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 : 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:
- The court’s main guide is the welfare of the beneficiaries.
- In cases of positive misconduct the court will have no difficulty in removing trustees who have abused their trust.
- Where trustees are merely incompetent that is not enough to remove them; trustees must breach the confidence that comes with a fiduciary relationship
- Removal of a trustee will be appropriate when the continuance of the trustee would prevent the trust being properly executed
- 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 : 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 : although there is a conflict of interest here, it is a declared conflict of interest which is okay so the trustee could remain