TRUSTEE APPOINTMENT AND RETIREMENT IN PRACTICE - Wolters Kluwer New … · 2018. 8. 10. · particular it appeared that Kairos was incorporated in New Zealand in 2011, was wholly

Ammundsen Trustee Appointment and Retirement in Practice

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TRUSTEE APPOINTMENT AND RETIREMENT IN PRACTICE

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TRUSTEE APOINTMENT AND RETIREMENT IN PRACTICE

Vicki Ammundsen

Vicki Ammundsen Trust Law Limited

Auckland

This paper considers the appointment, removal and retirement of trustees in a practical context

with reference to the role of the appointor and protector in the appointment and removal of

trustees.

Appointment, removal, retirement

It can be necessary for trustees to be removed for reasons such as deadlock, incapacity or

incompetence. Sometimes trustees wish to retire, but can face opposition to their retirement.

It is common, but not necessary, for trust deeds to provide variously for the appointment, removal

and retirement of trustees. Powers of appointment and removal might be held by the trustees

from time to time, or could be reposed in an appointor or, less commonly, a protector.

Where a trust deed does not provide suitable powers, or there is no deed, then it is necessary to

look to the Administration Act 1969, the Trustee Act 1956 and, less commonly, the inherent

jurisdiction of the High Court.

Careful consideration is required with respect to the circumstances in which a trustee is to be

appointed, retire, be removed or replaced to determine the correct course of action.

Appointors

The starting point in most circumstances where there is a need to appoint or remove a trustee will

be to review the terms of the trust to establish who (if anyone) has the power of appointment and

removal of trustees. The appointor might be a person or class of persons named in the trust

deed, or a person subsequently nominated or where there is no surviving appointor and no

appointment by deed or by will, the executor and trustee of the settlor or the surviving settlor’s

will. Care is required when drafting trust deeds to ensure a workable mechanism. Trust review

can often provide an opportunity to review who the appointor is (or might be) to ensure suitability

and to ensure an appreciation of the appointor’s obligations. While the matter is not free from

contrary opinions, the power of appointment should be presumed to be fiduciary. See Thomas on

Powers1 at [10.49]:

“A power to appoint trustees is a fiduciary power even when not conferred on an existing

trustee. In some circumstances (for example when the number of trustees falls below a

specified minimum) such a power may have to be exercised but, even in the absence of

such a requirement, such power would seem to carry with it an obligation to consider its

1 Thomas on Powers, Second Revised Edition (May 2012)


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exercise, not only as and when a vacancy in the trusteeship arises but also from time to

time when an appointment is capable of being made.”2

However, for the contrary view see the position put forward in Guest v Warner at [18] where the

question asked, but not answered, was whether “a nominated settlor’s power to appoint and

remove trustees is a fiduciary power (to be exercised with a view to the interests of the

beneficiaries of a trust), or a personal power (without any such constraints but nonetheless to be

exercised in good faith for the purpose for which it was given). The contest is between viewing that

power as sourced in the trust deed, or as a necessary adjunct to settlement of the trust. Given the

probability of fiduciary aspects of the office, when making an appointment of a new trustee is

proposed it is important to consider whether the proposed appointment or removal is an

appropropriate exercise of the appointor’s powers and what constraints might apply to these

powers. In Representation of Jasmine Trustees Ltd3 the Royal Court of Jersey held that a person

exercising a fiduciary power to appoint a trustee (or a protector) has a duty to:

act in good faith in the interests of the beneficiaries as a whole

to reach a reasonable decision

to take into account relevant matters only

not to act for an ulterior purpose

When challenging the exercise of an appointor’s powers it is useful to remember that while the

Court has a supervisory role – just because a court might have nominated a different appointor –

that by itself does not mean the exercise of a power can be over-turned. In Representation of

Jasmine Trustees Ltd the Royal Jersey Court noted at [44] that:

“A settlor does not choose the Court as the donee of the relevant power; he chooses the

person appointed in or by virtue of the provisions in the trust deed. It is the donee upon

whom the power has been conferred. The Court’s role is merely a supervisory one. The

Court may not therefore overturn the decision of a power holder merely because the Court

would have reached a different decision. However, it may do so where the decision falls

outside the band of decisions within which reasonable disagreement is possible and

becomes a decision which, in the Court’s opinion, is a decision which no reasonable

holder of that power could arrive at.”

After considering the material before it, the appointment of the New Zealand trustee company was

held to be invalid as:

the material before the court did not show the trustee to be a suitable trustee

the court was not satisfied that the decision was one that a reasonable appointor would make

the appointor had failed to take relevant matters into account such as the trustee company’s

expertise, experience and financial standing

Regarding the suitability of the New Zealand trustee company, Kairos Trustees (NZ) Limited

(Kairos), the Court referred to the due diligence carried out before the proceedings were filed,

noting at [23] that:

“Finally on 10th March Kairos responded. They apologised for the delay and explained

this had been caused by the fact that two of their directors were travelling. Jasmine and

Lutea considered that the package of information provided by Kairos raised more

questions than it answered. After reviewing the material and carrying out Google

searches, they ascertained that there were a number of gaps in respect of the information

which had been sought (e.g. the CVs of the directors had not been

provided). Furthermore there were a number of features which gave rise for concern. In

particular it appeared that Kairos was incorporated in New Zealand in 2011, was wholly

2 [2018] NZHC 666

3 [2015] JRC 196

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owned by another company which was in turn wholly owned by another company which

was 100% owned by Mr Hanley personally. It appeared that were three directors of

Kairos namely Mr Hanley, an 80 year old resident of the Isle of Man and an Italian law

professor resident and practising law in Milan. Mr Jenner replied to Kairos on 20th March

posing eleven specific questions on which he sought further clarification and

information. At the same time he e-mailed the father enclosing a copy of his e-mail to

Kairos and asking the father to explain his rationale in choosing Kairos as successor

trustee. The father replied that he was referring the matter to his lawyer.”

In deciding that the appointment of Kairos was invalid, the court summarised its reasons at [48],

finding that:

“(i) There was considerable delay in supplying the standard due diligence information

requested of Kairos. Mr Jenner stated in evidence that this was a routine request to a

professional trustee and he would have expected there to have been a package of

documents and information available for immediate provision on a regular basis.

(ii) No information was provided at any stage about the financial position of Kairos or

of its parent companies. Nothing was provided to show that it had expertise and

experience in the field of trust administration.

(iii) It appeared ultimately to be 100% owned by an individual director.

(iv) No information was provided as to its insurance cover, its capital base and other

matters which might be thought relevant to whether it was suitable to act as a trustee of

these two substantial Trusts.

(v) Although in due course the names of the three directors were provided, no

information about their careers, experience in trust administration etc was ever

provided. The three directors resided in New Zealand, Italy and the Isle of Man

respectively and the Isle of Man director was aged 80.

(vi) Kairos appeared to have no presence on the internet nor did it have an internet

domain name and related email accounts. Mr Hanley was shown on the website for a

company called Pearse Trustees (which appeared from its website to be an international

trust company) as the manager of that company which operated from the same address

as Kairos; but Kairos was not mentioned at all on the website of Pearse Trustees.

