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Declaration of trust – an understanding in crisis?

Declaration of trust – an understanding in crisis?
"Declaration of trust – an understanding in crisis?"

The title above is framed with deliberate intent, and conscious desire to invoke discourse, specifically among the legal fraternity over a relatively fundamental and settled principle of law, collated from a series of cases as follows - Trust property held by a trustee cannot devolve to form part of the trustee’s personal estate upon his or her death but must remain for the sole benefit of the named beneficiary/beneficiaries under the trust, and this principle equally applies to Muslims and non-Muslims alike.

As simple as that principle may be, my personal experience suggests that the court may still be grappling with that, in instances, where it egregiously treats trust property as forming part of the trustee’s personal estate on account of the trustee’s death, instead of remaining for the benefit of the named beneficiary or beneficiaries.

This article is aimed at sharing the writer’s anguish regarding the aforesaid, commencing at the Kuala Lumpur High Court, followed by an appeal to the Court of Appeal, and back to the High Court again (in a time frame of slightly over seven months) just for a non-contested Vesting Order application arising from an uncomplicated declaration of trust.

On June 20, 2008, my client (Trustee), executed a Declaration of Trust (DT), declaring that she holds a condominium unit in Kuala Lumpur (registered in her name) on trust for the benefit of her niece (second client), and two adopted children (in equal shares).

On Feb 8, 2023, the Trustee died intestate (without a will).

On March 23, 2023, the two adopted children respectively affirmed a statutory declaration each, agreeing that the property be vested solely in the second client, subject to the proceeds from the eventual sale thereof, to be equally divided amongst the three.

On March 27, 2023, as instructed by the second client, I filed an ex parte application (first Originating Summons) for a Vesting Order, principally seeking, that the property be transferred (daftar) to her. On May 29, 2023, I appeared before a High Court judge for that application.

In brief, the judge dismissed the application, but raised the following before making that joyful pronouncement (summarised from the court transcripts):

1. Seeking to establish why no Faraid certificate was made available (in the proceedings) in light that the trustee is a Muslim, suggesting in turn, that the property, upon the trustee’s death, now forms part of the trustee’s personal estate, thereby giving avenue to any of the trustee’s heirs to make a claim over same.

2. Seeking to understand why the words “inter vivos” were not stated in the DT, in view that the Trustee made that declaration in her lifetime.

3. Demanding to know why the word “hibah” or “gift” was not used to convey the intention of the trustee (in the DT).

4. Querying as to why a Grant of Letters of Administration (LA), not applied first (to administer the trustee’s estate), before the first Originating Summons was filed.

5. Wishing to ascertain whether the Trustee had heirs (if any).

It became apparent that the judge predicated those queries through his belief that the property (as stated) forms part of the trustee’s personal estate, as it was not transferred to the intended beneficiary in the trustee’s lifetime.

More importantly and somewhat bizarrely, it became equally apparent that the judge went off on a different legal trajectory altogether when he refused to recognise and uphold the concept of trust (as generally understood) simply because the trustee was a Muslim, presupposing in turn, that a different set of laws were to apply under the circumstances.

In reaching that, the judge’s pronouncement became at odds with established laws pertaining to, and governing trust assets as understood within the Malaysian legal framework, which was not necessarily antithetical to Islamic precepts.

However much I tried, I could not persuade him on the legal merits of the application before him, and his refusal to take heed of the applicable principles from a reported Court of Appeal decision (which was not only favourable to the first Originating Summons, but also one which he was bound to follow under the doctrine of stare decisis), left me perplexed and disoriented.

As much as I wanted to argue further, I refrained, after seeing that the judge was already aggrieved by the courtroom’s insipid surroundings, and to press on (at that juncture), would have been counterproductive and angered him even more, hence the recourse to a higher judicial authority (after the first Originating Summons was dismissed, and without any official reason given).

Subsequent thereto, on Nov 2, 2023, after the lapse of over five months from the hearing of the first Originating Summons and the failure (after several written requests) to get the High Court judge to write a judgment explaining as to why he rejected the application, the appeal proper was finally heard before a three-judge Court of Appeal panel.

As I was not entirely familiar with the procedural aspects of appeals, I roped in the help of a legal colleague, Nizam Bashir, a person whom I have known for over 29 years since studying law together in Australia (in the early 1990s), and who so happens to be a very seasoned and able litigator, and with an envious set of natural hair, which would occasionally become a source of my contempt for him.

Nizam took over the conduct of the case, and henceforth, was solely responsible for the oral submission at the Court of Appeal.

The following were the salient points discussed, and addressed by the three-judge panel (summarised from the court transcripts):

I. The appeal was dismissed not because it lacks merit but because the first Originating Summons failed to invoke Section 48(e) of the Trustee Act 1949 in its intitulement (the heading of the first Originating Summons).

II. Section 48(e) is essentially the authority that gives power to any named beneficiary to seek a Vesting Order (in situations where no administrator/executor is available to represent the deceased trustee’s estate).

III. The fact that the words “Vesting Order” were already stated in the intitulement of the first Originating Summons made no difference whatsoever to the findings of the three-judge panel, which insisted that Section 48(e) must be specifically invoked for the first Originating Summons to succeed.

IV. We were then directed to file a fresh ex parte Vesting Order application (second Originating Summons) at the High Court, together with the requisite amendments.

V. We were also directed to retain references to Sections 417 and 420 of the National Land Code 2020 as per the intitulement in the first Originating Summons (federal legislative provisions require the relevant land registry to act upon the Vesting Order when served with a copy).

