LAW OF TRUSTS - III

S.Selvakunapalan LL.B., LL.M.

Attorney-at Law, Deputy Legal Draftsman
Visiting Lecturer – Sri Lanka Law College.

1
 Definition for trust
• The modern concept of ‘trust’ has come to Sri
Lanka via English law.
• The English law of trust stipulates dual
ownership of the trust property; Legal title
vests with the trustee while equitable title
vests with beneficiary.
• Justice Story:- A trust in the most enlarged
sense may be defined to be an equitable right,
title or interest in property distinct from the
legal ownership thereof.
2
• Lord Lindley :- A trust as equitable obligation
to deal with the property in a particular way.

• A trust formally known as nothing except a

confidence repose by one person in another,
and enforceable in a Court of Law.

3
 Sec 3 of the Trusts Ordinance
Trust" is

(i) an obligation annexed to the ownership of

property; and

(ii) arising out of a confidence reposed in and

accepted by the owner, or declared and
accepted by him,

(iii) for the benefit of another person,

4
(iv) while the ownership is nominally vested in the
owner, the right to the beneficial enjoyment of
the property is vested in such other person, or in
such other person concurrently with the owner.

The above definition emphasizes the ideas of

confidence, the legal ownership of the trustee
and the beneficial ownership of the beneficiary
cestui qui trust.

5
Keeton states that a trust may be said to be the
relationship which arises, wherever a person
called the trustee is compelled in equity to hold
the property whether real or personal and
whether by legal or equitable title, for the
benefit of some persons for some objects
permitted by law in such a way that the real
benefit of the property accrues not to the
trustee but to the beneficiaries or other objects
of the trust.

6
Trust is an obligation whereby the trust is bound
to perform or forbear some acts for the
beneficiary. But this obligation has peculiar
features.
First: the obligation must relate exclusively to a
property. The ownership of which vests in the
trustees. An obligation not so related cannot be
a trust.
Moreover, like English Law the definition of the
term of expression “trust” recognizes duplicate
ownership.
7
Himangshu Kumar Roy v. Maulavi Ali Khan [AIR
1938 Cal 818]
Trustee is not merely a nominal owner but a full
owner.

Second: Their obligation must arise out of

confidence which the author of the trust
reposes in the trustee or out of own declaration.
This obligation is different from contractual or
delictual obligation.

8
Bhaia Ramanui v. Lalu maheshunuj [AIR 1968
Pat 463]
It is a fiduciary obligation voluntarily accepted
by the trustee.

The definition of the term of “trust” in its legal

sense has technical and legal meaning which is
very much different from the sense we use the
word in daily parlance. In its legal sense, it
involves what is usually known as three
certainties namely -
9
(a) A person who is a trustee;
(b) The property which may be chattel or land or
money or any property tangible or intangible
which is called trust property.
(c) A person for whose benefit the property is
held.
Dooby v. Watson [1883 39 Ch D 178]
It is the combination of three elements which
must exist before we get a relationship of trust
and beneficiary.

10
Rajagopala Chetti v. Official Assignee [1932
MWN 289]
Mere intention to create a trust without any gift
of property for that purpose or object would not
constitute a trust.

In order to create a trust, the owner has to

divest himself of his rights to the property and
transfer it to the trustee.

11
Chandan v. Longa Bai [AIR 1998 MP 1]
When person executes a deed expressing his
desire to construct a Dharmasala to perpetuate
the memory of his family members without
divesting himself of the right in such property to
the trustee, no trust is created.

12
When the security deposits made by the agents,
employees, and lorry-owners with a transport
company had intended that the deposits so
made were to be held by the company in their
hands for the benefits of the depositors and
there was segregation of the deposit amount
and no payment of interest was made and
commission account were kept separately, it was
held by the Madras High Court that the company
must be held to be treated as trust said deposits-
Madras Bangalore Transport Co. (Fast),
Insolvents, in the matter of [AIR 1974 Mad 21]
13
A debtor constituted in writing a committee for
paying off his creditors but did not vest any
property to the committee nor was any power
of management or disposition of property or
collection of money was given it was held that
there was no trust in favour of the creditors-
Kishangopal Nathulal [AIR 1956 MB 236].