(vii) The beneficiaries of the two Trusts are resident in the United States and the United

Kingdom. Whilst the fact that a trustee is incorporated or carries on business in a

jurisdiction where none of the beneficiaries live (as is the case for both the Cayman

Islands and Jersey in relation to these Trusts), is not a reason to question the appointment

of a trustee, the fact that New Zealand is on the other side of the globe and in a wholly

different time-zone which would make communication between trustee and beneficiaries

more difficult, is at least a factor to be considered by an appointor.

(viii) Highly significantly, the father does not appear to have considered any of these

matters prior to making the appointment. Thus he was unable to assist when information

was requested by Jasmine/Lutea and he said merely that he expected to be in touch with

one of Kairos’ legal representatives in New York on 15th March. But this was of course

after he had appointed Kairos.

(ix) The father has explained in his affidavits why he wished to replace Jasmine and

Lutea. However the sole reason that he has given for choosing Kairos as the replacement

trustee is that he was advised in mid-2013 that it might be preferable to relocate the trust

to a ‘white listed’ jurisdiction as considered from the perspective of ‘relevant authorities’

(Jersey, he said, not being such a white listed jurisdiction). He was further advised that

New Zealand was such a jurisdiction and that Kairos was a New Zealand trust company

which had been identified and was happy to accept the role as trustee. On enquiry by the

Court, which understood that Jersey was indeed a white listed jurisdiction for OECD

purposes, the Court was informed that the ‘relevant authority’ which the father had in mind

was Italy. As none of the beneficiaries resides in Italy, it was not made clear why that

would be a material consideration.”


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At [49] the Court then went onto state that “In summary, we conclude that the father [who had the

power of appointment] failed to take into account material matters, namely the expertise,

experience, financial standing etc. of the proposed trustee of two substantial trusts, took irrelevant

matters into account (namely New Zealand’s position vis à vis Italy) and in the circumstances

reached a decision which no reasonable appointor could have arrived at. We therefore declare

the appointment of Kairos to be invalid in relation to both Trusts.”

A separate costs decision4 regarding the appointment of Kairos as a trustee is also noteworthy

given the reality of costs as a significant litigation consideration. The Court noted that the

proceedings only became necessary because of the appointor’s appointment. This raised the

question of whether he should be deprived of his indemnity (as protector) out of the Trusts and/or

whether he should be ordered to pay the costs of any other parties. The court was satisfied that

he should not at [38] because:

“… an unremunerated family trustee will not lightly be ordered to pay the costs of litigation

if he has made an innocent mistake or acted in a manner which has ex post facto been

shown to be misguided or even careless. In my judgment, that is the situation here. The

father was misguided in the appointment of Kairos. He failed to have regard to relevant

factors and took into account irrelevant factors as described in the September

judgment. However there is no finding, for example, that he acted in bad faith or for any

improper purpose or with reckless disregard for his fiduciary duties. These are of course

not to be taken as the only circumstances where a fiduciary may be deprived of his

indemnity or ordered to pay the costs of another party but, in the circumstances I do not

consider that the nature or gravity of his conduct has reached the level where it is

appropriate to deprive him of his indemnity. Nor do I consider that his conduct in

connection with the actual litigation was unreasonable. In the circumstances I agree that

he should be indemnified out of the Trusts for his costs and should not be ordered to pay

the costs of any other party.”

Settlor control through powers of appointment

Where powers of appointment are reposed in a party who is not necessarily acting in the trust’s

best interests, as demonstrated in Tarasiewicz v Titford,5 this can be addressed pursuant to the

High Court’s inherent jurisdiction. The case relates in large part to whether trust poperty can be

sold in circumstances where the sale is opposed by the trust’s settlor (in this case Mr Titford).

While it was not clear that Mr Titford was validly appointed as “Principal” as that term was defined,

the Court did not find it necessary to determine the validity of his appointment but ordered his

removal as Principal in accordance with the Court’s inherent supervisory jurisdiction to ensure that

the terms of a trust are properly carried out. In making the orders sought the Court also gave the

power of appointment and removal, alleged to be held by Mr Titford, to the trustee.

Protectors

Protectors, which are not commonly employed in New Zealand trusts, could be described as

a hybrid of a trustee and an appointor. The role of the protector developed in offshore

jurisdictions where it was more common for the settlor not to be a trustee and so the need arose

for there to be someone to keep an eye on things. There is no legal definition of protector and the

role is as big or as small and has as many (or as few) powers as the trust deed proscribes. The

extent of a protector’s fiduciary obligations is not always clear.

Kea Trust Company Limited v Pugachev6, while turning on its own facts, provides useful

guidance as to the role of protector and the extent of fiduciary obligations a protector can

4 In the Matter of the Piedmont Trust and the Riviera Trust [2016] JRC 016

5 [2013] NZHC 3466

6 [2015] NZHC 1960; [2015] NZHC 2218; [2015] NZHC 2412

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owe. In Kea Trust Company Limited the core dispute related to whether a trustee had been validly

removed by a protector in circumstances where the removal instrument was signed by both the

protector and the second protector (in case the protector no longer had authority due to the

protector being under a disability as defined in the Declaration of Trust).

The proposition for the court was that the Protector owed fiduciary obligations to beneficiaries of

the trust and that the power to remove the original trustees may have been exercised for improper

purposes.

The first question to decide then was whether a person holding the position of a Protector under a

trust owes fiduciary obligations. As noted in Kea Trust Company Limited in this regard “The first

port of call will always be the words of the relevant trust instrument, and the objects of the trust

that can be gleaned from them and any relevant extrinsic evidence.”

As noted at [47] of the judgment (citations omitted):

“The authorities suggest that a protector may hold a particular power, either as a fiduciary

or in his or her personal capacity. A useful survey of relevant authorities can be found

in Re Bird Charitable Trust. The Royal Court of Jersey held that the powers to appoint

additional trustees and a successor protector were fiduciary in nature and could only be

exercised in good faith and in the best interests of the trust and the beneficiaries as a

whole. The Court rejected a claim of fraud on the power even though the grounds

supporting a decision to appoint a successor protector were argued to have been made

with an improper intention of removing assets from the control of the courts in Jersey; in

particular, to defeat anti-money laundering legislation. The Deputy Bailiff, giving the

judgment of the Court, held that the power had been exercised in good faith and in the

best interests of the beneficiaries because it was believed their interests were promoted

by an ability to deal freely with assets of the trust, without having to seek consent from the

police in Jersey. That was regarded as an intention that was “entirely consistent with the

purposes for which the powers were conferred”.

However, regardless of whether the protector holds powers in a fiduciary or personal capacity; in

the event that the powers are not executed for a proper purpose the doctrine of fraud on a power

can apply. The inquiry here focusing on whether the power has been exercised for a purpose, or

with an intention, that goes beyond the scope of or is not justified by the instrument creating the

power.

A fraud on a power does not necessary involve conduct on the part of an appointor amounting to

dishonesty or any other form of moral turpitude; rather, it means that the power has been

exercised for a purpose, or with an intention, beyond the scope of, or not justified by, the

instrument creating the power. See Lord Parker of Waddington delivering the advice of the Privy

Council in Vatcher v Paull7, which was adopted by the Supreme Court in Kain v Hutton

8. In the

latter case Tipping J observed, in a separate judgment, that a person exercising a power must act

in terms of the mandate granted by the donor of the power, and must stay within the bounds of

that mandate. If the exercise of a particular power is contemplated by the instrument under which

the power is granted, there will be no misuse.

