LLB20803:INTRO TO TRUST 1 1/27/2020

 By the end of this topic, student should have an understanding of :

 a. Nature & definition of trust
 b. History of trust
 c. Classification of trusts
 d. Relevance & importance of trusts today
MURSHAMSHUL KAMARIAH MUSA
 e. Sources of trust law in Malaysia
SEM 2, 2019/2020
 F. the difference between trust & other legal concepts

LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 2

 A trust is a contract between

two parties for the benefit of a
 A concept which originated in equity. 3rd party.
 A trust exists when the titleholder of property (SETTLOR) is obliged to  3 important actors in a trust:
deal with that property for the benefit of another person(s) or for  a. settlor
certain lawful purposes (BENEFICIARIES)  b. trustee
 c. beneficiary.
 Legal owner is TRUSTEE, who has rights at law to hold and manage
the property.  3 important elements of a
trust:
 The person(s) for the benefit of whom the trustee must deal is the
 A. trustee
beneficiary – having beneficial or equitable ownership in equity to
 B. trust property
enjoy the fruits of the property.
 C. beneficiary

LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 3 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 4

LLB20803:INTRO TO TRUST 1
 1. settlor/ creator of a trust – ‘settles’ the property on
trust by transferring the legal ownership of the property to
the trustee
 2. trustee – administrator of a trust, holds the property for
the benefit of beneficiary, &upon completion of a trust,
transfers the property to the beneficiary.
 3. beneficiary – person(s) who benefit from the trust &
have the right to enforce trust.
 Need to be legally recognized person/purposes.
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA.
 1. the trustee — a legal person who holds a vested legal title (or a
vested equitable title) in the property, subject to fiduciary duties;
 2. trust property — (also referred to as corpus/subject of trust)
property in real or personal form which is identified or ascertainable
and capable of being held on trust. The trust property can be legal or
equitable property; and
 3. the beneficiary (sometimes referred to as the cestui que trust in
older cases, or the object of the trust in modern cases) — a person, or
group of persons, who hold a beneficial equitable estate in the
property and on whose behalf the trustee must act.
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA.
1/27/2020
 The three legal actors need not always be different legal persons. It is
possible for a creator and a trustee to be the same person, for
example, when a trust is created by declaration of trust.
 Possible for a creator to be a beneficiary, in cases where the creator
instructs the trustee to hold the property for his or her own benefit.
 A trustee might also be a beneficiary, but only in situations where the
trustee is one of a number of beneficiaries.
 It is impossible to be the sole trustee and sole beneficiary because
once a person owns complete legal and equitable estates they are
said to merge together, leaving no distinction between the legal and
equitable estates.
5 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 6
 No precise definition of the concept of trust, varies according to the
type of trust.
 Basic definition: it is a relationship that arises when a person called a
trustee is required by equity to hold property, made available by
another person (settlor) either for the benefit of some persons of
whom trustee/settlor may be one ,or for the benefit of some object
permitted by law a.k.a. beneficiaries.
 Maitland: “I should define a trust in some way as the following -
When a person has rights which he is bound to exercise upon behalf of
another or for the accomplishment of some particular purpose he is
said to have those rights in trust for that other and for that purpose
and he is called a trustee”
7 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 8
LLB20803:INTRO TO TRUST 1
 Keeton: “A trust is the relationship which arises whenever a person called
the trustee is compelled in Equity to hold property, whether real or
personal, and whether by legal or equitable title, for the benefit of some
persons (of whom he may be one and who are termed cestui que trust) or for
some object permitted by law, in such a way that the real benefit of the
property accrues, not to the trustees, but to the beneficiaries or other
objects of the trust.”
 Underhill: “A trust is an equitable obligation binding a person (who is called
a trustee) to deal with property over which he has control (which is called
the trust property), for the benefit of persons (who are called beneficiaries
or cestui que trust), of whom he may himself be one, and any one of whom
may enforce the obligation. Any act or neglect on the part of a trustee
which is not authorized or excused by the terms of the trust instrument, or
by law, is called a breach of trust.”
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA.
 Hague Convention on the Recognition of Trusts: (Article 2 of the Convention)
 “For the purposes of this Convention, the term ‘trust’ refers to the legal
relationship created - inter vivos or on death - by a person, the settlor, when
assets have been placed under the control of a trustee for the benefit of a
beneficiary or for a specified purpose. A trust has the following
characteristics - (a) the assets constitute a separate fund and are not a part
