Tutorial 7

The leading trust law case of Saunders v Vautier (1841) EWHC Ch J82 followed in Re Collins
(1886) 32 Ch D 229, Re Gower’s Settlement [1934] Ch 365 and others have consistently
witnessed long standing position with regards to variation of trust in the UK jurisdiction.

Critically discuss the judicial position in Malaysia in light of Saunders v Vautier (1841)
EWHC Ch J82 and the Court’s reluctance in permitting any kind of variation with reference
to relevant case law and articles.

This question requires us to discuss on the variation of trust.

Saunders v Vautier, in this case, the trust instrument stated that there shall be accumulation
of the stock trust till the testator’s grandson attain the age of 25. The beneficiaries were the
testator’s wife and grandson and heirs. After the son and testator passed away, the
testator’s daughter in law applied to court for payment and maintenance of the grandson
who is still minority and a remainderman.

While deciding this suit, the court laid down three principles with regards to variation of
trust. First, when the beneficiary attain full age and of sound mind, he can deal with his
equitable interest as he wishes. Secondly, an adult beneficiary can bring a trust to an end
before the stipulated time in the trust. Thirdly, the beneficiary or all the beneficiaries can
give their consent to any variation made by the trustee without undergoing the dissolving
and resettling of property.

There is a general rule that a trustee must administer the trust according to its terms. Any
deviation is a breach of trust for which the trustee will be personally liable at the instance of
an injured party.

trust is imperative - the trustee must follow the terms in the trust instrument and the court has no
power to sanction any departure of the trust terms. There is an exception where the beneficiary sui
juris can deal with his equitable interest under the trust and can give consent to the trustee to deal
with trust property in a way that might affect his interest.

However, there is an exception to general rule. When beneficiaries sui juris (of full age) may
deal with his equitable interest under the trust and may consent to the trustee dealing with
the trusts funds in a way which affects his interest. Beneficiary is sui juris may legitimately
decide to bring the trust to an end.

The question arises is whether variation can occurs when a beneficiary is not sui juris.
Chapman v Chapman o the court held that, it may in its inherent jurisdiction, approve of
variation includes:  where a beneficiary makes an application to vary a deed of trust to
alter the nature of an infant’s property interests;  to pay maintenance out of accumulated
income;  to endorse a transaction with trust property in order to ensure the survival of the
trust,  or to carry into effect a compromise for future beneficiaries.

Re Collins
o Court will have the inherent jurisdiction for maintenance to minor
o Even if a settlor has made no specific provision to maintain an infant beneficiary in
the trust, the jurisdiction here appears to be limited to trusts concerning the
settlor’s family,

S 59 Trustee Act 1949

when the trustee does not have the power vested to him by the trust instrument to do
certain disposal on the trust property which is deemed expedient by the Court, the Court
may order the power conferred upon the trustee.

S.57 of English TA = similar as to S.59 of TA.

The courts’ jurisdiction is restricted to four situations, salvage, emergency, power of court,
compromise, and maintenance. Compromise and maintenance are Possible for variation of trusts to
go beyond the administration of trust property.

1. Salvage - relates only to the administration of trust and does not authorise variation
involving the remoulding of beneficial interests.-allow the court to, for e.g., sanction
disposal of a portion on an infant’s beneficial interest for the benefit of the portion retained
in circumstances of absolute necessity
Conway v Fenton Court held that the jurisdiction is useful where expenditure is neccesary to
save building from being collapse.-trust property could be applied to save the buildings from
collapse.
(Salvage is trying level best to save the trust)

2. Emergency
- Emergency can be understood as something not anticipated by the settlor.
- The court will intervene if it would frustrate or interfere with the settlor’s intention.
- In cases of emergency, court may sanction the alteration of the terms of the trust
- Conway v Fenton
o Court held that the jurisdiction is very narrow and useful where expenditure is
necessary to save building from being collapse
- Re Tollemache
o The court refused to sanction a scheme of authorising the mortgage the interest of
the life tenant’s beneficial interest in order to increase her income as there was no
emergency.

3. Power of court
S.59 TA
Re Estate of Yong Wai Man
Trustee proposed to reinvest 200k to invest in MBF First Fund.
-necessary for the court to determine what an administrator can do with assets with an
estate of infant beneficiary.
-MBF falls outside the scope of s.5(3).
-Thus not sanctioning.
= Such variation must be in line with the TA.
Ramasamy & Ors v Thayalan S.K.Psalaniyandy
All parties bought a piece of agricultural land and plan to convert to housingdevelopment
land. After that, some beneficiaries refused to sign contract with the building
contractor. -Original trustee did not empower trustee to sell individual lot to others. Court
must step in to save the situation.-there was sanction by the court for the variation

= situation render necessity the courts interference

Tan Tat Hock v Chow Hon Thiam

the court was in the opinion that there is unjust and it served no purpose
of emergency and necessary of practicing the general inherent jurisdiction as
stipulated in section 59 of Trustee Act 1949. – necessity and emergency

4. Compromise (matter of beneficiary interest bcm genuine dispute) – go beyond

administration and management of trust.
- The second aspect of the court’s inherent jurisdiction is in approving compromises where
there is a conflict regarding the rights of the beneficiaries. (previous ways do not allow this).
Re Barbour’s Settlement Trusts

Chapman v Chapman (restrictive approach)

o The trustee applied for leave to execute a scheme releasing certain properties from
the trust in order to avoid estate duty.
o Some of the interests were enjoyed by infants and might be enjoyed by unborn
persons, so that any rearrangement of interests required the consent of the court.
o The court held that the scheme would not be approved because the court had no
jurisdiction to sanction a rearrangement of beneficial interest on behalf of infants
and unborn persons where there was no real dispute.

Re Powell Cotton’s ResettlemenT [1956] 1 WLR 23

Mason v Farbrother [1983] 2 All ER 1078

= even with the court’s inherent power with compromise, court still have to makesure , such
act is not ultra vires the TA.

Maintenance
- If a settlement is created to provide for a minor but enjoyment of a minor is postponed,
the
court may disregard the terms and order that minor is maintained from the income
generated.
To benefit the beneficiaries.
- Re Collins
o the court allowed the trust to be vary as to allocate some money for the
maintenance of beneficiary.
- S57 also allows this variation.
Both country apply narrow approach. Uk can be justified by referring to case of chapmen
while in Malaysia we can see even with the exception such as power of court, the Malaysian
court, took narrow approach by being strict and demanding for necessity to exercise their
power. Plus, provision s56 of ta and s57 of English Ta are similar provision.

Conclusion: These methods are exceptions to general rule and is created for sole intention
to give effect to intention of settlor.
Wtr variation is good or bad?
Wtr Malaysia should have variation act as in UK?
The approach in Malaysia ?

-Society of Lloyd’s v Robinson

-Beneficiaries of full age, sui juris and between them entitled to the entirely of the trust
property can bring the trust to an end;
 Re Chardon[1928] Ch 464
 Re Smith [1928] Ch 915

5.59 is on maintenance
59(1)
59(2)
59(3)
Re estate yong wai man ex parte yong khai min
British & Malayan Trustees Ltd v Abdul Jalil bin Ahmad & Ors
Tan Tat Hock v Chow Hon Thiam (circumstance here is on administration and management
of trust and not to vary the beneficial interest)

The courts have NO authority or discretion to vary or alter the beneficial interests Case: Re
Duke of Norfolk’s Wills Trust (Tax considerations) In the great majority of cases, the benefit
provided by the Act is a tax planning advantage, and so, ultimately, a financial one. In this
case, the beneficiaries saved £550k in taxes because of the variation.