14
The court is to look into the intention of the
author of the document whether a trust is
created or not.

A trust is created when an obligation annexed to

the ownership of the property for the benefit of
a third person is brought into existence- Indian I
& S Co v. Dalhousie Holding Ltd. [AIR 1957 Cal
293]

15
For the creation of a fiduciary relationship, it is
not necessary that the concerned document
must use the word “trust”, because a person
may become a trustee by his own acts or
conducts- Fazalbhhai Mills Ltd., in re [AIR 1936
Bom 296] and section 6 of the Trusts
Ordinance.
When a bank employee had made a security
deposit with the employer bank, such deposit
was held by the bank as trustee- Hindusthan
Commercial Bank Ltd, in re [AIR 1938 Mad 651]
16
 The person who reposes or declares the confidence is
called the "author of the trust“;
The person who accepts the confidence is called the
"trustee";
“beneficiary” means a person, or a defined or definitely
ascertainable class of persons, for whose benefit the
confidence is accepted; (Amended by Act, No. 6 of 2018)
The subject-matter of the trust is called "trust property "
or " trust money ";
"The beneficial interest" or "interest" of the beneficiary is
his right against the trustee as owner of the trust
property ; and
The instrument, if any, by which the trust is declared is
called the "instrument of trust" ; 17
The words ‘confidence reposed in’ are the keywords
for the formation of a trust. Trust is a gift property
or an interest in the property, to an individual or
group of individuals or an institution through the
instrumentality of ‘trustee’, in whom the owner of
the property reposes confidence.

The trustee is bound to hold the property for the

beneficiary and he can’t use the property for his
own benefit.

18
It is good to know the use of interpretation
clause of a statute.

In the case of Indian Immigration Board of

Natal v. Govindaswamy (AIR 1920PC 114), it was
stated that when the word is defined in the
interpretation clause, prima facie, the definition
governs wherever the word is used in the body
of the statute.

19
However, when the context makes the definition
given in the interpretation clause inapplicable a
defined word when used in the body of the
statute has to be given meaning different from
that contained in the interpretation clause.

Therefore, all the definitions given in the

interpretation clause are enacted subject to the
qualification “unless the context otherwise
requires” or “unless the context or the subject
matter otherwise implies”.
20
Although it is presumed that the legislature will
be precise and careful in its choice of language
in the definition section, sometimes, the
language used in a section itself requires
interpretation – Walker v. Leeds City Council
(1976 3 All ER 709).
In these circumstances, a definition in the
interpretation section may itself ambiguous and
may have to be interpreted in the light of the
other provisions of the Act and having regard to
the ordinary connotation of the word defined.
21
The definition in the interpretation section is not
to be read in isolation but it must be read in the
context of the phrase which it defines realizing
that the function of an interpretation section in
a statute is to give precision and certainly to a
word or phrase which would otherwise be vague
and uncertain but not to contradict it or to
supplant it altogether – Hotel and Catering
Board v. Automobile Proprietary Ltd. (1968 3 All
ER399).

22
Similarities and
Differences

23
 Trust and contract
A contract is agreement enforceable by law,
entails an obligation or legal duty to do or
abstain from doing something what one has
promised to do or abstain from doing. A trust
resulting from the act of the parties though
some of the characteristics of a contract, it
differs from a contract with respect to
beneficial interest in and legal ownership of
the trust property.
24
Trust is an obligation to use one’s property for the
benefit of another in whom it is concurrently
vested.

The beneficiary has more than the personal right

against the trustee for the performance of the
obligations of the trust, he has the beneficial
interest in the property though the legal
ownership vests in the person holding the
property for his benefits.

25
In a trust, the trustee must hold the property for
the benefit of the beneficiary. The trustee may
be one the beneficiaries. Similar result may be
obtained where A promises to B to pay money
to C.
But when A does not perform the contract. B
will be entitled to nominal damages only
because he has suffered no loss. C can not sue
because no consideration has moved from him
or in other words he is not a party to the
contract.

26
But the situation will be different if A promises
to B that A will pay money to B on condition that
the money will be paid by B to C. Here, B will be
entitled to substantial damages for the breach
by A. But C is without any remedy. However if C
is a joint promisee, he would be able to sue.

It is sometimes difficult to distinguish between a

trust from a contract because the law of trust
and law of contract are at places overlapping.-
Mailand, Equity, 2nd Edition.p54.
27
In trust, there is fiduciary relationship in
between trustee and beneficiary. The
beneficiary has a right to sue against the trustee
for the benefit or proper maintenance of trust
property. In a contract as specified earlier, C can
not sue against either A or B.