of the trustee’s own estate; (b) title to the trust assets stands in the name
of the trustee or in the name of another person on behalf of the trustee; (c)
the trustee has the power and the duty, in respect of which he is
accountable, to manage, employ or dispose of the assets in accordance with
the terms of the trust and the special duties imposed upon him by law. The
reservation by the settlor of certain rights and powers, and the fact that the
trustee may himself have rights as beneficiary, are not necessarily
inconsistent with the existence of a trust.”
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA.
1/27/2020
 Lewin quoting Mayo J in RE SCOTT [1954] AC 429 :
 “The word ‘trust’ refers to duty or aggregate accumulating of obligations
that rest upon a person described as trustee. The responsibilities are in
relation to property held by him, or under his control. That property he will
be compelled by a court in its equitable jurisdiction to administer in the
manner lawfully prescribed by the trust instrument, or where there be no
specific provision written or oral, or to the extent that such provision is
invalid or lacking, in accordance with equitable principles. As a
consequence the administration will be in such a manner that the
consequential benefits and advantages accrue, not to the trustee, but to the
persons called cestui que trust, or beneficiaries, if there be any; if to, for
some purpose which the law will recognize and enforce. A trustee may be a
beneficiary, in which case advantages will accrue in his favour to the extent
of his beneficial interest.”
9 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 10
 Halsbury’s Laws of Malaysia: where a person has property or rights which he holds
or is bound to exercise for or on behalf of another or others, or for the
accomplishment of some particular purposes; he is said to hold property or rights in
trust for the other or those others; or for that purpose or those purposes, and he is
called a trustee. A trust is a purely equitable obligation and is enforceable in the
High Court.
 Sec. 3 of Malaysian Trustee Act 1949 defines trust as :
 “Trust does not include the duties of chargee, but with this exception, the
expressions ‘trust’ and ‘trustee’ extend to implied and constructive trusts, and to
cases where the trustee has a beneficial interest in the trust property, and to the
duties incidental to the office of a personal representative and ‘trustee’ where the
context admits, includes a personal representative and new trustees includes an
additional trustee.”
11 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 12
LLB20803:INTRO TO TRUST 1
 In the Malaysian case of PARMESHIRI DEVI & ANOR v PURE LIFE SOCIETY
[1971] 1 MLJ 142, Chelliah J quoted the definition of trust as
prescribed by Underhill.
 In the case of YONG NYEE FAN & SONS S/B v Kim GUAN & CO S/B 1990
MLJ 493, Hashim Yeop Sani accepted Professor Keeton definition of
trust as a satisfactory definition of trust.
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA.
 Originates from concept developed during English feudal times known as
‘use’.
 Taxation in Tudor England – feudal tenures, whereby if a person died leaving
a minor child, or a female heir, the property will be vested with the King
under the feudal tenures. The concept of use is a device to overcome feudal
dues or as a tax avoidance scheme, where lands could be kept for
succeeding generations of a family, even though the real owner only left an
infant as an heir.
 Use concept is whereby - the owner (feoffor) could devise his land by will
to an adult, B (the feoffe to use), to be used by the said heir-infant, C, as
stipulated by owner. Thus, the King would not be able to seize the property.
 B then became the owner of the property at law, but held the legal estate
for the benefit of C.
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA.
1/27/2020
A --------------------------B ----------------------C
(Landowner) (feoffee to use) (cestui que use)
Legal estate Beneficial estate
CL Equitable
13 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 14
 Popularly used, resulting in reduction in feudal taxes.
 King not happy, - during reign of Henry VIII, Statute of Uses 1535 was
passed. Effect – equitable title hold by cestui que trust is an estate at
law & subjected to feudal taxes as imposed by law.
 1645 - the feudal tenure was abolished.
 However the concept of use & its exceptions as provided under the
Statute of Uses has provided a solid foundation for the continued
development of trust in the English legal system.
15 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 16
LLB20803:INTRO TO TRUST 1
 Trust instrument - a document which creates a trust, vesting the trust property in
the trustees. It also describes the terms of the trust. It must be noted that a trust
instrument is not really necessary to create a trust, whereby in appropriate
circumstances it may be created orally.
 Settlor(during lifetime)/testators (by will) - the person who owns the trust property
originally. He is the creator of a trust and will be much concerned with the
administration and management of trust for benefit of beneficiaries. He can also be
one of the trustee or beneficiary.
 Trustee (Sec 3.(1) of Trustee Act 1949) - a person in which the trust property is now
vested; holding the property in accordance with the trust instrument/terms for the
