LAW OF TRUSTS – S.Selvakunapalan Senior Assistant Legal Draftsman Question Paper 1.There is an Assignment Test for 10marks; 2. The examination paper consisting of 6 questions out of which you are requested to answer 4 questions 3. Every question carries equal marks of 10. Recommended books:- 1. Keeton G.W. Law of Trusts; 2. Scott A.W. The Law of Trusts; 3. Coorey L.J.M. The Reception in Ceylon of the English Trust. Definition for trust • The modern concept of ‘trust’ has come to Sri Lanka via English law. • The English law of trust stipulates dual ownership of the trust property; Legal title vests with the trustee while equitable title vests with beneficiary. • Justice Story:- A trust in the most enlarged sense may be defined to be an equitable right, title or interest in property distinct from the legal ownership thereof. • Lord Lindley :- A trust as equitable obligation to deal with the property in a particular way. • A trust formally known as nothing except a confidence repose by one person in another, and enforceable in a Court of Law. Sec 3 of the Trusts Ordinance Trust is (i) an obligation annexed to the ownership of property; and (ii) arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, (iii) for the benefit of another person, (iv) while the ownership is nominally vested in the owner, the right to the beneficial enjoyment of the property is ves The person who reposes or declares the confidence is called the author of the trust“; The person who accepts the confidence is called the trustee; The person for whose benefit the confidence is accepted is called the beneficiary; The subject-matter of the trust is called trust property or trust money ; The beneficial interest or interest of the beneficiary is his right against the trustee as owner of the trust property ; and The instrument, if any, by which the trust is declared is called the instrument of trust ; ted in such other person, or in such other person concurrently with the owner. The words ‘confidence reposed in’ are the keywords for the formation of a trust. Trust is a gift property or an interest in the property, to an individual or group of individuals or an institution through the instrumentality of ‘trustee’, in whom the owner of the property reposes confidence. The trustee is bound to hold the property for the beneficiary and he can’t use the property for his own benefit. Trust and contract A contract is agreement enforceable by law, entails an obligation or legal duty to do or abstain from doing something what one has promised to do or abstain from doing. A trust resulting from the act of the parties though some of the characteristics of a contract, it differs from a contract with respect to beneficial interest in and legal ownership of the trust property. Trust is an obligation to use one’s property for the benefit of another in whom it is concurrently vested. The beneficiary has more than the personal right against the trustee for the performance of the obligations of the trust, he has the beneficial interest in the property though the legal ownership vests in the person holding the property for his benefits. Trust and gift A trust differs from gift in the sense that a gift requires a delivery of the property and complete transfer of title. While in a trust the legal ownership vests with the trustee, though for the benefit of beneficiary. Essential elements to form a trust 1. Author or settlor of the trust; 2. Trustee; 3. Beneficiary; 4. Trust property or subject matter of the trust; 5. Objects of the property. I. The three persons must have the capacity to enter into the transaction; II. There must be certainty as to intention to create trust, beneficiary and subject-matter; III. Trust must not violate the rule of perpetuity; IV. It must be lawful purpose; V. Trust property must be transferred to the trustee. Subject to the provisions of section 107, no trust in relation to immovable property is valid unless declared by the last will of the author of the trust or of the trustee, or by a non-testamentary instrument in writing signed by the author of the trust or the trustee, and notarially executed. (Sec 5 (1) No trust in relation to movable property is valid unless - (1) declared by the last will of the author of the trust or of the trustee, or by a non-testamentary instrument in writing signed by the author of the trust or the trustee, or (2) the ownership of the property is transferred to the trustee by delivery. Sec 5(2) Subject to the provisions of sections 5 and 107, a trust is created when the author of the trust indicates with reasonable certainty by any words or acts – (a) an intention on his part to create thereby a trust, (b) the purpose of the trust, (c) the beneficiary, (d) the trust property, and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust property to the trustee – (Sec 6) Section 6 refers acts. An express trust under 5(1) could not be created by acts alone because writing is necessary, but it would be possible to do so under section 5(3), and under section 5(2) if accompanied by transfer of the ownership by delivery. These rules do not apply where they would operate so as to effectuate a fraud. (section (5(3)) Three parties There should be person to repose or declare confidence, known as ‘author of the trust’. Another person should accept the confidence as reposed in him by the author, called the ‘trustee’. When the author declares and accepts the confidence himself he becomes a trustee also. There should be a third person for whose benefit the confidence is reposed by the author and accepted by the trustee. The author of the trust may himself be the beneficiary or one of the several beneficiaries under trust property Capacity of settler • A trust may be created by every person competent to contract – (sec 7(a). • A group or community of persons can create a trust by contributing towards the value of the trust property. • Every person is competent to contract who is of the age of majority, or has otherwise acquired the status of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified by law from contracting – Sec 3(l). Section 2 and 3 of the Age of Majority Ordinance provides that legal age of majority is 18 years. • A trust may be created with the permission of the court by or on behalf of a minor – (sec 7(b)). The permission should have been obtained prior to the creation of trust. • A company or Government of Sri Lanka have the necessary capacity to create a trust under the Trusts Ordinance. • In Salahudeen Vs. Commissioner of Stamps (56NLR 351) The application for the incorporation of the proposed company was made in January 1943, but the grant of incorporation was -delayed, for one reason because the law at that time required the sanction of the Governor for the formation of a company with a capital exceeding one lakh. The Controller of Exchange was informed by the Proctor for the parties of the purpose of the incorporation and of the fact that it was intended that the property would be purchased in trust for the company to be formed. • As the sale had to be concluded before the certificate of incorporation could be granted, the proctor first tendered to the vendors a draft deed in favour of Mohamed in trust for the proposed company , but the vendors were unwilling to agree to that form and relied on the fact that the offer they had accepted had been made by Mohamed personally. Hence it was that the deed No. 1620 of March 15,1943, purported to be an outright transfer to Mohamed and contained no reference to the object with which the estates were being purchased. The certificate of incorporation of the company was subsequently issued (on June 8, 1943), and in July Mohamed executed, in favour of the company, the conveyance No. 1644 which is the subject of this appeal. • It was said “Property can be held by a person in trust to convey it to a Company which is to-come into existence in the future”. • A group or community of persons can create a trust by contributing towards the value of the trust property. Capacity to be trustee • Every person capable of holding property may be a trustee; but, where the trust involves the exercise of discretion, he cannot execute it unless he is competent to contract. – (sec 10(1)) The term “capable of holding property” is not defined; but it includes all living persons, corporation and company . • It is said that a settlor has the liberty to appoint a beneficiary or an insolvent as trustee in an instrument of trust, but a court when appointing had shown reluctance such persons as trustees. • In Sesma Lebbe Marrikar Vs. Manatchy Umma (11NLR237) The respondent is the only son of the deceased; the appellant is a grandson, and he opposed the respondents application for a grant of administration, alleging that he is not a fit and proper person to administer the estate, but giving no reason for the allegation. The appellant contends that an un-certificated bankrupt is by law incapable of being appointed administrator. • The Court held that an undischarged bankrupt is not ipso jure disqualified for the office of administrator of a deceased persons estate under the Civil Procedure Code. In Ceylon an application for a grant of administration of an intestates estate is made under section 544 of the Civil Procedure Code, which places no restriction on the power of the Court to appoint any person interested in having the estate administered. Capacity to be beneficiary • Every person capable of holding property may be a beneficiary. – sec 9(1). • A proposed beneficiary may renounce his interest under the trust by disclaimer addressed to the trustee, or by setting up, with notice of the trust, a claim inconsistent therewith. (Sec 9(2)). • A beneficiary would not forfeit the rights under the trust unless he intends to. Beneficiary and purpose of trust Certainty of beneficiary involves (1) As to who may be beneficiary; (2) As to identity of beneficiary; (3) Whether the interests taken by each of beneficiaries are indicated with certainty. • a trust is created when the author of the trust indicates with reasonable certainty by any words or acts the beneficiary.- 6(c). • The person for whose benefit the confidence is accepted is called the beneficiary”. -3(e) • Every written law whether made before or after the commencement of this Ordinance, unless there be something repugnant in the subject or context person includes any body of persons corporate or unincorporate.