In trust, there is a particular separate fund which

the trustee has to preserve in tact. In the case of
contract, there is no necessity have a separate
fund.
28
In a trust, the trustee can not use the trust
property for his own benefit and if he does, he
commits breach of trust.

A trust is exclusively for the benefit of the

beneficiary who is third person to the contract
between the author of trust and trustee.
Otherwise no trust is created.-Rama Rao v.
Chandra Gopal [1969 2 MLJ460]

29
In the case of Indian Iron and Steel Company v.
Dalhousie Holdings [AIR 1957 Cal 293] it was
observed “Trust in its origin was a form of
contract distinctly enforced in equity. A contract
creates a trust when it has brought into
existence an obligation annexed to the
ownership of the property for the benefit of a
person other than owner. No technical words
are required to create trust. The question is
fundamentally a question of the parties to the
contract.”

30
When a fiduciary relationship is created in a
family arrangement in favour of strangers, then
the strangers upon whom the benefit is
conferred can enforce it as the said family
arrangement creates a trust in favour of those
strangers.- Veeramma v. Appyya [AIR 1957 AP
465].

31
 Trust and gift
A trust differs from gift in the sense that a gift
requires a delivery of the property and
complete transfer of title. While in a trust the
legal ownership vests with the trustee,
though for the benefit of beneficiary.

32
• The role of the "declaration" also comes into
focus when self-declarations are compared
with gifts.

33
 In Shah v Shah[2011] W.T.L.R. 519

‘D’ signed a letter which purported to dispose of

shares in favour of his brother, ‘M’. He delivered
the letter to M, together with the executed share
transfer forms but without a share certificate
(which was held by the company). The letter
stated: "I am as from today holding 4,000 shares in
the above company for you … from this declaration
and letter."

34
D argued that the letter merely contained an
expression of an intention to make a gift, which
was never completely constituted, and therefore
was ineffective to vest title in M. The Court of
Appeal held that in fact the letter contained a
valid self-declaration of trust in M’s favour.
It would take effect immediately, and as a matter
of law this could only involve a disposition of the
beneficial interest in the shares, as legal title
could not pass before the share transfer forms
had been registered.

35
D had executed and delivered a stock transfer
form, he clearly intended registration to occur in
due course. The idea that D would hold the
shares for M pending registration could be made
effective only by the imposition of a trust and
this was what D had to be taken in law to have
intended.

A mere intention to make a gift is insufficient for

this purpose.

36
• The principal distinction between gifts and
self-declarations of trust is that in the former
the donor transfers rights to another, whereas
in the latter the settlor holds rights for
another.

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 Trust and Agency
A trustee has full title to the trust property. An
agent to whom property has been transferred
does not have title. When a money is handed over
with a direction to pay it to another person, there
is no vesting of ownership and there is no trust
only agency.-Mukta Prosad v. GajrajSingh [1904 1
All LJ 422]

38
When a person by an agreement entrusted the
management of his property for ten years with a
duty to keep an account and subject to payment
of remuneration, it was held that such appointee
was merely an agent and not a trustee.- Rai
Beharilar v. Bhaiyalal [AIR 1920 PC 8]
When a person has been given the management
and control of the provident fund of the
employees of a firm, such a person is not a
trustee but a manager.- Gopal Das v. Abdul
Jalwar [AIR 1946 Pat 430]
39
A person has been appointed as agent by a
person to purchase a property for him. After
such purchase, the agent fraudulently sold the
property to a third party. The principal could get
the recovery of possession of the property from
the transferee of the agent, because the agent
not being trustee could not convey valid title of
the property to the transferee.- Cove v.
Mackenzie [1877 46 LJ Ch 564]

40
A trustee is not subject to the general control of
the beneficiary, whereas an agent is subject to
the control of his principal.

Agents of trustee are not trustees and

beneficiary can not take action against the
agents of the trustee. However, an agent of the
trustee has fraudulently involved in the breach
of trust, he may be constructive trustee and
shall be accountable to the beneficiary.-
Ramanathan Chettiar v. Annamalai Chettiar [57
Mad 1031]
41
Agency is based an agreement between
principal and agent but there is not necessarily
any agreement between trustee and beneficiary.

The agent can involve his principal in liability

towards third person, whereas a trustee cannot
so involve his beneficiary.

