Appointment, Retirement and Removal of Trustees

s. 40The first trustees are usually appointed by the settlor (in case of inter vivos trust) or the testator in a will. If no trustees are appointed then the court will ultimately appoint one.s. 40 (1 ) (a) A Settlor may have also appointed certain persons to appoint trustees when a need to appoint trustee arises and frequently the settlor may reserve the power himself. But it must be noted that the person or persons who has that power are not trustees themselves.

England a minor cannot be a trustee of an express trust and trusts Of land under S 120 of the Law of Property Act (English)Case: Re Vinogradoff - Same position in Malaysia

When the trustees so appointed, the property will vest in themand they will hold the property until they die, retire or removed.Example:- S (Settlor) appoints Tl, T2, T3 and T4 to hold a land on trust for X and Y, his infant sons. The trust was created in 1970.

- Tl died in 1971 - The property then vests in T2, T3 and T4.- Then T2 retired in 1973 - The property then vests with T3 and T4 T3 was removed in 1975 - The property then vests in T4 as sole trustee.- T4 died in 1976 - The property then vested in the personal; representative of T4

Section 40 (1) (b) and Section 40 (5) Bhikku Daeng 1980 2 MLJ

Section 40 contains powers of appointment and also removal and it confers wide powers to appoint new trustee or trustees in place of a trustee who:- remain out of MalaysiaRe Walker/Ligar Fernandez 2002 5MLJ Unfit to act Re Roche (bankrupt) Refuses to act Desires to be discharged from all or any of his trust or powers Is dead S.40 (8) Incapable of acting in the trusts eg old age or infirmnity - Re Lemann's will TrustDisclaimer Has been removed under a power contained in the instrument creating the trust - s 40(2) An infant

Number of trusteesUsually 4 (s.39(1))

The persons nominated in the instrument, or

(b) The surviving or continuing trustees OR the personal Representative (ie. either an executor or administrator) of the last surviving or continuing trustees.

If no persons in these categories is available to make the appointment, the court will use Section 45 to appoint a trustee as a last resort.

Who may appoint trustees (s. 40 (1)(a) and (b)

Mode of Appointment1) By the Trustees or Persons Nominated Section 40(1):

- an appointment of a trustee be in writing

Sometimes a trust may have named only one or may be two trustees (not exceeding 4 trustees). In these cases the trustees may appoint new trustees to fill a vacancy .

Section 40(6):

However there may be circumstances where the trustees may need to have some other persons to be co - trustees. Here, it will be noted that there is no "vacancy" as no trustee was removed under section 40 or section 45 (appointment or removal by the court), but still statutory power is given to the trustees, but subject to the proviso that the total number of trustees does not exceed 4 .

Appointment of a person as a trustee can be made without his knowledge/consent and in his absence.

Case law seems to draw a distinction between an appointment and his acceptance of trusteeship Re Tyron:A person appointed as a trustee cannot be compelled to accept the office and he may disclaim it . Mountford V Cadogan:Acceptance of trusteeship may be express or implied, for example when the trustee appointed acts in the trust .

The grounds for removal under S 40(1) are only exercisable where a replacement trustee is being appointed since the section is concerned primarily with the appointment of trustees rather than their removal (see the last limb of s 40(1) ..in place of the trustee so deceased...)

2) Appointment /Removal Bv the CourtSection 45:

This power rests on it being "inexpedient, difficult or impracticable" to make an appointment out of court. It has been used in the following instances:1) Where all the trustees named predeceased the testator (Re Smirthwaite) 2) Where the trustee was incapable of acting because of old age or some other infirmity such as mental illness (Re Lemanns Trust)3) Where there was doubt as to whether the statutory or an express power of appointment was exercisable (RE Woodgate)4) Where the trustee was in enemy occupied territory (Re Mary)

RemovalSection 45 (I) (b)

The court can also remove a trustee against his will and replace him such as when a trustee is imprisoned, mentally disordered or becomes a bankrupt, but at the same time the court must appoint a new trustee in place of him.(s.45 (1) (b) can also be used to appoint additional trustees in difficult cases.)Re Hodson's Settlement: Where a person has a statutory or express power to nominate trustees of a trust the court will generally not interfere.Re Gadd:Even if trustees are nominated whom the court believes could have been bettered it will not interfere. If however the court concludes that the trustees nominated are unsuitable, it can call for a fresh nomination. Several unsuitable nominations may be regarded as a refusal to nominate and the court would make its own choice.

Termination Of Trusteeship 1. DisclaimerRe Lister:A person appointed as a trustee isnot obliged to take up the office and He may therefore disclaim it at any time before acceptance. However, there can be no disclaimer after acceptance

A disclaimer is usually effected by deed but this is not essential, it can be oral or implied from conduct or even from the fact that a long time has elapsed since the appointment of the trustee and he has done nothing. 2. Death On the death of a trustee his trusteeship automatically terminates. If there are surviving trustees then the trust estate will vest in them automatically as trustees will invariably hold the trust estate as joint tenants.

On the death of a sole or last surviving trustee the trust estate devolves on his personal representatives who is not obliged to accept the trust and they may appoint new trustees of the trust under the provisions of Section 40(1)

3. Retirement A trust may contain an express power permitting a trustee to retire. Apart from this, a trustee can retire when a new trustee is appointed in his place under Section 40(1). If no new trustee is to be appointed then he may retire Under the provisions of Section 43(1)4. RemovalSections 40 and 45 gives Room for the removal of certain trustees but the Trustees so removed must be replaced generally.