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INDEX

1. Introduction………………………………………………….……………………… 02

2. Defination of trust and trsutee……………………………………………………02

3. Evolution of trust in Bangladesh ………………………………..………………02

4. Language of trust ……………………………………………………………..……05

5. Formation and regulation of trust……………………………………..…………06

6. Trust in several laws and order in Bangladesh …………...……..……………07

7. Trustee powers………………………………………………………………………07

8. Trustee duties…………………………………………………………………..……08

9. Trustees rights and liabilities …………………….………………………………09

10. Beneficiaries rights…………………………………………………………………10

11. Doctrine of cypress…………………………………………………………………11

12. Charitable of trust…………………………………………………………..………12

13. Breach of trust………………………………………………………………………12

14. Variation and termination of a trust…………………………..…………………13

15. Conclusion …………………………………………………………………….……14

16. Reference…………………………………………………………………....………15
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Introduction :
A trust is a legal instrument that is perhaps one of the most important instruments in
law. The concept of trust law is very much at its adolescence in Bangladesh. The use of
trusts in most circumstances are very rare. A trust in its core is a legal relationship
between parties, in which the legal title to a property is entrusted to a person or legal
entity with a fiduciary duty i.e., to hold it as a trustee for the ultimate benefit of the
beneficiary. Although, in modern times, Trusts are primarily used for estate and tax
planning due to the manner in which cash flows are distribute. Trusts derive their history
almost entirely from equity – and it is equity that we look to for the primary creation of
trust law. There are laws in place such as the Trust Act 1882, the practical implications
of the same has been next to nil to say the least. A number of unique features exist in
Trusts that will be explored throughout these notes – and where relevant – the taxation
advantages of the structures will be highlighted.

Defination of trust and trsutee :

Trust :

Subject to the provisions of section 5, a trust is created when the author of the trust
indicates with reasonable certainty by any words or acts (a) an intention on his part to
create thereby a trust, (b) the purpose of the trust, (c) the beneficiary, and (d) the trust-
property.
Trustee :
The trustee is the legal owner of the property in trust, as fiduciary for the beneficiary or
beneficiaries who is/are the equitable owner(s) of the trust property. Trustees thus have
a fiduciary duty to manage the trust to the benefit of the equitable owners.

Evolution of trust in Bangladesh :

‘Trust’ literally means confidence. But as a legal device of transferring property it may
mean transferring property to someone with the confidence that he will hold the property
for the use or benefit of Others as nominated by the transferor. For example. A conveys
property to B for the use or benefit of C. Here A creates a trust. A is the author of the
trust. B is the trustee and C is the beneficiary. But this is the most simple example for
firsthand Knowledge on the subject. With the use and development of trust system for
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different purposes and in different manners, it has become almost difficult to give one
commonly acceptable definition of trust. Many well-known authors and jurists bn the
subject have tried to define trust. But no definition seems to be exhaustive. Prof.
Keetons definition “Trust is a relationship which arises whenever a person called the
trustee is compelled in equity to hold the property, whether real or personal, and
whether by legal or equitable title, for the benefit of some persons {of whom he may be
one and who are termed cestui que trust) or for some objects permitted by law, in such
a way that the real benefit of the property accrues, not to trustee, but to the beneficiaries
or other objects of the trust”[1] . But Keeton is criticized on that nobody can be
compelled to undertake a trust and also that his definition does not solve the question
who is the actual or real owner.[2] Underhill defines trust as” an equitable obligation
binding a person (who is called a trustee) to deal with property over which he . has
control (called the trust property) for the benefit of the persons (called the beneficiaries )
of whom he may himself be one, and any one of whom may enforce the obligation.”[3]

But underbills definition is not exhaustive in the sense that it does not include charitable
trust and some unenforceable trust which are permitted by law although having no
human beneficiaries.

Even to define a trust as a confidence (i. e. lewin’s definition)-has been criticized by

maitland[4] . There may be cases where no reliance or confidence is reposed by one
person in another e. g. where the owner creates a trust by declaring himself a trustee of
his property i. e. a watch for his child Here a trust is constituted from the moment of the
declaration though the child may not even know anything about it.