Agent arises by consent, whereas a trust can

arise without consent.
42
 Trust and fideicommissum
• Section 3(b) of the Trusts Ordinance declares
that a trust does not include a
fideicommissum. Fideicommissum has been
received into the law of Sri Lanka through
Roman Dutch Law.

43
The distinction between the legal and equitable
ownership is of the essence of the trust; the idea
is foreign to the fideicommissum.

In trust, the legal ownership of the trustee and

equitable ownership of the beneficiary are
concurrent, and often coexistence. In
Fideicommissum, the ownership of the
fideicommissary begins when the ownership of
the fiduciary ends.

44
Fideicommissum arises where property is given to
a person called the fideicommissary who has the
absolute control over it, and on his death or on the
happening of a condition, the property passes to
another person called the fideicommissary, and
may likewise devolve on successive
fodeicommissaries.
Differences between two concepts-
(1) In the trust, the legal ownership of the trustee
and the equitable ownership of the beneficiary are
concurrent and co-extensive;
45
In the fideicommissum, the ownership of the
fideicommissary begins when the ownership of
the fiduciary ends;
(2) In the trust, the interest of the beneficiary,
though not described as equitable ownership is
against bona fide alienation of the legal estate it
is ineffectual; in the fideicommissum, the
fideicommissary once his interest has vested,
has a right which he can make good against the
world.
(Abolition of Fideicommissa and Entails Act,
No.13 of 1972)
46
 Private trust and public trust
When the beneficial interest is limited to
specified individuals or definitely ascertainable
individuals, it is private trust.

In a private trust, a person creates a trust by

deed or will providing for the enjoyment of the
property by the members of his family and
descendants.

47
When the beneficial interest is for public as a
whole or section of the public, it is public trust.
In public trust, the beneficial interest is vested
on uncertain and fluctuating body of persons.

Public trust is constituted for the benefit of

either of the public at large or of some
considerable portion of it answering a particular
description.

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The duration of private trust cannot be extended
beyond the period allowed by the rules of
perpetuities.

A public trust may be permanent and indefinite

character and is not confined within the limits of
the rule against perpetuities.

49
Classifications

50
 Classification of Trusts
1. Express Trusts
2. Informal/ implied Trusts
3. Resulting Trusts
4. Constructive Trusts

51
 Express Trusts
“express trust” means a trust that is created by
the author of the trust generally in the form of
an instrument in writing with certainty
indicating the intention of the trust, but does
not include a constructive trust or a de facto
trust, whether charitable or not. (Act, No. 6 of
2018)

52
• An express trust is one which is deliberately
established and which the trustee deliberately
accepts.

• For example:- Trusts created under section

5(1) and (2) of the Trusts Ordinance.

53
 Informal/ Implied Trusts
• A implied trust may be said to arise where the
intention of the settlor to set up a trust is
inferred from his words or actions, e.g.
precatory words.
• Implied trust in that sense are probably best
regarded as express trusts, in that, the trust is
expressed, albeit in ambiguous and uncertain
language.

54
 Resulting Trusts
• The term resulting trust seems to be limited to
three well defined categories.
• First, where a man purchases property and
has it conveyed or transferred into the name
of another or the joint names of himself and
another when the beneficial interest will
normally, as it is said, result to the man who
put the purchase money.

55
• Secondly, where there is a voluntary
conveyance or transfer into the name of the
another or into the joint names of the grantor
and another where likewise there is prima
facie a resulting trust for the grantor.

• Where there is a transfer of property to

another on trusts which leave some or all of
the equitable interest undisposed of.

56
 Constructive Trusts
• The trust arises by operation of law as from
the date of the circumstances which give rise
to it.
• The function of the court is merely to declare
that such a trust having arisen in the past.

57
 Express Trust in Sri Lanka
• Subject to the provisions of section 107, no
trust in relation to immovable property is valid
unless declared by the last will of the author
of the trust or of the trustee, or by a non-
testamentary instrument in writing signed by
the author of the trust or the trustee, and
notarially executed. (Sec 5 (1))

58
• The term “notarially executed” is defined in
section 3(o) of the Trusts Ordinance to mean that
the instrument should be executed in the manner
prescribed by section 2 of the PFO.
• No sale, purchase, transfer… of land… shall be of
force or avail in law unless the same shall be in
writing and signed by the party making the same,
in the presence of a licensed notary public and
two or more witnesses present at the same time,
and unless the execution of such writing, deed, or
instrument be duly attested by such notary and
witnesses. (sec 2 of PFO)
59
• No trust in relation to movable property is valid
unless -