benefit of the beneficiaries. He is required to administer and manage the property
according to the terms of trust. He can also be one of the beneficiaries. He stands
in a fiduciary relationship to the beneficiary.
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA.
 Bequest : A gift of personal property by will. Also known as a legacy
 Codicil: a separate document that must be executed to amend a will.
It must be executed with the same formalities as a will.
 Pecuniary legacy: a gift of money by will.
 Residuary gift: Gift of the estate left after the debts, taxes, and
specific and general gifts have been paid
 Testamentary trust: A trust created by will: the trust comes into
existence when the settlor dies
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA.
1/27/2020
 Beneficiary/cestui que trust: (Sec 17(1) & 64(1) of Trustee Act) -
persons/objects who will benefit from the trust property. They own
the equitable ownership of the trust property.
 Trust property/corpus of trust - the subject matter of trust which may
include real property (land), tangible property (cars, computers,
moveable property) and intangible property (company shares,
loans/debts, intellectual property right).
 Inter vivos trust/settlement – trust created by a person during his
lifetime.
 Attestation: the action of a will being witnessed by two or three
objective and competent people.
17 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 18
 Intestate: person who died without leaving a will.
 Testator (M)/Testatrix (F) : one who makes a will.
 Executor (m)/ Executrix (f) : a person appointed in a will to
administer the testator’s estate.
 Administrator/trix : a person appointed by the Court administer the
estate of an intestate or where a testator has failed to appoint
executors.
 Personal representative : a collective name for both executors and
administrators.
19 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 20
LLB20803:INTRO TO TRUST 1
 a) Tax Planning : trusts in the modern day can minimize the incidence of tax. The
tax benefit/allowance/rebate given to trusts helps the growth of this concept
especially in charitable trust. A person/corporate body will enjoy certain tax
rebate upon their creation of a trust as the asset/property subjected to the trust
will be subjected to a lower rate of tax then the normal one.
 b) protection of family property: to tie up property so it can benefit persons in
succession. A gift made by a grandparent to the parent for life and with the
remainder to the benefit of grandchildren can be created through a trust to
ensure that the property will still benefit the next generation. Also protection
against spendthrift beneficiaries. Trustee will be given $ or property to hold on
trust and to pay part/certain sum of the $ to these beneficiaries at the term
instructed by the settlor so that the property and the beneficiary will both be
protected.
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA.
 f) Public benefit: to benefit the public at large through charitable trusts/for
the benefit of non-human objects. By way of trust one can make provision
for educational purposes/preservation of wildlife etc.
 g) Business investments: trust enable the establishment of Unit Trust, for
purpose of investments. The public can invest money to exploit stock
market potential without attracting all of the usual risks. The public will be
ensured a return on deposits made by them. Their deposits will be invested
by the Unit Trust fund manager in stocks and shares.
 h) Pensions funds: to provide pensions for retired employees and their
dependents. In many cases these funds, which are contributed by the
worker themselves e.g. : EPF scheme are held by trustees so that the
employee is assured that his pension/safekeeping will be forth coming and in
the meantime his employer cannot in any way dispose of the $.
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA.
1/27/2020
 c) to benefit minors : A minor cannot hold property legally, thus a trust can
be created of the property which will be held by trustees for the benefit of
minor.
 d) family arrangements : to enable a man to make provisions for dependents
privately. e.g. illegitimate children, mistress. If property is left by will,
secrecy will be defeated because after death, to obtain probate, a will
becomes a public document and open to public inspection. However a man
could leave a property by will to a friend subject to a secret trust
arrangement with the friend to benefit the secret beneficiaries.
 e) future gift: to make future gifts where circumstances has not yet arisen.
e.g. : a gift to an unborn child/to facilitate a marriage/furthering of studies.
21 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 22
 Trust can be classified in many ways – either according to the way it is
created/come into existence; the types of beneficiaries or the
obligations imposed on the trustees in carrying out their duties.
 These classifications can overlapped each other and in no way to be
construed too rigidly.
 Trust can generally be divided into three species of trust – according
to the way it come into existence namely
 1. express trusts;
 2. resulting (or sometimes referred to as implied) trusts; and
 3. constructive trusts (another type of implied trust).
23 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 24
LLB20803:INTRO TO TRUST 1 1/27/2020