- (sec 2(s) of the Interpretation Ordinance). • A trust for the maintain animals is invalid. • a trust is created when the author of the trust indicates with reasonable certainty by any words or acts the purpose of the trust. Sec.9 (c). • A trust is valid only if it can be construed as being to or for the present members of the society. If it is included future members it would be void for uncertainty and for perpetuity unless the future members are to be ascertained within the perpetual period. Anthony Gasper Vs. The Bishop of Jaffna • The trust property was a land adjacent to the sea shore with a shed built on it, to enable the beneficiaries under the trust who were fishermen, to keep their boats on the land, and to store their fishing tackle in the shed. It is apparent that the trust was not limited to the present members, and was intended to endure indefinitely. It is submitted that the reasonable certainty required by section 6 was not present because the beneficiaries included future members and the members of the community constitute an uncertainable group. • The Court held that “Just as a community of persons can hold property or acquire rights in property so also a community of persons can be beneficiaries under a trust deed. No provisions of the Trusts Ordinance invalidates the trust and there is no reason why it should not prevail. Kandasamy Vs. Kumarasekaran (63NLR193) • The Anthony case was distinguished. An unincorporated society, not being a juristic person, has no legal capacity to acquire property. Accordingly, a sale of immovable property in favour of an unincorporated society or association cannot pass title if it is not clear whether the transferor meant to benefit the present members of the society as individuals or to benefit the society as a quasi-corporation. • Weerasooriya J citied “I do not think the dictum amounts to more than that the individual members comprising a community (and not the community as a distinct entity) can hold or acquire rights in the property. • In Kandasamy case trust for the unincorporated society was held to be void. • But in Leahy Vs. A.G. it was held that a gift to the unincorporated body was prima facie gift to the individual members. Subject matter The subject-matter of the trust is the property in respect of which the trust has been created. For creating a valid trust, it is necessary that the subject-matter of the trust is defined with the certainty and it should be such which is capable of disposition. The word ‘property’ includes any property which a person can in law transfer or assign or dispose of inter vivos or under a will. The subject-matter of a trust must be property transferable to the beneficiary. So, any property inalienable by law can’t be the subject matter of the trust. The subject-matter of a trust must be property transferable to the beneficiary. It must not be a merely beneficial interest under a subsisting trust – Sec 8. In other words there can’t be trust upon a trust. • There must be certainty both of the property intended to be affected by the trust and as to the beneficial interest to be taken by each of the several beneficiaries. • Where there is uncertainty as to the property it is evident that there can be no transfer of title and purported transferor is never divested of his title. • Where certainty of intention and property are present but beneficiaries are uncertain there would be a resulting trust under section 85 of the Trusts Ordinance. Objects The object must be certain, practicable and lawful. A trust may be created for any lawful purpose. The purpose of a trust is lawful, unless it is – (a) forbidden by law, or (b) is of such a nature that, if permitted, it would defeat the provisions of any law, or (c) is fraudulent, or (d) involves or implies injury to the person or property of another, or (e) the court regards it as immoral or opposed to public policy – (Sec 4) A trust whose purpose is unlawful shall be void; and where a trust is created for two purposes one of which is unlawful and non-separable from other purpose, the whole of such trust shall be void. If the two types can be separated, the trust as whole will fail but shall stand for those objects which are lawful. • (a) A bequeaths property to B in trust to employ it in carrying on a smuggling business, and out of the profits thereof to support As children. The trust is void. • (b) A, while in insolvent circumstances, transfers property to B in trust for A during his life, and after his death to B. A is declared an insolvent. The trust for A is invalid as against his creditors. (illustration (a) and (b) of section 4) Three certainties • In the English case of Knight Vs. Knight, Lord Langdale declared that for a trust to be validly created three things were necessary. They are that- (1) The words employed must be couched that, taken as a whole, they could be deemed to be imperative; (2) The subject matter of the trust must be certain; (3) The objects or persons intended to be benefited must be certain. Subject to the provisions of sections 5 and 107, a trust