In Clayton v Clayton9, where the “Principal Family Member” had the power to appoint himself as

sole beneficiary, the Court of Appeal held that this did not amount to a fraud on a power. Note

though that in that case the writer suggests that it is not entirely clear that this is correct as the

7 [1915] AC 372 (PC) at 378C

8 [2008] 3 NZLR 589 (SC) at paras [18]–[20] (per Blanchard J for himself, Elias CJ, McGrath and Anderson

JJ) 9 [2015] 3 NZLR 293; upheld on appeal to the Supreme Court. See Clayton v Clayton [2016] NZSC 29 and

Clayton v Clayton [2016] NZSC 30


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power to amend the class of beneficiaries does not necessarily permit the Principal Family

Member to remove the final beneficiaries.

In Kea the Declaration of Trust gave the Protector the power to “remove any existing Trustee

with or without cause.” In that case the Protector had lost faith in the trustee and the Court found

that in removing the trustee the Protector “cannot be regarded as having been exercised for an

improper purpose. If the Protector had been a third party at arm’s length from the Pugachev family

who had diverted trust assets for his or her own benefit, the position would undoubtedly be

different.”10

Importantly it was also noted in Kea that whether the Protector is or is not labelled a fiduciary is

unlikely to affect the duty cast upon the Protector to exercise powers to promote the objects of the

trust. As noted by Matthew Conaglen and Elizabeth Weaver11

:

“The paramount consideration is the settlor’s intention, as derived from construction of the

trust documentation. Not only will that determine whether the protector is a fiduciary, but

also what sort of a fiduciary role the protector has. As we have shown, the fiduciary label

can cover a number of situations and fiduciary and personal powers can co-exist in the

hands of a protector. Where the purpose and intention of the settlor was that the protector

was also to be able to benefit under the trusts, the courts will usually respect that intention

and not find fiduciary obligations which would disable the protector from acting in his own

interest, although they might still hold that the protector owes limited or qualified fiduciary

duties to consider the exercise of his powers on a regular basis. On the other hand, the

cases show that powers which impinge upon the trustees’ position as ‘ultimate guardians

of the trust’ are likely to be treated as fiduciary, to some degree at least, so that the court

can retain a supervisory jurisdiction. We suggest that it is unlikely that the court will allow

that supervision to be avoided by language purporting to free the protector from any

fiduciary obligations, but, again the touchstone is always the settlor’s objectively

determined intention.”

Assistance of the Court

When the assistance of the court is required pursuant to the Trustee Act to appoint or remove a

trustee, it is important to ensure the correct provision of the Trustee Act is utilised and that the

person making the application has standing to do so12

.

Section 43 of the Trustee Act13

provides a ranked approach to determine who has the power to

appoint trustees in a range of circumstances.

Where the deed of trust is not able to assist, s 43 is the next place to go to establish who has the

power to appoint trustees and to determine how many trustees must be appointed.

If there is no appointor the trustees have the power to appoint trustees.

Section 45 provides that so long as there will still be a trustee corporation or at least two individual

trustees left, a trustee can retire by deed if the trustee’s co-trustees and the appointor (if there is

one) consent.14

A trustee cannot be compelled to remain a trustee. Where a trustee wishes to retire but cannot do

so without assistance (for example there is no right of retirement provided for in the trust deed

and s 45 of the Trustee Act does not apply), s 46 of the Trustee Act can assist. Section 46 allows

10

Also see the subsequent decision regarding the validity of the trust settlements: MezhProm Bank v Pugachev [2017] EWHC 2426 Ch

11 Protectors as Fiduciaries: theory and practice (2012) 18(1) Trusts and Trustees 1 at 19

12 Little v Howick Trustee DL Limited [2018] NZHC 1884 13

See appendix 1 for the full text of this section of the Trustee Act 1956 14

See discussed further under the heading Documentation

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a trustee who wishes to retire, but cannot otherwise do so to, can retire by passing the trust

accounts to the Registrar, and giving notice of the retirement to any co-trustees and the appointor.

If necessary, the court can also assist. In SWL Trustee Company Limited v Marshall & Anor15

SWL Trustee Company Limited (SWL) acted together with two other trustees as trustees of a

family trust. SWL was unable to get instructions from its co-trustees and gave the notice required

by the deed of trust. However, SWL’s co-trustees would not respond. Legal title to the trust

properties could not conveyed from SWL to a replacement trustee and the continuing trustees.

As a new trustee was not being appointed s 51 was not the appropriate course of action. Instead

an application needed to be made for removal under s 46 of the Trustee Act as well as an

application for a vesting order transferring the property to the continuing trustees. Costs were

also awarded to SWL.

Section 51 of the Trustee Act confers power on the Court to remove a trustee if the Court is

appointing a new trustee. Section 51 cannot be used only to remove a trustee: Thurston v

Thurston16

.

The High Court will not make an order removing a trustee lightly. Courts are reluctant to remove

trustees if other avenues can be found to remedy the perceived risk. Expedience is generally the

main criteria.

When the Court is exercising its power to appoint new trustees, matters to take into consideration

include the settlor’s intentions, neutrality between beneficiaries and promotion of the purposes of

the trust.

Guidance on when it is it is expedient that a new trustee is appointed by the Court or inexpedient,

difficult, or impracticable to appoint a new trustee without the assistance of the Court in the

context of a licenced securities trustee, is provided in Perpetual Trust Limited v Lombard Finance

& Investments Limited17

where the trustee’s licence to act as a corporate trustee was due to

expire. In that case it was “inexpedient, difficult and impracticable” to appoint a new trustee

without the assistance of the Courts because the investors had to agree to the appointment of a

new trustee by way of an extraordinary resolution and there were geographically diverse groups

of investors ranging from 230 to 13,000.

While the grounds set out in s 51 include misconduct, a trustee does not need to have committed

a breach of trust in order to be removed. As was stated in Attorney-General v Ngati Karewa and

Ngati Tahinga Trust18

:

“[66] As our Court of Appeal pointed out in Hunter v Hunter19

, the primary question is not

whether the impugned trustees have committed breaches of trust. The jurisdiction to

remove trustees is merely ancillary to the principal duty of the Court to see that the trusts

are properly executed: principal duty of the Court to see that the trusts are properly

executed: Letterstedt v Broers….”

Where there is no statutory remedy available, recourse can be had to the High Court’s inherent

jurisdiction. The inherent jurisdiction is a supervisory function is derived from the Court’s equitable

powers to supervise trusts for the benefit of the beneficiaries. See Miller v Cameron20

where

Dixon J explains the jurisdiction as follows:

“The jurisdiction to remove a trustee is exercised with a view to the interests of the

beneficiaries, to the security of the trust property and to an efficient and satisfactory

15

[2015] NZHC 132 16

[2013] NZHC 1886 17

[2013] NZHC 3521 18

HC Auckland M2073/99 and CP 242/00, 5 November 2001 19

(1938) NZLR 520, 529 20

(1936) 54 CLR 572


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execution of the trust and a faithful and sound exercise of the powers conferred upon the

trustee. In deciding to remove a trustee the court forms a judgment based upon

considerations, possibly large in number and varied in character, which combine to show

that the welfare of the beneficiaries is opposed to his continued occupation of the office.

