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Appointor; power of appointment, Corporate trustee, Deed of Trust, Removal of trustees, Trustee liability, Trustee retirement, Trustees

Trustees left holding the baby

SWL Trustee Company Limited (SWL) is a trustee that acts together with two other trustees as trustees of a family trust.  As is commonly the case, two of the trustees (the instructing trustees) are also settlors of the trust.  The trust owns a number of properties.  All is fine, until it is not.  The trust owns a number of properties.  A property previously owned by the trust is now subject to a weathertightness claim.  Body Corporate levies are outstanding in respect of current properties owned.

SWL cannot get instructions from its co-trustees.   As is commonly the case although SWL is a trustee, as a professional trustee it acts in accordance with its co-trustees instructions.  Whether the deed of trust requires majority or unanimity, by itself SWL is powerless to act.  SWL wishes to retire as a trustee and gives the notice required by the deed of trust.

The co-trustees do not respond.  Legal title to the trust properties is not conveyed from SWL to a replacement trustee and the continuing trustees.

SWL seeks (and obtains) removal as a trustee (s 46 of the Trustee Act), a vesting order transferring the property to the continuing trustees (s 52 of the Trustee Act) and costs.

But what of the beneficiaries?  While SWL is now protected from loss or risk (although given the circumstances how will its costs be met?) what is the position of the beneficiaries while the trust in questions flounders for want of management and direction (that is trusteeship)?

Likely this situation is one that will arise with increasing regularity. While there is a procedural answer, the harder questions raised (good enough to be a trustee while there is a stream of legal fees, but not so much when there is not) may require more thought.

Editor’s note:

The case also highlights (again) the risk of operating a trustee company that acts for multiple trusts, as SWL appears to.  If that were not the case, then perhaps SWL might not have felt the need to embark on the High Court application that it did.  In this regard it is noted that this was clearly the correct course of action.  However, the SWL’s view of the matter might have been somewhat different if there would not have been broader consequences.

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