is created when the author of the trust indicates with reasonable certainty by any words or acts – (a) an intention on his part to create thereby a trust, (b) the purpose of the trust, (c) the beneficiary, (d) the trust property, and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust property to the trustee – (Sec 6) Intention to create a trust • A trust is created when the author of the trust indicates with reasonable certainty by any words or acts an intention on his part to create thereby a trust. – sec 6(a). • in construing the term of the deed, the question is not what the parties may have intended, but what is the meaning of the word they have used. The use or non-use of word ‘trust’ in a document is not an indication of the intention. In order to that a trust may be valid and enforceable at law, the intention to create a trust must be indicated by words or acts with reasonable certainty. The language used must be clear enough to show an intention to create a trust. No formal language is necessary to constitute an effective declaration of trust, but the language used must take it certain that the settlor intended to constitute a trust binding in law on himself or the person to whom the property was given. The use of words ‘trust or trustee’ is not essential to create the trust; even where the words by the settlor are in precatory form, the trust will come existence. Where the words used in the instrument do not indicate with certainty an intention to create a trust, no trust can come into existence. A trust may be created by any language sufficient to show the intention or by conduct of parties. Dr. L.J.M Coorey has noted as follows- “Though for the sake of brevity we refer to ‘intention of the settlor’ it is more correct to speak of the settlors ‘manifestation of intention’ to create a trust.” • In Fernando Vs. Jossie (58NLR 114) the Court cited the case of Maharaja Manindra Chandra Nandi v. Raja Durga Prashad Singh [A.I.R. (1917) Privy Council 23.], Lord Parmoor said :- In construing the terms of a deed, the question is not what the parties may have intended, but what is the meaning of the words which they used. “ • Settlor may use the words precatory or recommendatory or expressing a belief when they mean to declare a trust. • A bequeaths certain property to B, having the fullest confidence that he will dispose of it for the benefit of C. This creates a trust so far as regards A. (illustration sec 6(a)). Visaladchypillai Vs. Sivapakkiammal (40NLR114) • A devise “absolutely forever” subject to precatory words was construed to create trust. Section 3 defines a trust as an ‘obligation annexed to the ownership of the property’ was cited and it was thought that the words specified were intended to vest the ownership in the trustee and was no bar to creation of a trust. • A bequeaths certain property to B, having the fullest confidence that he will dispose of it for the benefit of C. This creates a trust so far as regards A. • A bequeaths certain property to B, hoping he will continue it in the family. This does not create a trust, as the beneficiary is not indicated with reasonable certainty. • A bequeaths certain property to B, requesting him to distribute it amongst such members of Cs family as B should think most deserving. This does not create a trust, for the beneficiaries are not indicated with reasonable certainty. • A bequeaths certain property to B, desiring him to divide the bulk of it among Cs children. This does not create a trust, for the trust property is not indicated with sufficient certainty. • A bequeaths a shop and stock in trade to B, on condition that he pays As debts and a legacy to C. This is a condition, not a trust, for As creditors and C. In Fan Eyre Vs. The Public Trustee (46NLR59) the Court said “The will must be construed as a whole and apparent contradictions must be reconciled, if possible. If that cannot be done, then only will a later provision prevail. But the main thing is to get at the intention of the testator from the whole will. If authority be needed for this well-known proposition, I would refer to Burrows on Interpretation of Documents, p. 71. Beales Cardinal Rules of Legal Interpretation, p. 607, gives many interesting dicta, e.g., the paramount rule is that before all things we must look for the intention of the testator as we find it expressed and clearly implied in the general terms of the will; and when we have found that on evidence satisfactory in kind and degree, to that we must sacrifice the inconsistent clause or words, whether standing first or last, indifferently per Coleridge J. in Morrall v. Sutton1[14 L. J. Chan. 266 at p. 272.]”