| Rajabali Jumabhoy and Others v Ameerali R Jumabhoy and Others [1998] 2 SLR 439; [1998] SGCA 35 |
| CA 145/1997 | |
| 20 May 1998 | |
| Court of Appeal | |
| Chao Hick Tin J, L P Thean JA, Yong Pung How CJ | |
| Terence Etherton QC, Harry Wee and Leong Why Kong (Braddell Brothers) for the appellants, Davinder Singh SC, Ameera Ashraf and Harpreet Singh (Drew & Napier) for the first and third respondents, Jules Sher QC and Edwin Tong (Allen & Gledhill) for the second Respondent, Chong Boon Leong (Rajah & Tann) for the fourth respondents |
Judgment
[Please note that this case has not been edited in accordance with the current Singapore Law Reports house style.] Judgment reserved. LP Thean JA (delivering the judgment of the court): 1 Originally there were two appeals before us. There was CA 137/97 in which Rafiq Jumabhoy (Rafiq), the second respondent abovenamed, appealed against that part of the decision of Judith Prakash J, in which she set aside the option granted to him by Scotts Investments (Singapore) Pte Ltd (SIS), the fourth respondent abovenamed, to purchase certain shares in a public quoted company, Scotts Holdings Ltd, on the ground that the option was procured by Rafiq, who was, and is, a director of SIS, and approved by the other directors, in breach of their fiduciary duties. The second appeal is the present appeal, which is against that part of the decision of Judith Prakash J, in which she declared that SIS is the legal and beneficial owner of all the shares which it currently holds in Scotts Holdings Ltd. At the commencement of the hearing, counsel for Rafiq informed the court that Rafiq and the abovenamed appellants, who, inter alios, were the parties to CA 137/97, had reached an amicable settlement and sought leave to withdraw that appeal. As part of the settlement, the appellants abovenamed in the present appeal would not pursue their appeal against him, and leave was also sought to withdraw the appeal against Rafiq. Accordingly leave was granted to Rafiq to withdraw CA 137/97 and to the abovenamed appellants to withdraw their appeal against Rafiq in the present appeal. 2 There is one other matter which we should mention at this stage. Quite independently of what had transpired between the appellants and Rafiq, the solicitors for SIS applied by Notice of Motion 46/98 for leave to be discharged on the ground that SIS had not paid their legal fees, and we granted them the discharge. Thus, at the hearing of this appeal SIS was not represented, but the case filed on its behalf would stand. 3 The contest in the present appeal is essentially between the appellants on the one hand, and the first and third respondents on the other. For ease of reference, we shall refer to both these respondents as ‘the respondents’, unless otherwise expressly stated. Rafiq is concerned only on one minor issue which turns on the outcome of the appeal. The respondents had claimed an indemnity against Rafiq in the event that they should be held to be liable for any breaches of trust. This issue would only arise for determination, if it is held that the respondents are liable for a breach of trust. Facts 4 The facts leading to the dispute have been comprehensively set out by Judith Prakash J in her judgment, reported in 5 All the parties in the present appeal are very closely related. The first appellant, Rajabali Jumabhoy (Rajabali), is the patriarch of the family and is just over 100 years old. The second, third and fourth appellants are the children of Rajabali and his wife, Fatimabai, now deceased. The second appellant, Yusuf Jumabhoy (Yusuf) is their second son, and the third appellant, Mustafa Jumabhoy (Mustafa), their third son. The fourth appellant, Perin A Mooraj (Perin), is their youngest child and the only daughter. The remaining appellants are the sons of Mustafa, being Anwar Ali Jumabhoy (Anwar), Faez Jumabhoy (Faez) and Saleem Ali Jumabhoy (Saleem). As for the respondents, the first respondent, Ameerali Jumabhoy (Ameerali), is the eldest son of Rajabali and Fatimabai, and the second and third respondents, Rafiq and Iqbal Jumabhoy (Iqbal), are the eldest and second sons of Ameerali respectively. The fourth respondents, SIS, is the family investment holding company in which the appellants and the first, second and third respondents have an interest. 6 Sometime in 1956, Rajabali and Fatimabai each decided to make irrevocable trusts in respect of their properties, No 8 and No 6 Scotts Road (the Scotts Road properties) for the benefit of their children. No 8 Scotts Road was owned by Rajabali and No 6 Scotts Road by Fatimabai. Their intention was to settle the two properties on irrevocable trusts for the benefit of their children with the intention that the capital and income of the trust funds of the settlements would be held intact and would only be distributed to the beneficiaries on the expiry of the period of accumulation. 7 Fatimabai made her settlement earlier. She executed her deed of settlement on 23 November 1956 whereby she appointed Ameerali and Yusuf as trustees and conveyed to them No 6 Scotts Road, to be held on, inter alia, the following trusts: with her consent during her lifetime, to sell the property and to hold the proceeds of sale and invest them in any investments authorised by the terms of her settlement, and to hold the investments during her life or for the period of 20 years from the date of the settlement, whichever was the longer. The other terms of this settlement were identical with corresponding terms of the settlement of Rajabali, of which more will be said. 8 On 17 January 1957, Rajabali executed his deed of settlement (the settlement). Under the settlement, Rajabali appointed Ameerali and Yusuf as the trustees of the settlement and conveyed to them No 8 Scotts Road to be held on, inter alia, the following trusts: to permit Rajabali and Fatimabai to reside there during their joint lives and the survivor of them during his or her life; with the consent of Rajabali and his wife or the survivor of them to sell the property in such manner as the trustees may think proper; to hold the proceeds of sale and invest them in any of the investments authorised by the terms of the settlement and to hold the investments and the income (the trust funds) during the joint lives of Rajabali and his wife or the survivor of them, or for the period of 20 years from the date of the settlement, whichever is the longer (the period of accumulation). At the expiration of the period of accumulation, the surviving children of Rajabali would be entitled to the trust funds in equal shares absolutely, but if during that period one or more of the children had died then if he left a surviving child or children who attained the age of 21 years, that child or children would take the share which his parent would otherwise have taken. The power of appointing new trustees was vested in Rajabali and his wife during their joint lives or the survivor of them. 9 The settlement by cl 5 conferred express powers on the trustees to invest the trust funds in authorised investments and also by cl 6 exonerated them in certain circumstances from any loss occasioned by a breach of trust. Both these provisions will be considered and dealt with in detail in a moment. On the basis of the settlement, Rajabali’s four children are the primary beneficiaries and any children of the primary beneficiaries born during the period of accumulation would be the contingent beneficiaries. 10 In 1964, Fatimabai passed away. Under the terms of her settlement, the subject matter of the trust, No 6 Scotts Road, would vest in the beneficiaries 20 years after date of the settlement, namely, on 23 November 1976. 11 After Fatimabai’s death, Rajabali on 29 March 1966 in exercise of the power of appointment contained in the settlement appointed his third son, Mustafa, a trustee. Subsequently, in 1988 and 1993 he appointed his two grandsons, Asad and Iqbal Jumabhoy respectively as trustees. At the hearing below, an issue was raised as to who were in fact the trustees of the settlement during the period between the 1988 and 1993. Mustafa resigned as a trustee sometime in September 1992 but was re-appointed in 1993. The learned judge found that when Mustafa resigned as a trustee, Asad had already been validly appointed a trustee. After Mustafa resigned, Iqbal was then appointed a trustee. However, Asad resigned as a trustee sometime in 1992. Hence, by the time Mustafa was re-appointed a trustee sometime in 1993, he became the fourth trustee of the settlement. It is now not disputed that at all material times the four trustees of the settlement were Ameerali, Yusuf, Mustafa and Iqbal. 12 The Scotts Road properties are centrally located in Singapore’s prime shopping and hotel district, and Ameerali saw great potential in them. By 1975 Ameerali, Yusuf and Mustafa were seriously considering what they should do with the two trust properties. In 1978, Ameerali put forward a proposal to redevelop the two sites, to which Rajabali, Yusuf and Mustafa agreed. However, as the proposed development was not within the powers of investment conferred upon the trustees under the settlement, it was agreed between the trustees, namely, Ameerali, Yusuf and Mustafa on the one hand, and Rajabali himself on the other that a limited company should be formed to carry out the redevelopment. Consequently, on 29 March 1979, Scotts Holdings Pte Ltd (SHL) was incorporated for this purpose. Ameerali, Yusuf and Mustafa, together with Rafiq became the directors of SHL with Ameerali being the chairman and managing director. 13 Following the incorporation, SHL in April 1979 purchased the Scotts Road properties from the trustees of the settlement and Fatimabai’s settlement respectively. The purchase price for both the properties was $625 per square foot which, according to Ameerali, was considered by the trustees as representing the fair market value of the properties at that time. Based on this unit rate the purchase price of No 8 Scotts Road was $25,039,375 and that of No 6 Scotts Road was $25,103,750. These two sums were satisfied as follows: (a) in respect of the sum of $25,039,375 (representing the purchase price of No 8 Scotts Road) by the issue and allotment of 25,039,375 fully paid redeemable noncumulative 5% preference shares of $1 each to the trustees of the settlement ; and (b) in respect of the sum of $25,103,750 (representing the purchase price of No 6 Scotts Road) by the issue and allotment of 5,000,000 fully paid redeemable noncumulative 5% preference shares of $1 each and 25,103,750 fully paid ordinary shares of $1 each to the trustees of Fatimabai’s settlement. In addition, Ameerali, Yusuf and Mustafa each subscribed and paid for in cash 5,000 ordinary shares. About a year later, in March 1980, they each increased their shareholding in SHL by subscribing for an additional 30,000 ordinary shares. 14 In 1982 or thereabouts, SHL was looking for investors, and negotiations were then conducted with a Japanese financial institution, Orient Leasing Company Ltd (Orient Leasing). It was eventually agreed between them that Orient Leasing would through its subsidiary, Croissant Investment Pte Ltd, invest in SHL by subscribing for 35,000,000 ordinary shares of $1 each in SHL, representing 20% of the increased issued share capital of SHL. In the course of negotiations, some doubt was raised as to the validity of the sale of No 8 Scotts Road by the trustees of the settlement to SHL. The doubt was entertained in two areas. First, the sale was made by the trustees of the settlement to SHL in which the trustees themselves had substantial interests, and the sale might be voidable at the instance of the beneficiaries. Second, the trustees in accepting the shares in SHL might be in breach of the prohibition contained in cl 5 of the settlement. There was no such doubt, however, in respect of the sale of No 6 Scotts Road to SHL, as the property had already vested in the beneficiaries under the trust. To obviate the doubt, an application was made to the High Court in OS 867/83 for authorisation of the said transaction and other reliefs. On 29 November 1983, an order was made (as far as relevant) in the following terms: 1 [Ameerali, Yusuf and Mustafa] as trustees and the settlor be and are hereby authorised to execute a deed of confirmation and conveyance of the freehold property (the freehold property) in a form acceptable for registration all that piece of land marked on the Government Resurvey Map as Lot 41 of TS 27 in Singapore (formerly having thereon a dwelling house known as No 8 Scotts Road Singapore and presently a commercial cum residential building complex being partly erected thereon) in favour of Scotts Holdings (Pte) Ltd, a private limited company incorporated in Singapore under company registration No 881/1979, (hereinafter called the company) which said deed is to confirm a conveyance dated 26 July 1979 (registered in Vol 2145 No 83) made between the trustees, the settlor, and the company whereby the trustees conveyed or purported to convey by way of sale the freehold property to the company and also to confirm and convey the freehold property to the company to the extent necessary freed from the trusts of [the settlement] and all claims whatsoever under or in connection with the said trusts. 1A … 2 [Ameerali, Yusuf and Mustafa] as trustees be and are hereby wholly relieved from personal liability for past breaches of trust, if any, by reason of their investment of money subject to the trusts of [the settlement] in the capital of the company in contravention of cl 5 of [the settlement]. 3 The terms of [the settlement] be and are hereby varied by the insertion in cl 5 thereof of the following additional sentence: ‘Notwithstanding any of the foregoing and without prejudice to the generality of any other power conferred on them it is hereby declared that the Trustees shall be entitled to retain any shares or securities of Scotts Holdings (Pte) Ltd.’ The order thus confirmed the sale by the trustees of the settlement of No 8 Scotts Road to SHL in exchange for fully paid shares in that company and authorised the trustees to hold the shares in SHL in lieu of the original trust property. 15 On 5 July 1985, Ameerali, Yusuf and Mustafa each created personal trusts from their respective entitlements under Fatimabai’s trust. These three trusts were in all respects similar, and were each for a period commencing from the date of creation until 15 years thereafter or until the death of the settlor, whichever was the earlier. Yusuf was the trustee of the trusts made by Ameerali and Mustafa respectively, and Ameerali and Mustafa were the trustees of Yusuf’s trust. Where relevant, for ease of reference, we shall refer to the settlement and the trusts of Ameerali, Yusuf and Mustafa collectively as ‘the Jumabhoy family trusts’. 16 In the meantime, the commercial cum residential complex at Scotts Road developed by SHL had been completed. Things were looking good for the Jumabhoy family. By the end of 1982 the commercial portion of the development, known as Scotts Shopping Centre, was doing well, in that it had achieved an occupancy rate of 98%. The service apartments, Ascotts Service Apartments, commenced operation in 1984 and were highly successfully. Ameerali and his sons were actively involved in the running of SHL with Ameerali as the chairman and Rafiq as the managing director. Iqbal was the company’s financial controller. Mustafa and Yusuf remained on the board but they were non-executive directors. 