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Appointment,

removal,
retirement and
control
Subtitle
Appointment
• The rule is that any person capable of holding property in law could be
made a trustee.
• Phua Chui Har v Amanah Raya Bhd [2002] 4 AMR 4753  ‘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’.
(“The court will not acquire why testator appoint the particular
trustee.” )

Ways to Appoint:
• A person may declare himself or herself as a trustee.
• A trust instrument may specify someone to appoint the trustees.
• Settlor may also reserve himself or herself the power of appointment.
• A person could also be a trustee by implication of law, exemplified by
resulting trusts or by operation of law, as illustrated by constructive
trust.
Cont..
• Where the trust instrument or the will makes no provision
for the appointment of trustees, the court will make the
necessary appointment because equity will not allow a
trust to fail for want of trustee.
• However, it will not apply where, exception stated in the
case of Re Lysaght [1965] 2 AII ER 888

“In the trust, if the trustee selected by the settlor is of the


essence of the trust, and no one else shall act as the
trustee of it if those trustee cannot or will not undertake
the office, the trust will fail.”
Appointment
• Number of trustees:
• Section 39 (1) (a) , (b) of the Trustees Act 1949
• Number of trustee shall not exceed 4
• If more than 4, the first four should be trustees and the other
persons shall not be the trustees unless appointed on the
occurrence of vacancy
• Section 39 (1) (a) , (b) of the Trustees Act 1949
• The number of trustees shall not be increased beyond 4.
• Exception under Section 39(2) of the Trustees Act 1949 (Such
restrictions do not applies in case of property vested in trustees for
charitable, religious or public purposes i.e. non-private trust, trust
relating to religious matter etc)
Subsequent Appointments
• May be made in a number of ways:

1. Express provision :
• The trust instrument or the will may contain express
provisions for the subsequent appointments of trustees.
• This is unnecessary as the statutory power that exists for the
purpose under the TA 1949
2. Section 40(1) (a) (b) (c) (d) (e) (f) of the Trustees Act
1949
Cont….
3. Appointment by Court – Section 45 (1) (a) (b) of the Trustees Act 1949
•S.45(1)(a) –
•Court has statutory power to appoint new trustee either in substitution for or in
addition to any existing trustee or although there is no existing trustee.
•Court can appoint trustee if “it is found inexpedient, difficult or impracticable so to do
without the assistance of the court”.
•Re Tempest (1866) 1 Ch App 485  one of two appointed trustees in family
predeceased the testator. Those with power of appointment could not come into
consensus on a selection. Mr. Petrie was named but was objected by a beneficiary on
ground it was testator’s wish to exclude him. Held could not be appointed given the
testator’s wish and the likelihood of his bias to the prejudice of some of the
beneficiaries.
•Re Tempest  Laid down principles governing appointment of trustee:
• Court have to regard to the wishes of the persons by whom the trust is created.
• Court will not appoint a person interested under the trust. (such as beneficiary)
• Whether his appointment will promote or impede the execution of the trust. (someone
who will execute the trust in a proper way)
Cont…
• Re Smirthwaite Trust – appointment by the court can be
made when trustees all of whom had died before the
testator
• Re May’s Will Trust - appointment by court can be made
when a trustee who was in enemy territory and was unable
to escape
• Re Solicitor – appointment by court can be made when the
trustee is bankrupt
Retirement of Trustees
1. Express Provision
• The trust instrument may make specific provisions in respect
of the retirement of trustees.
2. Statutory Provision
• Section 40(1)  “..or desire to be discharged from all of the
trusts or powers reposed in or conferred on him..”
• Section 43(1)  provides for the retirement of a trustee
without a new appointment but subject to conditions. Such
as :
• There will be either a trust corporation or at least 2 individuals to act
as trustees to perform the trust, then if such trustee declares in
writing that he is desirous of being discharged from the trust.
• And the co-trustees consent in writing to the discharge of the
trustee.
Cont…
3. Consent of all Beneficiaries
• A trustee who secures the consent of all the
beneficiaries who are of full age and sui juris may retire.
4. By court order
• Section 45 of the Trustees Act 1949  court may make
order appointing a new trustee, in substitution, in the
prescribed circumstances. The court also enjoys an
inherent jurisdiction to allow trustee to retire.
Removal of Trustee
1. Express Provision
•The trust instrument may contain express provisions authorizing the removal
of trustees.
2. Statutory Provision
•Section 40(1) of the Trustees Act 1949 : A Trustee may be removed if
•He or she remains out of Malaysia for more than 12 months or
•Refuses to act
•Is unfit to act
•Incapable to act
•Is a minor
•Ligar Fernandez v Eric Claude Cooke  his continued absence from Malaysia
for over 12 months as this rendered him legally incapable of acting as a trustee
pursuant to s40(1)
•Phua Chui Har v Amanah Raya Bhd  The saving of expenses that a defendant
trustee may charge when administering the estate without more is not valid
ground within the intendment of the section.
Cont…
• Section 45 of the Trustees Act 1949
• The court is empowered to appoint new trustee in the prescribed circumstances.
• Titterton v Oates [1998] 143 FLR  May a trustee be removed when court
appoints a new trustee under the section?
• the Plaintiff applied to have the 1st defendant removed as a trustee on the
account that she had not distribute income efficiently, that she was guilty of
conflicts of interest and that she had failed to understand the nature of the
discretion conferred in dealing with 2nd defendant, a brother who was
intellectually disabled.
• It was explained by Crispin J that the section was intended to authorize the court
to make orders where there was an existing and independent right to have a
new trustee appointed.
• The section contains no explicit power to remove a trustee and the power to
appoint in substitution for an existing trustee may be intended to simply
authorize the court to replace a trustee who has resigned or is disqualified form
continuing in that role.
• Held: Court had no power to remove a trustee against his or her will.
3. Courts inherent power to remove trustees
•The court enjoys an inherent jurisdiction to remove trustees in the execution of trust.
•Re Wrightson [1908] 1 Ch 789
• “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 be properly executed in the interest of the beneficiaries.”
• The complaint must satisfied the court that the alleged is fit to be removed.
•Letterstedt v Broers (1884) 9 App Cas 371
•The courts main guide is the welfare of the beneficiaries.
•In cases of positive misconduct the court will have no difficulty in removing trustees who have abused their
trust.
•It is not every mistake or neglect of duty, or inaccuracy of conduct of trustees, which will induce the court to
remove the trustee. The trustee’s acts or omission must be as such to endanger the trust property, or to show a
want of honesty, or a want of proper capacity to execute the duties, or a want of reasonable fidelity.
•Removal will be appropriate when the continuance of the trustee would prevent the trust being properly
executed.
•Friction or hostility between trustees and beneficiaries is not of itself a reason for the removal of a trustees.
However, it should not be disregarded if the hostility is grounded on the mode in which the trust had been
administered, such as where it has been caused wholly or partially by substantial overcharges against the trust
estates.
• Titterton v Oates 
• Trustee will not normally be removed merely because certain beneficiaries
desire his or her removal.
• It is insufficient to show that all beneficiaries require such removal. Nor will a
conflict of interest or a breach of trust will necessarily lead to removal.
• The jurisdiction of court as to the removal of a trustee must be exercised with a
view to the interest of the beneficiaries, security of the trust property, the
efficient and satisfactory execution of the trusts and a faithful and sound
exercise of the trustee’s power.

• General law is that breaches of trust may or may not lead to removal. As Crispin
J says: “More importantly, my decision to order removal is not ultimately based
upon the commission of those breaches of trust but upon the conviction that
the maintenance of the present arrangement would be damaging to the
interests of all concerned.”
• Halsbury law of Malaysia : Court will only remove the trustee if he refuse to
execute the trust, mismanaged, or has disqualified himself, or the continuance
will be detrimental to the trust. When a trustee is removed, he is usually
ordered to pay the cost of removal.
Death of trustee
• Where there are 2 or more trustees, and death occurs to one of
them, then the remaining living trustee may fulfill his obligations
until another trustee is appointed or the trustee can act solely to
fulfill the mission of the trust. (If remaining trustee can deals with
the management of trust, they can do so without having to
appoint a new trustee)

