Trustees Appointment and Removal

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Appointment of Trustees

Overview

With an express trust, the trustees will be appointed by deed and may be parties to the deed

  • It is possible for a settlor to exclude the terms of the TA 1925 in whole or in part (TA 1925, s69) → Therefore, the settlor may choose to create a different mechanisms by which trustees are to be appointed to the office of trustee

With a trust set up in a will, trustees will be expressly appointed

Any number of trustees can be appointed (usually there is a maximum of 4)

  • There is no restriction upon the number of trustees of personalty → it is inconvenient to have too many; and rare to have more than four
  • In trusts of land, the Trustee Act 1925 section 34 restricts the number of trustees to 4, with some exceptions

To be a trustee you must have capacity i.e. must be sui juris

To be a trustee you must accept the responsibility of trustee

  • You are entitled to refuse to act as a trustee (Robinson v Pett 1734 per Lord Talbot)
  • Acceptance of the responsibility includes signing the trust instrument (Jones v Higgins 1866) or express declaration such as a written letter (Vickers v Bell 1864)

Trustees hold trust property as joint tenants, subject to jus accrescendi, so as trustees die, the property will automatically vest in the surviving trustees.

Appointment by the court

Equity will not allow a trust to fail for want of a trustee. If there are no trustees, the court may appoint them where it is ‘expedient’ to do so (under s.41 of the Trustee Act 1925)

However, this power will only be exercised by the court where the normal mechanisms for appointing a trustee have failed

This power may be used to replace/appoint trustees where there is no-one capable of exercising the statutory power, or where those who have the power are unable to agree

Matters which the court should take into account when replacing/appointing a trustee: wishes of the settlor; be neutral and not favour any particular beneficiary; appoint someone who helps the trust continue

“The fact existing trustees do not want a particular person should not be taken into account, as that would give them a veto over the court’s appointment” (Re Tempest (1866))

The Public Trustee (appointed by the Lord Chancellor)

In theory, any person may name the Public Trustee as a trustee of a trust, under the Act.

However, the Public Trustee is not obliged to accept any trust and will, in practice, only act as the trustee of trusts for the benefit of persons under a disability, where there is significant dispute between existing trustees, or as a last resort.

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CONTENT

Replacement of Trustees

Overview

By the trust instrument:

The trust instrument may contain provisions for the appointment of new trustees

By the trustees themselves:

s.36 Trutee Act 1925: trustees have a statutory power, unless excluded, to replace trustees who have died, retired, disclaimed the trust (i.e. refused to acknowledge it) or refused to act, or are incapable of acting, or unfit to act, or who have been out of the UK for twelve months.

The power may be exercised, if there is no person specified in the trust instrument with the power or that person is not able to exercise the power, by the remaining trustees or by the personal representatives of the last surviving trustee

This means that, in the ordinary course of events, the trustees are able to maintain continuity by appointing new trustees as they retire or give up being trustees.

By the beneficiary:

Under TOLATA 1996, s.19, if there is no power under the trust instrument to appoint trustees, the beneficiaries, if sui juris and acting together, may direct the trustees, in writing, to retire or to appoint a specified person as a trustee.

Removal of trustees

Trustees may retire or disclaim the trust. However, where a trustee becomes incompetent owing to the following criteria, they may be removed from office: Mental illness, or; Bankrupt, or; Remains out of country for over 12 months

This may be done by powers conferred under the trust instrument, or by the power under s.36(1) of the Trustee Act 1925

Removal by the court

The court may intervene where the existing trustee refuses to go or where the trustees are in dispute.

A court may also remove a trustee for breach of trust or ‘improper’ conduct, but the principles on which it will exercise this jurisdiction are ‘somewhat vague’.

In re Stoneham Settlement Trusts [1953]: the trustee of the trust had been abroad for over 12 months and was unwilling to resign. The court held the other trustees could force his removal and he (the removed trustee) could play no part in appointing his successor

The case of Letterstedt v Broers [1881-85] produced some guidance about when a trustee can be removed:

  1. The court’s main guide is the welfare of the beneficiaries.
  2. In cases of positive misconduct the court will have no difficulty in removing trustees who have abused their trust.
  3. Where trustees are merely incompetent that is not enough to remove them; trustees must breach the confidence that comes with a fiduciary relationship
  4. Removal of a trustee will be appropriate when the continuance of the trustee would prevent the trust being properly executed
  5. Hostility between trustees and beneficiaries is not of itself a reason for the removal of trustees – it must go beyond this (as in this case)

See the case of Re Wrightson [1908]: Warrington J held it was not in the beneficiaries’ best interest that the trustees be replaced

Conflict of Interest

If the trustee has a conflict of interest, this may result in the removal of the trustee. However, a conflict of interest doesn't necessarily mean the trustee should be removed

See the case of Isaac and others v Isaac [2005]: although there is a conflict of interest here, it is a declared conflict of interest which is okay so the trustee could remain

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