17 One of the conditions on which Orient Leasing invested in SHL was that the company would go public within five years so that Orient Leasing could realise a return on its investment. By the late 1980s, SHL’s main businesses were doing well. Rafiq and Iqbal felt that the time was ripe for the listing of SHL on the Stock Exchange of Singapore Ltd. Iqbal was given the task of looking into various schemes for listing SHL. 18 At this time, the shares in SHL were held by or on behalf of various parties, namely: (i) the trustees of the settlements, (ii) the trustees of those settlements created individually by Ameerali, Yusuf and Mustafa respectively, (iii) Ameerali, Yusuf and Mustafa themselves individually, and (iv) Croissant Investment Pte Ltd, a subsidiary of Orient Leasing. At Rajabali’s request, Ameerali, Yusuf and Mustafa agreed to contribute each 1,529,050 of their own shares in SHL to a charitable foundation called ‘The Rajabali Jumabhoy Foundation’ (the Foundation). Since the Foundation had not been legally established as yet at that time, each of them held the shares on trust for the Foundation until its incorporation. 19 The idea of listing SHL was floated to the whole Jumabhoy family and everyone agreed with it in principle. However, the family had two major concerns. The first was the ease of disposal of the shares in the company (when listed) by the various shareholders, and the second was that the family might not continue to control the management of the company. The solution arrived at, on the recommendations of their merchant bank and other advisers, was that there should be a holding company created in between the Jumabhoy family trusts and the listed vehicle. In particular, all the SHL shares held on behalf of the Jumabhoy trusts would be transferred to and be held by the holding company which in turn would issue its shares to the trustees of the Jumabhoy family trusts with the result that the holding company would then be the single and largest shareholder for the family in the listed company. Effectively, the exercise proposed was a ‘share swap’: the trustees would exchange the shares held by them in SHL for the shares in the holding company. Accordingly, sometime in May 1991, SIS was incorporated for this purpose. 20 In connection with the listing, in early 1991 or thereabouts, a deed of release and variation (deed of release) was prepared. The parties to the deed of release were (i) Ameerali, Yusuf and Mustafa as trustees of the settlement, and (ii) the three of them individually, Rafiq, Iqbal, Asad, all Mustafa’s children and Perin and her children, as beneficiaries of the settlement, and (iii) Rajabali himself. Although the deed of release produced in the court below did not exhibit the signatures of some of the parties named in it, most notably Rajabali, his daughter Perin, Saleem (Mustafa’s son) and Perin’s children, it was found by the learned judge that all of them did execute the deed. It was executed in or around March 1991. Before us this finding was not challenged. 20 In connection with the listing, in early 1991 or thereabouts, a deed of release and variation (deed of release) was prepared. The parties to the deed of release were (i) Ameerali, Yusuf and Mustafa as trustees of the settlement, and (ii) the three of them individually, Rafiq, Iqbal, Asad, all Mustafa’s children and Perin and her children, as beneficiaries of the settlement, and (iii) Rajabali himself. Although the deed of release produced in the court below did not exhibit the signatures of some of the parties named in it, most notably Rajabali, his daughter Perin, Saleem (Mustafa’s son) and Perin’s children, it was found by the learned judge that all of them did execute the deed. It was executed in or around March 1991. Before us this finding was not challenged. 22 With all the formalities nearly completed, the trustees of the settlement, together with Rafiq and Iqbal, proceeded to prepare for the listing of SHL. On 12 July 1991, SHL became a public company, and at or about this time they proceeded to carry out the exercise of the share swap as recommended by their advisers. All the shares held by the various trusts of the Jumabhoy family in SHL were transferred to SIS as a single shareholder in return for the issue and allotment by SIS of a proportionate number of its fully paid shares to the trustees of the various trusts. The net result was that SIS became the registered holder of 100,792,985 ordinary shares in SHL, and in turn it issued and allotted 79,816,126 fully paid ordinary shares as follows: (i) 56,113,723 shares to the trustees of the settlement; (ii) 9,115,253 shares to the trustee of Ameerali’s trust; (iii) 4,000,000 shares to the trustee of Mustafa’s trust; (iv) 6,000,000 shares to the trustees of Yusuf’s trust: and (v) 4,587,150 shares to the trustees of the Foundation. 23 In July 1991, two shareholder agreements were executed (the shareholder agreements). Both were similar in substance. The first was made between the shareholders of SIS, Rafiq and Iqbal (the first shareholder agreement) whereas the second was made between SIS, Ameerali, Yusuf and Mustafa individually and Rafiq and Iqbal (the second shareholder agreement). The effect of these two agreements was that each shareholder was to consult with the rest of the shareholders before exercising any voting rights in the respective companies, and that each was to exercise all the voting rights in favour of any policies or proposals which Rafiq and Iqbal might propose for SIS (in relation to the first shareholder agreement) or SHL (in relation to the second shareholder agreement). This was also the subject of a challenge by the appellants, who argued that the agreements were invalid as they fettered the discretion of the trustees to act in the best interests of the beneficiaries of their trusts. We shall deal with this issue in a moment 24 One of the problems that was encountered during the preparation for the listing of SHL was that it had two subsidiaries, Scotts Weitnauer Retailing Pte Ltd (SWR) and A & W Restaurants (Singapore) Pte Ltd (A & W), both of which were operating at a loss. SHL’s consultants and merchant banker advised that the listing could not proceed, unless these two companies were excluded from the listing exercise. To do this a shelf company was purchased and its name was changed to Intermediate Holdings Co Pte Ltd (IHC) on 16 July 1991. IHC, which subsequently became a subsidiary of SIS, purchased the issued shares in A & W and SWR from SHL. 25 Both A & W and SWR needed finance for their operations. The banks concerned wanted security for the facilities given to them. Since neither of the borrowers nor IHC had any substantial assets, SIS was the only entity able to furnish the form of security required. During the period from July 1991 to October 1991, SIS gave guarantees and executed ‘pledges’ (which in fact were charges) over some of its shares in SHL to various banks to secure the indebtedness of A & W and SWR. (The learned judge and both the parties before us have throughout used the term ‘pledges’ to describe the charges created by SIS. To avoid any confusion we shall continue to use the term ‘pledges’ to describe the charges.) These actions were approved by a majority of the directors of SIS, if not all of them. In many cases, both Mustafa and Yusuf formed part of that majority, but in all cases at least one of them was party to the relevant resolutions. Subsequently, further share pledges were created in order to secure further credit facilities for various other subsidiaries which it had acquired or taken over from other branches of the Jumabhoy business. 26 SHL was listed on the Singapore Stock Exchange Ltd sometime in November 1991. Its board of directors consisted of Ameerali as chairman, Yusuf and Mustafa as non-executive directors, a representative of Orient Leasing as a non-executive director, two independent directors, and Rafiq and Iqbal as executive directors. In addition, Rafiq and Iqbal were also executive directors of SIS, and Ameerali, Yusuf and Mustafa made up its other three directors. 27 Since the commencement of its business, SIS through its subsidiaries undertook a substantial number of businesses. In order to obtain credit for these new businesses and companies, more SHL shares were pledged by SIS to various financial institutions. The appellants complained that these share pledges, together with the running of the businesses, ran contrary to cl 5 of the settlement. Sometime in June 1993, Ameerali, together with his two sons Rafiq and Iqbal, passed a resolution acquiring a shelf company which was subsequently re-named Lion City Holdings Pte Ltd (LCH). The purpose of this company was to take over the various retail companies which were at that point in time owned by members of the Jumabhoy family. This would help consolidate and rationalise the retail business of the family. Thereafter, LCH took over SWR from IHC, Cost Plus Pte Ltd and National Chemicals Pte Ltd from Aliph Holdings 1990 Pte Ltd (Aliph) and Connoisseurs (Pte) Ltd from R Jumabhoy & Sons Pte Ltd. Aliph was a company wholly owned by Rafiq, Iqbal and Asad. In addition, SIS invested in LCH, and took up 76.6% of its issued capital. The other 23.4% of the capital was held by Aliph. Within one year, LCH had purchased 84.6% of Cost Plus Pte Ltd, together with a 50% share in SWR previously held by IHC and a 50% share in National Chemicals Pte Ltd owned by Aliph. Connoisseurs (Private) Limited was also fully acquired by LCH. The directors of LCH were Ameerali, Iqbal, Asad and one Ramesh Sarin, with Asad being the managing director. 28 In all, there were about 16 companies in the LCH group, and most of the companies in the LCH’s group made heavy losses. One of the appellants’ complaints was that the losses actually resulted from LCH’s mismanagement of the various subsidiaries. This issue was not discussed in the court below as the learned judge took the view that this was not an issue before her, but rather a corporate matter for SIS, as SIS owned a substantial stake in LCH. The appeal 29 Before us, the appellants contended that the shares swap effected in 1991 was not authorised by the terms of the settlement as authorised investments, nor was it permitted by any law currently in force at the material time. As a result, SIS held the SHL shares, which it exchanged for its own shares, on trust for the trustees of the settlement and could not deal with them in any way it decided. More particularly, under cl 5 of the settlement no investment could be made by the trustees in any securities in a company in Singapore. This included not only the sale of land (ie No 8 Scotts Road) for shares in SHL in 1979 but also the share swap effected in 1991. In both instances, investments were made in companies in Singapore, and they were not permitted by the terms of the settlement. The former, however, was sanctioned by the court order obtained in 1983 but the latter was not sanctioned by any court order. 30 This issue turns on the true construction of cl 5 of the settlement which is the only clause conferring on the trustees the powers of investment of the trust funds. The construction on cl 5 as contended by the appellants was this. By cl 1 of the settlement, the trustees were empowered to sell the property under the settlement (ie No 8 Scotts Road) provided it was with the consent of Rajabali and his wife or the survivor of the two of them. Clause 2 of the settlement directed all proceeds received from any sale of the property under the settlement to be invested in any of the investments authorised by the settlement. Thus, looked at as a whole the settlement created a trust for sale, and the trustees were under a duty to sell the property, which formed the subject matter of the settlement, and to invest the proceeds in investments authorised by cl 5 of the settlement. 31 The appellants further argued that although the sale of No 8 Scotts Road was for fully paid shares in SHL and not for cash, it was nevertheless a sale and the fully paid shares in SHL represented the notional proceeds of sale and the trustees were empowered to invest such proceeds in investments authorised by cl 5 of the settlement. Similarly, with reference to the 1991 share swap, the shares in SIS received by the trustees in exchange for the shares in SHL were an investment caught by cl 5. In other words, both the 1979 sale of No 8 Scotts Road for shares in SHL and the 1991 share swap must be considered with reference to cl 5. In their submissions, cl 5 applied to the sale of land for shares in 1979 and the share swap in 1991, and on both occasions, the investment transactions involved fell foul of cl 5. The first was sanctioned by an order of court but the second was not. 32 The respondents’ answer to the appellants’ contentions followed substantially what had been decided by the learned judge, and it was briefly this. Money must be taken literally to mean cash. It could not have been the intention of Rajabali under cl 5 to allow for an investment other than that acquired with money received as proceeds from the sale of No 8 Scotts Road. A power to sell under a trust for sale, in the absence of any specific provision, meant a power to sell for cash. Hence, cl 5 did not apply to the transaction in which the property under the settlement was sold in exchange for investments. This included not only the transaction in 1979 but also the share swap in 1991. Clause 5 of the settlement 33 We now turn to examine cll 1, 2 and 5 of the settlement which, so far as relevant, provide as follows: 1 The settlor hereby conveys unto the trustees all that the property described in the schedule hereto (hereinafter referred to as ‘the said property’) … upon trust that they shall with the consent of the settlor and the said Fatimabai binte Premji during their joint lives and with the consent of the survivor of them during his or her life and afterwards at their discretion sell the same in such manner as they may think proper with power nevertheless to postpone the sale so long as in their discretion they may think fit. 2 The trustees shall hold the nett proceeds of sale of the said property after payment or reimbursement of all expenses incurred or paid by the trustees in connection with the sale or attempted sale thereof and the nett rents and profits thereof until sale after payment of the said outgoings upon trust that they shall invest the same when received in any of the investments hereby authorised and shall hold the said investments (hereinafter called ‘the Trust Fund’) upon trust … … 5 The trustees shall not invest any money for the time being subject to the trusts of this settlement in any securities of or in the Colony of Singapore but subject as aforesaid may invest any such money in any securities for the time being authorised by law in England or the Federation of Malaya for the investment of trusts funds. 