Hanbury in his Modern Equity [5] says:” It is not thought that a dissection and criticism
of earlier definitions are very rewarding, rather it is better to describe than to define a
trust, and than to distinguish it form related but distinguishable concepts”. Snell, a
renowned authority on the subject, also holds the same view. [6]

We have got the same definition problem in Bangladesh. The definition of trust given in
Section d of the Turst Act, 1882, says: “A Trust is an obligation annexed to the
owneship of property, and arising out of a confidence reposed in and accepted by the
owner, or declared and accepted by him, for the benefit of another, or of another and
the owner.”
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Since the Act applies to the private secular trusts only ; the definition does not include
charitable trusts, public religious trust, private religious trust etc. Moreover, the words
“confidence reposed in and accepted by the Owner” shows that it refers to express
trusts only. Resulting and constructive trusts are not within the purview of the definition
and are discussed seperately in chapter IX of the Act under the heading “Obligations in
the nature of trusts. “In fact, no enactment has given an exhaustive definition of trust in
Bangladesh. In the history of English- legal system, as we know, because of the rigidity
and inflexibility of the common law courts, it could not give remedies to the people in
many cases. That is why the court of equity came into existence to solve the problems
of the society on the basis of equity, Justice, fairness and good conscience. Thus trust
dealings being a new innovation of society were unknown to the common law courts.
Thus where ‘A’ transfers property to ‘B’ in trust for C, common law courts recognised B
as the legat owner; because with the passing of the property legal ownership passed
from A to B But for many reasons i.e. (i) the rigidity and inflexibility of the common law
courts and (ii) there was no law before the court to recognize C, (iii) no capacity to
enforce a moral obligation etc. the court, therefore, refused to help C in cases of breach
of trust by B. To remove this uncertanity, court of equity came forward. The court of
equity recognised B to be the legat owner but it attached an obligation to B on the basis
of conscience, wherby he was bound to hold property for the benefit of C, for to do
otherwise would be an act of dishonesty. Thus the court of equity gave B an equitable
ownership. In other words equity converted moral obligation into legal obligation by
separating beneficial interest from legal title and gave the benefit to C and the husk to
B. A trust thus arises when beneficial interest is separated form legal title and
confidence is reposed in the legai title- holder. This double ownership idea i. e. legal
ownership to trustee and equitable ownership to beneficiary, is not present in this sub-
continent. The same court here applies both law and equity. The beneficiary, here does
not have equitable ownership but he has only rights against the trustees (Sec. 3 of Trust
Act. 1882)[7]

Both private and public trusts are in operation in Bangladesh. A private trust is one
where benefit is conferred to some selected individuals,!, e., beneficiaries are identified.
For example, A conveys his land to B in trust for C. In a public trust benefit of the trust is
conferred to public at large[8] • Here beneficiaries are not identifiable. Trusts to promote
public welfare activities or education are public trusts. It may be a charitable or religious
trust. For example, A transfers his land to B for building a hospital for the public at large.

In Bangladesh private trusts are at present guided mostly by the Trusts Act, 1882. Prior
to the enactment of the Act there were various provisions under different enactments
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dealing with the subject. Thus trust Act of 1866; the penal code contained provisions for
the punishment of criminal breach of trust, the Specific Relief Act made provisions of
suit for the possession of property by trustee, the Civil Procedure Code made provisions
of suite by and against the trustees executors and administrators and suits relating to
public charity, Limitation Act, 1877 provides the time limit of recovering the property
transferred by breach of Trust. So the Act. of 1882 was passed to define and ammend
the laws relating to private tursts and trustees. But the Act does not apply to (i) The
Rules of Mobammadan law as to wakf; (ii) The mutual relations of the members of an
undivided family as determined by any customary or personal law; (iii) public or private
religious or charitable endowments {iv} trusts to distribute prizes taken in war among the
captors.[9] It is said that the English rulers, at the time of British India did not want to
injure the religious feelings of the people. Therefore they made above reservations in
order to leave Muhammaden and Hindu religious and charitable trusts untouched.

