When a trustee is removed as a trustee of a trust; say pursuant to a power of appointment and removal of trustee; it is necessary to separately arrange for the transfer of any trust assets to the remaining and any new trustees. However, some trustees are not happy about being removed as trustees and may refuse to sign the necessary transfers and authorities.
So what are the trustees to do?
Where a trustee will not (or cannot) sign an authority for the transfer of land; the trustees can seek a vesting order pursuant to the Trustee Act, s 52.
However, what if the trustee has a valid reason for refusing to sign the transfer authority? Consider the situation where the trustee has liabilities that could survive the trustee’s removal as trustees. This was the situation in Brodrick v Brodrick. In this case Lang J noted at  and  that in the absence of any indemnity:
“… Mrs Brodrick had no protection in respect of such debts. Normally the issue of an indemnity would be raised and resolved at the point where a trustee retires or resigns. In the present case Mrs Brodrick had no opportunity to raise the issue before her removal because Mr Brodrick gave her no advance warning that she was about to be removed. As a result, Mrs Brodrick needed to take such steps as she could to protect herself once she learned she had been removed as a trustee.
 The only realistic step that Mrs Brodrick could take to protect herself was to refuse to sign the transfer of the property until she had received an appropriate indemnity from the new trustees. This is what she elected to do, even though she knew that it could prompt the trustees to apply to the Court for vesting orders under s 56 of the Act. For their part the trustees elected to issue the proceeding even though they must have been aware that Mrs Brodrick had raised a valid concern that they needed to address. The fact that they ultimately gave her a full indemnity in respect of the trust’s liabilities … underscores the validity of that concern.”
So the parties got there in the end, so why did the matter end up in court? Simply because costs were incurred and the trustees who felt they had been successful (having obtained the transfer they sought from Mrs Brodrick by way of agreement) and thus were entitled to costs.
Neither the Associate Judge who first heard the matter, or Lang J agreed. While they each reached the conclusion by a different route, the end result was that no order as to costs was made. While the trustees were justified in issuing proceedings seeking a vesting order, Mrs Brodrick was equally justified in refusing to transfer the property owned by her as a trustee until she was suitably indemnified.
The case is a timely reminder on just because you can; doesn’t mean that you should. While more commonly trustees are questioned for not seeking vesting orders sooner, each case must be considered on its own facts.
- Brodrick v Brodrick  NZHC 1038
- Trustee Act 1956, s 52