(1) declared by the last will of the author of the

trust or of the trustee, or by a non-testamentary
instrument in writing signed by the author of the
trust or the trustee, or

(2) the ownership of the property is transferred to

the trustee by delivery. Sec 5(2)

60
Milroy v Lord [1862] 4 De G.F. & J. 264; 45
E.R. 1185
• Express trusts may be constituted in one of
two ways.

• "[The trust will be] effectual if [the settlor]

transfers the property to a trustee for the
purposes of the settlement, or declares that
he himself holds it in trust for those purposes

61
Bernedette valangenberg Vs. Hapuarachchige
Anthony ([1990] 1 SLR 190)
• Court stated that section 5(1) of the Trusts
Ordinance specially enacts that a trust created
under Chapter II of that Ordinance must be
notarially executed in the manner prescribed
by s.2 of the Prevention of Frauds Ordinance.

62
 Essential elements to form a trust
1. Author or settlor of the trust;
2. Trustee;
3. Beneficiary;
4. Trust property or subject matter of the trust;
5. Objects of the property.

63
1. The three persons must have the capacity to
enter into the transaction;
2. There must be certainty as to intention to
create trust, beneficiary and subject-matter;
3. Trust must not violate the rule of perpetuity;
4. It must be lawful purpose;
5. Trust property must be transferred to the
trustee.

64
Capacities

65
 Three parties
There should be person to repose or declare confidence,
known as ‘author of the trust’. Another person should
accept the confidence as reposed in him by the author,
called the ‘trustee’. When the author declares and
accepts the confidence himself he becomes a trustee
also.
There should be a third person for whose benefit the
confidence is reposed by the author and accepted by the
trustee. The author of the trust may himself be the
beneficiary or one of the several beneficiaries under trust
property
66
 Capacity of settlor
• A trust may be created by every person competent to
contract – (sec 7(a).
• A group or community of persons can create a trust
by contributing towards the value of the trust
property.
• Every person is " competent to contract " who is of
the age of majority, or has otherwise acquired the
status of majority according to the law to which he is
subject, and who is of sound mind, and is not
disqualified by law from contracting – Sec 3(l).  

67
• Section 2 and 3 of the Age of Majority
Ordinance provides that legal age of majority
is 18 years.

• A trust may be created with the permission of

the court by or on behalf of a minor – (sec
7(b)). The permission should have been
obtained prior to the creation of trust.

68
 Capacity to be trustee
• Every person capable of holding property may
be a trustee; but, where the trust involves the
exercise of discretion, he cannot execute it
unless he is competent to contract. – (sec
10(1))
• The term “capable of holding property” is not
defined; but it includes all living persons,
corporation and company.

69
• It is said that a settlor has the liberty to appoint a
beneficiary or an insolvent as trustee in an instrument of
trust, but a court when appointing had shown reluctance
such persons as trustees.
• In Sesma Lebbe Marrikar Vs. Manatchy Umma
(11NLR237) the Court held that an undischarged
bankrupt is not ipso jure disqualified for the office of
administrator of a deceased person's estate under the
Civil Procedure Code. In Ceylon, an application for a grant
of administration of an intestate's estate is made under
section 544 of the Civil Procedure Code, which places no
restriction on the power of the Court to appoint any
person interested in having the estate administered.
70
 Capacity to be beneficiary
• The person for whose benefit the confidence is
accepted is called the " beneficiary”. -3(e)

• Every person capable of holding property may be

a beneficiary. – sec 9(1).

71
• Every written law whether made before or after
the commencement of this Ordinance, unless
there be something repugnant in the subject or
context " person " includes any body of persons
corporate or unincorporate.- (sec 2(s) of the
Interpretation Ordinance).

• A trust for the maintain animals is invalid.

72
 Trusts Created by Action
• Also section 6 states that the trust must be
declared by words or acts of the settlor.

73
• The formalities laid down in section 5(1) of the
Trusts Ordinance will have to be adhered to in
creating a valid trust in respect of immovable
property.

• Therefore, any trust alleged to have been

created without complying with the above
said formalities is invalid and will no force in
law.

74
• However section 5(3) of the Trusts Ordinance
presents exception. It states that the rules
specified in section 5(1) and (2) do not apply
where they would operate so as to effectuate a
fraud.

