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appointment and removal of trustees, Appointor; power of appointment, Beneficiary rights, Removal of trustees, Settlor; settlors, trust, Trust review, Trustee Act, Trustee liability, Trustees, Trusts

Loss of morale

Triezenberg v Mason (As to power and appointment and costs) follows the earlier trustee removal decision.  See Buyer’s remorse.

By way of background the High Court removed Mr Mason and his incapacitated wife as trustees of two family trusts.  A rift had occurred between the competent trustees that had resulted in significant dysfunction.  No orders were made at that time regarding Mr Mason’s powers of appointment. In this later decision, Fitzgerald J considered who should hold the powers of appointment and made orders regarding costs.  Although Mr Mason was a settlor of trusts that owned “the bulk of the assets that he and his wife built up over a working lifetime …”  Fitzgerald J was of the view that for the same reasons Mr Mason was removed as a trustee, he should be removed as an appointor.  As noted by Fitzgerald J at [23], Mr Mason “is, in my view, incapable of exercising the power in accordance with the interests of all beneficiaries of the trusts, given his now deep animosity towards his two daughters.  I consider he is likely to use any sole power of appointment and removal for the purpose of remaining sole control of the trust assets to the detriment of the beneficiaries as  a whole.”

Orders were then made that the trust deed for each of the trusts was amended to provide that the power of appointment of trustees was vested in the trustees for the time being.

With respect to costs, which were considerable (Mr Mason’s costs alone were in excess of $330,000), the plaintiffs were awarded costs against Mr Mason on a 2B basis, with the balance of their costs to be met by one of the Trusts.  Mr Mason’s costs, and the costs awarded against him, were also to be met from one of the Trusts.    The reason for Mr Mason’s costs being met from one of the Trusts  “was on the basis that notwithstanding the hostile nature of the proceedings, Mr Mason’s conduct in defending the application to remove him as a trustee was conduct “arising out of or in connection” with his role as a trustee, and accordingly was permitted under the terms of the Trusts.  Although Mr Mason was ultimately removed because he could not properly carry out his duties as a trustee in the context of the deep hostility between him and his fellow trustees and some of the beneficiaries, nevertheless the court was satisfied that he was entitled to have his costs met on the basis that he was not removed on the grounds of misconduct or conflict of interest.   As noted in Lewin on Trusts, where a trustee is removed on grounds other than misconduct or conflict, “the trustee is at less risk of being ordered to pay [costs].”

The decision warrants careful reading regarding circumstances where trustees can recover their costs and attention should be given to the discussion at [28] to [62].  As more families confront the realities of inter-generational trust disharmony, the cost of funding these positions will warrant close consideration.

Editor’s note: it may be that the decision reflects some healthy pragmatism regarding costs in that as the family wealth was contained within the Trust, it is unclear whether Mr Mason had the personal resources to meet the award against him.

References:

  • Triezenberg v Mason [2019] NZHC 920
  • Triezenberg v Mason [2019] NZHC 14

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