Sunshine Bhd.

As a trustee, Eddie have some fiduciary duties that he must abide. One of the fiduciary duties
of Eddie is to not allow his interest and duties to conflict. This duty can be seen in the case of
Bray v Ford which states that it is a rule that a trustee is not allowed to put himself in a
position where his interest and duty conflict unless it is expressly provided that he is entitled
to make a profit. A trustee who derives an incidental profit from his position as a trustee will
be held in breach of trust. Next, in the case of Keech v Sanford, it was held by the court that
the trustee must not renew the lease for his own benefit even if the lessor has refused to
renew it in favour of the trust. The trustee’s duty is to hold the lease on trust for the
beneficiary, the trustee should have let the lease expired rather than have it renewed in his
favour.

        In applying the law to the fact of the case, as a trustee, Eddie have some fiduciary duties
that he must abide. One of the fiduciary duties of Eddie is to not allow his interest and duties
to conflict. Eddie’s duty here is to take care of the trust property while his interest arise when
Eddie who owns a construction company was offered a contract by Sunshine Bhd to renovate
the nursery owned by them. The offered may have triggered Eddie’s to accept the contract. If
Eddie accept the contract offered by Sunshine Bhd, this act of acceptance will amount to
conflict in his duty as a trustee. This is because, when the trust money has been invested in
the Sunshine Bhd Company, the trust money and the company money cannot be separated.
Any dealing with the company will leads to the dealing with the trust money too. Based on
the case of Keech v Sanford, Eddie should not interfere with the trust property because Eddie
has a duty not to allow his duty and interest to conflict. Thus, if Eddie decided to accept the
contract offered by Sunshine Bhd, he will be held in breach of the trust in referring to the
case of Bray v Ford.

        In conclusion, if Eddie as the trustee of the trust property, he should not accept the
contract offered by Sunshine Bhd because it will be against his fiduciary duty as a trustee. If
he decided to accept the offer he will be held in breach of trust.
        
WILLS OF MUSLIM (FARAIDH)

Felix, who converted to Islam 20 years ago, died recently, in his will, he directed he that:
a) one third of his property to be given to his Christian brother, David
b) the remaining property to be given to his only son, Danial.
Felix did not leave anything to his wives Fatimah and Faridah.
Advise Fatimah and Faridah as to the validity of the will under the Islamic Law of succession
.
The issue is whether Fatimah and Faridah may challenge the validity of the will made by
Felix under the Islamic Law of succession.

        The definition of will is that it is an iqrar of a person made during his lifetime with
respect to his property or benefit thereof, or to be carried out for the purposes charity or for
any other purposes permissible by the Islamic law, after his death.

        The first principle is that non-Muslim are excluded from inheritance. In Re Timah Binti
Abdullah, a non Muslim next of kin of a deceased Japanese woman who had converted to
Islam could not inherit her property under Faraid. Applying to the present dispute, Fatimah
and Faridah may challenge on the issue that Felix directed one third of his property to be
given to his Christian brother, David. Under the first principle, the disposition made to David
would be invalid as he is a non-Muslim. Therefore, applying the case of Re Timah, the
situation is similar as they are both non-Muslim. Hence, Fatimah and Faridah may challenge
the validity of the will based on this principle.

        The second principle relevant to this situation is that the testamentary disposition may
not exceed one third. The general rule is that the testamentary disposition may not exceed
one-third of the estate of the deceased. Unless, consent of the other heirs to be given after the
death of the testator. In Shaikh Abdul Latif v Shaikh Elias Bux, under Muslim Law, a testator
has power to dispose of not more than one third of the property belonging to him at the time
of his death, and the remaining two third must descend in fixed proportions to those declared
by Muslim law to be their heirs.

        In Amanullah Haji Ali v Hajjah Jamilah, the plaintiff claimed to be entitled to 1⁄3 of all
of his father’s property under the will, the will which was made during the time when the
testator was ill and in a coma, is thus, invalid. Even if it was validly made, it would be found
void as it purported to dispose of more than 1⁄3 of the testator’s estate to his heirs. In Siti bt
Yatim v Mohd Nor, a man died leaving a will and left all his share to his son and the wife
was completely deprived of the share. The court held that the will is not valid and that the
wife is entitled to her share as stated in Islamic Law. Next, they may also challenge the
validity of the will based on that Felix disposed the remaining property to be given to his only
son, Danial. This is contravening with the second principle whereby the testamentary
disposition may not exceed one third. By virtue of Amanullah and Siti bt Yatim, the
disposition to Danial would be invalid as it exceeds 1⁄3. This can be seen where Felix
disposed the remaining property amounting to 2⁄3 of the property.
To conclude, both Fatimah and Faridah may challenge the validity of the will made
by Felix on the basis that the disposition made to his Christian brother, David. Aside from
that, they can also challenge on the remaining property given to Felix’s only son, Danial
where it exceeded 1⁄3 portion of Felix’s estate.
 