. • In the case of Visaladchypillai Vs. Sivapakkiammal (40NLR114), it was argued by the plaintiff, respondent that the whole transaction seems almost in illustration of the definition of a trust as set out in section 6 of the Trusts Ordinance. The property will otherwise have to be sold and the money paid out of the proceeds in order to comply with the terms of the deed creating the trust. A refusal to pay the sum would be in fraud of the trust. • The defendant Appellant argued that a gift subject to a condition is all we have here. It is a class of donation well known to the Roman-Dutch law and in such a case the Court will apply the common law in order to determine the rights and liabilities of the parties who must be deemed primarily to have intended to create only a common law obligation. • The Court said that Now, as the legal ownership has to be vested in the person who is designated the owner, language, however forcible and full, may be invoked to vest that ownership without affecting the intention to create a trust in favour of another, and this will explain the use of the words “absolutely forever. This done, there must be words to indicate a beneficial enjoyment of the whole or part of that property by another. • It would appear that the words “out of the said lands and premises” satisfies this requirement. Koch J. said ”I should wish to emphasize firstly the words “upon condition” in the passage quoted, for this will explain the presence of the words “subject to the conditions” in the deed in question; and secondly, the requirement that the condition must be “performed and satisfied out of the property”. We have these words in clause 3 of the deed. The essentials of a trust being present, I hold that a trust has been created. However a more stricter and more correct test was applied in Arumugampillai Vs. Veluppillai (46NLR241). In this case Where a deed of gift contained the following conditions:- (1) That the said V. S. shall look after the said properties and take the rents and profits of the said properties and perform the Arthasamapoojah, which is being generally performed and which we now are performing and also the Theertam festival in the temple standing in the land. (2) That after the lifetime of the said V. S. the person who was appointed by him in his place and, in default of such appointment the eldest child of his descendant will have the right to perform the duties of the said temple. (3) That the said V. S. will have no right to sell and transfer the said properties or alienate the same by documents in his lifetime and • that whenever he in his lifetime appoints a person, whom he likes, he shall have to appoint such person subject to the bindings recited in this paragraph. Held, that the conditions annexed to the deed were not sufficient to constitute a charitable trust. • that whenever he in his lifetime appoints a person, whom he likes, he shall have to appoint such person subject to the bindings recited in this paragraph. Held, that the conditions annexed to the deed were not sufficient to constitute a charitable trust. • In Murugesoe Vs. Chelliah (57NLR463) H.N.G Fernando J cited the case of Karthigasu Ambalavaner vs. Subramaniar Kathiravelu 1[(1924) 27 N. L. R. 15 at p. 21.], Bertram C. J. said When a person who is the owner of property purports to transfer it to a Temple, the effect of his so doing is to constitute himself a trustee of the Temple. The document of dedication is in fact a declaration of trust and the dominium remains with the dedicator and passes on his death to his heirs subject to the trust . • Where a transfer of immovable property contained a recital that the consideration was paid by the transferee for a specified Hindu temple- Held, that the transferee must be taken to have purchased the property with funds provided by, or held by him for, the religious charity represented by the temple. The transferee, therefore, held the property as trustee, and, on his death, the land devolved on his heirs subject to the same trust. • The words for the Temple were not merely precatory but were sufficient to create a trust. • Where a transfer of immovable property contained a recital that the consideration was paid by the transferee for a specified Hindu temple- Held, that the transferee must be taken to have purchased the property with funds provided by, or held by him for, the religious charity represented by the temple. The transferee, therefore, held the property as trustee, and, on his death, the land devolved on his heirs subject to the same trust. • The words for the Temple were not merely precatory but were sufficient to create a trust. • H.N.G Fernando A.J cited the case of Arumugam Pillai v. Velupillai Periyatamby 3[(1945) 46 N. L. R. 241.] the deed in question transferred a land by way of donation and on account of natural affection for the donee, who was entitled by its terms to take the rents and profits of the land . There was a condition also that the donee should perform a certain poojah as also a certain festival in the Temple standing on the land, but Wijeyewardene J. was unable to find any evidence as to whether or not the performance of the stated ceremonies would involve expenditure, • nor was the donee enjoined to utilize any part of the income for the purpose of those ceremonies. He held that the conditions were insufficient to create a trust, being presumably more in the nature of a pious desire on the part of the donors, than an expression of an intention to impose an obligation annexed to ownership. Certainty of object and beneficiary The object or purpose of the trust must be certain or capable of being rendered certain. Certainty of