Continuation of Duties and Powers of a Trustee (Part 1)
5) Duty to provide accounts and information
As a general rule, a trustee is required to maintain accurate accounts which ought to be made available on demand for the inspection of the beneficiaries. This is in line with Pearse v Green where it was held that the first duty of an accounting party whether an agent, trustee, receiver or executor is to be constantly ready with his accounts.
Besides, according to Lord Wrenbury in O’Rourke v Darbishire, “…a beneficiary has a right of access to the documents he desires to inspect upon what has been called in the judgments in this case a proprietary right. The beneficiary is entitled to see all trust documents, because they are trust documents, and because he is a beneficiary. They are, in this sense, his own.”
Although trustees are required to maintain accurate accounts, s27(4) of the Trustees Act (“TA”) provides no general duty to have the accounts audited. As such, trustees are not obligated to audit the accounts to ensure their accuracy.
It should be noted that there are, however, exceptions to a trustee’s duty to provide accounts and information. The right to access documents does not extend to:
i. to documents in which the beneficiaries have no beneficial interest.
ii. documents that belong to the trustees.
iii. documents that record the reasons for the trustees’ decisions.
6) Delegation by trustees
As a general rule, a trustee cannot delegate in respect of the management of the trust. Should they employ agents for the purpose, they will remain liable to the beneficiaries.
However, an agent may be employed in ministerial matters. When an agent is employed in that context, a trustee cannot be made liable for any loss attributable to the acts or defaults of agents if they can show that they have exercised care of a reasonable man of business in respect of both selection and supervision.
Should they fail this standard, they will be liable for breach of duty. This can be seen in s28 TA which states that as long as the act of employing the agent is done in good faith, then the trustees will not be liable for breach of duty.
In addition, as per s30 TA, a trustee also has the power to delegate (by power of attorney) trusts during their absence abroad. Said absence has to be for a period of more than 14 days. However, the donor of the power of attorney (i.e. the trustee) shall be liable for any acts or defaults of the donee.
7) Duty to maintenance
The power to apply income for maintenance and to accumulate surplus income during a minority is provided for under s36 TA. Under this section, where any property is held by trustees in trust for another during the minority of said person, the trustees may pay to his parent or guardian for or toward his maintenance, education, or benefit. If the beneficiary did not receive any interest during his minority, then the trustee shall accumulate the residue of income in investments and hold it until the beneficiary is 21 years old.
8) Duty to advancement
This is governed under s37 TA whereby it states that a trustee may pay or apply money for the advancement or benefit of any person they think fit (subject to any contrary intention in the instrument of trust) as long as it does not exceed RM10,000.
In regards to what is “advancement”, according to Pilkington v Inland Revenue Commissioners, the term “advancement” implies the establishment in the life of a beneficiary who was the subject of the power or, at any rate, of a phase which would lead to the furtherance of its establishment. This means the use of the funds which would enhance the material situation of the beneficiary.
10) Powers of trustees
a) Power of sale of trust property
The power to sell any or all of the trust properties is typically granted by a trust instrument. When exercising this power, it is the trustee’s duty to obtain the best price available on behalf of the beneficiaries.
b) Power to insure
Trustees are under no requirement to insure trust properties unless the power to insure is stated expressly in the trust instrument. As per s24 TA, a trustee may insure a property against fire damage without obtaining the beneficiary’s consent. However, this does not apply to property that the trustee has to give to the beneficiary immediately upon said beneficiaries request.
c) Power to compound liabilities
Trustees shall have broad discretion in the resolution of claims which may be brought by third parties against a trust estate or a trust estate against a third party.