Removal and Appointment of Trustees

Trustees have been removed from office where the trustee has refused to execute the trust {Palairet v Carew (1863) 32 Beav 564; 55 ER 222} and where court is satisfied that the trust would not be executed in the interests of the beneficiaries {Hackett v Hackett [1922] NZLR 242} .

Trustees must be appointed and removed from office in accordance with the term of the trust and in accordance with any statutory provisions as found in the State Trustee Acts. A person who intermeddles with the affairs of a trust and who has not been lawfully appointed to the office of Trustee is known as a Trustee de son tort.

The power provided in the Trust Deed to remove and appoint persons to the office of Trustee is construed as a “fiduciary power” even when the holder of the power is not a “fiduciary” such as an Employer.

The operation and effect of an express power is, of course, a question of construction of the particular words used, and such a power will be strictly construed {Stones v Rowton (1853) 17 Beave 308; Re Norris (1884) 27 Ch D 333; Re Papadimitriou [2004} WTLR 1141}.

The Full Court of the Supreme Court of South Australia in Pope V DPR Nominees Pty Ltd [1999] SASC 337 stated at [45-46]:

Regardless of the powers contained in s36 of the Trustee Act, the court has and may exercise a general supervisory jurisdiction over the administration of trusts, in order to ensure that the trusts are properly executed. As the Privy Council said in Letterstedt v Broers (1884) 9 AC 371 at 386-387:

“It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate….. In exercising so delicate a jurisdiction as that of removing trustees, their Lordships do not venture to lay down any general rule beyond the very broad principle above enunciated, that their main guide must be the welfare of the beneficiaries.

A power of appointment has therefore been described as a power of a fiduciary character and its exercise as a duty of a fiduciary nature to the cestuis que trust:Re Skeats’ Settlement; Skeats v Evans  (1889) 42 Ch. D. 522  per Kay J at 527. That is a decision which was followed by Kekewich J in Re Newen; Newen v Barnes [1894] 2 Ch. 297 at 308. In Re Burton; Wily v Burton [1994] FCA 1146(1994) 126 ALR 557 Davies J cited those two decisions with approval and said at 559:

“But perhaps the more important point is that the power to remove a trustee and to appoint a new trustee is neither a general power of appointment nor a power which may be executed in the interests of the appointor. The interests of persons other than the appointor must be taken into account. The power is a trust or fiduciary power, being a power conferred by a deed of trust, and must be exercised accordingly, in the interests of the beneficiaries. A power, even though not a fiduciary power, must be exercised solely in furtherance of the purpose for which it was conferred { Duke of Portland v Topham [1864] EngR 339; (1864) 11 HLC 31; 11 ER 1242}.

 

The Full Court continued at [47]:

As this court has held in Duke Group Ltd (in liquidation) v Pilmer [1999] SASC 97 at [716]– [736] fiduciary duties will arise where there exists a power or discretion, to be exercised in the interests of and for the benefit of another, and where that other is vulnerable in the sense that the relationship is one of trust and dependency. That will undoubtedly arise, as in this case, where beneficiaries rely on the integrity of the appointor to appoint a competent person to carry out the terms of the trust. The most important single component, however, is the duty to act with loyalty to and in the interests only of another. A person cannot be said to be acting in the interests solely of that other where his own interests conflict with those of the other.

Where trustees are being appointed under the usual power of appointment in the Trust Deed, it has generally been considered an abuse of the power to appoint either a greater or a less number of trustees than the number of the trustees in the place of whom the appointment is made {Hulme v Hulme, 2 M. & K. 682; Ex parte Davis, 2 Y. & C. 468).

All limitations to trustees in a Deed are strictly construed, and will take effect according to their strict legal meaning unless the very object and intention of the instrument would be defeated by such a construction {Venables v Morris, 7 T.R. 342; Colmore v Tyndale, 2 Y. & J. 605).

Davies J in Re Burton; Wily v Burton (126 ALR 557) held that:

“The power of removal and appointment of trustees was a fiduciary power and was required to be exercised in the interests of the beneficiaries and solely in the furtherance of the purpose for which it was conferred {Duke of Portland v Topham (1864) 11 HLCC 31; Re Skeats’Settlement (1889) 42 Ch D 522, applied}”

A transcript of this case can be found here.

Details of other cases where purported trustees where not lawfully appointed to the office of trustee can be found on the following links:

  • The Meier v Dozan Case. Details can be found here.
  • The NSW Masonic Youth Property Trust Case. Details can be found here.
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    A purported trustee who has not been lawfully appointed to the office of trustee is known as a Trustee de son tort. More information on a Trustee de son tort can be found here.

    Enforcement of Duty

    A court can compel a trustee to perform an act which it the trustee’s duty to perform1, and can order the trustee to pay the costs of any proceedings rendered necessary by the trustee’s failure to perform the duty2. The court may, in the alternative remove a trustee who refuses to perform the trustee’s duties, and appoint another in the trustee’s stead3.

    (1) Re Burrage; Burningham v Burrage (1890) 62 LT 752 at 753 per Chitty J.A.

    (2) Southwell v Martin (1869) 21 LT 135; Re Chapman; Freeman v Parker (1894) 72 LT 66; 11 TLR 177.

    (3) McPhail v Doulton [1971] AC 424 at 457;[1970] 2 All ER 228 at 247; [1970] 2WLR 1110 per Lord Wilberforce, HL.

    Proper Law

    The matter of the “Proper Law” of a trust was examined by Scott J the High Court of England and Wales in Chellaram v Chellaram [1985] 1 All ER (Ch d) 1043

    Scott J ruled:

    “All matters affecting the determination of the duties and rights of the trustees and the beneficiaries arising out of the settlement (including the right to remove and replace trustees is conferred by the trust instrument) are governed by the proper law of the trust and not by any so-called law of the place of administration of the trust; it is merely the enforcement of such rights and duties, once determined, that may take place under a different law (see p 1056j to p 1057c).

    The ruling in Chellaram v Chellaram was followed by the Full Court of the Supreme Court of South Australia in In the Estate of Webb(dec’d) (1992) 57 SASR 193 at 202-204.

    The Proper Law of a trust cannot be readily altered. A passage in the Duke of Marlborough v Attorney-General [1945] Ch 98 is authority that the proper law of a settlement can only be changed if the beneficiaries are all adult, identified and unanimously exercised their rights under the principle in Sauders v Vautier to bring about, effectively a resettlement of the trust.

    The “Proper Law” for the occupational pension trust established on the 23 December 1913 is that of South Australia, as confirmed by the fact that the terms of this trust were amended by the Parliament of South Australia pursuant the Elder Smith & Co Provident Funds Act 1963 (SA).

    Removal by the Court

    The Court has an inherent jurisdiction to remove and appoint trustee.

    More information on this inherent jurisdiction can be found here.

    The statutory provisions to remove a trustee from office are wider in South Australia and the ACT and the history of the statutory power of the court to remove a trustee from office is covered in the following document.

    Removing a Trustee from Office

    When appointing new trustees a Court is not limited to the provisions of the trust instrument and can appoint a different class of trustees if it is in the interests of the beneficiaries to do so.

    Appointment of Trustees by the Court


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    This tab updated on 5 March 2016