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Removal of trustees, Testamentary trusts, Trustees, Trusts, Trusts Bill, Will trusts, Wills

Saunders v Vautier 2019

The rule in Saunders v Vautier is generally well understood.  However, the parameters of the rule are less clear.  As noted in the Law Commission’s Third Issues Paper on the Review of the Law of Trusts “Perpetuities and the Revocation and Variation of Trusts”:

The scope of the rule has become wider than merely allowing a trust to be revoked. The New Zealand High Court has allowed beneficiaries to use the rule to vary trusts by conferring new powers upon trustees or allowing them to deviate from, or vary, the terms of the trust where trustees are in agreement.

In Re Philips New Zealand Ltd, Justice Baragwanath said:

The rule in Saunders v Vautier … points the way: while all beneficiaries sui juris cannot direct trustees who bona fide oppose a particular course of action — Re Brockbank  — their power to put an end to the trust is the ultimate exercise of unanimous consent. Since they can together use their possession of the total bundle of proprietary rights to terminate the trust it is difficult to see why they cannot use the same rights to permit the trustees to modify it.

The Trusts Bill proposes to effectively codify the Rule in Saunders v Vautier.  However, as the Trusts Bill sits (or slides) down the Parliamentary order papers, the common law marches on.

Summerlee v Pool, which is essentially a family squabble regarding the final distribution of a will trust, advances the Rule in Saunders v Vautier to allow the majority of the final beneficiaries (who gave notice as to the termination of the Trust)  to remove the incumbent trustee and appoint Perpetual Guardian as a new trustee.  This step appears to be a practical reflection of the need to have a functioning trustee to facilitate the final distribution of the Trust estate.

It is not clear if the appointment of the new trustee was to reflect the indivisible nature of the Trust’s assets or whether this step is permissible, regardless of the nature of the Trust’s assets.

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