34 Clause 1 directed the trustees to sell the property and cl 2 directed them to invest the proceeds of sale. Clause 5 regulated the particular kind of investments permitted for investing the proceeds of sale. In our opinion, a trust for sale was created by virtue of these provisions. Although a power was given to the trustees to decide when the property should be sold, such power would not prevent a trust for sale from being created. Equally, the requirement of Rajabali’s consent for the sale made no significant impact on whether or not the settlement created a trust for sale, as this related to the timing of the sale and did not affect the overriding direction that the property should be sold. In Marlborough v A-G (No 2) The doctrine of conversion arose, no doubt, from the rule of equity which considers that as being done which ought to be done, and the courts might have taken the view in the past that if a sale under the trust for sale in a deed is only to take place with the consent of AB no conversion takes place until such consent is given to the trustees. It might have been held that then, and only then, does it become the duty of the trustees to sell, and then, and only then, does conversion take place in equity. It is, however, well settled that if real property is vested in trustees on trust for sale with the consent of AB, the consent is treated as intended to regulate the exercise of the trust for sale, but not to prevent the trust for sale from being an immediate trust; and if there is an immediate trust for sale, whether subject to consent or not, the trust operates at once to effect a conversion. See, for instance, A-G v Dodd 35 In the exercise of the power of sale under cl 1 of the settlement, the trustees sold the property, No 8 Scotts Road, to SHL for the sum of $25,039,375 and this sum was satisfied by SHL by the issue and allotment to the trustees of 25,039,375 fully paid redeemable non-cumulative 5% preference shares of $1 each. The question is whether these shares were investments in which the trustees were authorised to invest under cl 5 of the settlement. On this issue, the learned judge held that cl 5 did not apply to these shares in the hands of the trustees for three reasons. First, the property was not sold for cash and no money was invested in the shares; it was a direct swap of the land for the shares. Secondly, cl 5 referred to ‘the Colony of Singapore’ which had ceased to exist. SHL was incorporated in the Republic of Singapore and the shares in SHL were therefore not ‘securities of or in the Colony of Singapore’. Third, the term ‘securities’ in cl 5 was unclear and in the context meant shares in a public company. The learned judge in construing cl 5 held in¶70 and 71 of her judgment as follows: 70 I accept [the] submission that cl 5 as a provision restricting the powers of the trustees has to be read narrowly. Three points arise from such a reading. First, the prohibition specifically applied to the investment of money. The land was not sold for cash. No money was invested in the shares of [SHL]. Instead it was a direct swap. Secondly, [SHL] was a company incorporated in the Republic of Singapore. Since the specific prohibition was in respect of securities of the Colony of Singapore, it should not be widened to apply to securities in the Republic of Singapore because, as Rajabali explained in 1983, the reason for the prohibition in 1957 was the political and economic instability which existed in the Colony at that time … It would not be correct to give the restriction greater force than as originally intended by extending it to securities of an independent Singapore, a totally different political and economic entity even though, technically, the republic might be considered the successor state of the Colony despite Singapore’s intervening incorporation as a part of Malaysia. 71 Thirdly, the meaning of ‘securities’ is unclear. Does it encompass any share issued by a company in Singapore or does it apply only to a share in a listed public company? It would appear that the latter is the case since in the same clause the trustees are authorised to invest in ‘securities’ which are authorised by law for trustee investments in England and Malaya. The statutory provisions for trustee investments in England and Malaya authorise only the acquisition of shares in listed public companies. The word ‘securities’ can not mean one thing when used in relation to Singapore and another when used in relation to Malaya and England. Accordingly, it is my view that what was specifically prohibited by cl 5 was the acquisition of shares in a listed public company in the Colony of Singapore … 36 With respect, we have some difficulty in following the learned judge’s reasoning. Clause 1 of the settlement directed the trustee to sell the property and cl 2 directed them to invest the proceeds of sale, when received, ‘in any of the investments [thereby] authorised’. Clause 5 governed investments to be made by the trustees. In exercise of their powers, the trustees sold No 8 Scotts Road to SHL for the sum of $25,039,375. Under the indenture of conveyance dated 20 July 1979 and made between (i) the trustees, (ii) Rajabali and (iii) SHL, No 8 Scotts Road was expressed to be sold to SHL for the sum of $25,039,375 and there was contained in that indenture an acknowledgment of receipt of that sum by the trustees. This sum therefore represented the proceeds of sale of the property. However, the trustees did not receive this sum in cash; they received in satisfaction thereof fully paid shares in SHL. Thus, notionally, the trustees applied the proceeds of sale in investing in the shares of SHL. In our opinion, such investments by the trustees are caught by cl 5 of the settlement. 37 Even if it can be said, as held by the learned judge, that the shares in SHL were acquired by the trustees not with cash but by way of a ‘direct swap’ of the property for the shares, they were acquired by the application and use of the trust property. In our opinion, cl 5, read with cll 1 and 2, applies to a situation where the trust property other than cash is used in making the investments. To confine cl 5 to investments made by cash only would lead to an odd result, in that while investments made by the use of cash would come within cl 5, investments made by the use of other property would not. Such a result could not have been intended by Rajabali when he made the settlement. In our judgment, cl 5 applied to the acquisition by the trustees of the fully paid shares of SHL in exchange for the property. 38 We next turn to consider the term ‘Colony of Singapore’ in cl 5 of the settlement. The question here is whether in the context of the settlement the term ‘Colony of Singapore’ referred to Singapore as a geographical location or the status of Singapore as a political entity. It was argued on behalf of the appellants that, on the true construction of cl 5, the term referred to the situs, ie Singapore as a geographical location. On the other hand, the respondents contended that if it was intended that the term referred to the situs, the draftsman of the settlement would have merely described the place as ‘Singapore’ without the added reference of ‘Colony’. The use of the term ‘Colony of Singapore’ showed that it was intended to refer to the status of Singapore as a political entity. 39 The parties referred to three cases which we need to examine in some detail. First, the case of Re Maryon-Wilson’s Estate A clause of this nature, enlarging the power of investment beyond what the general law sanctions, ought, I think, to be construed strictly. It is for those who seek to include a particular investment to prove beyond all reasonable doubt that the words of the clause cover it. In the present case I am not satisfied that the provinces of the Dominion of Canada are either colonies or dependencies. In my opinion the appeal must be dismissed. Farwell LJ made his observation at p 65: In this case the tenant for life desires the trustees to invest on the securities of several Canadian provinces, none of which have brought themselves within the Colonial Stock Acts. The question is whether they are within the words ‘any British colony or dependency’, and I am of opinion that they are not. The time for ascertaining whether any stock or security is or is not within the power is the date of the proposed investment: eg, no investment could properly be made in the securities of a territory which was at the date of the testator’s death a British colony, but which at the time of the proposed investment had been ceded to another country (as was Heligoland to Germany). It is therefore immaterial to consider the past history of the territories named, or to remember that at one time British Columbia and Vancouver were colonies by Act of Parliament. They are now integral parts of the Dominion of Canada, and their only proper title is ‘province.’ The words ‘any British colony and dependencies’ were used generically to describe the status of those countries which had a relationship of ‘colony’ or ‘dependencies’ with the mother country. Therefore, in considering whether investments could be made in the stocks of those provinces at that time, the question was simply whether those provinces were British colonies or dependencies; and clearly they were not at the material time. Farwell LJ appeared to take the view that the material time for determining this issue was the time when the trustees decided to make the investments. 40 The next case is Re Brassey’s Settlement It seems to me that in deciding this question I must have regard to realities and not to abstract theory. Since the Statute of Westminster 1931, I cannot possibly hold that the Dominion of Canada is either a colony or a dependency. No doubt the change in political thought was gradual, but there has been a change, as it seems to me, in the way in which the position of the Dominions and the Mother Country was regarded during the years which passed between 1911 and 1931, and the Statute of 1931 was passed to give effect to that change in political thought. That change in thought is expressed in the report of the Imperial Conference of 1926 in the words which I have already read. It described Great Britain and the Dominions as being equal in status, and in no way subordinate one to another in any aspect of their domestic or internal affairs, being united by a common allegiance to the Crown, and being freely associated as members of the British Commonwealth of Nations. I cannot see how states equal in status and in no way subordinate one to another in any aspect of their domestic or internal affairs can possibly be said in any respect to be dependent one upon another. As it seems to me, they are equal sovereign states and not dependencies, and, of course, not subordinate to the Parliament of the United Kingdom. The Statute of Westminster was giving effect to that conception, and I have to give effect to it also. Accordingly, I am compelled to conclude, however convenient it might have been to decide in the other way, that in this settlement the words ‘British colony or dependency’ cannot be given effect to in such a way as to include the Dominion of Canada. Here again, the words ‘British colony or dependency’ were used generically, and at the time of the proposed investment the Dominion of Canada clearly was not a ‘British colony or dependency’. This case was decided along the same lines as Re Maryon-Wilson’s Estate. 41 Relying on both Re Brassey’s Settlement and Re Maryon-Wilson’s Estate, the respondents argued that cl 5 of the settlement prohibited investments of money only in the ‘Colony of Singapore’. At the time the trustees made the investments, Singapore had ceased to be a colony, and consequently the prohibition in cl 5 was no longer applicable to investment in securities in the Republic of Singapore. 42 The third case is Re Rider’s Will Trusts … in 1908, when this will was penned, and in 1909 when this testator died, Canada and Australia anyhow — as to the State of Rhodesia I am not sure — were colonies or dependencies of the British Crown. I think that Rhodesia must have been also; but until 1931 there is no doubt that investments in Canadian and Australian or New Zealand government stocks were undoubtedly within this investment clause, and it seems to me to be a strange result of a political event like the Statute of Westminster can have, by a side wind, the effect of altering the status of an investment clause … whereby authorised securities become unauthorised which must be realised and investments made in another form. It is also ridiculous to suppose that it was intended that because a dependency had the added dignity given to it of becoming a dominion, its stocks should promptly become unauthorised stocks. I should like to be able to avoid that view and to say the time when one must look at the clause is the date when it comes into force, and if at that date the investment in question is within the authority, then it continues to be so, because that leaves out of the question the other view, namely, that stocks issued by such a colony or dependency afterwards becoming a dominion would not, although stocks issued before would, be authorised. 43 In that case, the question before the court concerned the investments then in the hands of the trustees, which presumably had been made sometime ago when those countries in question were British colonies, and of course such investments remained as authorised investments under the will. It seems to us that this part of the judgment of Harman J was said with reference to these investments. Nonetheless, Harman J appeared to take the view that the material clause in the will should be construed as at the date the will came into force, ie the death of the testator, and if at that date the investment to be made was authorised it would remain an authorised investment subsequently. This appeared to be at variance with what Farwell LJ said in Re Maryon-Wilson’s Estate (supra). 44 Some assistance may be derived from the local case of Butterworths & Co (Publishers) Ltd & Ors v Ng Sui Nam [T]he 1911 Act read with para 41 is to be construed ‘drained of any content implying any political relationship between the United Kingdom and Singapore’ and so far as concerned ‘the parts of His Majesty’s dominions’ to which the 1911 Act extends it is to be treated as a geographical expression: the geographical areas which fall within ‘the parts of His Majesty’s dominions’ to which the 1911 Act extends. In other words, the term ‘the parts of His Majesty’s dominions’ to which the 1911 Act extends is to be construed as an area embracing all countries geographically falling within those parts of the British dominions. On appeal, this construction was endorsed by this court: Ng Sui Nam v Butterworths & Co (Publishers) Ltd & Ors 45 Reverting to cl 5 of the settlement, we think that it should be construed in the context of the surrounding circumstances at the time in which it was made. In 1957 when the settlement was made, Singapore was a colony, and it was not inappropriate to describe Singapore as the ‘Colony of Singapore’. The draftsman could have described Singapore as merely ‘Singapore’. It is significant that the term was consistent with the other term, ‘the Federation of Malaya’, appearing in the later part of the same clause. In that part of the clause, the trustees were empowered to invest trust moneys in any securities for the time being authorised by law in England or the Federation of Malaya for the investment of trust funds. Therefore, if ‘Colony of Singapore’ is construed to refer to the status of Singapore as a political entity, then consistently the same construction should be given to ‘the Federation of Malaya’. At that date, ie 17 January 1957, the Federation of Malaya, consisting of nine Malay States and the two settlements of Malacca and Penang, was not, as yet, a sovereign country. It became a sovereign country on ‘Merdeka Day’, 31 August 1957. Therefore, if the term the ‘Federation of Malaya’ connotes the status of the Federation as a political entity, its status changed completely on Merdeka Day and thenceforth the Federation would cease to fall within cl 5 of the settlement. It is also useful to bear in mind that Singapore ceased to be a colony in August 1958, when the British Parliament on 1 August 1958 passed the State of Singapore Act which converted the colony into a selfgoverning state. 46 It seems highly unlikely that Rajabali intended to refer to the political status of Singapore. At the time when he made the settlement, he could not have foreseen a change in political status of Singapore, and it seems to us that it must have been his intention for economic reasons, and also probably for political reasons, to prohibit any investment in Singapore as a location regardless of its status. The future of Singapore then was uncertain, and he probably considered it not very prudent to take the risk of allowing the trust funds to be invested in securities in Singapore. The time for determining the intention of the settlor is the time when the settlement was made, and not subsequently; such an approach would fully reflect the intention of the settlor. In our judgment, the term ‘Colony of Singapore’ in cl 5 of the settlement connotes a geographical location and not the status of Singapore as a political entity. 