The recent decision by the Court of Appeal in Manuan a/l K Marappan & Anor v Sinwufu Enterprise Sdn Bhd (Mashudan bin Kamar, Bustani bin Nador & Khairil bin Sulaiman (selaku pengamanah Persekutuan Guru-Guru Melayu Johor, Cawangan Batu Pahat) & 2 Ors – Third Parties) (and Another Appeal) [2020] 8 AMR 325 is a timely reminder on legal limits that may apply to the sub-delegation of powers by trustees.
 
Background
 
In essence, the two appeals turned on the validity of the transfer of five pieces of land in Batu Pahat, Johor owned by one of the respondents, Persekutuan Guru-Guru Melayu Johor, Cawangan Batu Pahat, i.e. the Federation of Malay Teachers Johore, Batu Pahat Branch (‘PGMJ’) to the appellants pursuant to a power of attorney (‘PA’) granted by the trustees of PGMJ to one Omar bin Kassim (‘Omar’).
 
The High Court had granted a declaration that the sale and purchase agreement for the five pieces of land was null and void and ordered the appellants to deliver vacant possession of the lands to PGMJ.
 
Decision
 
The Court of Appeal upheld the decision of the High Court and dismissed the appeals.
 
According to the Court of Appeal, the primary issue in the appeals is the legal issue of the validity of the PA.
 
The Court of Appeal took the view that the decision of the Federal Court in Letchumanan Chettiar @ L Allagappan (sebagai perlaksana wasiat (executor) kepada SL Alameloo Achi Alsia Sona Lena Alamelo (si mati) menurut geran probet bertarikh 3/6/1966 menurut Petisyen No. 32-05-1996, Mahkamah Tinggi di Alor Setar, Kedah Darul Aman) & Anor v Secure Plantation Sdn Bhd [2017] 3 AMR 625 (‘Letchumanan Chettiar’) is authority for the proposition that the validity of a power of attorney is fundamental and if the power of attorney is invalid, then the transfer is invalid.
 
The Court of Appeal held that in equity the principle of delegatus non potest delegare (non-delegation) by a trustee is a strict rule that may be mitigated or modified by express provision in the trust instrument or by statute.
 
The Court noted that PGMJ’s constitution vests immoveable properties of the association in the names of the trustees, which was in line with section 9(b) of the Societies Act 1966. The Court observed that there were no provisions in PGMJ’s constitution or the Societies Act 1966 which permit delegation whether by PA or otherwise. Hence, PGMJ has no power under its constitution to appoint an agent and everything must be carried out by PGMJ and its office bearers and trustees.
 
The Court of Appeal agreed with PGMJ’s contention that the provisions of sections 28(2) and 30 of the Trustee Act 1949 are statutory exceptions to the equitable rule of delegatus non potest delegare and allow for delegation by power of attorney in two limited situations, namely (a) where the trustee wants to deal with property outside Malaysia (section 28(2)); and (b) where the trustee is leaving the country (section 30), and that outside of these two situations, the trustee cannot delegate.
 
Based on the facts of the case, the Court of Appeal concluded that PGMJ fell within the equitable rule of delegatus non potest delegare but not within the statutory exception under section 28(2) of the Trustee Act 1949.¹
 
For the reasons stated above, the Court of Appeal found that the PA is not valid on two grounds, namely that it breaches the non-delegation rule, and is ultra vires the constitution of PGMJ.
 
In light of its finding that the PA is void, the Court of Appeal affirmed the decision of the High Court. The Court of Appeal further ordered PGMJ to refund the sum of RM94,200.00 paid by the first and second appellants to PGMJ.
 
Comments
 
In coming to its decision, the Court of Appeal accepted Letchumanan Chelliah as authority for the proposition that the validity of the PA is fundamental and if the PA is invalid, then the transfer is also invalid. The Court held that the arguments raised by the appellants to distinguish Letchumanan Chelliah (where the issue of fraud had been raised) on, inter alia, the grounds that based on evidence by the last surviving Committee Member of PGMJ, there was clear intent on the part of PGMJ to give the PA to Omar and that PGMJ’s lawyer had testified that he drafted the PA on the instruction of PGMJ to appoint Omar as attorney, were not relevant to the legal argument at hand as they impinged on factual matters.
 
Based on the application of Letchumanan Chelliah in this case, the absence of express power for the trustees to appoint a sub-delegate is fatal and renders the instrument of appointment of the sub-delegate and the purported exercise of powers under the instrument by the sub-delegate to be invalid even if the sub-delegation may have been made in good faith and in the absence of misconduct by the trustee. 
 
This decision is a timely reminder that trustees who seek to sub-delegate their powers should ensure that they have express powers to do so under the relevant documents, such as the instrument of trust, the constituent document of the settlor or under the relevant laws. Similarly, a person dealing with a counterparty who is represented by a sub-delegate of the trustees should take steps to confirm that the trustees have the necessary powers to appoint sub-delegate.  
 
A person who wishes to create a trust should also consider whether to confer powers in the trust instrument for the trustees to delegate any of their powers to sub-delegates in addition to the circumstances provided under section 28(2) and 30 the Trustee Act 1949.
 
For enquiries, please contact the following members of our Wealth Management, Trusts and Charities Practice:
 
Oon Hooi Lin, Partner
oon.hooi.lin@skrine.com
 
Jesy Ooi, Partner
Jesy.ooi@skrine.com
 
Theresa Chong, Consultant
tc@skrine.com
 

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