75
 Re keyford[1975] 1WLR 279
Kayford Ltd were a mail order company. They received
pre-payments from customers and was concerned that
they may be facing insolvency. On taking legal advice,
they opened a separate bank account to deposit the
customer's pre-payments. The account was named
'Customer Trust Deposit Account'. Kayford Ltd
subsequently did become insolvent and the creditors
sought to claim the money in the separate account as
part of the company assets.

76
It was held the money in the account on trust
for its clients. Megarry J: There is no doubt
about the so-called “three certainties” of a trust.
The subject-matter to be held on trust is clear,
and so are the beneficial interests therein, as
well as the beneficiaries. As for the requisite
certainty of words, it is well settled that a trust
can be created without using the words “trust”
or “confidence” or the like: the question is
whether in substance a sufficient intention to
create a trust has been manifested.

77
 Paul v. Constance [1977] 1 W.L.R. 527]
• Mr. Constance was married to the defendant.
He left his wife in 1965 and later met the
claimant and moved in with her in 1967. He
never divorced his first wife. In 1973 Mr.
Constance received £950 in relation to a
personal injury claim from his employer. He
discussed what to do with the money with the
claimant and decided to open a bank account.

78
As they were not married, the bank advised him
to open the account in his own name but
assured him that the claimant would be able to
draw on the account if she had a signed note
from him. Constance had told the claimant that
the money was as much hers as it was his.
There were three further deposits into the
account which came from the couple's bingo
winnings which they played as a joint venture.

79
Constance died intestate in 1974 and his wife as
administratrix of his estate closed the account
and claimed the sums contained in the account
formed part of his estate. The claimant argued
that the sums contained in the account were
held on trust for the benefit of her and
Constance jointly.
There was an express declaration of trust and
the claimant was entitled to the money in the
account.

80
Lord Justice Scarman:"When one bears in mind
the unsophisticated character of the deceased
and his relationship with the plaintiff during the
last few years or his life, the words that he did
use on more than one occasion, "This money is
as much yours as mine," convey clearly a
present declaration that the existing fund was as
much the plaintiff's as his own."

81
• Paul v Constance, in this case, the deceased
partner of the defendant had frequently said
to the defendant, in respect of a sum of
money: "This money is as much yours as
mine". In finding that this amounted to a self-
declaration of trust.

82
 TYPES OF TRUSTEES
• Private trustee
• Charitable trustee
• Public trustee

83
 Private Trustee
• The person who accepts the confidence is
called the ‘trustee’ under the provisions of
Trusts Ordinance.
• The powers, functions, duties and liabilities
provided under the provisions of Trusts
Ordinance.

84
 Charitable Trustee
• The person who accepts the confidence is
called the ‘trustee’ of a trust created relating
to the subjects specified in section 99 of the
Trusts Ordinance.
• The powers, functions, duties and liabilities
provided under the provisions of Trusts
Ordinance.

85
 Public Trustee
• There is an officer appointed as the Public
Trustee of Sri Lanka under the provisions of
Public Trustees Ordinance (Chapter 88).

86
General Powers and Duties of Public Trustee-

(a)as an ordinary trustee;

(b) as collector of estates under an order to
collect;
(c)as a custodian trustee;
(d) as curator of the estate of a minor;
(e) as manager of the estate of a person of
unsound mind;

87
(f) as attorney for persons absent from Sri Lanka
for the purpose of receiving and paying
money;

(g) as the next friend or guardian for the action

under Chapter XXXV of the Civil Procedure
Code of any minor or person of unsound
mind.

88
Public Trustee shall have the same powers,
duties, and liabilities, and be entitled to the
same rights and privileges, and be subject to the
same control and orders of the court as any
other trustee acting in the same capacity.

89
 GENERAL POWERS OF THE PUBLIC
TRUSTEE
1. The Public Trustee may decline, either
absolutely or except on conditions which he
may lay down to accept any trust.

2. The Public Trustee shall not accept any trust

which involves the management or carrying
on of any business.

90
3. Any Sri Lankan citizen proceeding for
employment outside Sri Lanka may nominate
persons to whom compensation is to be paid in
the event of his death.
4. The Public Trustee may accept for the purpose
of winding up an estate, or any trust under a deed
of arrangement for the benefit of creditors, or any
trust which involves any religious observance or
ceremony or the decision of any questions as to
the religious merit or character of any individual
or institution.