Such a judgment must be largely discretionary. A trustee is not to be removed unless

circumstances exist which afford ground upon which the jurisdiction may be exercised. But

in a case where enough appears to authorise the court to act, the delicate question of

whether it should act and proceed to remove the trustee is one upon which the decision of

a primary judge is entitled to especial weight.”

The Court has a discretion whether to exercise its inherent jurisdiction. See Wallace v Naknok21

where the Court declined to do so.22

In that case Mr Wallace sought the removal of Ms Naknok

as his co-trustee following the end of their relationship. Although Mr Wallace was the sole

beneficiary of the trust, the Court found that as Mr Wallace had chosen to form a trust, the law of

trusts applied with respect to the legal relationships that arose as a result of the trust. While the

Court must have regard to the welfare of the beneficiaries, this does not mean that the Court must

accede to the wishes of a beneficiary as to who the trustees should be. As noted in Letterstedt v

Broers:23

“… in cases of positive misconduct, Courts of Equity have no difficulty in interposing to

remove trustees who have abused their trust; it is not indeed every mistake or neglect of

duty, or inaccuracy of conduct of trustees, which will induce [the Court] to adopt such a

course. But the acts or omissions must be such as to endanger the trust property or to

shew a want of honesty, or a want of proper capacity to execute the duties, or a want of

reasonable fidelity.”

Incapacity

The assistance of the court is not necessarily required where there is incapacity. However, the

decision in Marshall Family Trust24

highlights the likelihood of needing the assistance of the court

when the appointor has lost mental capacity. In that case the surviving appointor, who was also a

trustee, lost mental capacity and quite properly needed to be removed as a trustee.

An application was made for a vesting order. Initially it was intended that the sole competent

trustee act as a sole natural person trustee. However, when the matter first came before the court

the court considered the terms of the deed of trust, which required at least two trustees. At that

point as noted by the court:

“Counsel for the applicant needs to consider how a new trustee could be appointed and

who that should be. It may be that the Court will have to be asked to appoint an

appropriate person with the agreement of all of Mr and Mrs Marshall’s children.”

The court then needed to determine whether the trustee’s property attorney could exercise her

powers of appointment and remove the incapacitated appointor and appoint a new trustee in her

place. While it has generally been accepted that this is a power that can be exercised by a

property attorney Nation J expressed the considered view that this is not building on the

arguments made in Godfrey v McCormick25

and noting at [12] to [14]:

21

[2012] NZHC 382 22

Also see Also see Clifton v Clifton CIV-2004-404-4185, 5 November 2004, Davidson v Israel [2012] NZHC 631, Mudgway v Slack HC Auckland CIV-2010-404-2058, 26 July 2010 and Morris v Sumpter HC Auckland CIV-2004-404-3060 6 April 2005

23 (1884) 9 App Cas 371 at 385 to 386

24 [2017] NZHC 472

25 [2017] NZHC 420

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“[12] In the recent judgment of Godfrey v McCormick, I held that the attorney under an

EPO does not have the ability to act for an incapacitated trustee in relation to the exercise

of trustee powers, rights or obligations as a trustee.

[13] The reasoning for that conclusion also applies to the power which a settlor or other

named person has to appoint new trustees under a trust deed. Section 97A(2) of the

PPPR Act provides that the “paramount consideration of the attorney is to use the donor’s

property in the promotion and protection of the donor’s best interests”. As with a trustee

exercising trustee powers, a person who has the power of appointment under a trust deed

must at all times have the best interests of the beneficiaries in mind. The Court has long

held that the power of appointment is subject to fiduciary duties. For example, in Carmine

v Ritchie26

, Gilbert J held:

The power to appoint new trustees is generally acknowledged to be a fiduciary

power even though it may not have been conferred on trustees or the holder of

any other office. Equally, a power to remove a trustee and replace him with a new

trustee is almost always considered to be a fiduciary power to be exercised in the

best interests of the beneficiaries. This is because the subject matter of the power

is the office of the trustee which lies at the core of the trust and carries

fundamental and onerous obligations to act in the best interests of the

beneficiaries as a whole.

[14] For this reason and the reasons discussed in Godfrey v McCormick, the PPPR Act

must be read as not extending to an attorney the power to act for a person in relation to

their power of appointment of new trustees under a trust deed. This power cannot be

considered as a personal property right of the person who has granted the EPA because

associated with the power are the fiduciary duties owed to the beneficiaries.”

As the power of appointment could be not exercised by the Appointor’s attorney it was necessary

for the court to appoint a new trustee pursuant to s 51 of the Trustee Act and a vesting order

under s 52 of the Trustee Act.

As vesting orders are required where a trustee loses capacity, regardless of whether the

assistance of the court is required to appoint or remove a trustee, the decision may be considered

of no moment. However, where a trust owns personal property, where for example the LINZ

(Land Information New Zealand) requirements do not apply, it is suggested that vesting orders will

still need to be sought to transfer the trust property from a trustee who has lost capacity. When

seeking vesting orders, it is important to ensure that the application correctly identifies the

provisions of the Trustee Act 1956 that are being relied upon. Vesting orders in respect of real

property are provided for in accordance with s 52 of the Trustee Act. Vesting orders with respect

to stock and things in action are provided for at s 59 of the Trustee Act.

Unless there is a delegation in the Trust Instrument that is in accord with s 31 of the Trustee Act

1956 a power of attorney in a trust deed should not be relied upon for the purposes of signing

authority and instruction forms on behalf of an incapacitated trustee.

Absence

Sometimes a trustee may be required to be removed, not because of any impasse or dispute

between trustees, but through the trustee’s prolonged absence from New Zealand. A trustee who

is absent (either overseas or “missing in action”) cannot acquit the trustee’s responsibilities and

so may need to be removed. See Wright v Wright27

where the plaintiff trustees could not

continue to administer the trust as one trustee would not attend trustee meetings to discuss trust

26

[2012] NZHC 1514 27

[2017] NZHC 2053

http://www.nzlii.org/nz/cases/NZHC/2012/1514.html


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business, but also refused to sign a Deed of Retirement. On application to the Court the trustee

was removed and a new trustee appointed pursuant to s 51 of the Trustee Act. The Court was

satisfied that “the defendant has not been discharging her duties as trustee and is willing to resign

but has not done so.”

Documentation

When documenting the appointment and retirement of trustees, it is important to review the terms

of the deed to ensure that the powers of appointment or removal or retirement being utilised are

correctly referenced in the deed and that any limitations on the powers are recognised. Ensuring

the transfer of trust property to the newly constituted trustees is an important facet of appointment

and retirement that is too often overlooked.

Properly recording retirement in a deed of retirement is am important facet of retirement where

there is no power of retirement in the trust deed. See Cadman v Visini,28

where the failure to

record the retirement of a trustee in a deed meant that the retirement was not effective.