• Section 23 (1) of the Trustees Act 1949 – where a power of trust


is given to or imposed on two or more trustees jointly, the same
may be performed by the survivor of them for the time being.
• In the case of sole trustee, if he dies, then the personal
representatives can exercise the power given to the sole trustee –
Section 23(2) or choose to appoint new trustees as they are not
bound to accept trusteeship as per Section 40(1) of the Trustees
Act 1949.
Disclaimer of
trusteeship
• Any person nominated to be a trustee can choose
to disclaim it. (can choose not to accept it, because
trustee is in fiduciary position)
• Re Lister [1926] Ch 149: But once he or she
accepted, then cannot disclaim.
Vesting of trust
property
The vesting of trust property in new or continuing
trustees is provided for under Section 44 of the
Trustees Act 1949
If trustee wants to discharge himself, he must vest
the trust property he holds to other remaining
trustee.
Section 44(3) of the Trustees Act 1949
Section 48 of the Trustees Act 1949
Fiduciary nature of
trusteeship
A. Remuneration
•General Rule: A trustee cannot expect remuneration(salary) for
performing duties in relation to the trust as a trustee is not allowed to
put himself in a position where his or her personal interests would
conflict with his duties as a trustee.
•However, recover of costs and expenses in executing the trust is
allowed: Section 35(2) of the Trustees Act 1949. Examples:-
• Barret v Hartley  a trustee who had managed the trust business for
some six years with considerable success nevertheless failed to secure
remuneration for his personal efforts in managing the trust
• Vacuum Oil Co Pty Ltd v Wiltshire expenses incurred in performing a
business authorized by the trust instrument
• Re Raybould in defending the trustee as legal owner of trust property
• Re Knapman  to give effect to this, the rights can be effected by means
of equitable lien on the trust property.
• Re Syed Ahmed Alsagoff  the principle of non-remuneration is closely
related to the fundamental principle, namely a trustee is not allowed to
put himself in a position where his interest will conflict with his duties as
a trustee. The general position is that the equity will disallow a trustee
to enter into an arrangement when his interest conflicts with the
interest of those whom he is required to protect.
• Barret v Hartley (1866) LR 2 Eq 789  a trustee who had managed the
trust business for some six years with considerable success nevertheless
failed to secure remuneration for his personal efforts in managing the
trust.
Exceptions as to
remunerations
1. Remuneration is provided for in the trust instrument
•Public Trustee v IRC - charges to be paid ought to be reasonable and may take the form
of income from a part of the estate
•Re Beatty’s Will Trust – capital payment pursuant to a power of appointment
•Re Chapple (1884) LR 27 Ch D 584 – A clause to “make the usual professional charges”
was held to restrict the remuneration of a solicitor, trustee, to professional services only
and did not extend to the other things a trustee could perform himself without being a
solicitor.
2. Remuneration authorized by the court
•Boardman v Phipps  The court take into account what agent had done and agent had
done it openly. Lord Denning “ it would be inequitable how far the beneficiary step in and
to take the profit without paying for the skill and labor which trustee has produced it”
•Brown v Litton (1711) 1 P Wms 140  a mate who had assumed command of the vessel
on the captain’s death made use of the money brought by the captain resulting in
considerable profits. In spite of being held accountable for all the money and profits, he
was nevertheless permitted to receive a fair remuneration for his diligence.
•O’Sullivan v Management Agency and Music Ltd  A contract was set aside for breach
of fiduciary duty and undue influence. The recession of the contract did not stop the court
from recognizing the agent’s contribution to the singer’s success justifying fair
remuneration.
Fiduciary nature of
trusteeship
3. With consent of with all the beneficiaries
•Trustee may contract for remuneration with the beneficiaries, all sui juris and
absolutely entitled to the trust property.
4. Authorised by legislation – Section 46 of the Trustees Act 1949
•The normal rule is that a solicitor who is also a trustee cannot claim remuneration
for his services save where the trust instrument permits it.
•However, the exception in case of Cradock v Piper (1850) 1 Mac & G 664 
however, in this case, a solicitor-trustee is permitted to charge for his services if he
has acted for a co-trustee and himself in respect of an action or matter in court.
The principle relates to works litiguos in nature and the activities concerned have
not increased the usual expenses.
5. Overseas trust assets
•Where the law of the country where the trust assets are situated permits trustees
to receive remuneration
•Re Northcote’s Will Trust [1949] 1 All ER 442  where the law of the country
where the trust assets are situated permits trustees to receive remuneration, the
trustees would be entitled to be remunerated under the law of the state where the
assets are located.
B. Secret profits
•If trustee makes secret profit from a trust, secures a benefit for himself by
taking advantage of the trust, equity will not allow him to retain the same and
shall hold the benefit under the constructive trust.
1.Under the Rules in Keech v Sandford (1726) Sel Cas Ch 61
•A trustee must not use his position as a trustee so as to enrich himself. The case
extended to all instances where one stands in fiduciary relationship with
another. The fiduciary has to account for the profit and the profiteer cannot
escape the risk of being called upon to account
Regal Hastings Ltd v Gulliver  trustee must not use his position as a trustee so
as to enrich himself. The fiduciary has to account for the profit, and “the profiter,
however honest and well intentioned, cannot escape the risk of being called
upon to account.”
2. Arising of the use of confidential information
Lac Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR
(4th) 14 – concern use of confidential information. A trustee of a company
received a lot of confidential information, if trustee make use and make money
out of the information, it does not matter whether detriment or benefits the
company, equity will go after the trustee as long as there is secret profit made,
and make him liable for the secret profit made.
3. Purchase of trust property
•Tito v Waddell  The general position is that a trustee cannot involved in self-dealing with
property belonging to the trust.
•Campbell v Walker (1800) 5 Ves 67, 68  “Any trustee purchasing the trust property is liable to
have the purchase set aside, if in any reasonable time the cestui que trust chooses to say, he is
not satisfied with it.”
•It provides no defense in an action for a trustee to plead that he or she had paid the market price
for the property, or was the highest bidder at an auction.
•Exceptions:
•Holder v Holder [1968] Ch 353 [Exceptions] (testator appointed son as trustee, later the son
discharge himself as trustee, the son later purchase the farm which was part of trust property,
and the purchase trust took place after he being discharge, court held transaction valid on
grounds:-
 He was a trustee, but he discharged himself.
 No interference in the administration of the trust property and he had not taken part in
organizing the auction.
 There was no conflict of interest and duty as the beneficiaries were not looking to protect
their interests.
 Any special knowledge he had about the property was acquired as tenant and not as
executor.
4. Purchase beneficial interest –

