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Appointor; power of appointment, Beneficiary rights, Cases, Removal of trustees, Trustee Act, Trustee retirement, Trusts

Use it or lose it

When a trustee relationship breaks down, if one of the trustees holds the power of appointment, it is important that that trustee does not rely on this power to presume future control.

Consider the case of Nysse v Nysse.

Mr and Mrs Nysse were co-trustees of a trust settled by Mr Nysse.  The trust’s assets were shares in a trading chocolate company and the company that owne the premises leased to the chocolate company.  Following the separation of Mr and Mrs Nysse, Mr Nysse incorproated new companies and diverted much of the chocolate company’s business to new companies.

How these actions might be viewed vis-a-vis Mr Nysse’s obligations as a trustee are not the subject of the present proceedings.  However, it can be expected that these actions warrant further enquiry.

Rather the subject of the present proceedings was an application removing Mr Nysse as a trustee (relacing him with a new trustee) and also an application to amend the deed of trust to provide for a new power of appointment and to divest Mr Nysse of his power of appointment.

Before granting the applications, the court reviewed the history of the trust, the evidence that indicated significant reduction of the chocolate company’s assets and evidence of meetings being held by a sole trustee (Mr Nysse) without the knowledge of his co-trustee.  The court was satisfied that Mr Nysse’s actions were detrimental to the trust and granted the orders sought.  The jurisdiction for the removal and appointment was pursuant to the Trustee Act and the court’s inherent jurisdiction to protect trusts (acting effectively for the benefit of the beneficiaries).

Regarding the removal of Mr Nysse’s power of appointment the court noted that “it is pointless to make alterations to the trustees and not amend the terms of a trust which provides a person to be removed with the absolute power to remove and appoint trustees”. The court then cited Patterson J in Clifton v Clifton who stated that:

[43] The Court’s inherent jurisdiction to alter trusts has been restricted by the House of Lords decision in Chapman v Chapman [1954] UKHL 1; [1954] AC 429, as applied in Re Ebbett [1974] 1 NZLR 392. However, what is sought here is not, in my view, a variation of the trust. As noted above, it is a variation of an administrative provision and not an alteration of the trust itself. This trust was sanctioned by this Court to protect infant beneficiaries. In my view, the Court must have a supervisory jurisdiction to modify an administrative provision which has been shown can be used in a manner which may be to the detriment of the infant beneficiaries. The Court, in its inherent jurisdiction, should intervene to modify that administrative provision so that the interests of the infant beneficiaries cannot be readily jeopardised. In the circumstances, I intend to use the inherent jurisdiction of this Court to modify this administrative provision.

An order was made in that case amending the trust deed to vest in a new trustee the power to appoint and remove trustees. The same approach was adopted by Ellis J in Mudgway v Slack.

In addition to the orders sought, the court also order that Mr Nysse pay the costs of the application personally and that he was not to be indemnfied from the trust.

 

References:

  • Nysse v Nysse [2014] NZHC 2833
  • Chapman v Chapman [1954] UKHL 1; [1954] AC 429
  • Re Ebbett [1974] 1 NZLR 392
  • Clifton v Clifton HC Auckland CIV-2004-404-4185, 21 July 2010; (2004) 1 NZTR ¶14-018
  • Trustee Act 1956, s 51

 

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