Cap. 331 Art. 6BManagement of conflict provisions.

In order to ensure that the provisions of applicable law which cannot be derogated from by voluntary act are applied in a manner which preserves the trust relationship as far as possible, the following rules shall apply:

(a) the application of the mandatory rules shall not produce the failure or invalidity of the trust, and where possible, the trust shall continue under the same terms in relation to property which is unaffected by such mandatory laws. Subject to any order of the court, the affected property shall be held by the trustee in trust for the settlor absolutely, or if he is dead, for his heirs;

(b) the trustee shall be empowered to -

(i) vary the terms of the trust in so far as relates to the nature or the extent of benefit, or

(ii) do such acts as are necessary and legally permissible, so that the beneficiary derives the benefits in accordance with the intentions expressed by the settlor in the trust instrument in a manner compatible with the mandatory rules and any property which becomes free from trusts for any reason shall be held by the trustee in trust for the settlor absolutely, or if he is dead, for his heirs;

(c) for the purposes of resolving conflicts between the trust relationship and any mandatory provisions and to enable the continuance of the trust as specified in paragraphs (a) and (b), the terms of the trust, where silent, shall be deemed to include:

(i) the power, without any obligation to do so, of the trustee to reduce the trust assets and return all or part of them to the settlor or the estate of the settlor so as to achieve compliance with such provisions of law;

(ii) the power of the trustee to enter into arbitration and mediation agreements and to reach a compromise to disputes and claims by third parties; and

(iii) the power to seek directions from the Court on such matters; such powers being exercisable notwithstanding any contrary provisions of the trust and, provided the trustee acts honestly, in good faith and reasonably, such acts shall not constitute a breach of trust.

(d) the property of the settlor which is not settled in trust should first be utilised, to the extent possible, to meet the claims of any person seeking to invalidate or reduce a trust;

(e) notwithstanding any other applicable law, the trustee may meet a valid claim being made against the trust property, whether voluntarily or as a result of a court direction, order or judgement, by a payment of value in money and shall not be obliged to return property settled in trust in kind;

(f) any person who succeeds in reducing the property under trusts or obtains a court order to invalidate a trust in part or who enjoys the benefits of an arrangement with the trustee as provided in paragraph (c)(i), shall forfeit the benefits under the trusts, unless the terms of the trust expressly state otherwise or the trustee considers it unreasonable in the circumstances and obtains the consent of the Court to maintain in force trusts in favour of such person subject to such conditions as the Court may consider appropriate;

(g) in any event and notwithstanding any provision of law, a trustee shall not be subject to an obligation to pay or return more than the trust property held by him under trust, after deducting any fees and costs, and he shall not be subject to any obligation to account for any distributions made by him in good faith prior to having written notice of any claim.