 
OCTOBER 09 Q1 PA MAINTAINENCE
The trustee of a trust fund held for Andrew and Brown (both minors) had been approached by
their mother for maintenance of the boys. The father had deserted the family for two years
and she has run out of funds to support the family. Advise the trustee.
Whether the trustee can give maintenance to the beneficiaries.
Trust deed may provide for maintenance for the beneficiaries. In the event that the trust deed
is silent, section 36 will apply to the case above.
Under the case of Re Erskine’s ST:
Settlor created a settlement for the benefit of his grandson who entitled to the trust fund upon
the age 22. Trust deed also excluded the statutory provision for maintenance and
advancement. Court held, power of maintenance was successfully excluded.
Power of maintenance is the power that enables trustees to pay or apply capital to, or for the
benefit of, a beneficiary.
Under section 36(1)(a): Where any property is held by trustees in trust for any person for any
interest whatsoever, whether vested or contingent, then, subject to any prior interests or
charges affecting that property :-
during the minority of any such person, if his interests so long continues, the trustees may, at
their sole discretion, pay to his parent or guardian, if any, or otherwise apply for or towards
his maintenance, education or benefit, the whole or such part, if any, of the income of that
property as may, in all the circumstances, be reasonable, whether or not there is—
(i) Any other fund applicable to the same purpose; or
(ii) Any person bound by law to provide for his maintenance or education;
Provided that, in deciding whether the whole or any part of the income of the property is
during a minority to be paid or applied for the purposes aforesaid, the trustees shall have
regard to the age of the minor and his requirements and generally to the circumstances of the
case, and in particular to what other income, if any, is applicable for the same purposes; and
where trustees have notice that the income of more than one fund is applicable for those
purposes, then, so far as practicable, unless the entire income of the funds is paid or applied
as aforesaid or the Court otherwise directs, a proportionate part only of the income of each
fund shall be so paid or applied.
Case of Wilson v Turner: trustee’s discretion under section 36 means he must use active
mental exercise-well thought over and discussed. Failure to maintain in particular where the
trust deed compels him to do so could amounted to a breach of trust.
Case of Bryant v Hickley: if the discretion is exercised in good faith, court will not interfere.
Sowarsby v Lacy (1819): if the trustees know that other income is available for the
maintenance of the minor, and the total exceeded the needs of the minor, then only a
proportionate part of each fund shall be applied for the maintenance. The trustee may pay any
money which they decide to use either to the minors’ parent/guardian or pay directly for his
educational or benefit.
Under section 57, court has statutory power to order the disposal of a minor’s beneficial
interest for purpose of maintenance.
Re Collins: where a settlor has directed the trust income to be accumulated, the court has
inherent jurisdiction to allow the expenditure of the income on maintenance of the infant
beneficiaries. The settlor’s instruction may be ignored under the court presumption that the
settlor did not intend for his children to be left un-provided for or not educated properly.
Application.
In the above matter, the trust deed is silent on matter whether trustees have the power to give
maintenance from the trust fund made for Andrew and Brown. Therefore, section 36 will
apply. In applying section 36, the trustees may have sole discretion to apply the maintenance
for Andrew and Brown. Provided that the trustees shall have regard to the age of the minor
and his requirements and generally to the circumstances of the case, and in particular to what
other income, if any, is applicable for the same purposes and where trustees have notice that
the income of more than one fund is applicable for those purposes. Both Andrew and Brown
are minor which is under the age of 18. Their mother run out of funds to support the family
and their father left them for 2 years. Even if there is other fund available for the
beneficiaries, trustee still can give maintenance for the two beneficiaries as stated in the case
of Sowarsby v Lacy. After considering all the factors mentioned, only then trustee may give
maintenance for Andrew and Brown. If trustee had consider all the factors mentioned and had
exercise discretion in good faith, court will not interfere under section 57. However, if
trustees fails in doing so, under section 57, courts has the inherent jurisdiction to order the
disposal of a minor’s beneficial interest for purpose of maintenance as illustrated in the case
of Re Collins.
Conclusion, trustee have the power to provide maintenance for Andrew and Brown
provided that the trustees had consider all the factors mentioned earlier.  
WILLS (TESTAMENTARY CAPACITY)
Jan 2018 Part A Question 3
The issue involved is whether Joe’s will is valid as there are suspicious circumstances
in the making of Joe’s will and to Joe’s testamentary capacity.
        
