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Relationship Property, Removal of trustees, Trustee retirement, Trustees, Trusts

If you can’t play nicely …

It is fundamental to the role of a trustee that the trustee must act in the best interests of all of the beneficiairies.  This obligation can be sorely tested when the trustees are separated spouses or partners.  Many do not pass the test. When trustees cannot work together the prudent course of action is for one or more trustees to be removed and a new trustee or trustees appointed.  Where the dysfuntional trustees are parties to a broken relationship the question becomes who should that replacement be?  Perhpas not surprisingly when trustee relations break down, the ability to agree on a replacement trustee can also be compromised.  However, where the parties cannot agree, the matter can be taken out of their hands.

It is then the court that decides.  This is when the dust settles and reality sets in.  The manner in which these cases are prepared often boil down to shopping lists of the breaches of trust, real or imaginary committed by the co-trustee.

The relevant principles are settled law and focus on the need for the court to establish whether the trusts are being properly and prudently managed.  There is no need to actually demonstrate misconduct (Broadbent v Broadbent).  That is, it is necessary to demonstrate that a trustee is acting properly, rather than that the trustee is acting improperly.  This subtle distinction is often overlooked when cases are assembled, perhaps in no small part due to the general detritus that circulates in the wake of failed relationships.

What the court is guided by is the welfare of the beneficiaries (Hartley-Grieg v Lilian)- and in this context the focus is all the beneficiaries not just the warring parties, or in some cases, just the children.

The court is also not concerned to protect feelings or support the wounded parties.  As noted in Broadbent v Broadbent: “… the Court’s powers in this area should be exercised robustly and not timidly.”

Trusts are about the welfare of beneficiairies in toto, not trustees and trustees who cannot appreciate this stand to be removed, kicking and screaming notwithstanding.

References:

  • Ritu Khanna v RohitKhanna [2014] NZHC 1715
  • Broadbent v Broadbent [2014] NZHC 254
  • Hartley-Grieg v Lilian [2012] NZHC 797

 

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