In Gallagher-Dekker v Gallagher Anderson J carefully traverses the matters the Court will take into consideration when deciding whether trustees of a testamentary trust should be removed and replaced with a professional trustee. By way of background:
Sections 112 and 114 of the Trusts Act 2019 provide that the Court may remove a trustee and/or appoint a new trustee whenever it is “necessary or desirable” to do so, and it is difficult or impractical to do so without the assistance of the Court. The Trusts Act (unlike the equivalent provision in the since repealed Trustee Act 1956) does not require the Court to replace a trustee that the Court removes.
The matters that the Court will be guided by in making such a decision are set out at [17] as follows:
(a) The starting point is the Court’s duty to see estates properly administered and trusts properly executed. See Farquhar v Nunns at [13(a)].
(b) The jurisdiction includes a large discretion which is heavily fact-dependent. See Farquhar v Nunns at [13(b)].
(c) The Court will not readily replace an executor selected by a deceased to manage their estate. See Tod v Tod at [27(a)]. But while the wishes of the testator/settlor are to be given consideration, ultimately the question is what is necessary or desirable in the interests of beneficiaries. See Farquhar v Nunns at [13(c)].
(d) Misconduct, breach of trust, dishonesty or unfitness need not be established. See Farquhar v Nunns at [13(d)].
(e) A trustee will not be removed simply because of a position of conflict between duty and interest. See Tod v Tod at [27(c)]. Whether or not a position of conflict will justify removal depends on the nature of the conflict and the other circumstances of the case. See Green v Green at [604] and Bond v Platun at [12]. In substance, the conflict must actually prejudice the beneficiaries’ welfare or undermine the trustee’s ability to perform their duties. See Tod v Tod at [27(c)].
(f) Hostility as between trustees and beneficiaries is not of itself a reason for removal, but hostility will assume relevance if and when it risks prejudicing the interests of the beneficiaries. See Farquhar v Nunns at [13(d)]. The issue must be such that it seriously adversely affects the proper administration of the trust.
(g) The same principle applies to incompatibility or hostility between trustees themselves. See Bond v Platun at [14]. The Court should look at whether the hostility between the trustees obstructs the administration of the trust and whether there is realistic prospect of improvement in the future.
The Court carefully considered the matter in hand by reference to the above factors and although the Court’s view that the grounds set out in the above factors were largely not made out, the Court’s ultimate decision turned on whether the trustees could in fact work together.
Although a statutory trustee had been proposed as a replacement trustee, as the Court had not been provided with “detail of its fees or the basis of charging [or] any information on how it would approach management of this trust” the Court gave the parties time to reach agreement if possible on a new trustee with the order removing the respondents as trustees, to be effective only on the resignation of the applicant as trustee and upon the appointment by the Court of a replacement trustee/s.
The details of the order highlight the importance of addressing the practical aspects of appointment such as consent and fees as part of an application pursuant to section 114 of the Trusts Act.
References
- Gallagher-Dekker v Gallagher [2024] NZHC 1329
- Farquhar v Nunns [2013] NZHC 1670
- Tod v Tod [2015] NZCA 501, [2017] 2 NZLR 145
- Green v Green [2015] NZHC 1218
- Bond v Platun [2016] NZHC 3038
- Trusts Act 2019, ss 112 and 114
Matters of Trust 
Discussion
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