In making a valid will, there are certain legal requirements that must be met. One of
such legal requirements is that the testator must be of sound mind. As mentioned in Section 3
of the Wills Act 1959, “...every person of sound mind may devise, bequeath or dispose of by
his will”. Under common law, it is presumed that the testator, at the time of the making of the
will, he had the legal capacity to do so. However, this presumption is rebuttable. But, if the
on the face, the will does not appear irrational and appeared to be duly executed, then the
Will will be admitted for probate without having to prove testamentary capacity. Therefore,
the burden of proving said rebuttal is on the alleger or propounder. As seen in Re Ng Toh
Piew, the courts confirm that a will that is executed at a time when the testator lacks
testamentary capacity is wholly invalid.

        In order to determine the testator’s mental capacity, the main test to determine
testamentary capacity or animus testandi is introduced by Cockburn CJ in Banks v
Goodfellow should be referred to. The main essence of this test is that the testator must have
the ability to comprehend rather than to make decisions. In this test, there are certain
elements which must be adhered to. Firstly, the testator must be able to understand the nature
of the act and its effects. Under this element, the testator must be able to understand that he is
in fact making and executing a Will. Additionally, he must also understand the consequences
of not making a Will in that if the Will is not made, the testator’s estate may not be benefitted
to his beneficiaries.        
        
Secondly, the testator must understand the extent of the property of which he is
disposing. The testator must comprehend the extent or amount of property that he owns in his
estate. This includes the debts he has owned before that has not yet been dealt with. If such
debts are yet to be paid, the debts will be settled first and the remaining estate will be
distributed according to the Will. As illustrated in Wood v Smith, the testator claimed that he
had investments worth up to RM 17,000. But in reality, the actual value of his investments
was in excess of RM 105,000. It was held that the testator was seriously confused to the
extent of the assets owned by him, thus he is regarded to lack testamentary capacity.

        Thirdly, the testator must be able to comprehend and appreciate the claims to which he
ought  give effect. A testator must be able to recognize his heirs and comprehend their
relationship with one another and their claims upon them. As illustrated in Harwood v Baker,
the testator had no recollection of his relatives and family other than his own wife. It was held
that the Will was invalid as the testator lacked testamentary capacity. However, in situations
where the testator does recalls his heirs but decides to exclude some of his family members
from the Will, the Will is still valid merely because he is moved by bad motives. As decided
in Boughton v Knight, the court purports that if the testator satisfies the test, he may
disinherit his children, and leave his property to strangers to gratify his spite or charities to
gratify his pride.

        Finally, the testator must not be subject or influenced to any “insane delusions” or
mental illness. In other words,the testator must not be subject or influenced to any “insane
delusions” or mental illness. A testator is considered to be delusional when he holds belief on
any matter which no rational person could hold, and which cannot be permanently eradicated
from his mind by reasoning with him. However, a testator can be delusional as long as it does
not affect his ability  to make a will. As seen in Banks v Goodfellows, the testator suffered
from paranoid schizophrenia and thought that a grocer, who was actually dead, was molesting
him. This was used as an argument to invalidate the Will made by the testator. However, the
court rejected said argument and held that the delusion did not affect the Will that was made,
and thus valid.

        Additionally, common law dictates that any suspicious circumstances surrounding the
execution of the Will will rebut presumption of knowledge and approval. If such suspicious
circumstances arises, it would be on the the propounder of the challenged Will to establish
that the Will was made by a testator with testamentary capacity in order to dispel such
suspicious circumstances as affirmed in Tho Yow Pew’s case. An illustration of suspicious
circumstances can be seen in Richards v Allan. In this case, the testatrix had died in July
1995. In May 1994, she signed a Will appointing A as he sole executrix, which she was
challenged by those would have been entitled on a intestacy.  At the time of execution, the
testatrix was 84 years old prone to periods of confusion and in poor health. A suggested that
O should make a Will and had approached her solicitor brother in law who drew up the Will.
This fact raises suspicious circumstances that A had  influence over the testatrix in creating
the Will. A fail to dispel such suspicious circumstances and thus invalidates the Will.
In application to the situation given, the given facts of that Joe relies everything on
Bella in signing anything, that the will was in Bella’s handwriting, that Joe was under
sedation when the Will was signed and that Bella was the only one present during the signing
of the Will raises suspicious circumstances that Bella has undue influence over Joe.
Therefore, in reference to Tho Yow Pew’s case, Bella must present evidences and arguments
in dispelling the suspicious circumstances surrounding the creation of Joe’s Will.

