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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

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