Duties and powers of trustees

3. Duty to invest
(i) express power (iii) lending money on security of property
(ii) statutory range (iv) liability for loss
(i) Express power
- s. 2(2) - powers conferred by the Act is in addition to the trust instrument (will/ trust deed). It will be
apply if it does not contravene the intention of instrument (express power)
*Re Hastings
Court may interfere when the trustee exercise power on mala fide/ take into account irrelevant factor/ fail
to take into account relevant factor
*Re Tan Tye
Trustee has the duty to invest the trust funds in investment authorized by the instrument/ legislation/ court
*Re Whiteley
In exercising power to invest, trustee has the duty to take reasonable care as an ordinary man would take
if he were to make investment for the benefit of other people whom he is morally bound to provide (Ex:
seek for professional advice)
Trustee has a duty to confine himself to investment which are permitted and avoid investment which are
risky
*Cowan v Scargill
Duty of trustee may include duty to seek appropriate advice. Acting in good faith is not sufficient.
*Lee Tak Suan
some members of the club were alleged to have made a huge investment without due diligence. They
argued that advice had been obtained from an independent financial adviser and they were assisted by the
club's administration manager who has financial experience.
HELD: committee had not breach its fiduciary duty by acting prudently in investing the fund
*Barlett v Barclays Bank Trust Co Ltd (No 2)
Requires higher standard from professional trustees.
(ii) Statutory range
- s. 4 - 15
*Re Wragg
Investment means purchase of anything which profit is expected
*Re Power's Will Trusts (1947)
Power to invest in property for the occupation of beneficiary is not authorized
HELD: investments should produce income
*Re Harari's Settlement Trusts (1949)
The power to invest was given in the instrument "as the trustees may think fit"
HELD: trustee has the power to invest in any investment which they honestly think necessary. (power
should not be interpreted restrictively - overruled Re Power)
*Khoo Tek Keong
Trustees were authorised to invest in investments which they think fit. They made a loan and charged
interest on the security of jewellery and other loan without any security
HELD: the first loan was proper but the second was not. A clause giving the trustee an absolute discretion
to choose such investments as he thought fit did not entitle him to make an unsecured personal loan
- s. 4 - list that can invest (land, buildings, loan...)
- s. 5 - further power of investment
- s. 6 - duty of trustee to choose investment.
s. 6(2), (3) - seek advice from expert in investment before investing
s. 6(5) - must have writing from expert (use as DEFENCE)
s. 6(6) - (5) does not apply if the person giving advice is the co-trustee
- s. 9 - power to invest under s. 4 & 8 shall be exercised according to discretion of trustee subject to
direction in instrument/ law
- s. 12 - trustee will not be liable for lending money on security of property if he comply with (1)(a) - (c)
s. 12(1)(a) - act upon report on the value of property by surveyor
s. 12(1)(b) - amount of loan does not exceed 2/3 of the value in report
s. 12(1)(c) - loan was made under the advice of surveyor
Is valuer necessary or trustee can exercise in his reasonable belief?
*Re Walker
the valuer to have been as a matter of fact employed independently of the owner;
*Re Solomon and *Re Somerset
a reasonable belief on the part of the trustees would be adequate.
- s. 13 - trustee improperly advances excess trust money than the actual amount for investment, has to
pay back the excess amount with interest
*Shaw v Cates
the funds were to be over-secured by an asset worth half of the funds invested
HELD: trustees to make good the loss sustained on a trust investment
(iii) lending money on security of property (supplementary power)
- s. 14(1) lend money on security of property
 trustee can lend money under S.12 to 3rd party (Chargor) to invest.
  trustee may within 5years does not call back the capital but ask for interest provided that chargor
should not breach any clause regarding maintenance & protection of property
- s. 14(2) charge land
 property charged by chargor must have insurance
4. Enlargement power by court
- s. 59(1) - management of property by trustee in the court opinion is expedient, but cannot be done
because of the absence of power in instrument, court may grant additional power
* Lee Brothers Plantations & Realty (M) Sdn Bhd v Lee Yeow Teng
Df is a beneficiary under one of the trusts. Df fearing that certain lands were to be sold to a third party and
would defeat his interests, lodged caveats on these lands. Pt applied for removal of these caveats.
ISSUE: whether the trustees had the power to sell the said lands which were trust property.
HELD: the lands were held on trust for the beneficiary. Trustee did not obtain a Court order to sell the
trust properties - nor is there a consent by the beneficiary. It is clearly a breach of trust. Pt could not
remove the caveat
- s.59(2) - court may allow trustee to make investment on immovable property, auction land, raise fund
for the improvement of land or houses
* Re Syed Hashim Bin Kassim
Houses which are trust property were not occupied by the beneficiaries. Houses are rented to strangers
and the rental are distributed by the trustees in accordance with the terms of the trust. Municipal
Commissioners require mandatory installations of sanitary appliances.
HELD: installations of sanitary appliances are permanent improvement and expenses used are payable by
capital money. Any expenditure is to increase the capital value of the trust property then that expenditure
is a capital charge.
 Remainderman
- Person who inherits or is entitled to inherit property upon the termination of the estate of the former
owner.
- Ex: Property is to A for life, and residue to B.
A = life tenant -> entitle for capital and income
B = remainderman -> only income
*Wilkie
ordinarily recurring repairs which more towards the enjoyment of the tenant for life and which last only
for a short time -> paid by income
structural repairs are very great -> paid by capital (advantage obtained will benefit the remainderman)
5. Duty to convert
- apply together with duty of apportion
- Ex: house convert into money (liquidation), use money to invest in other property
*Nestle v Westminster Bank
The claimant said that the defendant bank as trustee of her late father’s estate had been negligent in its
investment of trust assets.
HELD: claimant had failed to establish either a breach of trust or any loss arising from it.
trustee must act fairly in making investment decisions which may have different consequences for
different classes of beneficiaries.
For the purposes of ensuring that a degree of fairness is maintained, the law has established a set of rules
related to the duty of trustees to convert and to apportion.
*rule in Howe v Dartmouth
applies to gift by will of residuary. Trustee is required to sell
(1) wasting, hazardous and unauthorised investments
(2) properties yielding no income
- not applied to intervivo instrument (during lifetime of settlor)
- subject to statute & instrument
Ex: abandoned house (trust property). In will stated house is to be used for charity purpose =>cant
convert
- after disposal of asset, trustee may use it for investment
6. Duty to apportion
- if there is no duty to convert (cant fulfil rule in Howe), no need for apportionment of income
- life tenant is entitled to all the income and the remainderman's interest is the capital
- divide according to portion (capital & income). life tenant receive capital + income
7. Duty to distribute
How to distribute:
 Directly give to beneficiary (if can be identified & contacted)
 Serve notice to beneficiary last address (if can't be reached then advertise)
 Advertisement
- s. 32
- once complied with s.32 = trustee is protected
*Re Aldhous
no beneficiary responded to the advertisement. The executor paid the estate money to the Crown
HELD: beneficiary was protected by s.27 English Trustee Act in respect to the proceeding brought by
next of kin
 - s. 27 = s. 32 of our Trustee Act
 Benjamin order
- trustee may know the identity of beneficiary but not the location
- order is made to allow the distribution of asset even if not all the beneficiaries are known
- court must satisfied that all inquiries had been done (notice, advertise)
8. Duty to provide accounts and information
- s. 27(4) - trustee may from time to time provide account to beneficiary. If beneficiary does not ask for
it, at least once in a year provide it to beneficiary