        However, in referring to the test introduced by Cockburn CJ in Banks v Goodfellows, it

would seem that Joe fails to fulfill the test in one of the elements, thus rendering him to be of
not having testamentary capacity. Said element is the element of that the testator must be able
to understand the nature of the act and its effects. In referring to the situation when the Will is
signed, Joe was in a state of confusion and disarray as he was sedated due to his medication
in the hospital. This is supported by the fact that the witnesses of the Will thought that Joe
was mentally ill during the signing of the Will. Obviously, Joe was not capable of
understanding and comprehending the act of him signing the Will and its effect of it. His state
of confusion and sedation may invalidate the Will as such can be seen in the judgement given
in Re Ng Toh Piew where the courts state that the testator’s second will that was signed
during the testator was extremely ill is held to be invalid as he was oblivious to the act and
thus lacking in testamentary capacity.

        In conclusion, Joe’s will is invalid as there is suspicious circumstances that the Will was
made  under the influence of Bella and that the Joe lacked in testamentary capacity due to
failing to fulfill the test in Banks v Goodfellow
REVOCATION OF WILL (BY MARRIAGE)
APRIL 2010, PART A, QUESTION 4

Twenty years ago, Simon was engaged to marry Janice, made a will by which he left
“RM5,000 to my fiancee, Janice and residue of my estate to my brother, Brian”. His total
assets then were worth RM50,000. Simon did subsequently marry Janice. Simon recently
died leaving an estate worth RM200,000. Advice Janice on the validity of Simon’s will.

The issue is whether Simon’s will to Janice is a valid will.

According to Section 2(1) of the Wills Act 1959, ‘will‘ means a declaration intended to have
legal effect of the intentions of a testator with respect to his property or other matters which
he desires to be carried into effect after his death. Application of Wills Act only apply to non-
muslim as stated in Section 2(2), whereby it stated that this Act shall not apply to the wills of
persons professing the religion of Islam.

A wills however may be revoked by a testator at anytime prior to his death. Under the Wills
Act, according to section 14, revocation of a Wills may be done by destruction. Revocation
by destruction must consist the act of destruction and it can be done by other person with the
presence and direction of Testator and the intention to revoke or destroy the Will. Under the
same Section, a Will can be revoke by a later Will as a later will always supersede the earlier
Will. Thirdly, revocation by marriage under Section 12.

The issue falls under revocation by marriage. The general rule of Section 12 of Wills Act, is
that, a marriage will automatically revokes a Will, regardless of testator’s intention. However,
it will not be revoked if the Will is expressed “to be made in contemplation of a marriage”.
Then, solemnization of the marriage contemplated will not revoke the Will. The exception
also applicable to the “first, second, or the subsequent marriage of a person lawfully
practicing polygamy”.

In Sallis v Jones, the marriage must be one that is likely to take place within the foreseeable
future. However, in the case of Pilot v Gainfort, testator make a will to a woman, who was
not yet her wife. The Will was made in contemplation of a marriage. After three years, they
married. The Will was held to be valid. The reason they need to wait that long was because
the man at the time was still a husband to some other woman.

Applying to this issue, Simon’s Will to Janice must be made in contemplation of marriage. If
the will was made in the contemplation of their marriage, then the Will is a valid Will and
Janice is entitled to the money. However, if the Will was not made with the contemplation for
the marriage, then the marriage will automatically revokes the Will. Apart from that, the
marriage must be one that likely to take place within the foreseeable future as stated in Sallis
v Jones. In this case, the marriage did took place within the foreseeable time, since Simon
was engaged to marry Janice subsequently marry her.

In conclusion, the Will is valid if it was made in contemplation of marriage. However, if it