Coles v Trecothick (1804) 9 Ves 234:-


“ … a trustee may buy from cestui que trust, provided that
there is a distinct and clear contract, ascertained to be such
after a jealous and scrupulous examination of all the
circumstances, proving that the cestui que trust intended the
trustee should buy; there is no fraud, no concealment, no
advantage taken, by the trustee of information acquired by
him in the character of trustee.”
5. Director’s fees
•Where trustees are appointed as directors of companies on account of trusts and
shareholdings in the related companies, trustee is not to profit from the trusteeship.
•Re Macadam [1946] Ch 73  trustee appointed themselves all directors of a
company. Held: They were accountable for directors fees they received as a
directors. Because the only way in which the P became directors was by the exercise
of the powers vested in the trustees of the will, although the remuneration was for
services as director of the company. The opportunity to receive that remuneration
was gained as a result of exercise of a discretion vested in the trustees and they had
put themselves in a position where their interest and duty conflicted.
•But the rule does not apply if a trustee secures directorship not by virtue of his
position as a trustee.
•Test: Did they come by directorship or by virtue of trusteeship?
•Re Dover Coalfield Extension Ltd  If B is director of company, and appointment of
trusteeship only comes afterwards, he is entitled to director’s fees. However, if B is
trustee of a trust which makes him becomes director of the business then he is not
allowed to collect because his position is the result of his trusteeship.
•The trust instrument may provide for trustee to appoint himself as a director and
be remunerated as in:-
•Re Llewellin’s Will Trusts [1949] Ch 225  a clause in the will permitting the
trustees to be appointed as a director was construed, on the part of the testator, as
having “expressly empowered his trustees to make arrangements for the
appointment of themselves to offices which can fairly be remunerated”. The trustees
could thus lawfully retain the fees received.
Fiduciary nature of
trusteeship
6. Competing with the trust
•A trustee is prohibited from competing with any business belonging to
the trust. (conflict of interest)
•In specialized business, this rule is strictly adhered to.
•Re Thomson [1930] 1 Ch 203 – testator’s estate was involved in yacht-
broking business. One of the trustee set up similar business  held
amount to breach of fiduciary duty because it was “an engagement in
which he would have a personal interest conflicting or which might
possibly conflict with the interests of those he was bound to protect”.
•The rule does not apply to ordinary business where element of
competition is not in issue.
7. Receiving bribes
•Constructive trust may be imposed on a trustee who has received bribes.
•AG of Hong Kong v Reid [1994] 1 All ER 1 Bribes were taken by an employee, in fraud
on his employer. He then invested the proceeds in the purchase of property in New
Zealand. The property increased in value. Employer sought repayment of the bribes
received from the properties purchased. Held: The employer had a proprietary interest
both in the bribe and in the asset substituted for it. Thus, the property belonged in
equity to the employer.
•Lord Templeman said: ‘When a bribe is accepted by a fiduciary in breach of his duty
then he holds that bribe in trust for the person to whom the duty was owed. If the
property representing the bribe decreases in value the fiduciary must pay the difference
between that value and the initial amount of the bribe because he should not have
accepted the bribe or incurred the risk of loss. If the property increases in value, the
fiduciary is not entitled to any surplus in excess of the initial value of the bribe because
he is not allowed by any means to make a profit out of a breach of duty.’ and ‘a fiduciary