VI. The prayer (body) of the second Originating Summons should state, inter alia, the following:

(a) The trust property (in the prescribed portion given) must first be vested (diletakhak) in the name of the applicant/beneficiary.

(b) Subsequent thereto, the relevant land registry upon being served with a copy of the Vesting Order, to then register (mendaftar) the name of the applicant/beneficiary on the issue document of title to the property.

VII. The three-judge panel unanimously and unequivocally added that no Faraid certificate is required for the vesting exercise, thereby ruling out (by implication) that trust property falls into a trustee’s personal estate upon her death.

VIII. As the Court of Appeal did not at all canvas the issues raised by the High Court judge (save for the question of the Faraid certificate), it can safely be stated that they were not material nor relevant.

IX. Finally, the three-judge panel directed that when we do file the second Originating Summons, we are to formally allude to their findings (as aforesaid) to the High Court below, which can then act accordingly by granting the Vesting Order without more (when the matter goes for hearing).

On Nov 3, 2023, Nizam, through his firm, filed the second Originating Summons at the Kuala Lumpur High Court, together with a certificate of urgency for the purpose of expediting the hearing process.

On Nov 8, 2023, the second Originating Summons was heard before a Senior Assistant Registrar (SAR). Pursuant to the assurances and comfort officially given by the Court of Appeal, it was natural for Nizam and I to assume that the High Court would then, as a matter of recourse, grant the Vesting Order without much fanfare and celebration.

Disappointingly, our confetti moment was not meant to be, and once again, we were both drawn into another route of exasperating chicanes. The SAR directed the second client to first obtain an LA towards administering the trustee’s estate before proceeding with the Vesting Order application.

Nizam respectfully replied that we could not accede to the SAR’s direction as it was not only contrary to the clarity of Section 48(e), but it also openly countermanded the direction from the Court of Appeal. Nizam added that should the SAR insist, he was quite happy for her to dismiss the second Originating Summons and thereafter, for us to go through the appeal process once again.

Regrettably at that point, the Court of Appeal transcripts were not yet made available to assist us, and as such, we could not definitively convince the SAR of the material substance thereof, which could have allowed a mere formality of a hearing in granting that order-in-terms sought.

That said, it is important to be mindful that it would have been criminally insane for Nizam and I to deceive the SAR over what the Court of Appeal had averred. Such conduct would get us disbarred and with our respective legal careers ending on a most disgraceful note where being incarcerated thereafter in a joint cell at one of His Majesty’s fine prisons for some quiet and reflective time is an outcome waiting to happen.

Anyhow, after temporarily standing down the matter, the SAR then came back and fixed another date of Nov 17, 2023, essentially to hear further submissions (from Nizam) on the legal reach of Section 48(e), and as to why we should not comply with her direction on the need to file the LA first, before proceeding with the Vesting Order application.

Eventually, Nizam and I appeared once again before the same SAR. This time, the Court of Appeal transcripts were made available in the records of proceedings. The written judgment by the High Court judge (in the first Originating Summons) was also made available, though Nizam did not feel it was necessary that it be filed in the records of proceedings in light of the Court of Appeal transcripts which would have superseded whatever ruling in the former.

To our disappointment, the SAR did not even wish to hear Nizam submit, but fixed another date of Jan 16, 2024, for the purpose of bringing the second Originating Summons to be heard before a High Court judge.

I could not help but wonder then as to why such a basic principle of trust appears seemingly difficult to comprehend and disposed with, hence my belief that this area of law is indeed in crisis.

Thankfully, on Jan 16, Nizam and I finally had our day, and victory. There, a different High Court judge, upon a thorough examination of all documents filed, tackling of a series of elaborate questions posed (and answered), and taking cognisance of the position of the Court of Appeal (on the matter at hand), invariably granted the Vesting Order.

Arising therefrom, the High Court judge implicitly reaffirmed the long-established principles as follows:

1. Trust property cannot devolve to form part of the trustee’s personal estate on account of the trustee’s death but must remain for the benefit of the beneficiary;

2. The fact that the trustee is a Muslim, made no difference to the legal standing of the trust which remains valid and enforceable regardless of the death of the trustee; and

3. There is no legal requirement for trust property to be transferred to the beneficiary in the trustee’s lifetime for the trust to remain valid and enforceable – thus in consonance with the statutory position of Section 344 of the National Land Code.

Though Nizam and I felt elated over our success, there is still that genuine concern that what we went through could happen again if there remains an inconsistency of application on the notion of trust as discussed here.

I hope that someone with leverage within the judicial corridors will take note of this matter and perhaps facilitate pre-emptive measures by way of better education and training to enable those tasked with presiding over such a legal issue (or any legal issue for that matter), will be well versed on the applicable law, preventing in turn wrongful directions and judgments from ever taking shape and form.

The courts after all should be seen as the bastion of consistency and uniformity for legal redress (in a timely manner), not as an adjudicative impetus for the rigmarole of procedural uncertainties, where justice delayed, will invariably mean, justice denied.

Whether what I propose here will take place or not, I can only pray for obvious reasons, that providence will spare me from ever having to appear again before the same High Court judge who rejected the first Originating Summons, for I have no doubt if that were to happen, it will not be the courtroom’s insipid surroundings that will be the source of his wrath and pain.

The views expressed here are the personal opinion of the writer and do not necessarily represent that of Twentytwo13.

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