91
5. The Public Trustee shall, except where he is
appointed a custodian trustee, always be sole
trustee, and it shall not be lawful to appoint
the Public Trustee to be trustee along with
any other person.
6. If any minor or person of unsound mind is
entitled to any gift, legacy, or share of the
assets of a deceased person, it shall be lawful
for the Public Trustee to retain the same in
his hands as trustee for such minor or person
of unsound mind pending the order of court,
or until claimed by a duly appointed trustee.
92
7. An executor or administrator may pay to
official trustee, legacy or share of minor or
person of unsound mind if he consents.

8. The Public Trustee may be appointed as the

next friend or guardian for the action if he
consents.

93
9. Whenever a person has been sentenced by
any court to a term of imprisonment of not
less than three years, such court may, on the
application of the person sentenced and with
the consent of the Public Trustee and subject
to the payment of the prescribed fees, order
that the property of such person shall be
vested in the Public Trustee for the purpose
of its custody and management during the
period of the imprisonment.

94
10.Notwithstanding anything to the contrary in
the Buddhist Temporalities Ordinance, the
Public Trustee may hold movable property in
trust for the benefit of a temple and may
manage any immovable property vested in
the trustee or Controlling Viharadhipathi of a
temple, being immovable property which is
twenty acres or over in extent on contract
containing such terms and conditions as may
be agreed upon by the Public Trustee and
such trustee or Controlling Viharadhipathi.

95
 THE PUBIC TRUSTEE AS ORDINARY
TRUSTEE
1. The Public Trustee may by that name, or any
other sufficient description, be appointed to
be trustee of any will or settlement or other
instrument creating a trust or to perform any
trust or duty involving management of
agricultural property.

96
2. Where the Public Trustee has been appointed
a trustee of any trust, all existing trustees
under the trust shall upon such appointment
cease to be trustees.
3. When it is proved to the satisfaction of the
court that any private trustee has been guilty
of such misconduct or mismanagement of
the trust property as to render his
continuance in office undesirable, the court
may remove him from office and appoint the
Public Trustee or some other fit and
competent person in his place.
97
However, Public Trustee shall not be appointed if
it appears to the court that there is some other
fit and competent person willing to carry out the
terms of the trust who is entitled to be
appointed by reason of the terms of a will or
other instrument creating a trust.

4. The Public Trustee may accept the custody of

the will of any living person, subject to the
payment of the prescribed fees.

98
5. Any trustee or any beneficiary under any
trust may apply to the court that the
condition and accounts of such trust be
investigated by the Public Trustee or by some
other person appointed by him, and the
court may, with the consent of the Public
Trustee and after notice to such parties as it
considers entitled to the same, make order
accordingly.

99
6. Where the Public Trustee makes an
application for probate or letters of
administration in respect of the estate of the
deceased person, he may at the same time
make an application for an order authorizing
him to take provisional possession of the
movable and immovable property of the
estate.

100
 THE PUBLIC TRUSTEE AS COLLECTOR
UNDER AN ORDER TO COLLECT
1. Whenever it is made to appear to the court
that there is reasonable ground to suppose
that any person who usually resided within
the jurisdiction of such court has died
intestate leaving property in Sri Lanka, the
court may order and empower the Public
Trustee to collect the estate of such person.

101
2. Every such order shall empower the Public
Trustee to collect, manage, and administer
the movable property of such supposed
deceased person, enter upon and receive the
rents and profits and otherwise manage the
immovable property, and pay and discharge
the debts and liabilities of such person in like
manner as if he were certainly dead, and the
Public Trustee had obtained letters of
administration to his estate.

102
 THE PUBLIC TRUSTEE AS CUSTODIAN
TRUSTEE
1. The Public Trustee may, with his consent be
appointed to be custodian trustee of any
trust by order of the court made on the
application of any person. The court may
order the appointment of a new trustee or by
the testator, settlor, or other creator of any
trust, or by the person having power to
appoint new trustees.

103
2. Where the Public Trustee is appointed to be
custodian trustee of any trust, the trust
property shall be transferred to the custodian
trustee as if he were sole trustee.

3. The management of the trust property and

the exercise of any power or discretion
exercisable by the trustees under the trust
shall remain vested in the trustees other than
the custodian trustee.

104
4. All sums payable to or out of the income or
capital of the trust property shall be paid to
or by the custodian trustee.