47 Reference was made by the learned judge to Rajabali’s evidence as to the ambit of cl 5. With respect, at this stage, in constructing cl 5 it would be wrong to take into account Rajabali’s subjective intention. Even if his evidence was admissible, it would only show that at the date of the settlement he regarded Singapore as an unsuitable situs for investment for economic and political reasons. He certainly did not envisage, still less provide for, any change, political or economic, in the situs as would render it a suitable place for investment of the trust funds. 48 Turning to the term ‘securities’ we find it difficult to restrict its meaning, as the learned judge did, to cover only shares in public companies. We can find no reason for ascribing such a restrictive meaning to the term. It seems to us that it would lead to a somewhat bizarre result, if ‘securities’ were only confined to shares in a public company, in that the trustees could not invest in stocks or shares in a public company, which are generally marketable, but they could invest in such securities in private companies, which by their very nature are more restrictive and less marketable. 49 In our opinion, the word ‘securities’ should receive its ordinary and natural meaning, and in that sense it means investments, including stocks or shares in companies, public or private. In Singer v Williams The normal meaning of the word ‘securities’ is not open to doubt. The word denotes a debt or claim the payment of which is in some way secured … the meaning of the word may be enlarged by an interpretation clause contained in a statute … or the context may show that the word is used to denote, in addition to securities in the ordinary sense, other investments such as stocks or shares. 50 In Re Douglas’s Will Trusts [1959] 2 All E R 620, a testator by his will, which he made about four years before his death, directed that his trustees invest the trust funds ‘on such securities as they may think fit …’. The trial judge held that ‘securities’ included any stocks or shares or bonds by way of investment. The learned judge said, at p 623: On the third point, I think that ‘securities’ means investments. The term is not confined to secured investments. I am prepared to make a declaration that ‘securities’ includes any stocks or shares or bond by way of investment. On appeal, this was affirmed by the Court of Appeal. We think that the present case is no different. 51 In Re Rayner all moneys liable to be invested under this my will may be invested in such securities as my trustees in their absolute discretion shall think fit: and I authorise my trustees to continue or leave any moneys invested at my death in or upon the same securities. Vaughan Williams LJ cautioned that the term ‘securities’ bore many different definitions and each time the word was used, it should be construed in its particular context. However, he went on to say, at p 187: Now the reasons why I have formed this conclusion as to the meaning of the word ‘securities’ in this will are these. Take this passage in the will: ‘And I authorize my trustees to continue or leave any moneys invested at my death in or upon the same securities.’ I think that in this passage ‘the same securities’ obviously means ‘the same investments’; and I think that the effect of using the words ‘moneys invested’ and the word ‘securities’ to cover the same subject-matter is not to narrow down or limit the natural sense of the words ‘moneys invested’, but to extend what Farwell J considers to be the ‘strict and primary’ meaning of the word ‘securities’, so as to cover anything which, according to the strict and primary meaning of the words ‘moneys invested,’ would be covered or connoted by those words; and, in my judgment, property in the shape of railway shares falls within the meaning both of the words ‘moneys invested’ and of the word ‘securities’. 52 In our judgment, the term ‘securities’ means investments including stocks and shares in companies, whether public or private. It is difficult to see that Rajabali could have intended in the settlement to prohibit any investment in public companies in Singapore but at the same time allow investment in private companies. We think that it was the intention of Rajabali, having regard to the economic and political conditions of Singapore at that time, to prohibit any forms of investment in Singapore. 53 The learned judge made the observation that ‘securities’ ought to be defined consistently within cl 5. We agree. But she went on to say that if authorised ‘securities’ for trustee investments in England and the Federation of Malaya in 1957 meant only shares in public listed companies, the same interpretation should be adopted when referring to securities in Singapore. However, there is nothing to suggest that the authorised securities for trustee investments in England and the Federation of Malaya in 1957 meant only shares in public listed companies and not private companies. 54 In so far as we are aware, the English position in 1957 was governed by the Trustees Act 1925, now replaced by the Trustee Investment Act 1961, and by s 68(13) of the latter Act, ‘securities’ included shares and stocks of private and public companies. In the Federation of Malaya, the investment of trust funds was at the material time governed by the Trustees Ordinance and ‘securities’ defined in s 2 thereof included stocks and shares of private and public companies. 55 Clause 5 is both prohibitive and permissive. It prohibits investment of the trust funds ‘in any securities of or in the Colony of Singapore’, and such prohibition in the ordinary and natural sense covers any ‘securities of or in the Colony of Singapore’ including stocks, shares and debentures in companies, whether public or private. On the other hand, the clause permits the trust funds to be invested ‘in any securities for the time being authorised by law in England or the Federation of Malaya for the investment of trust fund’. Here, the permitted investments are ‘any securities’ including stocks, shares or debentures in companies, whether public or private authorised by the relevant laws for trust funds. It may be assumed that, normally, investments such as stocks, shares or debentures in private companies are not authorised by law for trust funds. Be that as it may, it does not follow that the term ‘securities’ should be given a restricted meaning, ie only stocks or shares in public company. 56 The result of our decision on the construction of cl 5 of the settlement is that the 1979 transaction in which No 8 Scotts Road was sold in exchange for fully paid shares in SHL fell foul of cl 5 of the settlement. Clause 5 prohibits any investment in shares of companies in Singapore, be it public or private. However, the transaction was sanctioned by the court order in 1983 and the trustees of the settlement were authorised to hold the shares in SHL, which thenceforth became the subject matter of the settlement. The 1991 share swap 57 We now come to the share swap effected in 1991, in which the shares of SHL held by the trustees of the settlement were transferred by them to SIS in exchange for shares in SIS. In view of what we have decided, prima facie the share swap was not permitted under cl 5 of the settlement. The court below held that the trustees as holders of the shares in SHL were empowered by s 11(4) of the Trustees Act (previously s 14(4) of the Act before the amendment made in 1992) to concur in a scheme or arrangement for the reconstruction of SHL in which they exchanged the shares in SHL for the shares in SIS. The question which now arises is whether s 11(4) of the Act applies so as to empower the trustees to effect the share swap. 58 Section 11(4) is contained in Part II of the Trustees Act, which confers on trustees powers of investment of trust funds in addition to those contained in trust instruments, and before we turn to this provision it is necessary to consider first s 2(2) which governs the applicability of these statutory powers to trust instruments. Section 2(2) reads as follows: The powers conferred by this Act on trustees are in addition to the powers conferred by the instrument, if any, creating the trust, but those powers, unless otherwise stated, apply if and so far as a contrary intention is not expressed in the instrument, if any, creating the trust, and have effect subject to the terms of that instrument. [Emphasis is ours.] The question here is whether there is any ‘contrary intention’ in the settlement which prevents s 11(4) from applying to the settlement. 59 Section 2(2) is identical with s 69(2) of the Trustees Act 1925 of the United Kingdom which was replaced by the Trustees Investment Act 1961. However, in relation to trustees’ statutory powers in addition to those contained in trust instruments, the Fourth Schedule of the 1961 Act has preserved s 69(2). 60 In the case of Re Warren The 1925 Act was intended to be a consolidating Act, and, though it contains some new provisions, it would be strange if there were any serious departure from the 1893 Act: Re Turner’s Will Trusts 61 What emerged from Re Warren was that ‘contrary intention’ was being construed to mean ‘unless expressly forbidden’, having regard to the earlier Trustees Act governing trustees’ powers of investments. Since that decision, however, several other English authorities have taken a more liberal approach to construing the expression ‘contrary intention’. 62 In Inland Revenue Commissioner v Bernstein Section 69(2), which I have read, uses the language ‘so far only as a contrary intention is not expressed in the instrument … creating the trust,’ though those words are followed by this later phrase ‘and have effect subject to the terms of that instrument.’ At a first reading of the subsection it might seem that in order to exclude the power of advancement there would have to be an express exclusion or something equivalent thereto. But Mr. Bathurst for the Crown has not here contended that the section requires anything so positive in expression. He has conceded (and for reasons which will in a moment appear, I think, if I may say so, rightly conceded) that it suffices to make the statutory power of s 32 inapplicable if, on a fair reading of the instrument in question, one can say that such application would be inconsistent with the purport of the instrument. 63 In Re Evans’s Settlement Stopping at the first phrase, ‘The powers conferred by this Act on trustees are in addition to the powers conferred by the instrument, if any, creating the trust …,’ a possible approach is that those words, if they mean anything, mean that if in the trust instrument there is an express power of advancement, the power conferred by the Act is additional to it. The words cannot mean that if there are two powers of a different nature: eg, a power of maintenance in the settlement and a power of advancement in the statute, one is to be additional to the other, for, if so, those words would be merely stating what is abundantly obvious and clear. If, therefore, the statutory power does not apply in any particular case it can only be by force of one of the latter limbs of s 69(2). The second phrase is: ‘… but those powers, unless otherwise stated, apply if and so far only as a contrary intention is not expressed in the instrument, if any creating the trust …’ Since the first phrase contemplates the statutory powers being additional to the powers conferred by the instrument, the mere fact that the instrument confers express powers cannot, without more, amount to an expression of intention to exclude the statutory power. Where, then — so the argument may run — is the expression of a contrary intention to be found? The learned judge then dealt with this question as follows: Although the mere existence of an express power does not exclude the statutory power — for s 69(2), as I have indicated, contemplates the existence of both — when one examines its terms as distinct from its mere existence, and the surrounding circumstances by reference to which all instruments fall to be construed, one may find an expression of intention that the statutory power shall not apply. And in construing the instrument for this purpose I see no escape from the general rule of construction — that intention may be expressed by necessary implication or by ascertaining the meaning of the instrument by reference to all its terms and by reference to the surrounding circumstances. The learned judge followed the approach of Lord Evershed MR in Inland Revenue Commissioner v Bernstein (supra) and held that the statutory power of advancement was excluded so far as it would otherwise be exercisable in favour of the settlor’s two children. 64 We would respectfully adopt the ‘fair reading’ approach adumbrated by Lord Evershed MR in Inland Revenue Commissioner v Bernstein (supra). The trust instrument need not expressly forbid any statutory powers from applying so long as it can be said that on a ‘fair reading’ of the trust instrument the application of the statutory powers would be inconsistent with the purport of the trust instrument. 65 We revert to the provisions of cl 5 of the settlement. There is present an express prohibition against investment of the trust funds in securities in Singapore. In view of this prohibition, which is clearly a ‘contrary intention’ falling within s 2(2) of the Trustees Act, the trustees are precluded from investing in the shares in SIS, even if the share swap is a scheme or arrangement falling within s 11(4) of the Act. The additional powers of investment conferred by, inter alia, s 11, so far as securities in Singapore are concerned, have no application in this case. For this reason, the share swap is not saved by s 11(4) of the Act. In the circumstances, it becomes unnecessary for us to consider whether the share swap effected in 1991 is a scheme or arrangement falling within s 11(4). Jurisdiction to approve the share swap 66 It follows from what we have decided that the shares in SIS which the trustees acquired in exchange for the shares they held in SHL are not investments authorised by cl 5 of the settlement and such investment made by the trustees was in breach of trust. That being so, we now need to consider whether the court has jurisdiction to ratify and approve the share swap made in 1991. This was the alternative defence which the respondents raised, should it be found that the share swap was in breach of trust. 