must not be allowed to benefit from his own breach of duty, that the fiduciary should
account for the bribe as soon as he receives it and that equity regards as done that which
ought to be done. From these principles it would appear to follow that the bribe and the
property from time to time representing the bribe are held on a constructive trust for the
person injured. A fiduciary remains personally liable for the amount of the bribe if, in the
event, the value of the property then recovered by the injured person proved to be less
than that amount.’
Tutorial questions
1. Quick Build Ltd is a property development company. They employ Good Cost Ltd as their surveyors.
Alex is one of the Good Cost surveyors. He goes to value a development plot for Quick Build Ltd. Alex
then tells his friend John about the plot. Alex and John goes ahead and successfully outbids Quick
Build for the plot. Discuss
• Issue 1:
• Whether there is fiduciary duty between Alex and Quick Build Ltd?
• QBL employed Alex as their surveyors.
• British & West Building Society v Matthew
• Because of this undertaking, there is trust and confidence. (there is breach of confidence in this
case)
• Define Fiduciary Duty. No conflict of interest, cannot make secret profit, must act in best interest
of beneficiary, cannot compete with trust, refer this topic slides under fiduciary duty (a duty that
a person has to act in the best interest of another person)
• The fiduciary can be liable for the benefit that he had received (benefit & monetary in nature)
( the benefit you received will be returned to the person you’re working for/ represents base on
constructive trust ).
• Alex is a trustee for Quick Build because he holds the confidential information for them that will
benefit Quick Build and he is employed by Good Cost, who was hired by quick built, thus, Alex
act as an agent for Good Cost Ltd,
• Issue 2:
• Whether Alex had breached his fiduciary duty?
• Alex had breached his fiduciary duty by disclosing confidential information to John,
who is privy to the contract (John can be a colleague working in the same company
with Alex, but still he is not part of the contract)
• There is a breach of confidentiality.
• He has acted in conflict of interest, he acted in his own interest by using the
confidential information he had acquired from his employment for Quick Build for
his own benefit. He was suppose to use the information for the benefit of QB, but
instead he use it to benefit himself and John. There is conflict of interest of QB and
himself.
• So NOW, he had obtained the property. He had engaged in competition with the
principle, QBL.
• Since he breached the fiduciary duty, whatever profit or property he gained, the
law shall make him a constructive trustee and he may be liable tonreturn the gift.
2. Annie, Ben and Cindy are the trustees of a private trust set up under the will of a testator
who died last year. The beneficiaries are members of the testator’s family. The assets of
the trust comprise of the shares in the testator’s family business, FreshGreens Ltd which
deals with vegetables gardening. Annie is a solicitor, Ben is accountant and Cindy was a
friend of the testator and has considerable experience in vegetable gardening.
The trust instrument contains no provision for remuneration of the trustees. Advise the
trustees whether they are entitled to claim remuneration for acting as trustees.
• Issue 1: Whether the three trustee is entitled to claim remuneration.
• General Rule of Fiduciary Duty
• Rule of Remuneration
• S.35(2) of Trustee Act, Barret v Hartley

Solicitor (Annie) + Accountant (Ben) Cindy


• Solicitor + Accountant are • Not professional service. GR 
professional service. cannot claim for remuneration
• Cradock v Piper • But can claim for expenses.
• Brown v Litton • She, having the experience may
• Re Chapple appoint herself as director as a result
of the trust.
• Brown v Phillips
• Boardman v Philips
• Duke of Novfolks Shelf Trust