Tension between trustees and beneficiaries is a common feature of trusts. However, when this tension compromises the administration of a trust, trustee appointments may warrant review.
In Smith v Campbell the UK High Court considers an application for removal of trustees in the context of a dynastic trust where there had been a breakdown of the relationship between the trustees and the beneficiaries. A trust owned company was a significant factor in the dispute. However, as noted at 33:
“Although the company level dispute is the principal occupation of the more than 400 pages of witness statements that have been filed in these proceedings, it is clearly not the function of the court either to attribute blame or to grant relief in respect of that dispute. Accordingly, it is neither necessary nor helpful for me to undertake a blow-by-blow account of the company level dispute. For the purposes of resolving the Claimants’ claim to replace the Trustees, the following is a sufficient summary of the dispute.”
The grounds for removal were articulated at [85] as:
a. Failure by the Trustees to provide accounts for the Trust;
b. Failure by the Trustees to recognise the First and Second Claimant as beneficiaries of the Trust;
c. A conflict of interest as a result of the First Defendant acting as Trustee and Chairman and Director of the Company;
d. A lack of oversight of the Company by the Trustees as both are controlled by the same person;
e. Failure by the Trustees to follow the Deceased’s wishes;
f. A lack of consultation by the Trustees with the First and Second Claimants over important Company matters;
g. The removal of the First and Second Claimants as Directors of the Company and subsequently, their dismissal as employees;
h. The Trustees failing to hold the Directors to account for inappropriate actions they have taken in respect of the Company;
i. The breakdown in relationship in trust and confidence between the Claimants and the Defendants; and
j. The Trustees allowing non-beneficiaries to utilize Trust assets.
The tipping point for the Court was whether the hostility between the parties could compromise the exercise of trustee discretion. As noted at [154]:
154. Whatever the provocation, in my judgment the trenchant and deeply negative views expressed by Paddy about the Claimants give rise to a reasonable concern that he will find it very difficult to carry out his duties as one of the trustees of the Trust with the objectivity and impartiality required. It seems to me that this is a case which has gone beyond mere friction and hostility, and is a situation in which the hostile views about the Claimants formed and expressed by Paddy could well have an adverse impact on the proper administration of the Trust. For example, Paddy’s view that the Claimants are motivated by “deep-rooted greed” could well adversely impact on his consideration of any request made by the Claimants to receive a distribution from the Trust.
Although the Court was satisfied that the various allegations of misconduct and of breach of duty were not made out, that was not dispositive of matters due to concerns regarding trustee conduct. As noted at [157] and [158]:
157. However, further to my analysis of ground 6 above, I have reached the conclusion that Paddy should be removed as a trustee of the Trust. In light of the clear hostility he has shown towards the Claimants, and of the risk that his hostility may have an ongoing adverse impact on the proper administration of the Trust, in my judgment it is necessary to secure the welfare of the beneficiaries and the proper administration of the Trust for Paddy to cease to act as one of the Trustees.
158. In relation to Malcolm, the position is finely balanced. Malcolm has acted as a trustee without remuneration, and in that capacity has clearly undertaken important services for the Trust, including preparing the Trust’s regular cashflow forecast. The loss of those services to the Trust would be unfortunate. However, in his evidence Malcolm has explicitly agreed with the hostile remarks about the Claimants made by Paddy. Ultimately, I consider that I ought to ensure that negative personal views about the Claimants’ character which have been formed by Paddy, and which appear to be shared by Malcolm, do not adversely affect the future administration of the Trust. I have therefore decided that Malcolm should also be removed as one of the trustees of the Trust.
The end result was that two trustees were removed, two remained and a new independent trustee was appointed. Closer to home in Matchitt v Mattchit the Court focussed on the trust’s purposes to determine how to address a breakdown in the relations between trustees ultimately deciding to remove all family member trustees. The process the court adopted in coming to this decision is set out at [95] to [104] as follows:
[95] In considering whether to replace the trustees the starting point is the interests of the beneficiaries. In this case, ascertaining what the interests of the beneficiaries actually are, is difficult because of the absence of any substantive purpose provision in the Trust Deed. It is therefore necessary for the Court to attempt to discern what those interests are by looking at the background material.
[96] It is perhaps easiest to start with identifying what would not be in the beneficiaries’ interests. It is not in their interests for Para’s surviving artwork to be stored in a building which has significant weathertightness issues with the prospect of the artworks being damaged or even destroyed as a result of water ingress.
[97] It is not in the beneficiaries’ interests for the value of the artworks to dissipate because Para’s standing in the art world gradually declines because of a failure to adequately promote his reputation and legacy among the artistic community and public generally.
[98] It is not in the beneficiaries’ interests for there to continue to be a significant level of personal disharmony and animosity between the trustees, resulting in the Trust being unable to meet its running expenses and pay its debts, and to have to rely on financial contributions from people like Maia to pay accounting, tax and other trust/estate costs.
[99] It is not in the beneficiaries’ interests to spend money on lawyers to engage in litigation such as in this case.
[100] Any solution has to be practically achievable. I have not overlooked Para’s wish that the trustees should be his children and his aspiration that the Trust would endure for the benefit for his descendants into the future. The reality is that these goals are not realistically going to be achieved without the removal of the present trustees.
[101] I also have regard to Para’s desire that a pāpakainga be established on family land to display his artwork. There are fundamental obstacles to the achievement of that objective. The first of those being whether the current Māori Land Court proceedings are realistically capable of achieving partitioning the family land in a way that provides a distinct title that is capable of being utilised by the Trust. The second is the cost of such a project. Given the present state of the Trust’s finances it is wholly unrealistic. Whether that changes in the future is not a matter that can be accurately predicted. My conclusion is that it is not presently in the interests of the beneficiaries to expend the Trust’s assets in pursuing such an objective.
[102] Having considered what is not in the beneficiaries’ interests, it is easier to identify what is in their interests. It is in their interests for all of the family trustees to be removed and replaced with trustees who are able to preserve the integrity and value of Para’s artwork and to maintain and enhance Para’s reputation and accordingly the ongoing value of that body of work.
[103] It is not for me to instruct new trustees as to how to go about their role. They will have to undertake the exercise themselves of considering the interests of all the beneficiaries. They may determine that some of the artworks need to be sold in the overall interests of the beneficiaries. They may determine that it is in the interest of the beneficiaries that reproductions be made of some artworks or for artworks to be loaned for exhibitions on a fee paying basis. It seems to me that the interests of the beneficiaries are likely to be maximised if the trustees have expertise in these areas.
[104] Accordingly, I have reached the conclusion that it is in the interests of the beneficiaries for all of the trustees (including Marita) to be removed and I do so.
References:
- Matchitt v Mattchit [2026] NZHC 198
- Smith v Campbell [2025] EWHC 3011
Matters of Trust 
Discussion
No comments yet.