67 In considering this issue, we have to disregard the order made in 1983 which ratified and approved the share swap made in 1979 in which the property No 8 Scotts Road was sold to SHL in exchange for shares in that company. Whatever be our decision on this issue, that order would stand as valid and ought not to be disturbed. Inherent jurisdiction 68 On this issue we need to consider the inherent jurisdiction and the jurisdiction under s 59(1) of the Trustees Act (Cap 337) to vary a trust. We turn first to the inherent jurisdiction. The court has an inherent jurisdiction to sanction a variation of a trust in limited circumstances. This inherent jurisdiction is summarised in 48 Halsbury’s Laws of England (4th Ed) at para 921 as follows: 921 Inherent jurisdiction. The court gives effect to the intention of the settlor or testator as expressed in the trust instrument and has not arrogated to itself any inherent overriding power to disregard or rewrite the trusts. However, apart from cases where a change has been effected in a minor’s property, or the court has approved a compromise on behalf of minors and of possible after-born beneficiaries, there have been cases in which the court has allowed trustees exceptionally to obtain remuneration or increased remuneration for their services or to enter into some beneficial business transaction by way of management or salvage or in emergency, which was not a transaction authorised by the trust, and cases in which, in allowing maintenance out of income, the court has altered beneficial interests, for example because accumulation is thereby suspended. Nevertheless, the court’s inherent jurisdiction to modify private trusts is limited; … 69 In the case of Re New, Re Leavers, Re Morley As a rule, the court has no jurisdiction to give, and will not give, its sanction to the performance by trustees of acts with reference to the trust estate which are not, on the face of the instrument creating the trust, authorised by its terms. The cases of Re Crawshay (1888) WN 246 at p 251, decided by North J, and Re Morrison 70 In the subsequent case of Re Tollemache Generally speaking, the function and duty of the court is to administer the trusts which are placed under its control, and not to exceed the limits of investment or application fixed on their true construction by the instruments creating the trusts. After referring to various exceptions to this general rule (which are not relevant here) the learned judge referred to the foundation of the exercise of such jurisdiction adumbrated by Romer LJ in Re New (at p 543). He said at p 464: The foundation of the exercise of jurisdiction by the court is to be found in an interlocutory observation by Romer LJ, speaking no doubt on behalf of the other Lords Justices as well as himself. He says [at p 543]: ‘The principle seems to be this — that the court may, on an emergency, do something not authorized by the trust. It has no general power to interfere with or disregard the trust; but there are cases where the court has gone beyond the express provisions of the trust instrument — cases of emergency, cases not foreseen or provided for by the author of the trust, where the circumstances require that something should be done. Kekewich J expressed the opinion (at p 465) that the decision of the Court of Appeal in Re New did not enlarge the jurisdiction of the court and in addressing the matter before him he said, at p 465: In this particular case I have nothing more than a proposal to sanction a change of investment not authorized by the instrument of trust, on the ground that it will be to the advantage of the beneficiaries. From what I have mentioned at the outset of this judgment, it might be urged that this ground is somewhat too broadly stated; but, even assuming that such advantage is proved, I have just that application which Buckley J in Re Morrison 71 On appeal Kekewich J’s decision was affirmed by the Court of Appeal: It is admitted that the applicant cannot succeed unless she can bring herself within Re New Romer LJ agreed, and Cozens-Hardy LJ said that Re New was ‘the high-water mark of the exercise by the Court of its extraordinary jurisdiction in relation to trusts’ 72 The principles governing the exercise of such inherent jurisdiction were reexamined at some length in Re Downshire Settled Estates, Re Chapman’s Settlement Trusts, Re Blackwell’s Settlement Trusts It is a power or jurisdiction to confer upon trustees, quoad items of trust property vested in them, administrative powers to be exercised by them as the persons in whom the property is vested (notwithstanding that such powers were not conferred by the trust instrument) where a situation has arisen in regard to the property (particularly a situation not originally foreseen) creating what may be fairly called an ‘emergency’ — that is a state of affairs which has to be presently dealt with, by which we do not imply that immediate action then and there is necessarily required — and such that it is for the benefit of everyone interested under the trusts that the situation should be dealt with by the exercise of the administrative powers proposed to be conferred for the purpose. The power or jurisdiction does not, in our view, extend to changes or re-arrangements of the beneficial interests inter se under the trust, as distinct from re-arrangements or reconstructions of the trust property itself. 73 The case of Re Chapman Settlement Trusts went on appeal to the House of Lords, sub nom Chapman v Chapman The major proposition I state in the words of one of the great masters of equity. ‘I decline,’ said Farwell J in Re Walker 74 Similarly, Lord Asquith of Bishopstone expressed the opinion (at p 469) that in practice, the Courts of Chancery asserted the inherent jurisdiction ‘mainly, if indeed not solely’, in three classes of cases: (a) where a trust provided only for accumulation of income for infant beneficiaries during their minority without providing for maintenance and the court in such circumstances would authorise maintenance to be provided; (b) where some event or development unforeseen and unprovided for by the settlor arose which ‘threatened to make shipwreck of [the settlor’s] intentions’ and it was imperative that something should be saved from the ‘impending shipwreck’, these cases being often referred to as the ‘salvage cases’; and (c) where there has been a compromise of rights under a settlement or will which are the subject of a doubt or dispute. 75 Thus the court’s inherent jurisdiction would be exercised mainly in circumstances such as emergency where the trustees have no power under the trust to carry out the act or transaction and it is expedient in the interest of trust that the court should allow the trustees to carry out the act or transaction, and such jurisdiction is not exercised merely because the court considers that it is beneficial to the trust. The established principle is that the court must give effect to the intention of the settlor or testator as expressed in the trust instrument or the will (as the case may be) and should not arrogate to itself any inherent overriding jurisdiction to disregard that intention and rewrite the trust. In Re Downshire Settled Estates (supra), Evershed MR and Romer LJ after referring to Re New and Re Tollemache said, at p 234: [O]ne thing is, we think, clear: just as the court has always insisted on the due and proper observance by trustees of the terms of their trusts, so also will it in its own orders depart as little as possible from the strict letter of the trust instrument … The general rule, as we have said, is that the court will give effect, as it requires the trustees themselves to do, to the intentions of a settlor as expressed in the trust instrument, and has not arrogated to itself any overriding power to disregard or re-write the trusts. 76 Reverting to the case at hand, having regard to the terms of cl 5 of the settlement we do not think that the court has the inherent jurisdiction to sanction the share swap made in 1991. To sanction it would be tantamount to re-writing or remoulding the terms of the trust, which clearly the court cannot do. Further, what transpired in 1991 when the share swap was effected was not a situation of an ‘emergency’ and did not fall within any of the exceptions discussed in any of the cases we have examined. 77 We now turn to the jurisdiction under s 59(1) of the Trustees Act. Section 59(1) provides as follows: Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release, or other disposition, or any purchase, investment, acquisition, expenditure, or other transaction, is in the opinion of the court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the trust instrument, if any, or by law, the court may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions, if any, as the court may think fit and may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne as between capital and income. 78 Section 59(1) of the Trustees Act is identical with s 57(1) of the Trustees Act 1925 of the United Kingdom. In Re Downshire Settled Estates, Re Chapman’s Settlement Trusts, Re Blackwell’s Settlement Trusts (supra) the Court of Appeal considered also the court’s jurisdiction under s 57(1), and Evershed MR and Romer LJ said, at pp 243–244: We now turn to s 57 of the Trustee Act, 1925. It was presumably the intention of Parliament, in enacting that section, to confer new powers on the court rather than to codify or define existing powers, though it may well be that the new extended jurisdiction does in some degree overlap the old. We have already examined the inherent jurisdiction of the court, and we have found that the common characteristic of the orders which were made by virtue of that jurisdiction was the determination of the court never to depart from the strict letter of the trust further than the exigencies of any particular case demanded. The question now to be considered is whether, and to what extent, s 57 has empowered the court to depart from that principle. Their Lordships later said, at pp 244–245: It seems to us that the section envisages, on analysis: (i) an act unauthorised by a trust instrument, (ii) to be effected by the trustees thereof, (iii) in the management or administration of the trust property, (iv) which the court will empower them to perform, (v) if in its opinion the act is expedient. It is, we think, mainly on the proper interpretation of the phrase ‘management or administration,’ in the context in which it appears, that the question at issue primarily depends. They continued at p 248: In our judgment, the object of s 57 was to secure that trust property should be managed as advantageously as possible in the interests of the beneficiaries and, with that object in view, to authorise specific dealings with the property which the court might have felt itself unable to sanction under the inherent jurisdiction, either because no actual ‘emergency’ had arisen or because of inability to show that the position which called for intervention was one which the creator of the trust could not reasonably have foreseen; but it was no part of the legislative aim to disturb the rule that the court will not rewrite a trust, or to add to such exceptions to that rule as had already found their way into the inherent jurisdiction. [Emphasis is ours.] Lord Evershed MR and Romer LJ made it quite clear that s 57 applied only when the act of trustees was unauthorised, not when it was expressly forbidden. However, the House of Lords in their deliberation on the appeal in Chapman v Chapman (supra), did not consider the court’s jurisdiction under s 57. 79 We should add that following the decision of the House of Lords in Chapman v Chapman (supra) the Lord Chancellor appointed the Law Reform Committee chaired by Lord Justice Jenkins to consider whether any alteration was desirable in the powers of the court to sanction a variation in the trusts of a settlement in the interests of beneficiaries under disability and unborn persons. The Committee in its report (Cmnd 310) recommended wide powers be conferred on the court to approve on behalf of infants and others the variation of a trust. In consequence, the Variation of Trusts Act 1958 was passed, which gives the court extensive powers to approve any arrangement varying or revoking all or any of the trusts and enlarging the powers of the trustees in managing or administering any of the property subject to the trusts. 80 There are two authorities in Singapore on the application of s 59(1) of the Act. The first is British and Malayan Trustees Ltd v Abdul Jalil bin Ahmad & Ors 81 The High Court held that the property was part of a settled estate under s 2 of the Settled Estates Act; that although s 4 of that Act conferred on the court a power to order a sale of the property if the court considered proper, due regard being had to the interests of all the parties, s 6 thereof delimited this power to the extent which the sale might have been authorised by the terms of the settlement; and that it was clear from the provisions of the settlement that the settlor intended that the trustees should have no such power to sell, except to a limited extent, and in view of these provisions the court could not order a sale under the Settled Estates Act. Turning to s 59(1) of the Trustees Act, the court held that that section should be read together with s 2(2) of the Act and in view of the contrary intention expressed in the settlement, s 59(1) was not available and the court could not sanction the sale. The court said, at p 1074: By these provisions [cl 16], the settlor made his intentions abundantly clear; he put it beyond question that, except to a limited extent, the trustees have no power to sell the settled property, or and further the trustees are forbidden to invoke the jurisdiction of the court and seek an order for sale of the settled property. The limited extent is a sale in the event of a compulsory purchase or acquisition of the settled property, or sale in connection with such purchase or acquisition. That is the only extent, to which a sale is authorised in and by the settlement by the settlor. Beyond that, in my opinion, a sale of the settled property is not authorised. 82 The second case is Re Haji Meera Hussain’s Will’s Trusts Even in the exercise of its discretion [under s 59(1)], a court cannot rewrite the terms of a trust and it most certainly cannot dispose of the property of a deceased against his wishes as expressed in his will: British and Malayan Trustees Ltd v Abdul Jalil bin Ahmad & Ors. 83 Returning to s 59(1) of the Trustees Act, we find that there are two impediments to the application of this provision. First, it only applies in relation to ‘the management or administration of any property vested in trustees’. In Re Downshire Settled Estates (supra), Evershed MR and Romer LJ held (at p 247) that the application of both the words is confined to ‘the managerial supervision and control of trust property on behalf of the beneficiaries’. The property vested in the trustees of the settlement at the material time consisted of the shares in SHL, and it is in relation to the ‘management or administration’ of these shares that s 59(1) may be invoked. The share swap transacted was not a matter of or concerning the management or administration of the shares in SHL; it was a swap of the shares in SHL for the shares in SIS. 84 The second obstacle in the way is the provision of cl 5 of the settlement. We think it is implicit in s 59(1) that that section cannot be invoked to sanction or authorise an act or transaction, where there is an express prohibition against such act or transaction contained in the trust instrument. In this respect, the crucial words in that subsection are ‘the same [ie the act or transaction] cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the trust instrument’. In a case, such as the present one, there is no ‘absence of any power’ in the trust instrument. On the contrary, there is, in this case in the trust instrument, cl 5 which expressly forbids the act or transaction to be carried out, ie to invest in any securities in Singapore. In the face of this prohibition, the court cannot sanction or authorise an act or transaction proposed to be carried out, or ratify and approve such act or transaction which has been carried out, which is contrary to the terms of the trust. The intention of the settlor as expressed in the settlement ought to be respected. In our judgment, the court has no jurisdiction to ratify and approve the share swap carried out in 1991. 85 It was contended on behalf of the respondents that s 2(2) of the Trustees Act does not limit the jurisdiction conferred on the court by s 59(1) of the Act. Section 2(2) by its express terms limits only the additional powers conferred on the trustees by the Act, and not the powers available to the court under s 59(1). We think that this argument is well founded. On a plain reading of s 2(2), the additional powers under the Act are conferred on the trustees, only if and so far as a contrary intention is not expressed in the trust instruments. That section does not apply to limit the powers available to the court under s 59 (1) of the Act. In this respect, the decision in British and Malayan Trustees Ltd v Abdul Jalil bin Ahmed & Ors (supra) (at p 472) that s 59(1) is limited by s 2(2) is in error, though in all other respect the decision on s 59(1) is correct. That having said, it is, nonetheless, difficult to see how the court can, in the face of an express prohibition in a trust instrument, as that contained in cl 5 of the settlement, approve or sanction a scheme or transaction, such as the share swap in this case, which would result, or has resulted, in the trustees holding investments expressly prohibited in the trust instrument, as in this case. The presence of such express prohibition would exclude any suggestion of ‘an absence of any power for that purpose vested in the trustees by the trust instrument, if any, or by law’. 