was made without the contemplation of marriage, Janice cannot claim the Will to be valid as
the rule of Section 12 is that a marriage will revokes a Will regardless the Testator’s
intention. However, according to Section 3 of Inheritance Act, the court have power to order
payment out of net estate. A person dies domiciled in Malaysia leaving, inter alia,a wife or
husband, on their application, if the court thinks fit and the distribution was unreasonable on
the behalf of applicant, the court may make order under Section 3 of the Inheritance Act.
POWER OF ADVANCEMENT
June 2014 part A Q2
Circumstances when beneficiary would NOT be entitled to advancement under Trustee
Act 1949
When trust instrument makes provision for the trustee to pay advances to the beneficiary
from the capital, such provisions governs the power of advancement. However, when trust
instrument is silent on this matter, then the power of advancement was referred under Section
37 of Trustee Act 1949.
Advancement means the payment of a part of the trust capital to a beneficiary for certain
non-recurrent beneficial purpose. Advancement could also be made for the purposes of the
trust itself. Advancement is made before the beneficial interest becomes vested. The power to
advancement must be exercised before the shares become vested. When beneficiary’s interest
becomes absolute and vested, and that is to have indefeasibility tittle over the shares, the
advanced money will be calculated as part of the share of the beneficiary in the trust capital.
Under sect 37, it explains that trustee may apply the money from the trust capital for the
advancement and benefit of the beneficiary who have interest over the trust property. The law
has given an absolute discretion to the trustee over this power. The advancement shall be paid
with the conditions that it does not contravene with the intention in the trust instrument, the
amount of money paid for the advancement shall not exceed RM10k or half of the share of
the beneficiary in the trust capital whichever is greater. In Pilkington v Inland Revenue
Commissioner [1886], the court highlighted the meaning of advancement as a payment to
persons who are presumably entitled to have interest over the trust property, before the time
fixed by the will for them to obtain an absolute interest in a portion or a whole of that which
they would be entitled.
In Malaysian position, the issue was raised in the case of Re Cheong Soon Piang, Lau Poh
Yoke & Anor v Cheong Weng Moon & Anor [1954], the question in the case was not
whether there is an obligation on the infant beneficiaries to pay for necessaries supplied, but
whether the administrator had to account for any necessaries supplied from the asset of the
estate of the deceased. The court held that the administrator was the trustee within the
definition given by Trustee Ordinance 1949. A trustee had the power to apply the capital
money subject to a trust for the advancement and benefit of the beneficiaries as provided
under sec 37 of TA. However, the power is subjected to certain limitations provided by the
law.
The general rule of power of advancement is that every beneficiary is entitled to the
advancement. However, there are certain circumstances where beneficiaries are not entitled
to the advancement provided under Trustee Act. In Pitt v Holt [2011], the court held that it
is not possible to lay down a clear rule as what matters which the trustee should take into
account in exercising his power of advancement. The circumstances will differ from one to
another; from time to time according to the nature of the particular exercise of consideration.
Firstly, restriction provided in the trust instrument. In Re Gulbenkian’s Settlement Trusts,
the trustees were given discretion to pay or not to pay such income and capital to certain
beneficiaries.
Secondly, when the amount paid exceed RM10k or half of the share in the trust capital where
the beneficiaries have interest to. However, in Re Evans Settlement, the trust instrument
provided that the trustee could advance up to 5000 pounds which excluded the statutory
powers to advancement up to half of the shares.  Therefore, the words of the settlor in the
trust instrument overruled the statutory power.
Thirdly, beneficiaries will not entitle for the advancement if the sum of money was not for
the benefit of the beneficiaries. It is an essential factor to be taken into consideration by the
trustee. The advancement must be made for the benefit of the beneficiaries. In addition, the
payment of the capital money must be given for certain non-recurrent purposes for the benefit
of the beneficiaries itself. For example, to start a business or to buy a house. In Re Pauling’s
Settlement Trust [1964], court held that the advancement was a breach of trust as trustee has
wrongly paid the money not for the purpose of benefit of the beneficiary. The trustee aware
that the money advance was used by beneficiaries’ father for the family living expenses and
not for the benefit of the beneficiary.
Next, when the advancement was made not in bona fide or honesty. A trustee cannot benefit
from his own position as even he hold the discretionary power for advancement.
Advancement cannot be made to benefit the trustee itself. In Molyneux v Fletcher
[1898], court held that it was not a bona fide exercise of power and was therefore breach of
trust. The trustee agreed to the advancement on the condition that the money was used to
repay a loan made by beneficiary’s farther to one of the trustee was decided by the court as
invalid investment.
 
Lastly, the principle of remainder man. Section 37(c) of Trustee Act provides that no
advancement can be made that is to prejudice any person unless the person consented in
writing. A remainder man (beneficiary) is a person who inherits or entitled to inherit the trust
upon the death of the said beneficiary. A remainder man holds an interest in the remainder
and will becomes entitled to the property in some future time ie death. Therefore, the
advancement of the capital can only be made to the remainder man if the beneficiaries that
are entitled to is consented.
These are some of the example of the circumstances that the beneficiaries would not entitle to
the advancement.