Yusof bin Ahmad and Others v Hongkong Bank (Singapore) Ltd and Others

• Jurisdiction: Singapore
• Judge: Chan Sek Keong J
• Judgment Date: 05 April 1990
• Neutral Citation: [1990] SGHC 26
• Date: 05 April 1990
• Subject Matter: Application to court to remove trustees,Application made by beneficiaries,Basis for ordering costs,Not entitled to costs of action to remove trustees,Duty to comply with settlor's wishes and terms of trust,Duties of trustees,Trusts,Costs,Whether parties to action for removal of trustees entitled to have their costs,Party liable to bear costs,Trusts and Trustees,Civil Procedure,Grounds justifying removal by court,Whether failure to carry out duties justify their removal by court,Application to court,Removal of trustees by court,Removal of trustees,Failure to carry out duties,Intervention by parties superfluous,Protector,Trustees later discharged on their own application
• Docket Number: Originating Summons No 878 of 1987,Originating Summons No 878 of 1988
• Published date: 19 September 2003
• Defendant Counsel: J Parker QC and Anand Karthigesu (Tan Rajah & Cheah),TPB Menon (Wee Swee Teow & Co),Koh Juay Kherng (Lee & Lee)
• Court: High Court (Singapore)
• Plaintiff Counsel: Aloysius Leng (Abraham Low & Partners)

Cur Adv Vult

This action was commenced on 8 August 1987 by the plaintiffs, who are income beneficiaries of the family settlement, for the purpose of removing the then existing trustees, viz Hongkong Bank Trustee (Singapore) Ltd (HBT), the first defendants herein, as trustees of the family settlement and the appointment of British and Malayan Trustees Ltd (BMT) in their place. On 23 January 1989, HBT applied by S/C No 443 of 1989 to be discharged as trustees and to have the second, fourth and fifth defendants appointed as trustees in their place. On 31 March 1989, I made an order in that summons discharging HBT as trustees of the family settlement and appointing BMT in their place (see Yusof bin Ahmad bin Talib v Hongkong Bank Trustee (Singapore) [1989] 3 MLJ 84 ). The said second, fourth and fifth defendants have appealed against that order.

Issue

The issue as to whether HBT ought to have been removed on the grounds relied upon by the plaintiffs was not argued in S/C No 443 of 1989. The parties now require the court to decide the said issue for the purpose of determining whether the parties to the original action are entitled to have their costs of the action up to 23 January 1989 when S/C No 443/89 was filed, and if so, against whom and on what basis.

Plaintiffs` grounds

The grounds relied upon by the plaintiffs for the removal of HBT as trustees are set out in the affidavit of the second plaintiffs filed on 16 January 1990. The plaintiffs have alleged that HBT have failed to do the following things as trustees of the family settlement:

(1) to act as trustees of the relation and the charity settlements in breach of the terms of the family settlement;

(2) to inform the beneficiaries of the terms and fees of their appointment as trustees;

(3) to act properly in relation to the distribution of income from the Australian investments in repatriating overseas income to Singapore and thereby subjecting non-resident beneficiaries to Singapore tax, and also promptly in regard to the same;

(4) to avoid incurring unnecessary expense in the administration of the family settlement, eg in making police report against the defaulting trustees on the `loss` of interest income which were intended for distribution to the Muslim poor;

(5) to make the correct deductions for withholding tax in respect of the income for the year 1986;

(6) to take into its safe custody some trust documents;

(7) to take prompt control of two Australian companies which belonged to the family settlement and the mortgages in favour of the previous trustees;

(8) to invest the trust funds in authorized investments in Australia and to disclose to the beneficiaries the advice of Queen`s Counsel on how to deal with the Australian investments;

(9) to remit the sum of US$477.77 to a beneficiary, as a result of which he was paid five months late;

(10) to avoid incurring unnecessary expense in taking advice from solicitors on a claim involving $371;

(11) to compute correctly the estate duty payable on the estate of one of the deceased`s beneficiaries, viz Fatimah, resulting in the estate duty being reduced, after the intervention of the plaintiffs.

(12) to hold an even hand amongst the beneficiaries by discriminating against the family members of two former trustees, Hussein and Mustapha.

I do not find it necessary to review the evidence in respect of all the above complaints. Many of these were trivial complaints. Some of them were exaggerated complaints which were, no doubt, contributed to a certain extent by the excessive caution and delays on the part of HBT. One of them had nothing to do with the administration of the family settlement except that it was construed as putting obstacles in the way of a beneficiary from recovering a sum of money owing to him by the settlement.

