LAW OF TRUSTS II

APPLICATION OF ENGLISH LAW

S.Selvakunapalan LL.B., LL.M.

Attorney-at Law, Deputy Legal Draftsman
Visiting Lecturer – Sri Lanka Law College.

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 Section 2 of the Trusts Ordinance
All matters with reference to any trust, or with
reference to any obligation in the nature of a
trust arising or resulting by the implication or
construction of law for which no specific
provision is made in this or any other
enactment, shall be determined by the
principles of equity for the time being in force in
the High Court of Justice in England.

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This section permits the reception of principles of
equity in force in the High Court of Justice in
England in the event of a casus omissus, i.e. when
there is no specific provision in the Trusts
Ordinance or any other enactment on any issue
arisen with reference to-

(a) any trust; or

(b) any obligation in the nature of a trust arising

by the implication or construction of law.
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 This section need to be analyzed
after breaking it into several parts
as follows:

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 All matters with reference to any trust

The above words seem to point out those trusts

created under Chapter II of the Ordinance while
“with reference to any obligation in the nature
of a trust arising or resulting by the implication
or construction of law” to those arising under
Chapter IX.

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Section 2 would not permit the introduction of
English Law in determining whether the factors
essential for the creation of a trust are present,
e.g. whether the “three certainties” were
observered; the prescribed formalities were
followed or the perpetuity rules were infringed.
It is only after a valid trust under Chapter II has
been created that the section would operate.

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The alternate view is that there are no
limitations on the applicability of the section and
the word ‘trust’ should be loosely construed to
include a potential trust.

The view expressed that the former construction

is to be preferred.

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There is judicial authority for the proposition
that Chapter II is complete and therefore section
2 is irrelevant to matters which arise in the
creation of a trust.- Valiyammai Vs. Majeed
(45NLR 169).

The words ‘arising or resulting’ make clear that

in determining whether a “constructive trust”
exists, unlike in the case of a trusts under
Chapter II.

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The view is expressed that the former
construction is to be preferred. (see
A.G.V.Abraham Singho- 18 NLR 417).

There is judicial authority for the proposition that

chapter II is complete and therefore section 2 is
irrelevent to matters which arise in the creation of
a trust. (see Valliyammai v.Majeed-45 NLR169)
and (Fernando v.Sivasubramaniam- 60NLR 241).
However the question whether the section applies
to the creation of trusts has never been canvassed
as a specific issue in a case before the court.
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“All matters…. With reference to any obligation in
the nature of a trust arising or resulting by
implication or construction of law…”

The words “any obligation in the nature of trust

arising or resulting by implication or construction
of law…” suggest that this part of the section deals
with the Constructive trusts. See the wordings in
section 82 in chapter IX of the Trusts Ordinance. It
states: “An obligation in the nature of trust….”. The
sections of chapter IX contain examples of
resulting and construction.
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“English principles are applicable
where there is no specific provision in
the Trusts Ordinance or any other
enactment.”

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• Muthalibu v.Hameed (1950-52 NLR 97)is a
case where the application of section 2 was
discussed in the event of casus omissus. In this
case, father provided consideration and
purchased a property in the name of the son.
After a time, the father asked the property
back relying on section 84 of the Trusts
Ordinance.

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Section 84 of the Trusts Ordinance enacts
“Where property is transferred to one person
for a consideration paid or provided by another
person, and it appears that such person did not
intend to pay or provide such consideration for
the benefit of the transferee, The transferee
must hold the property for the benefit of the
person paying or providing the consideration.

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In this case there was evidence that it was the
father who had paid or provided the
consideration for the transfer of the property in
the name of the son. In such a situation the only
fact that the father must prove is that he did not
intend paying or providing such consideration
for the benefit of the son as per section 84.

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However, in this case the son relied on section 2of
the Trust Ordinance and cited the equitable principle
of advancement available in England and argued that
were a person in loco parentis pays or provides such
consideration, a presumption of advancement arises
that such purchases was made by the other person
for the advancement or benefit of the transferee and
that this aspect has not been provided for in the
Trusts Ordinance or any other enactment is
applicable in Sri Lanka where the consideration is
paid by a person in loco parentis, such as a father
/husband by the virtue of the provisions of section 2.
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Dias S.P.J said: “that it is a well settled principle of
equity , which is recognized by section 2 of the
trusts Ordinance, that where a father or person in
loco parentis purchases a property in the name of
his child such child or wife and the provisions of
section 84 of the Trusts Ordinance do not apply to
such transaction. The onus in such cases is,
therefore, on the party seeking to establish the
trust to prove that fact. The son therefore did not
hold the lands or the consideration in trust for his
father”.
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It was further said that “although our Trusts
Ordinance was only enact in the year 1917,
nevertheless, ever since the time the British
connection begins in this Island, thereafter, our
courts have applied Principles of Equity to the
problems which arise in our courts whenever
necessary. …..that the doctrine of ‘advancement’
is part of the law of Ceylon is placed beyond all
questions by the provisions of section 2 which
makes applicable the English rules of equity to
all casus omissus.

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It is only where section 2 applies that English
authorities are binding and that otherwise they
are relevant but of persuasive authority.

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 Bernedette valangenberg Vs.
Hapuarachchige Anthony ([1990] 1 SLR 190)
The Court discussed the question of a presumption
of advancement in favour of the defendant-appellant
who admittedly was the mistress of the plaintiff, and
not the wife. Learned Counsel for appellant sought
to extend the rationale in Mutalibu v. Hameed to the
case of a man and mistress relationship. As no such
presumption can arise in such a relationship in the
law of Sri Lanka, Counsel sought to introduce
modern trends in the law of England through s.2 of
the Trusts Ordinance.
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I do not think this can be done. The decisions of
the English Courts have given rise to qualified
trusts based on property concepts and rules of
English property law which is not the law of Sri
Lanka. Furthermore, the Courts of this country
have been disinclined to introduce categories of
English constructive and resulting trusts not
mentioned in Chapter IX of the Trusts
Ordinance.

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the principles of equity for the
time being in force in the High
Court of Justice in England

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Section 2 has been applied and English
principles received into Ceylon but there has
been no judicial definition and analysis of
“principles of Equity”.

In the light of Keeton’s definition the phrase

“principles of equity” in section 2 may be
defined as follows, “The rules evolved by the
courts of chancery and “in force” in England.

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Where a rule of equity is repealed by legislation,
the repealed rule cannot be said to be in force
within the meaning of section 2.

Refer the pages from 36 to 57 in Reception in

Ceylon of the English Trust.

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