Retirement of Trustees – Statutory Provisions

Section 31(3) of the Conveyancing and Law of Property Act 1881 (UK) set out a power to appoint new trustees. It allowed the appointment of “another person or other persons” to be a new trustee. Subsection (3) read:

“(3) On an appointment of a new trustee, it shall not be obligatory to appoint more than one new trustee, where only one trustee was originally appointed, or to fill up the original number of trustees, where more than two trustees were originally appointed; but, except where only one trustee was originally appointed, a trustee shall not be discharged under this section from his trust unless there will be at least two trustees to perform the trust.”

This provision was then included in The Trustee Act,1893 (UK) which provided:

(c) it shall not be obligatory to appoint more than one new trustee where only one trustee was originally appointed, or to fill up the original number of trustees where more than two trustees were originally appointed; but, except where only one trustee was originally appointed, a trustee shall not be discharged under this section from his trust unless there will be at least two trustees to perform the trust;…”

There was no additional condition that the two trustees must be individuals. In 1922, that provision was amended by the The Law of Property Act 1922 to change the formulation that was subsequently included in 37(1)(c) of the English Trustee Act 1925. In 1996, however, section 37 of that Act was amended so that the condition for the discharge of a trustee is that there will be either “a trust corporation” or at least two persons to act as trustees of the trust. As a result, it is no longer necessary for two trustees to be individuals. The requirement for the discharge of a trustee will also be satisfied if there will remain two corporate trustees or an individual and a corporate trustee to administer the trust.

The following Australian States and Territory retailed the provisions of the The Trustee Act,1893 (UK) which required at least two trustees:

  • South Australia {Trustee Act 1936 (SA) 14(2)(c)}
  • New South Wales {Trustee Act 1925 (NSW) s6(6)}
  • Tasmania {Trustee Act 1898 s 13(2)(c)}
  • ACT {Trustee Act 1925 (ACT) s6(7)}
  • Northern Territory {Trustee Act (NT) s 11(2)(c)}
  •  

    The following Australian States adopted the provisions of the English Trustee Act 1925, which required at least two individuals:

  • Queensland {Trusts Act 1973 (Qld} s 12(2)(c)}
  • Victoria {Trustee Act 1958 (Vic) s 42(1)(c)}
  • Western Australia {Trustees Act 1962 (WA) s 7(2)(c)}
  •  

    New Zealand also adopted this provision {Trustee Act 1956 (NZ) s 43(2)(c)}.

    The consequences of the contravention of this provision was the subject of Jasmine Trustees Ltd v Wells & Hind [2007] 3 WLR 810, [2007] 1 All ER 1142, [2007] EWHC 38 (Ch)

    In this case there were originally two natural person trustees who purported to retire in 1982 and where purportedly replaced by a corporate trustee and another natural person trustee. However Mann J ruled that the original two natural person trustees had not be discharged from office since the provisions of 37(1)(c) of the English Trustee Act 1925 had not been satisfied.

    Mann J noted at [12]:

    Although there was no theoretical bar to companies being trustees in the 19th century, there was a practical obstacle which made corporate trusteeship less attractive. While a company could be constituted a sole trustee of personalty, a company could not be one of two or more trustees because it could not be a joint tenant with a natural person – Law Guarantee & Trust Society Ltd v The Governor of the Bank of England (1890) 24 QBD 406. It required statutory intervention to cure this, and this was provided by the Bodies Corporate (Joint Tenancy) Act 1899

    Mann J noted at [14]:

    A statutory power to appoint new trustees was first introduced in Lord Cranworth’s Act in 1860 but I do not need to set that out here. It contained no equivalent to section 37(1)(c).

    Mann J noted at [14]:

    The Interpretation Act 1889 section 19 provided that:

    “In this Act and in every Act passed after the commencement of this Act the expression ‘person’ shall, unless the contrary intention appears, include any body of persons corporate or unincorporate.”

    Having ruled that the replacement trustees had to be two natural persons and not a natural person and a corporate trustee, Mann J then ruled at [33]:

    The effect of my decision on issue (b)(i) is that Major-General and Mrs Coaker did not retire when they thought they had, so the subsequent appointments of trustees in which they did not participate were invalid even though those purported trustees acted as trustees and are to be taken as having acted entirely bona fide and innocently of the mistake that had been made in the chain of appointments. Those later trustees were trustees de son tort.

    Mann J at [42] stated :

    “However, the question in this case is not whether the de facto trustees are trustees; it is whether they should be treated as being trustees of the settlement. The status of a trustee de son tort is limited. He will be liable for breach of trust much as a properly appointed trustee would be but the doctrine is more about liabilities than anything else. The trustee de son tort will be obliged to hold the property for, and to account to, the beneficiaries, but on the other side of the coin will not have the powers of the trustee conferred by the settlement …. It would be contrary to principle to allow such a person to arrogate powers to himself by virtue of his “intermeddling“, even if that intermeddling is innocent”.

    A Trustee de son tort retains the liabilities of a lawfully appointed trustee, however a Trustee de son tort cannot exercise the powers of a lawfully appointed trustee.

    Mann J at [55] stated :

    The Trustees” is defined as the originally appointed trustees and was to “include the trustees or trustee for the time being hereof”. It is clear to me that that means trustees properly appointed. Anyone improperly appointed is not appointed at all, and I fail to see how such a person can claim to exercise powers given to trustees under the deed.