[17] In 2005, Mr Wood indicated to the Cadmans that he wished to retire as a trustee. This

was done by a handwritten note dated 25 November 2005. A document headed ―Deed

of Retirement of Trustees and Appointment of New Trustees‖ (―the retirement

document‖) was drawn up in 2007 to give effect to Mr Wood’s desire. The retirement

document purported to retire Mr Wood as a trustee while appointing Northplan Trustees

Limited (―Northplan‖) in his place. The Cadmans were to continue as trustees.

[18] The document contemplated, at clause 6, the vesting in the new trustees of trust

property not automatically transferred, such as the Coatesville property. However, no such

transfer ever took place and, even after the retirement document was purportedly

executed, Mr Wood remained on the certificate of title to the property.

[19] After signing the retirement document, Mr Wood ceased to have any involvement with

the Trust although he continued to act for the Cadmans as their accountant. No other step

was taken to bring his trusteeship to an end, although after the commencement of this

proceeding, a transfer authority as contemplated in the retirement document was

executed, removing Mr Wood from the certificate of title to the property from about August

2010.

[20] It is now evident that the retirement document was defective. It did not fully comply

with the requirements of s 4 of the Property Law Act 1952, the Act in force at the time.

Although the document was signed by all the parties to it, including a representative of

Northplan, s 4 required each of those signatures be witnessed by at least one person. The

signatures of the Cadmans were not witnessed.

[21] There is an important distinction to be drawn between the removal of a trustee and

the retirement of a trustee. That distinction is particularly evident in the current case.

[22] Here, the former is contemplated by cl. 14.2 of the trust deed. That clause gives the

same person who has the power to appoint new trustees (in this case the Cadmans) the

power to remove trustees without the need to give reasons. There is no requirement in

that clause that the removal be facilitated by deed. In fact there are no requirements as to

form at all.

28

[2011] NZHC 526

CCH – August 2018

12

[23] The retirement of a trustee, by contrast, is not provided for in the trust deed. There

being no contrary intention expressed in the trust deed, the provisions of s 45 of the

Trustee Act 1956, relating to the retirement of trustees, apply. That section requires that

the retirement of a trustee be by deed and, importantly, that the consent of the co-trustees

to that retirement must also be by deed.

[24] At no stage did the Cadmans purport to remove Mr Wood as a trustee. That much is

evident from the retirement document itself which is headed up a ―Deed of Retirement of

Trustees… But, purporting to be a deed of retirement, it had to comply with the

requirements of s 4 of the Property Law Act 1952. It did not so comply, at least so far as

the signatures of the Cadmans were not witnessed.

[25] In Re Vanstone29

a deed was signed by eight out of the nine parties. The party who

refused to sign contended that the other eight were bound by their execution of the deed.

It was held by the Court of Appeal that there was no statement by the signatories that the

deed was intended to be delivered in escrow, and that the surrounding circumstances did

not disclose any intent that the deed should be operative only when executed by all

parties.

[26] On this basis, it could be argued that Mr Wood’s retirement was effective,

notwithstanding the defect in the deed, as he was bound by the deed from the moment

that he signed.

[27] In my view, however, this case is distinguishable from Vanstone. Here, any attempt to

hold the retirement to be effective must be reconciled with the specific statutory

requirement that the continuing trustees must consent by deed before the retiring trustee

is deemed to have retired. Because their signatures were not witnessed, the Cadmans

cannot be said to have given their consent by deed.

[28] I find that, for those reasons, Mr Wood continued to be a trustee of the Trust at the

time the proceeding was issued.

Another important aspect of retirement is to consider whether the outgoing trustee has been

properly discharged notwithstanding whether a retirement has been recorded by way of a deed.

The use of corporate trustees is a common response to trustee liability. However, where one of

two natural person trustees retires, and a corporate trustee is appointed, it is important to consider

whether the retiring trustee has been discharged. In the United Kingdom case of Jasmine

Trustees Limited v Wells30

the England and Wales High Court (Chancery Division) needed to

decide whether the word “individuals” in s.37(1)(c) of the Trustee Act 1925 (on which the Trustee

Act 1956 is modelled) was capable of extending to corporations as well as human

individuals. The context of the case was whether retiring trustees had been discharged from the

trust. As noted by way of background in that decision at [6]:

“The issues arise because of concerns over the effectiveness of the 1982 deed by which

Major-General and Mrs Coaker purported to resign and IBI and Mr Thornton took over the

trusteeship. It is said by the claimants in these proceedings that the closing words of

s.37(1)(c) of the Trustee Act 1925 (see paragraph 11 below) mean that, while the

appointment was effective, the resignations were not because if they had been effective

then there would be one company and one individual, as opposed to two individuals, as

trustees of the settlement. Accordingly, they say, Major-General and Mrs Coaker

remained trustees at that point (they were not discharged from their trust, in the wording of

s.37(1)(c) of the Trustee Act 1925). That is said to have had two unintended effects – it

29

[1955] NZLR 1079 30

[2007] EWHC 38


13

affected the validity of the acts of the ostensible trustees thereafter, and it affected

whether the trust was on shore or not for the purposes of the capital gains tax legislation.”

A comparable New Zealand case, which was heard after Jasmine Trustees (but does not refer to

that decision) might be Vance v Lamb31

where the natural person trustees retired in favour of a

corporate trustee. However, when there was a short-fall to Inland Revenue, the primary cause of

action related to claims against the director (and shadow director) of the corporate trustee for

breach of the duties owed. While the question of the application of s 43 of the Trustee Act 1956

was raised, Mackenzie J noted at [64] that “The question whether any liability may continue to

attach to either of the former trustees is not before me. I consider that it is preferable not to

address further the possible application and effect of the Trustee Act provisions.”

Other cases, although not many, and few in New Zealand, have considered whether “individuals”

includes body corporates or is limited to natural persons. The Legislation Bill, which was

introduced on 20 June 2017 and that “rewrites and replaces the Legislation Act 2012 to implement

publication and other reforms relating to the production of high-quality legislation that is easy to

find, use, and understand; and updates and re-enacts the Interpretation Act 1999” regrettably

does not address this definition. Persons are defined to included body corporates. However,

there is no definition of natural person or individual.

In Great Northern Railway v Great Central Railway32

“Individual” is considered to mean, as Wright

J notes at p 275- 276, “any legal person who is not the general public” and (relevantly to corporate

trustees, and natural persons who retire to act through a corporate trustee) “Supposing a trader

had a right given home for a siding or anything else, and he converted his business into a limited

company, it would be a strange thing to hold that because of that this Court lost its jurisdiction to

enforce the rights which were given.”

Note that in Jasmine Trustees Limited v Wells, Great Northern is distinguished by reference to

context. However, no reason is given in Jasmine other than the observation that individuals

replaced persons in precursor legislation and “it is to be assumed that a different meaning was

therefore intended.” As stated at [24]:

“The relevant words were introduced by the 1922 Act. The technique of the draftsman

was to amend the existing provision – so the words were deliberately added by

amendment. The words specifically chosen for that purpose included “individuals”. The

words were replacing a wording that included “persons”, a word capable of including

corporations. In the light of that it is hard to accept that “individuals” was intended to be a

synonym for “persons”. A different word was apparently deliberately chosen, and it is to

be assumed that a different meaning was therefore intended. This is the real legislative

context of the introduction of the words, and it is particularly important.”

