INTERNATIONAL ISLAMIC UNIVERSITY MALAYSIA

END-OF-SEMESTER EXAMINATION
SEMESTER 2, 2014/2015 SESSION

AHMAD IBRAHIM KULLIYYAH OF LAWS

Programme : Bachelor of Laws Level of : Third

Study

Reading Time : 9.00 a.m. 9.15 a.m. Date : 28.5.2015

Duration : ( 15 minutes )

Answering Time : 9.15 a.m. 12.15 p.m. Section(s) : All Sections

Duration ( 3 hours )

Course Title : Equity & Trust II Course Code : LAW 3711

This Question Paper Consists of 10 Printed Pages With 6 Questions.

INSTRUCTIONS TO CANDIDATES
DO NOT OPEN UNTIL YOU ARE ASKED TO DO SO.

Answer FOUR (4) Questions only.

There are TWO (2) PARTS. Answer TWO (2) questions from each PART.

REFERENCE(S) ALLOWED

TRUSTEE ACT 1949

Any form of cheating or attempt to cheat is a serious

offence which may lead to dismissal
Statutes should be free from any form of annotations.
APPROVED BY
 PART A

QUESTION 1

(a) Discuss the relevance of the maxim equity shall not assist a volunteer in relation

to the constitution of trust.

(3 marks)

(b) Kathy transfers all her shares to her husband Simon instructing him to hold the

bulk of the shares in CTCT Company for the benefit of their only son, John. As

for the remaining shares, Simon is to enjoy the dividends during his life time and

after his death to John absolutely. When Kathy died, Simon could not identify the

exact shares to be invested for John. What should he do with these shares?

(5 marks)

(c) Raj Kumar is the owner and CEO of Syarikat Basmathi Sdn Bhd. (SBSB). In June

2010, he went through a coronary artery bypass surgery at Damansara Specialist

Hospital. Early 2011, he called for a board meeting and announced that all his

shares in SBSB will be transferred to his wife and four sons. Three of the sons are

working at SBSB whilst the youngest is a lawyer. Raj on the other hand still

manages the company and he runs the day to day business of SBSB with the help

of his sons. In December 2014, one of his sons, Sanjay, is keen to expand the

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 business to an international level and for a start, with the agreement of his other

siblings, they wanted to open a branch in Johannesburg, South Africa. Raj

disagreed. Early this month, all the sons brought an action to remove Raj as the

CEO of SBSB in their capacity as the majority shareholder of SBSB.

Advise Raj.

(7 marks)

QUESTION 2

(a) Gopal Sri Ram SCA in delivering the decision of Court of Appeal ( Kuala

Lumpur) in Bank Bumiputra Malaysia Bhd v. Mohamed Salleh [2000] 2 CLJ 13

said;

It is quite true that Courts of Equity have been careful not to permit a litigant

from relying on the concept of constructive trust willy-nilly. Decisions of the

English Courts show that the device of a constructive trust is not to be readily

inferred in the absence of a clear intention to create a trust.

Comment on the above quotation and illustrate two circumstances that may come

within the purview of constructive trust with the support of decided cases.

(8 marks)

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(b) Ellinor, who died on 9th April 2014, by her will, dated 23rd April 2013, gave all

her estate to her husband, Simon, for his use and benefit during his life, "knowing

that he will carry out my wishes." She made no other disposition by her will.

Simon died on 14th April 2015. The will of Ellinor was found in the husband's

safe with an unattested paper, signed by her dated 27th April 2013, stating that her

wishes were that "the money I leave to my husband, Simon, should on his death

be divided between Cindy, Cathy and Joseph, myr twin nieces and nephew. It

was later discovered that shortly after the execution of her will, Ellinor had said in

the presence of her husband, that her property was to be divided after the

husband's death between her two nieces and her nephew, and Simon had

consented to that statement.

Cindy, Cathy and Joseph are your good friends.

Explain to them the structure of the above bequest and advise them on its validity.

(7 marks)

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QUESTION 3

(a) A donatio mortis causa has unique characteristic. It is neither a gift intervivos

nor a testamentary gift, but a hybrid a singular form of gift of an amphibious

nature.

Per Buckley LJ in Re Beaumont [1902] 1 CH 899 at p 892

Explain the above rule and its relation with the maxim equity shall not assist a

volunteer and compare it with the rule in Strong v Bird.

(7 marks)

(b) During the Malayafair 2013, Travel Cheap Sdn Bhd. (TCSB) was awarded the

agency contract for three years to sell tickets on behalf of Jomfly Airlines (JA).

This contract was signed by Tim, who is the managing director and principal

shareholder of TCSB. It was an agreed term in the said agreement that all proceed

from the sale of tickets, whether at the counter or online, should be credited in a

separate account. Between 2013 to middle of 2014, the sales amounted to RM5

million and commissions were paid throughout that period. Nevertheless, earlier

this year, JA has stopped receiving any payment from TCSB. TCSB fell into

arrears in respect of its arrangement with JA. It was discovered that Tim has

instructed the proceed of sale from June 2014 until now to be deposited in his

personal account.

