Athene Trust Law
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Trustees, seek help and don’t dig in your heels!

Two recent High Court cases provide examples of two different methods of removing trustees. In both cases, the trustees were failing to, or refusing to, administer a trust. In both cases, the trustees were not represented by lawyers in court, and were removed by the court with costs ordered against them. Sadly, both cases involved relationship breakdown between close family members over the administration of a will trust. Together the cases demonstrate the risk to a trustee or executor of “digging in their heels” when there is a disagreement.

Roblin v Roblin [2019] NZHC 374 involved an application to remove a trustee under s 51 of the Trustee Act 1956. Janet Roblin died leaving a will appointing her sons, Ian and Grant, as her executors and trustees and leaving the residue of her estate to them equally. Janet’s estate included a residential property with three floors. Ian and his wife lived in one, Janet had lived in one, and Grant and his wife lived in one.

After their mother died, Ian and Grant fell out over whether or not to sell the property. Ian stopped communicating with both Grant and the lawyers who were acting for the estate. Grant applied for an order to remove Ian as a trustee under s 51 of the Trustee Act 1956. He proposed the appointment of an independent professional trustee in Ian’s place. Ian did not participate in the court hearing and was not represented by a lawyer.

In the High Court, Hinton J noted that to remove a trustee under s 51, it is not necessary to show a breach of trust, dishonesty, misconduct or unfitness to act as a trustee. Rather, the test is “expediency”, which is more a matter of practicality, efficiency and suitability.

The court is guided by its duty to see trusts and estates duly administered. The wishes of the settlor or testator are to be given weight but the interests of the beneficiaries are most important. Hostility between trustees or between trustees and beneficiaries is only relevant if it affects the interests of beneficiaries.

This was a clear case for removal under s 51 because Ian was refusing to cooperate or take part in distribution of the estate. There had been a 17-month delay since probate was granted, during which numerous attempts were made to engage him.  Ian had also acted in conflict with his duties as trustee by allowing third parties to occupy his mother’s flat.

Although it is not always expedient to replace a trustee when removal would suffice, given the family dynamic, and the fact that the estate was sufficiently large to carry the expense, Hinton J appointed the independent trustee to act alongside Grant.  Costs were awarded against Ian.

Summerlee v Pool [2019] NZHC 387 was an application for removal under the rule in Saunders v Vautier (1841) 4 Beav 115; 49 ER 282.

The plaintiffs were three great grand-children of the late Donald Pool and the beneficiaries of the Donald Pool Summerlee Children’s Trust, which was set up in his will. The defendants were the trustees of the trust, although two of the trustees were also beneficiaries. The plaintiffs applied for the removal of the third trustee, Anthony Pool, and for the property to be vested in them as remaining trustees, or in the alternative, for the appointment of Perpetual Guardian as an additional trustee.

Anthony had been living in a property owned by the trust and was resistant to making any changes to his circumstances. There was evidence before the court that the property was uninsured and was not being properly maintained. There were outstanding EQC repairs to be made.

The will provided for a fixed trust, which would vest on the 25th birthday of the youngest beneficiary. However, once the youngest beneficiary reached the age of 18, the beneficiaries called for the trust property to be transferred to them under the rule in Saunders v Vautier.

The rule in Saunders v Vautier holds that if the beneficiaries of a trust are adults and have capacity and unanimously agree, they may call for the trustees to transfer the trust property to them, regardless of anything to the contrary in the trust document.  In effect, the stipulation in Donald Pool’s will that the trust would vest when the youngest grandchild reached the age of 25 could be overridden.

In the High Court, Lester J agreed that the beneficiaries were entitled to direct how the trust property would be dealt with, including that Anthony Pool be removed as trustee.

The case was complicated by the fact that Anthony had paid $30,000 towards the purchase of the property and there was a decision to be made as to the implications of this for the trust. Given the remaining trustees would have a conflict of interest, Lester J considered that it was appropriate for an independent trustee to be appointed in place of Anthony. The beneficiaries did not dispute this.

Anthony was not represented but did appear at the hearing and made arguments. Nevertheless, an order was made to remove him as trustee and replace him with the Perpetual Guardian. Costs were awarded against Anthony.

It is possible that, with legal advice, Anthony could have negotiated a solution that better suited his needs.

A trustee who is faced with a disagreement with another trustee or with the beneficiaries, should seek to resolve the disagreement, in the interests of the beneficiaries. It may assist to seek legal advice. A trustee’s reasonable expenses can normally (but not always – that is a topic for another blog) be reimbursed out of the trust fund.

Unfortunately, disagreements are relatively common in family trust scenarios. Trustees are expected to act impartially and to put their personal interests aside. The court will not look favourably upon a trustee who has dug in their heels and obstructed administration of a trust.