86 The Australian case of Riddle & Ors v Riddle & Anor (1951) 85 CLR 202, cited by the respondents, does not assist their case. In that case, there was no power of investments given in the will and the trustees’ powers were those found in the Trustees Act 1925–1942. The court’s jurisdiction under s 81 of the Trustees Act (which is the equivalent of s 59(1) of our Trustees Act) was invoked, and the court considered that that section was applicable, as there was an ‘absence of power to invest’. That case was clearly different from the present case, where there is a prohibition against the investment made by the trustees. 87 The respondents relied also on the Canadian case of Re Nathanson (1971) 18 DLR (3d) 495. In that case, the testator had, for some years prior to his death, been operating a television station, CJCB-TV. He died in 1966, and by his will, made about two years earlier, gave the following direction with regard to the television station: On the death of my widow, the television station, so-called, and equipment … shall be held by my trustees as a separate trust for a period of twenty years for the children of my son Norris. My trustees are to have the authority to use sufficient of the income from such television station for the general upkeep, taxes and expenses of this property. The net income is to be used for the support and education of the infant children of my son Norris. On the termination of this trust, the said property is to vest in the children of my said son Norris, share and share alike. The child or children of any deceased child to take the parent’s share. The trustees desired to sell the television station, when another television station was given the permission to be set up by a competitor, and the trustees felt that the television station would suffer a severe drop in advertising revenues as a result of the competition. An application was then made to the court to authorise the trustees to sell the station. Cowan CJTD of the Supreme Court of Nova Scotia, Trial Division, allowed the application. He said at p 501: I am satisfied that, on the evidence before me, it is in the best interests of the trust and of the children of Norris Nathanson, to dispose of the leased assets now (ie the television station), on the terms suggested. I am of the opinion that the court has power, in the circumstances, to authorise a sale of the leased assets in question, in spite of the direction in the will of the testator to hold these assets as a separate trust for a period of 20 years, and the exclusion of such assets from the class of property for which a power to lease, sell or otherwise dispose of is given by the will. The learned Chief Justice then referred to s 50 of the Trustee Act RSNS 1967 (which was equivalent to s 59 of our Trustees Act) and continued: Even apart from statute, there is an inherent power in the Court to authorize a trustee to sell trust property, in cases where no power of sale is conferred upon the trustee, or even in cases where he is specifically directed not to sell the trust property: see Scotts on Trusts (3rd Ed, 1967) vol II, para 167, pp 270–271; vol III, para 190.4, pp 1565–1568; 38 Halsbury’s Laws of England (3rd Ed) pp 1026–1027. I am of the opinion that a sale of the leased assets in question is expedient and that an order should issue, conferring upon the trustees the necessary power for the purpose. 88 These passages of the judgment were heavily relied upon by the respondents. In that regard, we would, with respect, make two observations. First, the decisions of the Court of Appeal in Re Downshire Settled Estates (supra) and the House of Lords in Chapman v Chapman (supra) were not cited to and considered by the learned Chief Justice. Secondly, Re Nathanson was slightly different from the present case. In that case, there was no express prohibition against selling the television station; it was only the timing of the sale which was not followed. Instead of selling the trust property and dividing the assets on the expiry of 20 years from the date of the testator’s death as directed by the will, approval from the court was sought to do so earlier. In the instant case there is an express prohibition on investing the trust fund in securities in Singapore. Relief to trustees of liability 89 As the 1991 share swap was not in accordance with cl 5 of the settlement, it follows that the trustees were in breach of trust in effecting and carrying out the share swap. The question now is whether the trustees should be held responsible for their actions, especially in the light of the fact that the share swap was fully supported by each and every beneficiary of the settlement who were sui juris at the time and also by Rajabali himself. The respondents raised two defences: one under cl 6 of the settlement, and the other under s 63 of the Trustees Act. 90 We turn first to cl 6 of the settlement, which reads as follows: No trustee purporting to act in the execution of the trusts and powers hereof shall be liable for any loss not attributable to his own dishonesty or to the wilful commission or omission by him of any act known by him to be a breach of trust and in particular he shall not be bound to take any proceedings against a co-trustee for any breach or alleged breach of trust committed by such co-trustee. 91 Counsel for the respondents contended that both Ameerali and Iqbal, as trustees and directors of SIS, acted honestly and reasonably at all material times in relation to the share swap. There was no evidence that Ameerali and Iqbal were dishonest. On the contrary, Ameerali and Iqbal acted in the interests of the beneficiaries of the settlement at all times. The main consideration at all times was the interests of the beneficiaries as a whole, and towards that end they agreed to and participated in the share swap They did not benefit from the carrying out of the share swap in any way other than as beneficiaries of the settlement like all the other beneficiaries. 92 Counsel relied on the case of Armitage v Nurse & Ors No trustee shall be liable for any loss or damage which may happen (to the beneficiary’s) fund or any part thereof or the income thereof at any time or from any cause whatsoever unless such loss or damage shall be caused by his own actual fraud … Millett LJ, delivering the judgment of the Court of Appeal, held that an exemption clause in a trust instrument could validly exclude liability for gross negligence on the part of the trustees. He held that cl 15 excluded liability for breach of trust in the absence of dishonesty on the part of the trustees. He said at p 1054: In my judgment, cl 15 exempts the trustee from liability for loss or damage to the trust property no matter how indolent, imprudent, lacking in diligence, negligent or wilful he may have been, so long as he has not acted dishonestly. Drawing the analogy from Armitage v Nurse, counsel for the respondents argued that cl 6 relieved the trustees from liability for any breach of trust which they might have committed so long as no dishonesty was involved. 93 The extent of the exemption depends very much on the precise wording and ambit of the exemption clause itself. The material words in cl 6 of the settlement are: ‘No trustee … shall be liable for any loss not attributable to his own dishonesty or to the wilful commission or omission by him of any act known by him to be a breach of trust’. On the basis of this provision, there are two prerequisites to be satisfied by the trustees: first, the absence of any dishonesty, and second, the absence of any knowledge that the act or omission was a breach of trust. 94 The first prerequisite the trustees have satisfied. There was no evidence of dishonesty on the part of any of the trustees, including Ameerali and Iqbal, and there was no allegation by the appellants or any of them that there was any dishonesty whatsoever. It is the second that is controversial. We need to examine the background and the relevant circumstances in the context of which the share swap was effected in 1991. 95 In 1979, with Rajabali’s consent the trustees of the settlement sold the trust property in exchange for fully paid shares in SHL. Plainly they must have done that with the advice of their solicitor. Apparently it did not occur to anyone that the transaction was not in accordance with cl 5 of the settlement. At any rate, subsequently, that transaction was sanctioned or approved by an order of court in 1983. The point that the court had no jurisdiction to sanction or approve the share swap was not in issue; nor was it raised by anyone before the court. All the parties concerned, namely, Rajabali, the trustees and all the beneficiaries, primary and contingent, the latter being those who were then sui juris, consented to the order. It is apparent to us that it was on that basis that the court made the order sought. It is also apparent to us that the application to court to obtain the order was requested for by their investors, Orient Leasing, who presumably were advised by their solicitors of some doubt in the transaction which might affect adversely the title to the property conveyed to SHL. 96 In 1990 and 1991 SHL was doing very well with the development on the Scotts Road properties. The development was unquestionably a success. Every member of the Jumabhoy family was keen to have the shares in SHL listed. Towards that end all of them, namely, Rajabali, Ameerali, Yusuf, Mustafa, Perin, and all the contingent beneficiaries of the settlement who were sui juris, executed the deed of release. There is no doubt that that deed was drafted by the solicitors acting for the family including the trustees, and the deed was executed with the benefit of advice of their solicitors. One of the important things the deed purported to do was to delete cl 5 of the settlement and substitute it with a very comprehensive provision giving wide powers of investment to the trustees. The material portion of cl 1 of the deed is as follows: With immediate effect cl 5 of the settlement shall cease to apply and the following shall be substituted therefor: ‘Notwithstanding any of the foregoing and without prejudice to the generality of any other power conferred on them it is hereby declared that the trustees shall have the power in their absolute discretion and from time to time and at any time or times to sell transpose exchange or vary any or all of the investments and assets included from time to time in the trust fund and to reinvest the moneys arising from such sale in the investments authorised for the purpose or otherwise apply the same under the powers given to the trustees under this deed. The trustees may apply the trust fund or any part thereof and the income thereof or any part thereof: (i) in the acquisition of or at the interest upon the security of such shares stocks funds securities or other investments or property of whatsoever nature and wheresoever situate whether or not … as the trustees in their absolute discretion think fit; (ii) in the acquisition by original subscription or by purchase or otherwise of the shares or stock whether ordinary preferred deferred redeemable or otherwise and whether partly or fully paid or having any liability thereon of any corporation wheresoever situated or incorporated and expressed in whatsoever currency. Provided that …’ 97 It was held by the learned judge that this provision of the deed of release was invalid on the ground, inter alia, that the class of beneficiaries under the settlement had not, as yet, closed and the parties to the deed had no power to effect any modification to the settlement. Hence, the terms of cl 5 of the settlement remained intact and continued to have full force and effect. We agree. But the fact remained that the intention then was clearly to authorise the exchange of the shares in SHL for the shares in SIS. None of the parties concerned, namely, Rajabali, Ameerali, Yusuf, Mustafa and the beneficiaries who executed the deed, at that time, entertained even the slightest doubt as to the validity of the deed. No one, and in particular not even Yusuf himself, who is an experienced advocate and solicitor, ever questioned whether the deed was valid and effectual for the purposes it was intended. Everyone executed the deed willingly. The learned judge said in¶91 and 92 of her judgment: 91 I should state here that I accept the copy of the [deed of release] which was produced in court as evidence of the original document which could not be found and produced to me. All persons who were party to the [deed of release], with the exception of Rajabali, testified that they did execute it. I am satisfied that there were no circumstances which vitiated their consent to the document as signed. Though there were some complaints of not understanding the document and/or of being pressurised to sign it, there is no evidence that those who say that they did not understand it could not have proper explanation or advice on it had they really been concerned or that such pressure as may have been applied was so great as to amount to duress. 92 As regards Rajabali, I believe that he did sign it. He does not remember doing so but his memory was not always reliable. Further he was eager for the listing to go ahead and that everyone sign every document needed, as he saw it, for this purpose. Anwar’s evidence supports that conclusion in that Anwar did say that when he signed the document, all the other members of the family who were then in Singapore had already signed it … Further, it is against the probabilities of the situation that Rafiq and Iqbal who had arranged for the document to be prepared in order to support the structure for the listing of SHL and the swap would not have ensured that Rajabali executed it along with the other members of the family. I accept Rafiq’s evidence that Rajabali did so in about March 1991. 98 It is therefore abundantly clear from the evidence that not only had the appellants acquiesced and consented to the transfer of the SHL shares to SIS in exchange for the latter’s shares, but also they had agreed, participated and actively made possible the said transfer to SIS. They executed the deed of release to empower the trustees of the settlement to carry out the share swap and it was precisely to achieve that purpose that cl 5 of the settlement was deleted and a comprehensive investment clause, namely cl 1, was substituted therefor. True it is that cl 1 of the deed of release was struck down, but that does not eliminate the fact that that document clearly manifested the intentions of all the parties to the deed. 99 The purpose of the share swap was to control the ownership and disposal of the shares in SHL within the Jumabhoy family and consequently the control of SHL. Everyone concerned was in favour of such a scheme and fully supported it. To them the share swap was essential because of the listing of SHL, and professional advice was obtained. It was planned and carried out for the benefit of the Jumabhoy family. In this connection, the learned judge made the following findings in¶84 of her judgment: At this juncture, I should also state that it is my finding that all of the trustees and Rajabali were fully aware of and supported what was being done when the scheme was effected. They were eager to list SHPL and to obtain the repute and dignity that would come with their business efforts being publicly recognised by such listing. I accept the evidence that the trustees were fully briefed about the structure of the listing and the necessity for transferring the loss-making companies out of SHPL. I also find that they were concerned to maintain family control over SHPL in its new incarnation and, for that purpose, accepted the reasoning behind the setting up of SIS as a vehicle to take over all the shares which the various trusts had previously held in SHPL. In my opinion they fully understood that when they, as trustees of the settlement, transferred its shares in SHPL to SIS in exchange for shares in the capital of SIS, SIS held those SHPL shares as beneficial owner and not on trust for the settlement. Instead, the trust fund became the shares in SIS held by the trustees. We agree entirely with these findings. 