The decision in Marshall Family Trust may require some reconsideration of how powers of appointment can be exercised following the appointor’s loss of capacity. In that case the surviving appointor, who was also a trustee, lost mental capacity and quite properly needed to be removed as a trustee.
An application was made for a vesting order. Initially it was intended that the sole competent trustee act as a sole natural person trustee. However, when the matter first came before the court the court considered the terms of the deed of trust, which required at least two trustees. At that point as noted by the court:
“Counsel for the applicant needs to consider how a new trustee could be appointed and who that should be. It may be that the Court will have to be asked to appoint an appropriate person with the agreement of all of Mr and Mrs Marshall’s children.”
The court then needed to determine whether the trustee’s property attorney could exercise her powers of appointment and remove the incapacitated appointor and appoint a new trustee in her place. While it has generally been accepted that this is a power that can be exercised by a property attorney Nation J expressed the considered view that this is not building on the arguments made in Godfrey v McCormick and noting at  to :
“ In the recent judgment of Godfrey v McCormick, I held that the attorney under an EPO does not have the ability to act for an incapacitated trustee in relation to the exercise of trustee powers, rights or obligations as a trustee.
 The reasoning for that conclusion also applies to the power which a settlor or other named person has to appoint new trustees under a trust deed. Section 97A(2) of the PPPR Act provides that the “paramount consideration of the attorney is to use the donor’s property in the promotion and protection of the donor’s best interests”. As with a trustee exercising trustee powers, a person who has the power of appointment under a trust deed must at all times have the best interests of the beneficiaries in mind. The Court has long held that the power of appointment is subject to fiduciary duties. For example, in Carmine v Ritchie, Gilbert J held:
The power to appoint new trustees is generally acknowledged to be a fiduciary power even though it may not have been conferred on trustees or the holder of any other office. Equally, a power to remove a trustee and replace him with a new trustee is almost always considered to be a fiduciary power to be exercised in the best interests of the beneficiaries. This is because the subject matter of the power is the office of the trustee which lies at the core of the trust and carries fundamental and onerous obligations to act in the best interests of the beneficiaries as a whole.
 For this reason and the reasons discussed in Godfrey v McCormick, the PPPR Act must be read as not extending to an attorney the power to act for a person in relation to their power of appointment of new trustees under a trust deed. This power cannot be considered as a personal property right of the person who has granted the EPA because associated with the power are the fiduciary duties owed to the beneficiaries.”
As the power of appointment could be not exercised by the Apointor’s attorney it was necessary for the court to appoint a new trustee pursuant to s 51 of the Trustee Act and a vesting order under s 52 of the Trustee Act.
As vesting orders are required where a trustee loses capacity, regardless of whether the assistance of the court is required to appoint or remove a trustee, the decision may be considered of no moment. However, where a trust owns personal property, where for example the LINZ requirements do not apply, it is suggested that vesting orders will still need to be sought to transfer the trust property from a trustee who has lost capacity.
- Marshall Family Trust  NZHC 472
- Godfrey v McCormick  NZHC 420
- Carmine v Ritchie  NZHC 1514