In Société United Docks v Government of Mauritius33

the Privy Council found that there was no

logical distinction between an individual and a person protected by provisions in Mauritius statute.

Both expressions could include a corporation when the context allowed.

In Greenpeace of New Zealand Incorporated v Electoral Commission individual was held to mean

a natural person. However, the context of that case is important in that the draft legislation

referred to his and her (and not its), but that no explanation was available to explain the omission

of these pronouns in the final form of the legislation.

Also see Re Greenpeace (regarding whether political purposes can be charitable) at [70] where

the majority states “As well, a strict exclusion risks rigidity in an area of law which should be

responsive to the way society works. It is likely to hinder the responsiveness of this area of law to

31

[2008] NZHC 1902 32

(1899) 10 Ry & Canal Traffic C 266 33

[1985] AC 585

CCH – August 2018

14

the changing circumstances of society. Just as the law of charities recognised the public benefit of

philanthropy in easing the burden on parishes of alleviating poverty, keeping utilities in repair, and

educating the poor in post-Reformation Elizabethan England, the circumstances of the modern

outsourced and perhaps contracting state may throw up new need for philanthropy which is

properly to be treated as charitable.”

It is noted that the High Court does not in practice appear to be concerned with the appointment of

a single corporate trustee or a corporate trustee and a single natural person trustee in place of two

natural persons or two natural persons and a body corporate. See for example Powell v

Powell34

and Little v Little35

for example. Note that neither of these cases considered the

discharge of the removed trustees.

The matter is an important one because if the position in Jasmine is adopted as correct in New

Zealand there will be a substantial number of trusts where trustees have not been validly

discharged. The implication is that there will be numerous trusts in New Zealand where un-

discharged trustees remain liable and where subsequent decisions may be invalid as not having

been made by all trustees.

Reluctance

Trusts are commonly used for secession planning, providing, at least conceptually, for long-term

asset ownership that will not be disrupted by death. However, the passage of time and the

appointment and removal of trustees can mean that once harmonious relationships and

arrangements are no longer so.

The decision in Guest v Warner36

related to an application for the removal and appointment of

trustees in circumstances of family disharmony where one of the questions for the court to

determine is whether the removal of the accountant trustee was “properly motivated.”

Helpfully addressed is the professional trustee’s resistance to being removed. In this regard

Jagose J notes at [23]:

“Nonetheless, Anne Warner should not actively have resisted her removal, but only have

sought the Court’s directions if there was a basis to do so. An application for such

directions could have relied on s 51(1) of the Act (see full text below):

The court may, whenever it is expedient to appoint a new trustee or new trustees,

and it is found inexpedient, difficult, or impracticable so to do without the

assistance of the court, make an order appointing a new trustee or new trustees,

either in substitution for or in addition to any existing trustee or trustees, or

although there is no existing trustee.”

‘Substitution’ necessarily infers a power of removal, which the Court has in its inherent jurisdiction

in any event. Where a court is considering the removal of a trustee relevant considerations

include:

expedience, which imports considerations of suitability, practicality and efficiency

a trustee should not be removed lightly: the motivating reason for trustees’ removal

must be some “detriment to the administration of the trusts.” See Green v

Green (CA)

34

[2014] NZHC 2096 35

[2014] NZHC 3159 36

[2018] NZHC 666


15

When considering who to appoint the general principle as noted at [26] is “to appoint the person or

persons best suited to administer the Trust in the circumstances prevailing”. See Mendelssohn v

Centrepoint Community Growth Trust37

.

Specifically, the court is guided by three prevailing considerations:

the Settlor’s intentions – the Court will give considerable weight to the expression of

the settlor’s intentions as to the identity of the trustees, if such can be discerned. But

the Court is not bound by them, and may depart from them “if good cause is shown”

[26 (a)]

neutrality between beneficiaries – spouses, relative or conflicted advisers should not

expect appointment

promotion of the purposes of the trust

As was the case in Guest v Warner a pragmatic solution is desirable. Appointment as trustee

should not be considered a right. Guiding principles include:

serving the interests of all of the beneficiaries

securing / protecting trust property

animosity is a disincentive

In deciding who a new trustee should be the starting point is the settlor’s wishes. However where

these cannot be discerned with any particularity, the next consideration is to infer from

appointment made by the settlors. Neutrality is important. As noted at [37]:

“The weight the courts place on neutrality as between beneficiaries, and the courts’

refusals to appoint even people with indirect interests in trust property, strongly favours

appointment of a professional trustee. That would tend to exclude [related party

nominations] … While I have no reason to think [professional trustee] would be partial to

its nominator’s interests, I acknowledge appearances of partiality are still material, and its

particular appointment was opposed by the plaintiffs.”

As further noted at [38]:

” … promotion of the [Trust’s] purposes requires the trustee to stand back from the

present contests, objectively to consider exactly what those purposes are and how they

are best to be promoted. To my mind, that is presently best achieved by appointment as

trustee of an experienced trust lawyer, desirably with experience in negotiation and

mediation techniques as means of dispute resolution.”

The decision in Meritus Trust Company Limited v Butterfield Trust,38

a decision of the Supreme

Court of Bermuda, considers another aspect of reluctant retirement or removal, which is the

practical matter of whether a removed trustee can retain sufficient trust assets against which to

enforce its indemnity in relation to a contingent costs liability.39

In this case the contingent costs

liability was estimated at $5 million and related to the defence of the threatened claim in respect of

the removed trustee’s management of the trust assets.

As stated in the decision “The changing of the guard took place under the dark cloud of a

threatened claim against the former Trustee and so the transfer process was, from the outset,

somewhat prickly.”

37

[1999] 2 NZLR 88 (CA) at 97 38

[2017] SC (Bda) 82 Civ (13 October 2017) 39

Note that s 27(d) and 30 of the Trustee Act 1975 (Bermuda) are substantially based on s 39(2) and 40 of

the Trustee Act 1925 (England and Wales), which are substantially similar to s 45 and 47 of the Trustee Act

1956 (New Zealand).

CCH – August 2018

16

In simple terms the removed trustee wanted to retain some trust assets so that it was protected for

its costs; the new trustee was of the view that all assets should be transferred to the new trustee.

The Supreme Court of Bermuda concluded that the removed trustee “… is neither entitled to retain

any part of the trust assets as security for its equitable indemnity as former Trustee of [the Trusts]

nor to an equitable contractual indemnity.

The reasoning for this decision provides a useful overview of the law regarding trustees’ rights of

indemnity. The discreet point highlighted in the decision is that trustees have no right of retention

of trust property after trust’s assets have vested in a new trustee. See Lewin on Trusts40

:

“17-031 A trustee’s rights of indemnity under the general law consist of reimbursement,

exoneration, retention and realisation. A trustee who ceases to hold office and to have the

trust property vested in him must lose his right of retention for he has ceased to retain the

trust property….An outgoing trustee might retain his rights of retention by deferring vesting

of some or all of the assets pending settlement of claims….