100 It is apparent to us that Rajabali, the trustees and every beneficiary of the trust were under the impression — albeit erroneous as it turned out — that the share swap to be carried out was fully authorised by the terms of the settlement as varied by the deed of release. Professional advice undoubtedly was taken on the deed and the share swap. Having regard to all the circumstances, we do not find the trustees guilty of ‘wilful commission’ of ‘any act known to [them] to be a breach of trust’. In our judgment, cl 6 of the settlement applies and exonerates them from any liability for the breach of trust committed. 101 Even if cl 6 of the settlement is not applicable, we think that in all the circumstances the trustees are entitled to invoke s 63 of the Trustees Act to relieve them from liability. Section 63 provides as follows: If it appears to the court that a trustee, whether appointed by the court or otherwise, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before, on or after 1 September 1929, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the court in the matter in which he committed the breach, then the court may relieve him either wholly or partly from personal liability for the same. 102 It is settled that courts are given a residual discretion under s 63 to relieve a trustee of any personal liability. Each case must be dealt with according to its own circumstances, and a court should be slow to lay down exhaustive rules of principles which should be followed in every case of this nature: see Re Kay 103 In Re Windsor Steam Coal Co (1901) Ltd Under s 61 of the Trustees Act 1925, three conditions must be complied with before the Court will excuse a trustee who has committed a breach of trust by making payment to the wrong person. First, the payment must have been made honestly; secondly, the payment must have been made reasonably, and thirdly, the trustee must show that he ought to be fairly excused for having made the payment. Although the three conditions laid down by Lawrence LJ were directed specifically at the facts of the case itself, they are equally applicable here and we respectfully adopt them. 104 On the basis of the evidence before us, the trustees acted honestly and reasonably in executing the 1991 share swap, albeit the transaction was in breach of trust. It is unnecessary to repeat the relevant facts and circumstances leading to the share swap which we have discussed at some length. Suffice it here to say that the share swap was agreed unreservedly by everyone concerned including the appellants and the trustees and professional advice from merchant bankers and legal advisers was taken. The share swap was carried out by the trustees with good intentions and for the benefit of all the beneficiaries of the settlement as a whole. We can think of no countervailing reasons why in all the circumstances the trustees should not be relieved from the breach of trust. We are disposed to make an order granting relief to the trustees from any personal liability which might be incurred as a result of the share swap. We so order. Constructive trust 105 We now turn to the issue whether SIS holds all the shares in SHL that were transferred to it by the trustees of the settlement in exchange for the shares of SIS on a constructive trust for the trustees of the settlement. This was one of the reliefs sought by the appellants. In the amended statement of claim, they claimed, inter alia, the following: a a declaration that [SIS] is the constructive trustee of 70,861,237 [SHL] shares for and on behalf of [the settlement]; and b a order that [all the respondents] shall take all necessary steps to transfer the said 70,861,237 [SHL] shares to the trustees of [the settlement]. 106 On this issue the learned judge held in¶82 of her judgment: Accordingly, I accept the submission of the [respondents] that the scheme which was entered into in 1991 in relation to the listing of SHL and pursuant to which the transfer of shares was effected is not a breach of the terms of [Rajabali’s settlement]. It follows that there is no basis for the imposition of a constructive trusts on SIS in respect of any of the shares which it holds in the capital if SHL. The trust fund after the exchange became the shares which [Rajabali’s settlement] was given and continues to hold in the capital of SIS itself. Later she said in¶85: The consequence of my finding that because of s 14(4) of the Trustees Act the swap of the settlement’s SHPL shares for SIS shares was authorised, is that SIS owned its shares in SHL free from the constrictions of that settlement and could deal with them in such manner as it as the beneficial and legal owner deemed fit. 107 For the reasons given, our conclusion on the share swap differs from that of the learned judge. Our finding is that the share swap was in breach of cl 5 of the settlement. That being so, the question is whether SIS in the eye of equity holds the shares in SHL on a constructive trust for the trustees of the settlement. There is no clear definition of a constructive trust. The learned authors of Snell’s Equity (29th Ed) define a constructive trust at p 192 as follow: The constructive trust imposed by law is not capable of precise definition and is continually developing. For the present it is sufficient to say that a constructive trust is a trust which is imposed by equity in order to satisfy the demands of justice and good conscience. In Carl Zeiss Stiftung v Herbert Smith & Co & Anor (No 2) … English law provides no clear and all-embracing definition of a constructive trust. Its boundaries have been left perhaps deliberately vague, so as not to restrict the court by technicalities in deciding what the justice of a particular case may demand. However, his Lordship identified ‘want of probity’ as a useful touchstone in considering the circumstances giving rise to a constructive trust. He said at p 301: The concept of ‘want of probity’ appears to provide a useful touchstone in considering circumstances said to give rise to constructive trusts, and I have not found it misleading when applying it to the many authorities cited to this court It is because of such a concept that evidence as to ‘good faith’, ‘knowledge’ and ‘notice’ plays so important a part in the reported decisions. It is true that not every situation where probity is lacking gives rise to a constructive trust. Nevertheless, the authorities appear to show that nothing short of it will do. Not even gross negligence will suffice. 108 Where a person acquires a trust property, whether gratuitously or for valuable consideration, in breach of trust on the part of the trustee, and has knowledge of the breach of trust whether actual, constructive or imputed, then he would be liable as a constructive trustee to account to the beneficiaries under the trust. Such a constructive trust is based on ‘knowing receipt’ ie knowledge of the recipient that the property received is trust property and is in breach of trust. Such knowledge is absolutely essential to found a constructive trust based on knowing receipt. 109 In Re Montagu’s Settlement Trusts 110 Megarry VC held that the tenth Duke did not have any knowledge of the resettlement such that when he received and dealt with the chattels he knew that the release of the chattels to him was in breach of trust. There was no reason why his solicitor’s knowledge should be imputed to him so as to affect his conscience, nor did his failure to inquire give rise to the imposition of a constructive trust. Even if he had once known of the relevant terms of the settlement, there was nothing to suggest that he remembered them when he received the chattels. Hence, although the release of chattels to him by the trustees was a breach of trust, he did not have any knowledge of the breach and did not become a constructive trustee. His Lordship summarised (so far as relevant here) the relevant considerations for imposing a constructive trust based on knowing receipt at p 285 as follows: (1) The equitable doctrine of tracing and the imposition of a constructive trust by reason of the knowing receipt of trust property are governed by different rules and must be kept distinct. Tracing is primarily a means of determining the rights of property, whereas the imposition of a constructive trust creates personal obligations that go beyond mere property rights. (2) In considering whether a constructive trust has arisen in a case of the knowing receipt of trust property, the basic question is whether the conscience of the recipient is sufficiently affected to justify the imposition of such a trust. (3) Whether a constructive trust arises in such a case primarily depends on the knowledge of the recipient, and not on notice to him; and for clarity it is desirable to use the word ‘knowledge’ and avoid the word ‘notice’ in such cases. (4) For this purpose, knowledge is not confined to actual knowledge, but includes at least knowledge of types (ii) and (iii) in the Baden case 111 It is also helpful to refer to the case of El Ajou v Dollar Land Holdings plc & Anor [1994] 2 All ER 685 which was cited by the appellants. There, the plaintiff, a wealthy Arab businessman, owned substantial funds and securities which were under the control of an investment manager in Geneva, who had been bribed to invest the moneys in fraudulent share selling schemes operated by three Canadians. The proceeds of the fraudulent share schemes were channelled through various countries, Geneva, Gibraltar, Panama and back to Geneva from where some of the moneys were invested in a venture in conjunction with the defendants (DLH), a property company owned and controlled by two Americans. The latter had acquired that company on the advice of S who had been introduced to them by F, a Swiss fiduciary agent who also acted for the Canadians. The Canadians through various companies controlled by them provided funds for the venture. F was the chairman of DLH but played no active part in the management of DLH, though on behalf of DLH he concluded the agreements relating to the investment of these funds in the joint venture. Subsequently the Canadians withdrew from the joint venture and DLH purchased their interests on very favourable terms. The plaintiff, on discovering the frauds perpetrated by the Canadians and his agent, brought proceedings against DLH to recover the moneys received by it from the Canadians on the grounds that DLH had received the moneys with knowledge of the fraud. At first instance, Millett J (as he then was) found that certain funds received by DLH were traceable in equity as proceeds of the fraud; however, he found that the DLH had no knowledge of the fraud and that the knowledge of F could not be attributed to DLH and accordingly he dismissed the claim: see [1993] 3 All ER 717. On appeal this finding was reversed. It was held unanimously by the Court of Appeal that F was actively involved in concluding the relevant transactions in question and that the directing mind and will of the DLH in relation to the relevant transactions at the material time were the mind and will of F and no other. Therefore, DLH had the requisite knowledge through F at that time, and was liable to the plaintiff in constructive trust. 112 Reverting to the case at hand, we are of the opinion that a constructive trust is not automatically imposed on SIS merely because we held that the 1991 share swap was in breach of the terms of the settlement. In order to impose such liability on SIS, the appellants must show that SIS received the shares in SHL with the knowledge that the shares were trust property and were transferred to it in breach of trust. The case the appellants sought to make out here is a constructive trust on the part of SIS based on ‘knowing receipt’ of trust property, as in Re Montagu’s Settlement Trusts and El Ajou (supra). 113 In El Ajou, Hoffmann LJ (as he then was) said, at p 700: This is a claim to enforce a constructive trust on the basis of knowing receipt. For this purpose the plaintiff must show, first, a disposal of his assets in breach of fiduciary duty; secondly, the beneficial receipt by the defendant of assets which are traceable as representing the assets of the plaintiff; and thirdly, knowledge on the part of the defendant that the assets he received are traceable to a breach of fiduciary duty. In this case, there is no dispute that SIS received the shares in SHL from the trustees of the settlement and, as we have held, the transfer of those shares to SIS was in breach of trust. The vital question is whether SIS had knowledge of the breach of trust, actual, constructive or imputed, at the time. 114 Where the transaction in question concerns a company which received trust property, as in the present case, it is necessary to identify the relevant officers who manage and control that company and who have knowledge of the breach of trust, such that their knowledge would be treated as the knowledge of the company: see Re Montagu’s Settlement Trusts (supra) at p 283. In this case, the relevant officers in SIS who participated in the 1991 share swap were Ameerali, Yusuf, Mustafa, Rafiq and Iqbal. Ameerali, Yusuf and Mustafa were directors and Rafiq and Iqbal were executive directors of SIS. The trustees of the settlement at the time were Ameerali, Yusuf and Mustafa. Hence, if the trustees knew that the transfer of the shares in SHL to SIS was in breach of trust, and the trustees themselves are also directors of SIS, such knowledge would be treated as that of SIS. It was the contention of the appellants that the trustees, and in particular Ameerali and Iqbal, had knowledge of the breach of trust. They relied on the following documents. 115 First, there was a memorandum sent by Iqbal to Rafiq on 13 October 1990. At p 2 of the memorandum, in¶5(iii), Iqbal made specific reference to the settlement and said: This trust has got some specific restrictions with regard to the investments of funds owned by the trust. Specifically, the trust excludes investments in Singapore. The recommendation of the lawyers is that we dissolve this trust by obtaining the signature of each and every beneficiary in order that the continuation trust vests immediately. This will therefore circumvent the need to go through the courts for a specific exclusion. Perhaps I can explain further to you. I have however asked the lawyers to prepare a note to us on this. This trust has got some specific restrictions with regard to the investments of funds owned by the trust. Specifically, the trust excludes investments in Singapore. The recommendation of the lawyers is that we dissolve this trust by obtaining the signature of each and every beneficiary in order that the continuation trust vests immediately. This will therefore circumvent the need to go through the courts for a specific exclusion. Perhaps I can explain further to you. I have however asked the lawyers to prepare a note to us on this. It should be clear, therefore, that as Scotts Investments receives income and distributes dividends, the dividends will accrue to the different trusts that own Scotts Investments. [The Foundation] is one of these trusts. 