    This conclusion is reinforced by section 38(7) of the Trustee Act 1925:

    “Every new trustee appointed under this section as well before as after all the trust property becomes by law, or by assurance, or otherwise, vested in him, shall have the same powers, authorities, and discretions, and may in all respects act as if he had been originally appointed a trustee by the instrument, if any, creating the trust.”

    Section 14 of the Trustee Act 1936 (SA)

    14—Power of appointing new trustees

    (1) Where a trustee, either original or substituted, and whether appointed by a court or otherwise, is dead or remains out of the State for more than twelve months, or desires to be discharged from all or any of the trusts or powers reposed in or conferred on him, or refuses or is unfit to act therein, or is incapable of acting therein, then the person or persons nominated for the purpose of appointing new trustees by the instrument (if any) creating the trust, or if there is no such person, or no such person able and willing to act, then the surviving or continuing trustees or trustee for the time being, or the representatives of the last surviving or continuing trustee, may, by writing, appoint a person or persons to be a trustee or trustees in the place of the trustee dead, remaining out of the State, desiring to be discharged, refusing or being unfit or being incapable, as aforesaid.

    (1a) The person, or any of the persons, by whom or with whose consent the appointment of a new or additional trustee is required to be made, may appoint himself or, as the case may be, consent to the appointment of himself as a new or additional trustee.

    (2) On the appointment of a new trustee—

    (a) the number of trustees may be increased; and

    (b) a separate set of trustees may be appointed for any part of the trust property held on trusts distinct from those relating to any other part or parts of the trust property; or, if only one trustee was originally appointed, then one separate trustee may be so appointed for the first-mentioned part; and

    (c) it shall not be obligatory to appoint more than one new trustee where only one trustee was originally appointed, or to fill up the original number of trustees where more than two trustees were originally appointed; but, except where only one trustee was originally appointed, a trustee shall not be discharged under this section from his trust unless there will be at least two trustees to perform the trust: Provided that the Public Trustee or a trustee company may, irrespective of the original number of trustees, be appointed as a sole new trustee and the original trustee or trustees shall thereupon be discharged from the trust. Notwithstanding any other Act it shall not be necessary to obtain the consent of the Supreme Court to an appointment of the Public Trustee under this section; and

    (d) any assurance or thing requisite for vesting the trust property, or any part thereof, jointly in the persons who are the trustees, or solely in the new trustee, as the case may require, shall be executed or done.

    (3) Every new trustee so appointed, as well before as after all the trust property becomes by law or by assurance or otherwise vested in him, shall have the same powers, authorities, and discretions, and be entitled to the same remuneration (if any), and may in all respects act as if he had been originally appointed a trustee by the instrument (if any) creating the trust.

    (4) The provisions of this section relative to a trustee who is dead include the case of a person nominated trustee in a will, but dying before the testator, and those relative to a continuing trustee include a refusing or retiring trustee, if willing to act in the execution of the provisions of this section.

    (5) This section applies only if and as far as a contrary intention is not expressed in the instrument (if any) creating the trust, and shall have effect subject to the terms of that instrument and to any provisions therein contained.

    (6) This section applies to trusts created either before or after the commencement of this Act.

    (7) Nothing in this section shall give power to appoint an executor or administrator.

    Retirement with no Replacement Trustee

    If there are more than two trustees, then one of them can retire without replacement.

    TRUSTEE ACT 1936 – SECT 15

    15—Retirement of trustees

    (1) Where there are more than two trustees, if one of them by deed declares that he is desirous of being discharged from the trust, and if his co-trustees and any other person who is empowered to appoint trustees, by deed consent to the discharge of the trustee, and to the vesting in the co-trustees alone of the trust property, then the trustee desirous of being discharged shall be deemed to have retired from the trust, and shall, by the deed, be discharged therefrom under this Act, without any new trustee being appointed in his place.

    (2) Any assurance or thing requisite for vesting the trust property in the continuing trustees alone shall be executed or done.

    (3) This section applies only if and as far as a contrary intention is not expressed in the instrument (if any) creating the trust, and shall have effect subject to the terms of that instrument and to any provisions therein contained.

    (4) This section applies to trusts created either before or after the commencement of this Act.

     

    The Instrument Creating the Trust

    The original Trust Deed made on the 23 December 1913 provided a power to the Board of Directors of the sponsoring Employer to determine the number of trustees and a power to appoint by the Board of Directors

    The Board of Directors was also provided with the power to remove a trustee on the passing of a resolution to do so.

    The original Trust Deed prescribed that the number of trustees to be three in number and no express provision was made that the number of trustees could be reduced to one.

    Regulation 6 also provided:

    “The office of trustee shall be vacated (a) If any Trustee resign or cease to be a Director or officer of the Company as the case maybe then from the date of such resignation or ceasing to be a Director or officer:”

    A Deed of Variation executed on the 28 August 1973 provided a power to the officers (active members) to remove and appoint two natural person trustees and a power to the pensioner to remove and appoint on natural person trustees.

    The Board of Directors retained to power to remove and appoint the remaining two natural person trustees (“Director Trustees”) and a “Director Trustee” ceased to hold the office of trustee if he or she was no long a Director of the sponsoring employer.

    An “Officer Trustee” ceases to hold office if he or she is no longer an employee of the sponsoring Employer and a “Pensioner Trustee” ceases to hold office upon attaining the age of 72.

    A copy of this Deed of Variation can be found here.

    facebooktwittergoogle_plusredditpinterestlinkedinmailby feather

    This tab updated on 27 December 2015