Language of Trust :
Before Trust law is dived into - a consideration of the language used in Trusts is critical.
The following terms are terms that must be understood by any person undertaking study
into structure of Irists and the relevant law surrounding their construction

 Settior - The person or persons who create the trust.

 Trustee - The person or persons who own or hold the trust property.
 Beneficiary - The person or persons for whom the trust property is being held
and who has the orcatest interest in the trust.
 Testator - A person who is deceased who has left a valid will and a trust is
typically formed from the property in the will.
 Object -The primary beneficiary, or entities who benefit, under the trust by the
trustec.
 Trust Property - This subject of the Trust and the relevant property which is
being held for the beneficiarics.
 Trust Deed - The primary document that is used to create a trust but as we shall
find is not critical to the creation). If a trust deed does not exist, the trustces
duties are stipulated under relevant cquitable and statutory requirements.
 Inter vivos Trust - Inter vivos means 'durine ones littime. So a inter vivos Trust
is one that is created during the settlors lifetime.
 Testamentary Trust - A trust that is created through the will of a testator on their
death.
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Formation & Regulation of Trust :

There are two distinct sets of laws in Bangladesh that deal with nonprofit organisations
in Bangladesh. As far as trust is concerned, it has two aspects: public or charitable trust
and private trust. Creation, management and all activities of private trust in Bangladesh
are governed by the Trusts Act, 1882.

Non-profit/Charitable
Organisation

Laws on Formation/creation Laws on Regulations

(Substantive law) (procedural Law)

1. Societies Registration 1. The Voluntary Social Welfare

Act, 1880,
2. The Trusts Act 1882;
3. Voluntary Social Welfare
Agencies (Registration
and Control) Ordinance
1961;
4. The Companies Act
1994;
Agencies (Registration and
Control) Ordinance 1961;
2. The Foreign Donations
(Voluntary Activities) Regulation
Ordinance 1978;
3. The Foreign Contributions
(Regulation) Ordinance 1982.
4. The Trust Act, 1882
5. Charitable and Religious
Trusts Act, 1920
6. Section 91-92 of the CPC
7. The Waqf Ordinance,1962
8. Religious Societies Act,1880
9. Christian Religious Welfare
Trust Ordinance,1983 10.
Hindu Religious Welfare Trust
Ordinanc, 1983 11.
Buddist Religious Welfare Trust
Ordinance, 1983
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Trust in several laws and order in Bangladesh :

1. Trusts Act, 1882; ➤ Creation and regulation of private trust of all types.
2. Waqf Ordinance, 1962 ➤ Creation and regulation of public trusts under the
Muslim Communities only.
3. Christian Welfare Trust Ordinance, 1983 ➤ Religious Creates a trust
organisation among Christian Communities but does not provide for creation of
any trust.
4. Hindu Religious Welfare Creates a trust organisation Trust Ordinance, 1983 ➤
among Hindu Communities but does not provide for creation of any trust.
5. Buddist Religious Welfare Creates a trust organisation Trust Ordinance, 1983
among Buddist Communities but does not provide for creation of any trust.
6. Charitable and Religious Regulation and enforcement of Trust Act, 1920 ➤
Regulation and enforcement of public trust
7. The Societies Registration Act, 1860 ➤ Creation of society as public trust
8. The Religious Societies Act. 1880 ➤ Regulation and enforcement ofpublic trust
9. Sections 91-92 of CPC ➤ Regulation and enforcement of public trust

Trustee powers :
Trustees powers are sourced in
(a)The trust instrument, if any;
(b) Statute; and
(c) Order of the court if any.

A Trustee must consider

 Whether or not to exercise the power;

 The range of objects of the power; and
 The appropriateness of individual appointments.

A trustee who does not turn his or her mind to the exercise of the power will have failed
in that duty per Turnver v Turner [1984] Ch 100 - where trustees were selected without
knowledge of their duties and they made 3 appointments which were ruled in valid.
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***The trustees powers must be exercised in -***

⚫ Good faith;
⚫ For the purpose for which they were given; and
⚫ Not for an ulterior purpose.