Express trust –
settlor’s intention  Nature : created voluntarily by the settlor/testator.
Implied trust -
Fixed/discretionary by operation of  An express trust is irrevocable unless the settlor reserves the
right to revoke it.
trust law
 Express trusts can be classified further according to:
Special/simple
 A. Date/time it came into operation/existence - inter vivos or
testamentary
Resulting trust
Intervivos/testamentary  Inter vivos trusts or living trusts —trusts created while the
settlor is alive.
Private /Public &
charitable trust Constructive trust  Testamentary trusts —trusts created by will; such trusts come
into existence when the settlor dies.
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 25 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 26

 D. Nature of beneficiaries entitlements : fixed or discretionary
 Fixed trust : interests of beneficiaries are determined expressly
by settlor when trust is created & duty of trustees is to give to
the beneficiaries what the settlor has determined expressly in
the trust either by way of specific amount or share in the trust.
 Discretionary trust: an express trust whereby settlor gives the
trustees choice as to whom shall benefit from a particular
class/group of beneficiaries described by the settlor. Trustees
might have the choice to choose the beneficiaries and their
beneficial entitlement as well.
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA.
 This is trust which is implied by equity (law) based on conduct of
parties, thus sometimes referred as implied trust.
 It arises out of the settlor’s presumed but unexpressed intention.
 Usually discovered and affected by the court after examining conduct
of the parties together with the surrounding circumstances.
 Also known as resulting trust because the beneficial interest may
‘result’ back to the settlor or his estate because of an ineffective or
incomplete transfer of beneficial interest of trust property to the
beneficiary.
27 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 28
LLB20803:INTRO TO TRUST 1 1/27/2020

 Resulting trust can be implied by court of law in two circumstances:

 B. Nature of the beneficiaries who receive the benefit :  1. Automatic -where the settlor of an express trust fails to deal effectually with the
public/charitable or private or family whole of beneficial interest/part of it remains unexhausted. The trust property will
result back in the settlor estate.
 Public – society/part of society. Private – link with the giver.  Failure of express trust
 Satisfaction of purpose
 C. Nature of trustee’s duties: simple or special
 2. Presumed - there is no trust created in the first place but it is presumed out of
 Simple/bare trust: where a trustee simply holds the property the settlor’s unexpressed intention which is rebuttable by any contradictory
with no active duties to perform. He is known as a bare trustee. evidence. It arises out of the settlor’s presumed but unexpressed intention.
 Purchase in name of another
 Special trust: where a trustee has to perform duties for the
 Legal title no reflecting contribution to beneficial title
benefit of the trust & beneficiaries, e.g. administrative or
 Gifts
investment duties.
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 29 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 30