beneficiaries implies, firstly, that the beneficiaries should be identifiable, and secondly, that the interest which the beneficiaries take should be ascertainable. • Sabapathy Vs. Muhamed Yoosoof (37NLR70) The document is a will and in interpreting this will one must give full effect to the intention of the testator. Beyond the prohibition of alienation which sometimes occurs in fidei commissa there are no words in the will to show that the testator intended to create a fidei commissum. On the contrary the word trust is used. The English law of trusts was part of the law of Ceylon in. 1872 (see Ibrahim v. Oriental Banking Corporation [1 3 N. L. R. 148. ] and Suppramaniam v. Erampakurukal [2 23 N. L. R. 417.] ). The object of the trust should not be of a nebulous character but must be of such nature that a court can administer it. In Muthuswamy Naidu Vs. Rajulu Naidu (AIR 1925) case a trust for feeding the poor on a certain specific day has been held to be sufficiently precise and certain object of the valid trust. • In the case of Anthony Gaspar Vs. The Bishop of Jaffna (52NLR230) Basanayake J held that A community of persons can hold property or acquire rights in property. In the same way a community of persons can be beneficiaries under a trust deed. It is not disputed that the defendants belong to the class of persons for whose benefit the land has been provided. there is no provision of the Trusts Ordinance which invalidate the trust created and there is no reason why it should not prevail. Absence of Certainties In the case of Fernando Vs. Sivasubramaniam (61NLR241) It was mentioned that no particular formula is required by law for the creation of a trust. The requirement of law is that the author should make his meaning clear and evince his intention to create a trust and the Court will give effect to that intention. In the instant case Kanapathy the author of the trust declared by PI has clearly indicated that the purpose of granting the lands in question to himself and another was for the advancement of his religion and maintenance of religious rites and practices of the Hindu faith. The beneficial interest is not vested in any ascertained individual or individuals but in an uncertain and fluctuating body, the Brahmins. Under the law in force in 1888 he was entitled to create a trust in the way he did. • Glanville Williams in his “The Three certainties” has suggested three ways by which uncertainty as beneficial interests may be cured. (i) Where trustee is given a discretion to apportion the property among the beneficiaries or (ii) the court cures the uncertainty by applying the maxim equality is equity, dividing the property in equal shares; (iii) If all beneficiaries are competent to contract and are collectively absolutely entitled, they may elect to apportion the property among themselves in a definite manner • In VYRUPULLE v. PERERA (15NLR199) a testator by his last will gave and bequeathed to certain specified persons all the rents and profits arising from his properties, and further directed that the share of the rents of the legatee dying should be distributed among the widows, orphans, and really deserving destitute people of the Burgher community according to the discretion and judgment of the executors. Held (by Grenier J. and obiter by Wood Renton J.), that the trust in favour of the Burgher community was not void on the ground of its being vague. • Execution of Trust As we have seen the provisions of section 5(1), no trust in relation to immovable property is valid unless declared by the last will of the author of the trust or of the trustee, or by a non-testamentary instrument in writing signed by the author of the trust or the trustee, and notarially executed. • The phrase notarially executed has been defined in section 3(o) of the Trusts Ordinance. Accordingly “notarially executed” means executed in accordance with the provisions of section 2 of the Prevention of Frauds Ordinance(PFO). • Generally, in inter vivos trusts the declaration of trust and the transfer of the property to the trustee contained in one notarial document. But it may be possible to have two documents for the two purposes. • A transfer of the trust property to the trustee according to the last lines of section 6 of the Trusts Ordinance and a declaration of the trust under section 5(1) are both necessary for the creation of a trust of a land under Chapter II of the Trusts Ordinance and both must be notarially executed. The last three lines of section 6 states “(unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust property to the trustee.” • Also section 6 states that the trust must be declared by words or acts of the settlor. • The formalities laid down in section 5(1) of the Trusts Ordinance will have to be adhered to in creating a valid trust in respect of immovable property. • Therefore, any trust alleged to have been created without complying with the above said formalities is invalid and will no force in law. • However section 5(3) of the Trusts Ordinance presents exception. It states that the rules specified in section 5(1) and (2) do not apply where they would operate so as to effectuate a