TUTORIAL 4

Scope of the Question: Appointment of Trustees

Blue made a declaration of private trust in favour of his wife Berry, his daughters,
Fuchia and Ivory. He named his aunty, Lavender and his nephew, Lemon as the
trustees. In the trust, Blue stated that no one will be a trustee apart from the one that
he has appointed. After the death of Blue, Lavender who agreed to be the trustee,
involved in car accident and was hospitalized. The doctor who treated her, confirmed
that Lavender may suffered mental illness due to the accident. Advise Lemon

Issue 1: Whether the initial appointment of Lavender and Lemon as trustees is

valid?

Law:
The settlor in an inter vivos trust, or the testator in the case of a testamentary trust,
would normally appoint trustee or trustees to the trust. The rule is that any person
capable of holding property in law could be made a trust. It is for the settlor of
testator to decide the basis on which a person is chosen as a trustee. In Phua Chui
Har v Amanah Raya Bhd, it was held that the court is under no duty or obligation to
determine the reasons for the deceased’s appointment of the defendant as the
trustee of her estate.

Application:
Based on the current facts, Blue name his aunty, Lavender and his nephew, Lemon
as the trustees for the private trust declared in favour of his wife and daughters.
Since nothing in the facts indicate that Lavender and Lemon are incapable of holding
property in law (at the time Blue declared the private trust and named them as
trustees), it is presumable that Lavender and Lemon are eligible to be appointed as
trustees. Based on the case of Phua Chui Har v Amanah Raya Bhd, the court shall
not enquire the reasons for Blue’s appointment of Lavender and Lemon as the
trustees of his private trust.

Conclusion: The initial appointment of Lavender and Lemon as trustees is valid.

Issue 2: Whether the trust would fail if Lemon or Lavender refuse to act as
trustees for Blue’s private trust?

Law:
Equity will not allow a trust to fail for the want of trustees. The court would make the
necessary appointments in order to save the trust. However, there is one exception
to this rule which was illustrated in the case of Re Lysaght. In the case of Re
Lysaght, the court held that if it is the essence of the trust that the trustees selected
by the settlor and no one else shall act as the trustees of it and those trustees cannot
or will not undertake the office, the trust will fail.

Application:
Applying the law to the current facts, according to the general rule, the trust would
not fail if Lemon or Lavender refuse to act as trustees for Blue’s private trust as the
court would make the necessary appointments in order to save the trust. However,
since Blue stated that no one will be a trustee apart from the one that he has
appointed, the exception on Re Lysaght is applicable. Since it is the essence of the
Blue’s private trust that no one else shall act as the trustees of the said trust except
Lavender and Lemon, if those two cannot or will not undertake the office, the trust
will fail.

Conclusion: The trust would fail if Lemon or Lavender refuse to act as trustees
for Blue’s private trust.
Issue 3: Whether Lavender can be a trustee after involving in a car accident
and suffering mental illness due to that accident?

Law:
According to Section 40(1) of Trustees Act 1949, a trustee may be removed if he
or she is unfit to act. This ground would cover instances of personal incapacity
attributable to, for example, mental illness, old age and infirmity, as well as
bankruptcy. In addition to the statutory powers conferred under Section 40(1) of
Trustees Act 1949, the court enjoys an inherent jurisdiction to remove the trustees
in the execution of trusts. In Re Wrightson, the court ruled that in order to remove a
trustee, “you must find something which induces the court to think either that the
trust property will not be safe or that the trust will not property executed in the
interest of the beneficiaries. Furthermore, in Titterton Oates, Crispin J referred to
the formulation of Sir Owen Dixon in Miller v Cameron and stated that in respect of
grounds of removal of trustees, the jurisdiction must be exercised with a view to the
interests of the beneficiaries, the security of the trust property, the efficient and
satisfactory execution of the trusts and a faithful and sound exercise of the trustee’s
power.

Application:
In the current facts, Lavender was appointed along with Lemon, as trustee for Blue’s
private trust. However, after Blue’s death, Lemon involved in a car accident and was
hospitalized and was confirmed that she may be suffering mental illness due to the
accident. Based on this fact, Lavender is unfit to act as a trustee due to her mental
illness. Hence, Lavender’s mental illness fulfills the ground of unfit to act provided
under Section 40(1) of Trustees Act 1949, and she may be removed from acting as a
trustee for Blue’s private trust.
Furthermore, applying the principle of Re Wrightson, Lavender may be
removed from acting as a trustee if the court finds something which induces it to
think either that the trust property will not be safe or that the trust will not property
executed in the interest of the beneficiaries. Here, Lavender’s mental illness induces
a doubt that the trust property may not be safe or that the trust may not be executed
property. Besides, since Lavender’s mental illness may affect the sound exercise of
her power as a trustee, she may be removed from acting as a trustees based on
Crispin J’s ruling in Titterton Oates and Sir Owen Dixon’s ruling in Miller v
Cameron.
Conclusion: Lavender cannot be a trustee after involving in a car accident and
suffering mental illness due to that accident.