The thrust of the second complaint was not the failure to disclose the terms and fees of HBT`s appointment as trustees, but that the amount of fees charged by HBT was excessive. No doubt the plaintiffs considered that they did not get good value for the fees charged by HBT, but this cannot be a ground for removal since the fee structure (including the item on discretionary fees) was approved by the court and it has not been argued that the court had no jurisdiction to approve the fee structure. If the fees charged were excessive, it is not a ground for removing the trustees unless they amount to fraudulent charging, but a ground for recovery of such fees by the new trustees.

I find that the first part of the third complaint is not a breach of trust but a breach of duty, if any, to non-resident beneficiaries for which they have their remedy against HBT. The second part of the third complaint has some substance as HBT have not given a satisfactory explanation why they, as professional trustees with all the legal and accounting services available to them, took more than three years to get ready to distribute all the income. However, no appreciable loss has resulted to the settlement.

However, I find that the fourth, fifth, sixth, ninth, tenth and eleventh complaints have no substance.

With reference to the seventh complaint, that the delay in taking control of the Australian companies contributed to the delay in the distribution of the Australian income, I am of the view that here HBT should and could have acted much more promptly than they had actually done, given the circumstances leading to the discharge of the previous trustees and their appointment as trustees. Their justification was that the situation was uncertain and they were waiting for legal advice. In my view, professional trustees in the position of HBT do not need to rely on legal advice for everything that they have or may desire to do. Taking into custody and control in order to safeguard the assets of the family settlement trust is an obvious duty and function to perform, which they do not have to wait for or require legal advice, especially in the circumstances of this case. HBT have adduced no evidence that they had made any or adequate assessment as to whether it was safe to leave the Australian mortgages in the control of the defaulting trustees for such a long time.

In respect of the eighth complaint, I find that the complaint that the investments in Australian shares were unauthorized was an unfair complaint in view of the ambiguity of the court order which authorized HBT to invest in Australian equities. Moreover, there is no duty on the part of HBT to inform the beneficiaries as to what counsel had advised them to do in respect of such investments.

In my view, all the above complaints, collectively, would not have been sufficient as grounds for the removal of HBT as trustees. As was stated in Story`s Equity Jurisprudence , s 1289 which was cited with approval by the Privy Council in Letterstedt v Broers (1884) 9 AC 371:

... it is not indeed every mistake or neglect of duty or inaccuracy of conduct of trustees, which will induce courts of equity to adopt such a course. But the acts or omissions must be such as to endanger the trust property to shew a want of honesty, or a want of proper capacity to execute the duties, or a want of reasonable fidelity.

Clause 13 of the family settlement

In my view, the only serious complaint in this case is that HBT as trustees of the family settlement refused to take on the trusteeships of the relation settlement and the charity settlement. The complaint is that HBT committed and continued to commit a breach of their duties as trustees under cl 13 of the family settlement which provides as follows:

It shall be the duty of the trustees for the time being to accept and undertake the trusts declared in an indenture dated 6 October 1932 (Registered Volume 830 No 121) and made between the settlor of the one part and the settlor and Shaik Jaafar and Shaik Abdullah of the other part and if any of the trustees refuses to be appointed trustee of the said indenture or to accept and undertake when appointed the trusts of the last mentioned indenture he shall not be entitled to any share in the trustees` commission under cl 12 hereof until he shall consent to become and be appointed as such trustee.

The indenture dated 6 October 1932 is the relation settlement, which was a settlement of the income of certain properties for the benefit of the relations of the settlor described therein. Subsequently, by a supplemental indenture dated 31 August 1935, cl 13 of the family settlement was amended to impose on the trustees the duty to accept and undertake the trusts declared and contained in an indenture dated 7 August 1935 (this being the charity settlement which was a settlement of the income of certain properties for certain named charitable objects). There was an obvious reason for the settlor to require that the three settlements be administered by the same set of trustees. All the settlements provide for termination of the income trusts on the same date, whereupon the corpus of each of the settlements would vest in the income beneficiaries under the family settlement then living in the same shares as enjoyed by them immediately before such date.

It is equally clear from the terms of cl 13 that, by imposing a deterrent against a failure to perform such duty, the settlor considered the common trusteeship of the three settlements as a most important duty on the part of the trustees of the family settlement. Clause 13 provides that if any of the said trustees refuses to be appointed as a trustee of the relation settlement and the charity settlement, he shall not be entitled to any share in the trustees` commission under cl 12 of the family settlement until he shall consent to become and be appointed as such trustee.

In view of this clear provision, it might appear surprising that HBT chose to refuse to comply with it. I turn now to the reasons given by them for not doing so.

Originating Summons No 1269 of 1985

HBT were...