 Another classification of trust is : COMPLETELY CONSTITUTED & INCOMPLETELY

 A type of equitable trusts imposed by law to avoid fraud, unjust enrichment, and CONSTITUTED TRUST.
injustice, to prevent injustice in response or fraudulent conduct.
 Classification according to the way the trust property in vested to the trustees.
 Imposed by equity, in circumstances where it would be unconscionable to permit a
 A completely constituted trust is one which is perfectly created. It requires nothing
person to claim an equitable interest in property which really belongs to another.
more to be done by the settlor as the property has completely been
Arise where it would be an abuse of confidence for a trustee or holder of property
vested/transferred to the trustees. Such a trust will be enforceable by the
to retain a benefit from that property for himself.
beneficiaries and binding upon everyone except a BFP.
 Usually involves specific property which is neither expressly subjects to any trusts
 An incompletely constituted trust exist where the property has not been completely
nor subject to a resulting trust but which is held by a person in circumstances
(usually fiduciary relationships) where it would be inequitable to allow him to assert vested in the trustees and something further is required to be done by the settlor to
effect such vesting/transfer.
full beneficial ownership of the property.
 A trust which has not been perfectly created cannot operate as a trust and will only
 E.g.: If a trustee is appointed as a director in a company because of the trust
be enforceable as a contract to create a trust, and enforceable only if beneficiary
shareholding, any remuneration paid to him will be held on constructive trust.
gives consideration.
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 31 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 32
LLB20803:INTRO TO TRUST 1
 No specific legislation in Malaysia that defines the concept of trust, through
reference to it was made in a few statutes, enactments, case laws and customs.
 Sec 3 of Civil Law Act: Whenever applicable, English Law of trust & cases
subject to provisos in the Act.
 a) Federal Constitution:
 Reference to equity and trust and the concept of charitable trust - under the
jurisdiction of the Federal government; the Ninth Schedule, List I of Federal
List, Sec.4 (e) (i) and sec.15(c) respectively.
 Wakafs and other concept of trust under Islamic law - 9th Schedule, List II of
State List.
 For Sabah and Sarawak,:Sec.15, List IIIA, Supplement to Concurrent List.
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA.
 d) Other Statutes :
 The National Land Code, 1965, Sec 344 and Sec 345, deals with trust and
trustees.
 The Probate and Administration Act 1959 sets out the role of Amanah Raya
Berhad as trustee-Sec 86.
 Charitable Trusts Ordinance 1994 - Laws of Sarawak which repeals and
replaces the Charitable Trusts Ordinance, Cap 102 of 1958. This Act strives
to make better provisions in the law with respect to the creation,
administration and management of charitable trusts.
 There are many other statutes which mentioned the concept of trusts
however for the purpose of this study only those above will be mentioned.
LLB20803(c)Murshamshul K Musa@FUHA,UniSZA.
1/27/2020
 b)Trustee Act 1949 : This is the principle statute which relates to trustees and it
came into force in West Malaysia on 31.12.1965 and in Sabah & Sarawak on
30.6.1965
 Sec 2(3) of the Act : the Act will not affect the legality or validity of anything done
before its commencement unless expressly provided by the Act.
 The powers conferred by the Act are in addition to the powers conferred by the
trust instrument, unless it is expressly prohibited/excluded by the instrument.
 c)The Trust Companies Act 1949 : This act provides for the registration and
regulation of trust companies in Malaysia.
 d) Trustees (Incorporation) Act 1952 : this is an Act to provide for the incorporation
of the trustees of certain bodies or associations, but it only applies to West Malaysia
33 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 34
 Trust :one of Equity’s greatest contribution to the English legal system.
 Exist when a legal person holds a property for the benefit of another legal
person/ legally recognized purposes.
 Actors in trust : 3 – creator, trustee and beneficiary. The three legal actors
need not always be different legal persons.
 Elements of trust : 3 – trustee, trust property/subject matters of trust and
beneficiary/object of trust.
 Trusts can be classified in many ways – either according to the way it is
created, the nature of the beneficiaries & their entitlements of the trust
property, the way trustees need to perform their duties.
 General way to classify a trust : express trust, resulting trust & constructive
trust.
35 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 36
LLB20803:INTRO TO TRUST 1 1/27/2020

 Mohsin Hingun & Wan Azlan – Equity & Trusts in Malaysia 2nd Ed, 2013.
 Pettit - Equity & Law of Trust
TRUST
 Any text book on Law of trust (UK) and Australia

SOURCES OF
DEFINITION HISTORY IMPORTANCE CLASSIFICATION
LAW

LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 37 LLB20803(c)Murshamshul K Musa@FUHA,UniSZA. 38