With reference to decided cases advise TCSB on the possible arguments to

impose liability on Tim, the managing director.

(7 marks)
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 PART B

QUESTION 4

Comment on the validity of the following bequests found in the will of Hashim Hadda:

(a) RM1 million o be invested and the income to be used for the maintenance of

graves at the Melawati Muslim Cemetery and for holding a yearly prayer in Surau

al Hidaya, Melawati, Kuala Lumpur in memory of my great grandfather Abdul

Razak who is resting in peace at the aforesaid cemetery.

(4 marks)

(b) RM1 million to the Progressive Population Development Unit, a research cluster

at USIM to research and campaign for the establishment of Islamic law to govern

all financial transactions undertaken by Muslims in Malaysia.

(4 marks)

(c) RM50,000 to be used upon my death for the construction and maintenance of my

tomb, depicting an olive tree and a date tree at the head and foot of the tomb.

(3 marks)

(d) RM1 million for the purpose of encouraging sepak takraw games among deprived

youth as an alternative to spending too much time on mobile phones.

(4 marks)
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QUESTION 5

By her will Annie settled a trust of RM800,000 cash on trustees for the benefit of her

nephew Bill and her niece Carla, in equal shares upon their attaining 18 years of age.

When Annie died in 2013, Bill was 15 and Carla 14. Annie has also made a gift of

RM100,000 in her will to her youngest cousin Estelle. There was no express investment

clause in the trust instrument.

Tom, an accountant and Larrie, a self employed artist have accepted to become trustees.

They both shared the same flat during their undergraduate study at Unifinance. At a

meeting Tom persuaded Larrie to invest half the trust money in the shares of Globeoil

Sdn Bhd, a private limited company, as he has received information that it will be

awarded a lucrative contract to supply oil to a major shipping company. Larrie was

hesitant at first but Tom suggested that RM50,000 could be used to purchase Impianku

a prize winning oil painting on canvas by Larrie. Tom acquired 100,000 shares in

Globeoil at RM4/share and received a secret commission of RM25,000. He then issued a

trust cheque of RM50,000 in favour of Larrie. The painting was valued at RM30,000 a

month ago. Tom is the sole signatory to the cheque.

The share price of Globeoil rose significantly on acquisition but due to the slump in oil

price since late 2014, it is currently worth only RM1/share. The outlook for companies in

this sector is poor for the next few years. Larrie was convinced by Tom to keep on

holding the shares.

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Carla who is now 16 years of age has decided not to further her education beyond SPM.

She intends to pursue a career in baking and dreams of owning her own bread speciality

shop. She has approached the trustees to help her with fees for baking classes which is

conducted every Saturday 9am to 12pm. The bakery course runs for 10 sessions and each

session costs RM50. She was advised by the trustees to forget the bakery course and they

refused to sponsor the fees.

The balance of the trust money was left in an ordinary bank account until last month

when Tom withdrew the whole amount and applied for shares in Mondesir Sdn Bhd.

which is conducting an IPO [Initial Public Offer] of half its share capital on the KLSE.

Toms application was successful and the shares have increased by 50% in value.

Ben, the beneficiaries father requested an account of the trust property on behalf of the

children but received no response from the trustees. He engaged a forensic accountant to

conduct an investigation after which the above facts were communicated to him.

Advise Ben, the representative of the beneficiaries on the liability of the trustees.

(15 marks)

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QUESTION 6

Wendy Wang, a tax expert is the sole trustee of Zain Family Trust [ZFT] and the

executrix of her uncle Wongs estate [WE]. She has convinced beneficiaries of ZFT that

the introduction of GST will negatively impact investments in Malaysia and it was time

to venture into tax efficient offshore schemes. She had already spoken to Daniel who runs

Tresor Fiscalle, [TF] an offshore investment service in Seychelles. After examining

brochures of TF, Wendy agreed to liquidate all the trust assets in Malaysia and the

proceeds to be invested equally in the top five securities recommended and managed by

TF. The following events took place.

In January 2014 she received RM200,000 as compensation for the compulsory

acquisition of one acre of estate land belonging ZFT, which was banked into her personal

account, which at that time had a balance of RM100,000.

In February 2014 after liquidation of ZFT assets, Wendy credited the total proceed of

RM5 million into the same account pending transfer to TF in Seychelles.

In March she withdrew RM100,000 which was paid as a deposit for a condominium. In

April she withdrew RM1 million which was invested equally in the shares of Innofarm

Sdn Bhd. and Innocap Sdn Bhd.

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In May she withdrew RM400,000 to go on a luxury tour of the Pacific Islands with her

fianc Tom. She paid RM100,000 to the tour company, gambled away RM200,000 in a

floating casino, bought herself a diamond ring costing RM50,000 and a gold watch priced

RM50,000 for Tom.

The shares of Innofarm have doubled in value but Innocap shares are lower by 50%.

Jennifer, the main beneficiary of WE and the beneficiaries of ZFT have become aware of

the above facts.

Advise them on the equitable remedies available to them and their respective claims

against Wendy.

(15 marks)

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