5. Where the Public Trustee has reason to

believe that the managing trustee of any
trust of which he has been appointed
custodian trustee has committed a breach of
such trust, he may institute an action in the
District Court to obtain a decree-

105
(a)directing the removal of any trustee;
(b) directing accounts and inquiries;
(c) declaring what proportion of the trust
property or of the interest therein, shall be
allocated to any particular object of the trust;
(d) authorizing the whole or any part of the trust
property to be let, sold, mortgaged or
exchanged;
(e) settling a scheme for the management ' of
the trust;

106
(f) directing the specific performance of any act
by any trustee;

(g) appointing the Public Trustee as the sole

trustee.

107
Trusts extinguish

108
A trust is extinguished-

(a) when its purpose is completely fulfilled;

(b) when its purpose becomes unlawful;
(c) subject to the powers of the court under Chapter
X and to section 110 (4), when the fulfillment of its
purpose becomes Impossible by destruction of the
trust property or otherwise;
(d) when the trust, being revocable, is expressly
revoked.-(sec 79)

109
(1) A trust created by will may be revoked at the
pleasure of the testator.
(2) A trust created otherwise than by will can be
revoked only-

(a) where all the beneficiaries are competent

to contract, by their consent;
(b) where the trust has been declared by a
non- testamentary instrument or by word of
mouth, in exercise of a power of revocation
expressly reserved to the author of the
trust;
110
(c) where the trust is for the payment of the
debts of the author of the trust, and has not
been communicated to the creditors, at the
pleasure of the author of the trust. –(sec 80)

111
Declaration of Trust

112
Declaration of Trust consists of the following:-

(i) Name and address of the settlor and the name

and address of the trustee;
(ii) Name of the trust;
(iii) Definitions which shall include the definition
of the trustees and trust property;
(iv) Objects of the trust;
(v) General powers of the trustees;
(vi) Special powers of the trustees;
(v) Meetings and proceedings of the board of
trustees;
113
(vi) Appointment and removal of trustees;
(vii) Bank accounts and audit of accounts;
(viii) Application of trust property and income;
and
(ix) Amendment s and declaration.

114
 Self-declarations and transfers on
trust
• A self-declaration of trust is a comparatively
recent mode of constituting a trust.
Traditionally a settlor would create a trust by
transferring rights to another, a trustee, to be
held for a beneficiary.

115
  Ex parte Pye (1811)
• The settlor had instructed his agent to
purchase an annuity in his mistress’ name. The
agent ignored the instruction, and purchased
the annuity in the settlor’s name. Lord Eldon
held that trusts could be created in one of two
ways: the traditional method of transfer of the
legal title, in a manner that would be effective
at law, to a trustee, and by self-declaration.

116
• In Lord Eldon’s words: “he has committed to
writing what seems to me a sufficient
declaration, that he held this part of the estate
in trust for the annuitant".
• Charity Commission for England and Wales v
Framjee [2015] 1 W.L.R. 16. where donors
made donations to particular charities through
the defendant’s website. The issue was
whether the defendant held the donations
upon trust for the intended charities before
the money was paid over to them.
117
Henderson J. in finding that there was a trust,
was not troubled by the absence of a specific
declaration by the donors. Instead of a clear oral
or written statement declaring a trust, we find
contextual evidence of the purpose of the
transfer, from which Henderson J. could infer an
unexpressed intention to create a trust.
In the case of trusts by transfer, the declaration
is relevant only because it reveals something
about the settlor’s intentions, and not as a
specific act that constitutes the trust.

118
• When one turns to self-declarations, because
legal title remains with the settlor, there is no
legally relevant act or transaction other than
the declaration itself. This alone is effective to
change the settlor’s status from absolute
owner to trustee and give the beneficiary
equitable title.

119
 Choithram International SA v
Pagarani [2001] 2 All E.R. 492
• The difference between transfers on trust and
self-declarations lies in the role played by the
declaration. In the latter case, because the
declaration is the only legally relevant event,
courts will require evidence of a specific act of
declaration in order to find a trust.

120
Incorporation

121
The Minister may, in his discretion, by Order, on the
application of the trustees of any charitable trust
or of any public or private association (not being
an association for the purposes of gain), authorize
the incorporation of the said trustees, and upon
the publication of the said Order, the said trustees
of the charity or association and their successors
for the time being shall be constituted a
corporation under such style and subject to such
conditions as may be specified in the Order. –(sec
114)

122