Trustee duties :
The trustees duties are found in the
(a) The trust deed, if any;
(b) Equity;
and A trustee is a fiduciary and there is subject to the 'conflicts and 'profits 'rules Chan v
Zacharia (1984) 154 CLR 178
(c) Statute.
The most important duties can be subdivided into the following groups
⚫ Duties relating to the trust and trust property; and
⚫ Duties relating to the nature of the office of the trustee.

These duties are designed to ensure that the trustee performs the trust properly and
loyally, and that the property passes to the person who is entitled to it.

1. Duties relating to the trust and trust property

2. Duty to seek advice

3. Duty to get in the assets

4. Duty to keep and render accounts

5. Duty to Transfer Trust Property to those entitled to it

6. Duties relating to the office of trustee

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7. Duty of Care

8. Fiduciary Obligations

9. Duty to act gratuitously

10. Duty to act personally 'cant delegate powers'

11. Self-dealing Rule - trustee cannot purchase trust property'

12. Duty to act impartially between beneficiaries

13. Preservation of other duties

 Best Interests of present and future beneficiaries- 'no moral duty'

 Duty to act impartially towards beneficiaries and between different

classes of beneficiaries

14. Duty to Invest Trust Funds

Trustees rights and liabilities :

The trustee is the one who has a legal interest and is responsible for expenses to
be paid. Thus, the trustee must ensure prudent operation of the trust otherwise
they can be personally liable.

Contractual Obligations - The trustee and the other contracting party can agree that
the trustee will haven o personal liability for payment and that recourse can only be had
to trust assets.

Clear Intent - Such an operation must be expressed in the document and state a clear
intent for this limitation to apply.
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 Sign as Trustee-Insufficient wording to exclude liability since the wording is

merely descriptive of the contracting capacity and does not limit liability - Muir v
City of Glasgow Bank (1879) 4 App Cas 337,
 Sign 'as Trustee Only-It is sufficient to sign as 'as trustee only per Gordon v
Campbell (1842) 1 Bells App 428.

Beneficiaries rights :

'Beneficiary'
Discretionary Trust - Objects of a discretionary trust are in a much more precarious
position than is the case with beneficiaries of a fixed trust.

 Trustee retains absolute discretion - The trustee has a discretion to select

among a group of objects in a discretionary trust. Thus, these objects only
have a potential interest in the trust.
 Rights of Objects of a Discretionary Trust - Generally, their rights are limited
to seeing that the discretion is properly exercised, and to have the right
protected by a court - Sainsbury v IRC [1970] 1 Ch 712.

i. Objects not have a proprietary interest

ii. The sum of their interests does not amount to one whole
proprietary interest.

The basic rights of a beneficiary:

1. Right to Compel Performance

2. Right to restrain a breach of trust

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3. Right to information concerning the Trust

4. Right to Call for Trust Property - Saunders v Vautier

5. Beneficiaries Right to Transfer of a Share

6. Right to Possession of Trust Property

7. Right to Follow the Trust Property

8. Right to sue a Third Party who has assisted in a Breach

Doctrine of cypress :
The Latin word 'cypres' means- for a purpose resembling "as nearly as possible", the
purpose originally proposed. It approximation. Cypres (from ici-pres or, probably) is a
doctrine evolved in English legal system in relation to charitable means trusts whereby,
if a gift is clearly for charitable purposes only, it will not be allowed to fail because the
precise object to be benefited, or the mode of application of the fund is uncertain. It
must be evident that the truster had a general charitable intent, but the precise purpose
is impossible, or has never existed, or has ceased to exist before the testator's death, or
the purpose or institution has ceased to exist after the gift has taken effect, or in certain
other cases where the question of general charitable intent is less material. If the
conditions are satisfied the court will settle a scheme for the application of the funds to
another purpose as near as possible to that prescribed by the truster.
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Charitable of trust :

it is generally acknowledged that in order to it in be charitable a trust must be either for

the relief of poverty, or for the advancement of education or religion, or for any other
purpose beneficial to the community in the society.

