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Appointment and Removal of Trustees

Commonly trustees are appointed and removed pursuant to the terms of the deed of trust.  Some trustees are happy to be removed, or retire of the own volition, others less so.

However, what of the trustees who are unable to elect to retire?  What to do where a trustee has, for example, lost capacity, but cannot be removed as a trustee?

Inherent jurisdiction

Both the Trustee Act 1956, s 51 and the High Court’s inherent jurisdiction provide for the appointment and removal of trustees.  Where the court acts in accordance with its inherent jurisdiction a trustee can be removed and not necessarily replaced: In the Matter of the Borrich Family Trust.

In the event a trustee is removed and replaced by consent under s 51 of the Trustee Act, conditions attaching the appointment could be made by the Court in the exercise of its inherent powers within the Court’s supervisory jurisdiction over trusts: Eggink v Eggink.  Note that in this case the appointment of trustee was as an “independent trustee”, which is somewhat curious given that there is no recognition of categories of trustee for trust law purposes.

Incapacity

When a trustee can no longer act as a trustee due the effects of dementia, the appropriate course of action is the removal of the trustee, and if necessary the appointment of a replacement trustee.  Such applications can be made by way of originating application.  However, it is important that there are no competing positions or interests.  In the case of Neverman v Hudson the Court raised the question as to whether (given that all of the discretionary beneficiaries had consented to the application) the consent of “any issue of any final beneficiary” should also be required.  In this regard the court decided that the consent of that class of beneficiary was not required.

Also see the following examples of recent applications on incapacity of a trustee:

  • Andrew v Andrews.

Simultaneous vesting orders

It can be appropriate to also obtain vesting orders at the same time a trustee is removed and a new trustee appointed.  See Neverman v Hudson  where an originating application was made for the removal of an incapacitated trustee, the appointment of a new trustee and a vesting order in respect of the trust’s assets.  Note that the court has regard to the fact that the application was uncontroversial in deciding whether to allow it to proceed byway of originating application.  Also see Estate re Kett .

Invalid appointments

Where an appointment of trustee is made by an appointor who is subject to undue influence the appointment of trustee is void.  The appointment of a trustee by executors of a will that is the product of undue influence will also be void. See Green v Green, Fisher & Ors 

Refusal to act

A trustee who will not acquit the trustee’s responsibilities can be removed.  See Wright v Wright.

Friendly Societies 

Trustees of Friendly Societies can be removed in accordance with s 28(3) Friendly Societies Act 1909.  See Pritchard v Evans

Trustee retirement

Where a trustee retires but will not complete the requisite formalities a vesting order can be required even if there is no dispute regarding the retirement.  See re Kleiman

Costs

Whether a retiring trustee is entitled to its own costs in a proceeding where the trustee seeks discharge as a trustee depends on the circumstances of the case.  See Attorney-General v Murdoch.   As noted Cambridge Trustees Limited v Brandon as in general rule, a trustee is not to be deprived of its costs  unless it has acted unreasonably.

References:

  • Pritchard v Evans [2014] NZHC 3150
  • Green v Green, Fisher & Ors [2015] NZHC 1526
  • Eggink v Eggink [2014] 1784
  • In the Matter of the Borrich Family Trust [2014] NZHC 780
  • Neverman v Hudson [2015] NZHC 2065
  • Estate re Kett [2015] NZHC 2071
  • Andrews v Andrews [2015] NZHC 759
  • Re Kleiman [2015] NZHC 758
  • Wright v Wright [2016] NZHC 270
  • Attorney-General v Murdoch (1856) 2 K and J 571
  • Cambridge Trustees Limited v Brandon [2017] NZHC 12890

Discussion

5 thoughts on “Appointment and Removal of Trustees

  1. My wife’s “family” trust was established by her parents in 1984, with two Trustees (her parents). My wife, her sister and their children are beneficiaries. In 2007, my wife’s father passed away, and their lawyer was appointed as a Trustee. The Trust Deed stipulates a minimum of two trustees. When my wife’s mother passed away in 2009, the lawyer appointed his law firm as co-Trustee, and then a little later, added my wife and her sister as Trustees. There have been many issues of control exercised by the lawyer over the years, and it is my contention it would be beneficial if the lawyer retired as a Trustee. But unless he does so willingly, there seems no legal way to force him out. I should add the lawyer’s firm (naturally) is the Trust’s legal consultant and a close colleague of the lawyer was appointed as accountant shortly after the passing of the mother. The Trust’s assets (mainly property investments) are worth around $15,000,000 at market value. The lawyer & accountant, between them, charge fees of $180,000 p.a. Is there any way to break this monopoly of control?

    Posted by anon | August 31, 2015, 9:26 am
  2. Thanks for your reply, Vicki, and your comment. When you say “assistance of the court”, do you mean that it would be necessary to apply for a Court Order to force the lawyer to resign from his Trusteeship? The problem is that he does consider he has done anything unethical, whereas in my opinion, he certainly has. The nub of the problem is that his position is unchallengeable. By that I mean, he has the power under the Trust Deed to basically do what he likes. Any other comment would be welcomed.

    Posted by Roger Watkin | January 22, 2017, 6:32 pm
    • Thank you for your comment. A considered response would require the deed of trust. However, as a general observation we note that it is not necessary for a determination regarding wrong-doing. See for example LOW HOCK PENG and ORS v ROTHCHILD TRUST (SCHWEIZ) AG and ORS [2017] NZHC 25

      Posted by vickiammundsen | January 22, 2017, 10:49 pm
    • Trustees do not need to have been unethical. The issue is the management of the trust for the benefit of the beneficiaries. See for example the recent decision in Low Hock Peng v Rothschild Trust (Schweiz) AG . In this case the Court made it clear that its role was not to determine the merits of the underlying issues (including the concerns of the defendants, other than that they were genuinely held fears) but whether, in accordance with s 51(1) of the Trustee Act 1956 it was expedient for the court to assist in the removal and replacement of the existing trustees, and also that it was inexpedient to do so without the assistance of the Court.

      Posted by vickiammundsen | January 24, 2017, 7:48 pm

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