Previous blogs have chronicled the lamentable mess that results when trusts settled to benefit parties and their children become deadlocked when the same parties fall out of favour with each other.
So what are the parties to do when they remain unwilling co-trustees after the love has gone? One option is to seek the assistance of the Court in accordance with s. 51 of the Trustee Act. Section 51 provides that the Court can appoint a new trustee or trustees where expedient to do so, either in substitution for or in addition to existing trustees.
In determining the expediency of the matter the Court factors the Court will take into account include:
- whether other proceedings, such as relationship property proceedings will render any appointment of trustee nuggatory
- the costs associated with the appointment of a statutory trustee company such as the Public Trust
- whether the reason for the deadlock that has lead to the application can be addressed through the appointment of a new trustee
- whether the appointment is in the interests of all of the beneficiaries
That said, Despite the existence of options to deal with deadlock situations, in practice these are not often resorted to. Presumably this is because of concerns as to cost and / or publicity. While these considerations are generally valid, the fact is that protracted periods of deadlock can be far more costly than the cost of proceedings. Further, where trustees remain deadlocked for protracted periods it is important for the trustees to assess their own rights and obligations vis-a-vis the deadlock and how their rights and obligations as trustees are best acquitted in the circumstances.
- Should trustees be party to relationship property agreements?
- Williams v Williams (2007) 2 NZTR ¶17-030 (www.cch.co.nz)
- O’Neill  NZHC 510 v Moffatt
- Trustee Act 1956