In Section 18 of the Transfer of Property Act, 1882, charity has been classified under
the following four principal divisions:

(i) advancement of religion;

(ii) advancement of knowledge;

(iii) advancement of commerce, health and safety of the public; and

(iv) advancement of any other object beneficial to mankind.

Breach of trust :
Locus Standi (the ability of a party to demonstrate to the court sufficient connection)
Suing a Trustee

A trustee may be sued for breach of a private trust by a beneficiary, a co-trustee

or a successor in the role of trustee.

 Successor trustee suing -

Young v Murphy (1994) 13 ACSR

 The respondents were appointed by The Supreme Court of NSW as new
trustees of a trust. The previous trustee had become insolvent and gone into
liquidation. The respondent's commenced proceedings against person formerly
involved the administration of the trust alleging breach.
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 Court - The new trustees had standing to sue the former trustee. A defaulting
trustee can be sued by a beneficiary, co-trustee or successor trustee.
The successor trustee is, in fact, potentially committing a
breach of duty itself if it does not take action against a defaulting former trustee.'
Defences to Breach of Trust
There are three core defences which are relevant to breach of trust. These include -
1. The trust instrument itself
2. Statutory defences
3. Equity

Variation and termination of a trust :

Trust Terms cannot be varied, Unless settlor allows for it - Once a private trust has been
established, its terms cannot be varied unless the settlor has reserved a right to effect a
variation.

Statutory powers of amendment, and through the Courts inherent power- trust terms
can be amended. This infers there are three ways in which to vary a trust:
1. The trust instrument itself; and
2. Statute.

Variation pursuant to the trust instrument

Provision must be in the trust deed - A clear provision in the trust deed will allow the
instrument to be varied. This power can be invested in any party, such as the settlor, the
trustee, the beneficiaries, or even a complete stranger to the trust.
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a) Variation to remove beneficiaries - All kinds of variations can be made under a

power given by the instrument itself, even a power to remove certain
beneficiaries or classes of beneficiaries and add others - Kearns v Hill (1990) 21
NSWLR 107 & Loughnan v McConnel
b) Clauses can be constructed broadly - Clauses were required to be strict, but can
now be constructed broadly per Kearns v Hill (1990) 21 NSWLR 107

Termination of the Trust

Automatic Trust Termination - Trusts come to an end automatically when one
beneficiary becomes entitled to the entire legal and equitable interest in the trust
property. This is because the beneficial estate is extinguished.

 Re Cook; Beck v Grant [1948] Ch 212

Husband and wife owned a house as joint tenants in trust. They husband
died and then the wife died. Her will gave all her personal estate to her nieces and
nephews - if the trust continued to the wife then it would form part of personal estate, if it
did not - the house would form part of the real estate of the wife.
 Court stated that on the death of the husband, the testatrix became the absolute
owner and no trust subsisted after that date.
A trust must be terminated when, under its new terms, the trust property is due to be
distributed.

Conclusion :
From the above discussioru it is clearly seen that the resulting Uust as well as
the benami transactions are in operations in Bangtadesh. According to the
principles of resulting trust, a Person can purchase a proPelty in the name of
another which is recognized by equity. On the other hand, according to the
current laws of Bangladesh, no Person can purchase a ploperty in the name of
another, which is known as benami transaction, because bencrmi transactions
are made from notorious sources of black money of dishonest government
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officials, politicians, black marketers and persons dedicated to unscrupulous

intentions. Since benami tlansactions are prohibited by specific laws, it cannot
be made as a resulting trust.

Reference :
1. Text bool of laws on equity and trust in Bangladesh (Md.Abdul Halim)
2. Equity,trusts and specific relief (B.M.Gandhi)
3. http://law.timdavis.com.au
4. https://www.merriam-webster.com/dictionary/trust
5. https://www.investopedia.com/terms/t/trust.asp
6. http://bdlaws.minlaw.gov.bd/act-47/section-1534.html