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Beneficiary rights, General, Trusts

Removal of trustees

It is common for a modern deed of trust to provide for an appointor who has the power to add and remove trustees.  Where the deed is silent regarding the appointment of trustees, recourse can be had to s. 51 of the Trustee Act, which empowers the court to appoint new trustees.  Although, there is no corrollorary provision for the removal of trustees, the court can remove a trustee pursuant to its inherent jurisdiction. The inherent jurisdiction of the court is derived from the court’s ultimate responsibility to ensure that any trust is properly managed for the benefit of the trust’s beneficiaries. 

This was confirmed in the recent decision in Wallace v Naknok where Mr Wallace sought the removal of Ms Naknok as his co-trustee following the end of their relationship.  Although Mr Wallace was the sole beneficiary of the trust, the court found that as Mr Wallace had chosen to form a trust, the law of trusts applied with respect to the legal relationships that arose as a result of the trust.  While the Court must have regard to the welfare of the beneficiaries, this does not mean that the Court must accede to the wishes of a beneficiary as to who the trustees should be.

Although not considered in the decision, Mr Wallace could elect to resolve the matter by, as sole beneficiary, electing to bring the trust to an end.  However, while this would return the trust property to Mr Wallace’s sole dominion, the property would then be owned by him in his personal capacity, rather than on trust for him. 

References:

  • Trustee Act 1956
  • Letterstedt v Broers (1884) 9 Apps Cas 371 at 386  
  • Wallace v Naknok [2012] NZHC 382
  • Saunders v Vautier (1841) EWHC Ch J82

Discussion

2 thoughts on “Removal of trustees

  1. What body can audit a charitable trust to expose them for misappropriating grant funds?

    Posted by Frederica | March 5, 2018, 7:28 pm
    • Hello Frederica

      Charities Services, an arm of the Internal Affairs Department, is responsible for overseeing charitable trusts. All charitable trusts are requiring to file annual returns that include financial information. However, the size of the charity determines how much financial information is required and whether an auditor is required. (Most charities receiving grants are also required to prepare reports on how the funds have been applied – so if funds have been misappropriated these reports may be false and give rise to criminal offences involving falsification).

      However, where charities receive grant funding or donations from the public, Charities Services routinely authorises random audits as well. Further, if members of the public report possible/suspected misuse of funds by charities, Charities Services does indeed attempt to investigate and this may give rise to an audit – usually conducted by an auditor contracted by Charities Services (rather than being done themselves).

      If you have genuine concerns or information you can find out more about Charities Services at charities.govt.nz or you can contact them at:

      Email
      info@charities.govt.nz
      Freephone (within New Zealand)
      0508 CHARITIES (0508 242 748)

      Posted by vickiammundsen | March 7, 2018, 11:35 am

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