17-033 Further, retention of assets by an outgoing trustee is inconsistent with the statutory

provision which requires that on an appointment of new trustees any assurance or thing

requisite for vesting the trust property in the new trustees should be executed or done. We

do not consider that this statutory provision imposes an absolute bar on retention by a

former trustee as an incident of his right of indemnity, and indeed there is English,

Australian and Cayman authority suggesting that there is a continuing right of retention

against new trustees. But normally the trust property will be vested in the new and

continuing trustees and the former trustee will be protected either under his continuing

rights of reimbursement and exoneration under the general law or, most often, under

express indemnity and, where appropriate, express security arrangements.” [Emphasis

added]

The following consideration of whether a trustee’s equitable right to an indemnity included

a right of retention which could be asserted against a new trustee by Brerton J in Lemery

Holdings Pty Ltd v Reliance Financial Services Pty Ltd41

provides is a useful consideration

of the relevant authorities:

“13 The relevant principles concerning a trustee’s right of indemnity against trust

assets include the following, for which I am indebted in large part to the analysis

by Austin J in Trim Perfect Australia v Albrook Constructions [2006] NSWSC 153,

[20].

14 First, as against a third party, a trustee is personally liable for debts and

liabilities incurred in its capacity as trustee [Vacuum Oil Co Pty Ltd v Wiltshire

(1945) 72 CLR 319; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360,

367].

15 Secondly, however, the trustee has a right of indemnity out of the trust assets

for expenses or liabilities incurred by the trustee, by recoupment of expenditure

and exoneration from liability [Octavo Investments, 367; Chief Commissioner of

Stamp Duties for New South Wales v Buckle (1998) 192 CLR 226, 245].

16 Thirdly, this right of indemnity, recoupment and exoneration is secured by an

equitable lien over the trust assets, which arises by operation of law and confers a

proprietary interest, in the nature of a security interest, in the trust assets, and

40

Nineteenth Edition 41

[2008] NSWSC 1344


17

takes priority over the claims of beneficiaries [Octavo Investments v Knight, 367,

370; Chief Commissioner of Stamp Duties v Buckle, 246].

17 Fourthly, this equitable lien extends to all of the trust assets, save only those

that are specifically excluded by the trust instrument [Dowse v Gorton [1891] AC

190; Octavo Investments v Knight, 367].

18 Fifthly, being an equitable lien, the security is enforceable by the trustee only

by judicial sale or appointment of a receiver, and not by foreclosure nor by sale

out of Court [Tennant v Trenchard (1869) LR 4 Ch App 537; ANZ Banking Group

Ltd v Intagro Projects Pty Ltd [2004] NSWSC 1054, [14]; Melbourne Tramways

Trust v Melbourne Tramway & Omnibus Company Ltd (1887) 13 VLR 487, 490;

Re Pumfrey (1882) 22 Ch D 255, 265; Re Stucley [1906] 1 Ch 67; Davies v

Littlejohn (1923) 34 CLR 174, 184; Hewett v Court (1983) 149 CLR 639, 663;

Sykes & Walker, The Law of Securities, 5th ed, (1993) Lawbook Co, 198].

19 Sixthly, the right of indemnity accrues at the time the obligation is incurred

[Xebec Pty Ltd (in liq) v Enthe Pty Ltd (1987) 18 ATR 893; Southern Wine Corp

Pty Ltd (in liq) v Frankland River Olive Co Ltd [2005] WASCA 236; (2005) 31

WAR 162, [30]], and is not subsequently lost by cessation of office, whether by

retirement or removal [Xebec v Enthe, 898; Coates v McInerney (1992) 7 WAR

537; Southern Wine Corp v Frankland River Olive Co, [30]; Dimos v Dikeakos

Nominees Pty Ltd (1996) 68 FCR 39, 43].

20 Seventhly, upon bankruptcy or liquidation of a trustee, its right of indemnity

vests in its trustee in bankruptcy or liquidator [Official Assignee of O’Neill v O’Neill

(1898) 16 NZLR 628; Jennings v Mather [1901] 1 QB 108, 117; Savage &

Whitelaw v Union Bank of Australasia Ltd (1906) 3 CLR 1170, 1188, 1196; Octavo

Investments v Knight; Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99, 109;

(1983) 7 ACLR 873, 882].

21 Eighthly, if the trust property is transferred to a new trustee, the lien survives

and the new trustee takes subject to the lien of the old trustee – except perhaps in

the exceptional case of a bona fide purchaser for value without notice [Belar Pty

Ltd (in liq) v Mahaffey [1999] QCA 2; [2000] 1 Qd R 477, [20]; Octavo Investments

v Knight, 370; Chief Commissioner of Stamp Duties v Buckle, 246; Re Exhall Coal

Co Ltd (1866) 55 ER 970].

22 Ninthly, a trustee is entitled to retain possession of trust property against a

beneficiary until its indemnity is exercised [Octavo Investments v Knight, 369-370;

Chief Commissioner of Stamp Duties v Buckle, 246; Re Exhall Coal Co Ltd, 972;

Re Enhill Pty Ltd [1983] 1 VR 561].

Also see S and S Limited v XYZ Limited42

where the New Zealand High Court declined to uphold

caveats that had been lodged against former trust property to support an equitable lien arising

from a trustee’s right of recourse to trust assets distributed from the trust of which the plaintiff to a

subsequent trust to discharge liabilities incurred and recoup expenses paid as a trustee in

circumstances where the liabilities referenced were potential liabilities that had not yet crystalised.

Beneficiary consent

When the assistance of the court is required to facilitate the appointment and removal of trustees

or related vesting orders it is important to consider any competing interests. While it can be

argued that consent is not required from beneficiaries due to the mechanical nature of trustee

42

[2016] NZHC 16

CCH – August 2018

18

appointment and retirement and the fact that this does not affect the rights of any beneficiaries43

,

it can be prudent to obtain consent from the Trust’s beneficiaries. However, when there are wide

classes of beneficiaries a relevant consideration can be how widely consent should be

canvassed. In Neverman v Hudson44

the Court raised the question as to whether (when all of the

discretionary beneficiaries had consented to the application) the consent of “any issue of any final

beneficiary” should also be required. In that case the Court was satisfied that the issue of final

beneficiaries was adequately provided for as set out in the memorandum of guidance and their

consent was not required.

Conclusion

Appointment, retirement and removal of trustees is a regular occurrence. However, it is important

to consider each situation in its own context to determine how the appointment, retirement or

removal should be effected. Matters to take into consideration include recognising and

addressing the fiduciary elements of the appointor’s powers; correct documentation; and if the

assistance of the High Court is required, to identify the correct provisions of the relevant

legislation, or whether the inherent jurisdiction of the High Court will be required to be prevailed

upon before filing an application. Many applications to the court could be avoided through regular

review of trustees and trust management so that trustees could retire before losing capacity or

becoming entrenched in dead lock.