116 It was therefore argued on behalf of the appellants that Iqbal, Rafiq and, to a certain extent, Ameerali had knowledge that the shares which were to be transferred to SIS belonged to the settlement and further that these same persons had knowledge also that the transfer of these shares to SIS in exchange for SIS’s shares was in breach of trust. The note from Iqbal to Rafiq showed that both of them were aware of the breach of trust which would arise should the share swap take place and the note from Rafiq to Rajabali confirmed that these officers of SIS knew that the shares which it received from the trustees belonged to the settlement. As such, the knowledge of the breach of trust had to be treated as that of SIS. 117 We are unable to agree. In relation to the first document, on a plain reading of the documents, at its highest, Iqbal, in his capacity as an officer of SIS, considered the likelihood that the share swap might be in breach of trust. He had no actual knowledge of the breach, nor did he wilfully shut his eyes to the fact that it might be such a breach. On the contrary, it appears that he had taken the necessary step of seeking legal advice on the proposed transfer. Advice of solicitors was definitely sought before the 1991 share swap was carried out in order to ensure that the share swap would not be a violation of the terms of the settlement. It must have been the result of such advice that the deed of release was prepared and executed. As for the documents, there was nothing there that suggested that the share swap would or might be a breach of trust. 118 We have set out and discussed at length the relevant circumstances leading to the execution of the deed of release, and it is unnecessary to repeat them here. The significance of the instrument is this. Clause 5 of the settlement, governing the powers of investment by trustees, was replaced by cl 1 of the deed, which is a wide clause giving the trustees powers to execute the share swap. Everyone who executed the deed must have been under the impression — erroneous as it turned out — that they could validly vary cl 5 of the settlement and that so varied the trustees were authorised to carry out the share swap. Indeed, that would be the result, if the deed of release were valid; but unfortunately it was not. On these facts, the trustees could not be said to have the requisite knowledge that the share swap was in breach of trust. There was nothing which suggested to anyone then that the deed of release would be invalid. In all the circumstances, it would not be justified to impute to SIS any knowledge of breach of trust. The directors of SIS did not know that the share swap was a breach of trust. 119 In all the circumstances, we are of the opinion that the conscience of SIS in acquiring the SHL shares was not affected so as to give rise to the imposition of a constructive trust. In this respect, it should be borne in mind that SIS acquired the SHL shares for valuable consideration and not as a volunteer. There was no lack of probity on the part of SIS and its officers which calls for an imposition of such a trust in this situation. Other breaches of trust 120 We now come to another main ground of appeal of the appellants, namely, the breaches of trust (other than the share swap) alleged to have been committed by the trustees of the settlement. On this aspect, the appellants’ case before us took on a new dimension. The appellants complained that the following breaches of trust were committed by the trustees: (i) breaches of trust in carrying on the lossmaking businesses from 1983 to 1991; (ii) breaches of trust in causing SIS to pledge SHL shares to various financial institutions as securities for credit facilities for the loss-making businesses which the respondents carried on; and (iii) breaches of trust committed by the respondents in setting up and running further loss-making businesses after 1991. 121 In particular, the appellants contended that subsequent to the court order in 1983, the respondents undertook many businesses, including A & W and SWR, all of which incurred losses. These businesses were not permitted by cl 5 of Rajabali’s settlement, nor was it sanctioned by the 1983 court order. The appellants therefore asked for an inquiry of all losses incurred starting from the period 1983 to 1991. After the share swap in 1991, these breaches were further compounded by the respondents undertaking yet more loss-making businesses which were all not permitted under cl 5. Again, the appellants asked for an inquiry of those losses. 122 The appellants’ main arguments were these. There were no powers conferred by the settlement on the trustees to carry on any businesses, be it at a profit or loss, and the trustees had no power either at law or in equity to do so. The trustees could not avoid the prohibition under cl 5 of the settlement by setting up a company (ie SHL) to do what they could not do. Therefore, by conducting businesses through SHL, the trustees committed breaches of trust, and accordingly were liable to account for all the losses incurred. It was admitted that should the trustees be found liable for breaches of trust in this respect, Yusuf and Mustafa would be equally liable to account since they were trustees at that time. The complaints were made on behalf of the beneficiaries, as they had not acquiesced to these businesses being carried on. The appellants therefore sought an order for an inquiry as to the losses occasioned for the period from 1983 onwards to the present day. 123 The respondents, on the other hand, argued that this part of the appellants’ appeal was never canvassed before the learned judge. They referred to their amended defence, correspondence for further and better particulars with the appellants, and the appellants’ amended statement of claim. Insofar as the appellants’ amended statement of claim had a reference to the carrying on of unauthorised businesses, it was made in the context of the validity of the 1991 share swap. The same could also be said of any evidence which was adduced during the trial. The focus at the trial were mainly on two issues, first, the 1991 share swap, and, second, the share option which SIS granted to Rafiq, which was no longer in issue. All other issues were not before the court, and this included not only the carrying on of the loss-making businesses but also the creating of the share pledges. This was the reason why the learned judge made no findings at all on either the loss-making businesses or the share pledges. The appellants now wanted to remedy the way in which their case was not run below, and this should not be allowed on appeal. The appellants, in seeking an inquiry for the losses, were in effect asking for a re-trial of the whole case, as by allowing the inquiry, it would effectively be giving the appellants a chance to deal with matters which should have been dealt with at the trial. 124 We are in substantial agreement with the respondents. The several breaches of trust now alleged before us were not part of the appellants’ case below. It was not an issue that there were any breaches of trust before 1991, and certainly not within the period from 1983 to 1991. There were no complaints of the conduct of the trustees in administering the trust for the period before the share swap took place. On this point, it is relevant to mention that by cl 3 of the deed of release the beneficiaries released and discharged the trustees from all claims in connection with, inter alia, the settlement. Clause 3 provides as follows: The beneficiaries hereby release and discharge and undertake to procure that any other person who may after the date hereof become a beneficiary (the ‘future beneficiaries’) entitled to the trusts set out in the settlement shall release and discharge the trustees from all claims of whatever nature the beneficiaries or the future beneficiaries or any of them may have against the trustees in connection with this deed, the settlement or the R Jumabhoy Family Trust or in connection with any matter done by the trustees in connection with this deed, the settlement or the R Jumabhoy Family Trust. 125 The proceedings below were conducted without having any of the allegations of the breaches and particulars thereof being properly and adequately pleaded and with no evidence of such breaches being led. These breaches of trust were not pleaded, nor were they fully canvassed in the court below. Under O 18 r 12 of Rules of Court, particulars of breaches of trust must be pleaded. The relevant parts of the appellants’ amended statement of claim which alleged pledges of shares and breaches of trust in respect of loss-making businesses are paras 57 and 58 which read as follows: 57 Ameerali and two sons, Rafiq and Iqbal as directors of SIS, caused SIS to embark on numerous business ventures by using its Scotts Holdings shares to finance its undertakings. The value of SIS’s Scotts Holdings shares exceed $100m. SIS pledged the said shares with various banks to raise financing for trading ventures undertaken by SIS through several subsidiary companies. Yusuf and Mustafa, although they are directors of SIS, are minority directors and have little say in, the running of the business of SIS. The losses of SIS presently exceed $15m as shown in its latest audited accounts. 58 The plaintiffs will contend that the pledge by SIS of its Scotts Holdings shares with financial institutions to raise money to undertake trading activities also constitutes a breach of trust of the 1957 settlement. It was and never has been the intention of the Rajabali as settlor of the 1957 settlement to risk the trust fund for speculative business activities. This is and has been taking place through SIS after it acquired the [SHL] block of shares from the family trusts, as the public listed company shares are readily acceptable to financial institutions as security for bank loans. No other particulars of breaches of trust were pleaded. Apart from references to breaches of trust made in these pleadings and at the trial, it had not been established that the breaches of trust had in fact been committed by the trustees. By ordering an inquiry, we are effectively saying that these breaches of trust had been established without such issues being tried and decided below. That certainly we cannot do. 126 Thus, the issue of breaches of trust on the part of the trustees, other than the 1991 share swap, never really formed part of the appellants’ case below and hence was not considered by the learned judge. It is also significant that in the notice of appeal, the appellants appealed against only that part of the learned judge’s decision that decided the following: (i) that the share swap made in 1991 was not in breach of trust; and (ii) that SIS are the legal and beneficial owners of all the SHL shares held by it subject to the rights of existing pledgees of such shares, and that none of the SHL shares are held on trust for and on behalf of the trustees of the settlement. Accordingly, we are unable to accept the appellants’ contentions and are not disposed to make an order for inquiry as to the losses alleged to have been occasioned by the breaches of trust. The shareholders’ agreement 127 The appellants raised the issue concerning the status of the two shareholder agreements which were executed in 1991 after SHL was listed. This issue has no substantial impact on the outcome of the appeal. The first agreement was made between the trustees of the settlement, the trustees of those settlements made by Ameerali, Yusuf and Mustafa respectively, the trustees of the Foundation, Rafiq and Iqbal; and the second agreement was made between Ameerali, Yusuf, Mustafa, SIS, Rafiq and Iqbal. Both agreements had similar terms, and it provided that the shareholders would support and consult with each other and lend their support to any policies or proposals which Rafiq and Iqbal as executive directors might propose for SIS (in relation to the first shareholder agreement) or SHL (in relation to the second shareholder agreement). The appellants argued that these shareholder agreements were unenforceable, as they bound the trustees of settlement, being Ameerali, Yusuf and Mustafa, to accept any policies which Rafiq and Iqbal might put forward, notwithstanding that they were supposed to have an unfettered discretion in exercising their powers as trustees of the settlement. This was contrary to the principles set out in Re Lucking’s Will Trusts 128 he countervailing argument of the respondents was that it was implied in the shareholder agreements that the trustees would exercise their fiduciary duties in accordance with the terms of the agreements. In the event of conflict between their fiduciary duties and their obligations under the agreements, the trustees’ fiduciary duties would take priority. In any event, the agreements were valid until Rafiq or Iqbal sought to get the trustees to take a certain course of actions contrary to their fiduciary duties, and as they stood, there were no such allegations of breach on the part of the trustees. Finally, Iqbal himself was appointed a trustee of the settlement from 1993 onwards, and he had a veto power over all the policies being put into force. Hence, this mechanism was sufficient to ensure that policies which were contrary to the interests of the settlement were not advanced by the use of Iqbal’s veto power over any proposed policies. Effective control would still remain in the hands of the trustees, and in particular Iqbal. 129 We turn to examine the two shareholders agreement. First, cl 2.1 of both agreements provides: The shareholders shall and undertake with each other and with the Jumabhoy directors to: (a) consult with each other before exercising any voting rights and other powers of control available to them as shareholders or otherwise in relation to the company and as owners of share rights; … (c) exercise all voting rights and other powers of control available to them as shareholders or otherwise in relation to the company, and as owners of share rights in support of all policies and proposals put forward by the executive directors and the implementation by the executive directors of such policies and proposals; And cl 4.1 reads: The undertakings referred to in cl 2 … shall attach to and be applicable to shares and share rights in respect of which the shareholders at any time and from time to time (alone or together with others) are either (i) beneficial and registered owners or (ii) registered owners only and not beneficial owners Provided that such undertakings and restrictions shall only be applicable to the extent to which such undertakings are not prohibited in or manifestly inconsistent with the instruments of trust or settlement relating to such shares or share rights and the shareholders shall use their reasonable endeavours to procure that no such prohibitions are inserted in any such instruments of trust or settlement. [Emphasis added.] 130 These terms speak for themselves. They do not in any way indicate that the trustees had bound themselves to act in a certain way; nor do they fetter the exercise by the trustees of their discretions in carrying out their fiduciary duties as trustees under the settlement. It seems to us that the overall intention and effect of the shareholder agreements were to get all shareholders to act unanimously, thus effecting full control over SIS and SHL, and this by itself cannot be objectionable. The trustees had the duty to consider what was best for the settlement before agreeing to act in support of any proposal put forward by the executive directors of SHL or SIS. In our judgment, the shareholder agreements are not inconsistent with the terms of the settlement and did not in any way fetter the trustees’ discretion to act in any matter as requested by Rafiq and Iqbal without due regard to the interests under the settlement. 131 In the result, the appeal fails and is dismissed. We wish to hear arguments on the question of costs. Parties are invited to submit their arguments in writing on this question within seven days from the date hereof. Appeal dismissed. Reported by Tan Boon Khai