fraud. • Valliyammai Atchi Vs. Abdul Majeed (45NLR169) is a significant decision which explains this situation. In this case, A’s affairs were in an embarrassed condition due to want of liquid cash and creditors pressing for payment. A transferred absolutely by means of notarial conveyance all his property to B who was the one of the principal creditors, the stated price being the amount of A’s debts to B. • • The value of the properties was much more than the amount of A’s debts. A sought to prove by parol that the transfer to B was effected to enable B to manage A’s affairs collecting the rents and profits, selling properties if necessary and after paying A’s debts to retransfer the residuary properties to A. • A had been in possession of some of the properties. B was held to be a trustee for A of the residuary properties. B was held to be a trustee for A of the residuary properties. • B’s argument was that there was no declaration of trust notarially executed as required by section 2 of the PFO was met by reference to section 5(3) of the Trusts Ordinance which enacts that the formalities for the creation of trust cannot be used so as to effectuate a fraud. At this stage, A put forward the argument that according to section 91 read with section 92 of the Evidence Ordinance a written contract cannot be varied by oral evidence. • When the terms of a contract, or of a grant, or of any other disposition of property have been reduced by or by consent of the parties to the form of a document, ….., no evidence shall be given in proof of the terms of such contract. Grant, or other disposition of property,…, except the document itself, … (Section 91 of the Evidence Ordinance) • When the terms of any such contract, grant, or other disposition of property, …have been proved according to the last section, no evidence of any oral agreement .. shall be admitted as between the parties to any such instrument, or their representatives in interest, for the purpose of contradicting, varying, adding to, or subtracting from its terms. (section 92 of the Evidence Ordinance) • Howard CJ rejected B’ argument citing the proviso 1 to section 92 which is to the following effect: • Any fact may be proved which would invalidate any document, or which would entitle any person to any decree or order relating thereto, such as fraud, intimidation, illegality, …… • To summarize this situation, where a person attempts to effectuate a fraud on another person alleging that the other person had not adhered to the provisions of section 5(1) in respect of an immovable property and therefore arguing that there is no valid trust, the other person can resort to section 5(3) to prove a constructive trust. In such instant, the other person can cite section 83 or section 96 of the Trusts Ordinance to prove the existence of a constructive trust although the requirements in section 5(1) or (2) have not been satisfied. A trust is extinguished- (a) when its purpose is completely fulfilled; (b) when its purpose becomes unlawful; (c) subject to the powers of the court under Chapter X and to section 110 (4), when the fulfillment of its purpose becomes Impossible by destruction of the trust property or otherwise; (d) when the trust, being revocable, is expressly revoked.-(sec 79) (1) A trust created by will may be revoked at the pleasure of the testator. (2) A trust created otherwise than by will can be revoked only- (a) where all the beneficiaries are competent to contract, by their consent; (b) where the trust has been declared by a non- testamentary instrument or by word of mouth, in exercise of a power of revocation expressly reserved to the author of the trust; where the trust is for the payment of the debts of the author of the trust, and has not been communicated to the creditors, at the pleasure of the author of the trust. –(sec 80) Declaration of Trust consists of the following:- (i) Name and address of the settlor and the name and address of the trustee; (ii) Name of the trust; (iii) Definitions which shall include the definition of the trustees and trust property; (iv) Objects of the trust; (v) General powers of the trustees; (vi) Special powers of the trustees; (v) Meetings and proceedings of the board of trustees; (vi) Appointment and removal of trustees; (vii) Bank accounts and audit of accounts; (viii) Application of trust property and income; and (ix) Amendment s and declaration. The Minister may, in his discretion, by Order, on the application of the trustees of any charitable trust or of any public or private association (not being an association for the purposes of gain), authorize the incorporation of the said trustees, and upon the publication of the said Order, the said trustees of the charity or association and their successors for the time being shall be constituted a corporation under such style and subject to such conditions as may be specified in the Order. –(sec 114) Please read the following case reports- 1. Dayawathie and others V. Gunasekera and others (1991 1SLR 115) 2. Bernadetta Valangenberg V. Hapuara Chchige Anthony (1990 1SLR 190)
Posted on: Sat, 01 Feb 2014 17:57:14 +0000
Trending Topics
Recently Viewed Topics
© 2015