43

Marshall Family Trust [2017] NZHC 472 at [8] 44

NZHC [2015] 2065


19

Appendix

Trustee Act 1956

43 Power of appointing new trustees

(1) Where a trustee (whether original or substituted, and whether appointed by the court or

otherwise)—

(a) is dead; or

(b) remains out of New Zealand for the space of 12 months during which no delegation of

any trusts, powers, or discretions vested in him as such trustee remains in operation

under section 31; or

(c) desires to be discharged from all or any of the trusts or powers reposed in or conferred

on him; or

(d) refuses to act therein; or

(e) is unfit to act therein; or

(f) is incapable of so acting; or

(g) being a corporation, has ceased to carry on business, is in liquidation, or is dissolved,

then—

the person 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 for the time being, or the personal representatives of the last

surviving or continuing trustee, may by deed appoint a person or persons (whether or not being

the person or persons exercising the power) to be a trustee or trustees in the place of the first-

mentioned trustee.

(2) On the appointment of a trustee or trustees for the whole or any part of trust property—

(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, and whether or not new trustees are or

are to be appointed for other parts of the trust property; and any existing trustee may be

appointed or remain one of the separate set of trustees; or if only 1 trustee was originally

appointed, then 1 separate trustee may be so appointed for the first-mentioned part; and

(c) it shall not be obligatory to appoint more than 1 new trustee where only 1 trustee was

originally appointed, or to fill up the original number of trustees where more than 2

trustees were originally appointed; but, except where only 1 trustee was originally

appointed, a trustee shall not be discharged under this section unless there will be either a

trustee corporation or at least 2 individuals to act as trustees to perform the trust; and

(d) any assurance or thing requisite for vesting the trust property, or any part thereof,

jointly in the persons who are the trustees shall be executed or done.

(3) Where a trustee has been removed under a power contained in the instrument creating the

trust, a new trustee or new trustees may be appointed in the place of the trustee who is removed,

as if he were dead, or, in the case of a corporation, as if the corporation had been dissolved, and

the provisions of this section shall apply accordingly.

(4) The power of appointment given by subsection (1) or any similar previous enactment to the

personal representatives of a last surviving or continuing trustee shall be and shall be deemed

CCH – August 2018

20

always to have been exercisable by the executors for the time being (whether original or by

representation) of that surviving or continuing trustee who have proved the will of their testator or

by the administrators for the time being of that trustee without the concurrence of any executor

who has renounced or has not proved:

provided that a sole or last surviving executor intending to renounce, or all the executors where

they all intend to renounce, shall have and shall be deemed always to have had power, at any

time before renouncing probate, to exercise the power of appointment given by this section, or by

any similar previous enactment, if willing to act for that purpose and without thereby accepting the

office of executor.

(5) Where a sole trustee is or has been originally appointed to act in a trust, or where, in the case

of any trust, there are not more than 3 trustees either original or substituted and whether

appointed by the court or otherwise, then and in any such case—

(a) the person or persons nominated for the purpose of appointing new trustees by the

instrument, if any, creating the trust; or

(b) if there is no such person, or no such person able and willing to act, then the trustee or

trustees for the time being—

may, by writing, appoint a person or persons (whether or not being the person or persons

exercising the power) to be an additional trustee or additional trustees, but it shall not be

obligatory to appoint any additional trustee, unless the instrument, if any, creating the trust, or any

statutory enactment provides to the contrary:

provided that an additional trustee or additional trustees shall not be appointed under this

subsection without the consent of—

(a) the trustee or trustees for the time being; or

(b) the court.

(6) 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.

(7) The provisions of this section relative to a trustee who is dead include the case of a person

nominated trustee whether sole or otherwise in a will, and who dies 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.

(8) The provisions of this section relative to a person nominated for the purpose of appointing new

trustees apply whether the appointment is made in a case specified in this section or in a case

specified in the instrument, if any, creating the trust, but where a new trustee is appointed under

this section in a case specified in that instrument, the appointment shall be subject to the terms

applicable to an appointment in that case under the provisions of that instrument.

(9) In this section the term trustee does not include a personal representative as such.

45 Retirement of trustee

(1) Where there are 2 or more trustees—

(a) if one of them by deed declares that he is desirous of being discharged from the trust,

and

(b) if his co-trustees and such other person (if any) as is empowered to appoint trustees

by deed consent to the discharge of the trustee, and to the vesting of the trust property in

the co-trustees alone—

then, subject to the provisions of subsection (3), 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 and done.

(3) Except where only 1 trustee was originally appointed, a trustee shall not be discharged under

subsection (1) unless there will be either a trustee corporation or at least 2 individuals to act as

trustees to perform the trust.

46 Discharge of trustee with assistance of court or Registrar


21

(1) Where any trustee is desirous of being discharged from his trust he shall be entitled to retire

therefrom on passing his accounts before the Registrar, and giving notice of his retirement to his

co-trustees (if any), and to such other person (if any) as is empowered to appoint new trustees.

(2) If such co-trustees, or such other person as aforesaid empowered to appoint new trustees, or

any of them, refuse or neglect to appoint a new trustee or to consent to such appointment in place

of the trustee so retiring, or if the retiring trustee is the sole trustee having power to appoint a new

trustee, but the exercise of that power is impracticable or difficult without the assistance of the

court, it shall be lawful for the retiring trustee to apply to the court for the appointment of a new

trustee in his place.

(3) The court may, upon any such application, make an order appointing some proper person as

trustee in place of the trustee so desirous of being discharged from his trust, and direct any

accounts and inquiries to be made, and make an order discharging the trustee from the trust and

from all liability in respect thereof, and may make such order as to costs or otherwise as it thinks

fit, and may exercise any of the powers contained in Part 5; and the person who upon the making

of the order becomes trustee shall have the same rights and powers as he would have had if

appointed by judgment in an action duly instituted.

(4) If the court, on an application under subsection (2) by a trustee other than a supervisor,

appoints Public Trust as the replacement trustee, Public Trust must accept the appointment.

(5) In subsection (4), supervisor means a person appointed as a supervisor within the meaning of

section 6(1) of the Financial Markets Conduct Act 2013.

51 Power of court to appoint new trustees

(1) The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is

found inexpedient, difficult, or impracticable so to do without the assistance of the court, make an

order appointing a new trustee or new trustees, either in substitution for or in addition to any

existing trustee or trustees, or although there is no existing trustee.

(2) In particular and without prejudice to the generality of the foregoing provision, the court may

make an order appointing a new trustee in substitution for a trustee who—

(a) has been held by the court to have misconducted himself in the administration of the

trust; or

(b) is convicted of a crime involving dishonesty as defined by section 2 of the Crimes Act

1961; or

(c) is a mentally disordered person within the meaning of the Mental Health (Compulsory

Assessment and Treatment) Act 1992, or whose estate or any part thereof is subject to a

property order made under the Protection of Personal and Property Rights Act 1988; or

(d) is a bankrupt; or

(e) is a corporation which has ceased to carry on business, or is in liquidation, or has been

dissolved.

(3) An order under this section, and any consequential vesting order or conveyance, shall not

operate further or otherwise as a discharge to any former or continuing trustee than an

appointment of new trustees under any power for that purpose contained in any instrument would

have operated.

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

(5) Every trustee appointed by the court shall, as well before as after the trust property becomes

by law, or by assurance, or otherwise, vested in him, 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.

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TRUSTEE APPOINTMENT AND RETIREMENT IN PRACTICE - Wolters Kluwer New … · 2018. 8. 10. · particular it appeared that Kairos was incorporated in New Zealand in 2011, was wholly