 Right to inspect document

- provide relevant document according to the nature of power of beneficiary
- Ex: income beneficiary (life tenant) are entitle to examine full set of account; capital beneficiary
(remainderman) can only check on capital account
*Re Londonderry's Settlement
A beneficiary did not like the small sums proposed to be distributed to her. She wanted information about
the reasons for the decision
HELD: trustees exercising a discretionary power are not bound to disclose to their beneficiaries. They are
only bound to reveal trust documents.
trust documents has common characteristics: (1) document in possession of trustees; (2) contain
information about the trust which beneficiaries entitled to know; (3) beneficiaries has personal interest in
the document and entitled to see them

*Schmidt v Rosewood Trust Ltd

personal interest is not necessary. Inspection is an aspect of court's supervisory control over
administration of trust
*Re Fairbairn
The plaintiff was a beneficiary of trusts. The will gives discretion to trustee to divide the residue into 3
parts. The plaintiff was a life tenant sought to inspect books of accounts and financial records of the
testator.
HELD: beneficiary is entitled to inspect any property forming part of the deceased's estate in which he
was beneficially interested.
*Hartigan Nominees Pty Ltd
beneficiaries are prohibited from having access to a trust document if the provision in the instrument
expressly/ implied stated/ on account of confidentiality (settlor communicate to trustee not to tell
beneficiary)
- to pay/ not to pay income to beneficiary?
*Re Gulbenkian's Settlement Trusts
trustee are given absolute discretion. As long as they decide in good faith not to give income to any
beneficiary, court cannot interfere. If trustee decide to give all income, court cannot review their decision
Ex: House is to give to A when he reach 25years old. House rented out (investment)
Rental receive before 25years old can pay to A partly/ all at once/ not pay until 25 years old. Property
pass to A when 25 years old (according to instrument)
9. Duty to act personally
- more than 1 trustee, all have to act unanimously unless stated in express provision
- Ex: decision made according to majority decision
* Luke v South Kensington Hotel Ltd
where there is more than one trustee they must act unanimously. In case there is difficulties, on
application of one or other of the trustees or a beneficiary, court may intervene
10. Delegation of power
 Employ agent
- s. 28(1) - may employ agent and not responsible for the wrong done by agent as long as appoint
in good faith
s. 28(3) - appoint solicitor as agent
s. 28(3)(a)(ii) - trustee will not be liable for breach of charge in appointing the solicitor
provided that nothing in this act shall... => cannot use this provision as defence if trustee allow
agent to exercise longer than reasonable time/ allow agent to retain trust property
 Absence of trustee
- s. 30(1) - trustee not in Malaysia for more than 14days may delegate his power by power of
attorney
*Turner v Corney
trustees who take on themselves the management of property for the benefit of others have no right to
shift their duty on other persons: and if they employ an agent, they remain responsible to the
beneficiary
- s. 30(2) - donor (trustee) will be responsible for donee's (appointed trustee) wrong
 implied indemnity of trustee
- s. 35(1) - trustee is only accountable for transaction he done (not done by broker, banker..)
s. 35(2) - return back the money (pay back the amount he had lost)
11. Maintenance
- s. 36(1) - if beneficiary is a minor, interest can pay to his guardian/ apply towards his maintenance,
education, benefit
*Wellesley v Wellesley
Husband had separated from his wife and children. They had a marriage settlement. The wife died and the
children were taken care by his sister. Husband wanted to recover the children.
HELD: court has the jurisdiction to allow maintenance to be paid out of the trust to minor.
12. Advancement
- s. 37 - money provide as advancement shall not exceed 10k