Issue 4: Whether a subsequent trustee can be appointed to substitute

Lavender?

Law:
Section 40(1) of Trustees Act 1949 states that where a trustee is unfit to act, (a)
the person or persons nominated for the purpose of appointing new trustees by the
instrument, if any, creating the trust; OR (b) if there is no such person, or no such
person able and willing to act, then the surviving or continuing trustee may, by writing
appoint one or more others to be a trustee or trustees. The limitation on the number
of trustees is provided under Section 39(1)(b) of Trustees Act 1949 which reads
that the number of trustees shall not be increased beyond four.
Furthermore, the court enjoys statutory power under Section 45(1)(a) of
Trustees Act 1949 to appoint new trustee or trustees either in substitution for in
addition to any existing trustee or trustees. The statutory formula used for the
purpose is this: where “it is found expedient, difficuly or impracticable so to do
without the assistance of the court.” Besides, Section 45(1)(b) of Trustees Act
1949 further provides that without prejudice to the general power conferred under
Section 45(1)(a), the court may make an order appointing a new trustee in
substitution for a trustee who is mentally disordered or is of unsound mind.
The classic dicta of the principles governing appointment of trustees were
stated in Re Tempest. Firstly, the court will have regard to the wishes of the persons
by whom the trust has been created, if expressed in the instrument creating the trust,
or clearly to be collected from it. Secondly, the court will not appoint a person
interested under the trust, in opposition either to the wishes of the testator or to the
interests of the other cestuis que trust. Thirdly, the court in appointing a trustee will
have regard to the question, whether his appointment will promote or impede the
execution of the trust, for the very purpose of the appointment is that the trust may
be better carried into execution.

Application:
Based on the current facts, Lavender is suffering mental illness due to an accident.
Hence, she is unfit to act as a trustee for Blue’s private trust. Thus, based on Section
40(1) of Trustees Act 1949, (a) the person or persons nominated for the purpose of
appointing new trustees by the instrument, if any, creating the trust; OR (b) if there is
no such person, or no such person able and willing to act, then the surviving or
continuing trustee may, by writing appoint one or more others to be a trustee or
trustees. In the current facts, there are no person(s) nominated for the purpose of
appointing new trustees by the trust instrument. Hence, Section 40(1)(a) of
Trustees Act 1949 is inapplicable. Furthermore, no one in the facts were stated to
be able to willing to act as the trustee. Thus, based on Section 40(1)(b) of Trustees
Act 1949, the surviving or continuing trustee, i.e. Lemon, may, in writing, appoint a
substitute trustee for Lavender.

Also, according to Section 45(1)(a) of Trustees Act 1949, the court may
appoint new trustee in substitution for Lavender. However, the court must satisfy the
test that “it is found expedient, difficult or impracticable so to appoint the substitute
without the assistance of the court.” However, this test may not be satisfied in the
current facts as Lemon has been conferred the power to appoint the substitute
trustee under Section 40(1)(b) of Trustees Act 1949, which means that it is not
expedient, difficult or impracticable so to appoint the substitute without the
assistance of the court.

However, the court may reply on Section 45(1)(b) of Trustees Act 1949 to
appoint a substitute trustee for Lavender, based on the ground that Lavender is
mentally disordered or is of unsound mind.
 Applying the dicta of the principles governing appointment of trustees as
stated in Re Tempest, the court would firstly have regard to the wishes of the
persons by whom the trust has been created, if expressed in the instrument creating
the trust, or clearly to be collected from it. Based on the facts Blue stated that no one
will be a trustee apart from the one that he has appointed, hence, it is the essence of
the Blue’s private trust that no one else shall act as the trustees of the said trust
except Lavender and Lemon, if those two cannot or will not undertake the office, the
trust will fail. Since, it is the clear wish and intention of Blue that no one else shall act
as trustees for his private trust, the court shall not appoint a substitute trustee for
Lavender.

To conclude this issue, according to Section 40(1)(b) of the Trustees Act

1949, Lemon may appoint a substitute trustee for Lavender and Section 45(1)(b) of
the Trustees Act 1949 permits the court to appoint a substitute trustee for Lavender.
However, based on the dicta provided in Re Tempest, considering the wishes and
intention of Blue which had been clearly stated in the trust instrument, no substitute
trustee can be appointed to replace Lavender.

Conclusion: A subsequent trustee cannot be appointed to substitute Lavender.

Overall conclusion:
1. The initial appointment of Lavender and Lemon as trustees is valid.
2. The trust would fail if Lemon or Lavender refuse to act as trustees for Blue’s
private trust.
3. Lavender cannot be a trustee after involving in a car accident and suffering
mental illness due to that accident and shall be removed from the office.
4. A subsequent trustee cannot be appointed to substitute Lavender.