Redes Inalámbricas

Retirement Removal

Challenging decisions

10.1 Capacity

s Generally any person has capacity to hold property as a trustee except that a minor cannot be a trustee of an express trust including that of personal property (Law of Property Act 1925 s 20).

s A minor, however, can be the trustee of an implied trust.

10.2 Number of trustees

s While there are no restrictions on the number of trustees of personal property, too many will make administration onerous.

s Where land is concerned there can only be a maximum of four trus-tees (Trustee Act 1925 s 34).

s There should also be a minimum of two to allow the over- reaching provisions of Law of Property Act 1925 s 2 to come into play.

10.3 Appointment of trustees

10.3.1 Order of appointment

The starting point is the Trustee Act 1925 s 36.

Chapter 10

Control of trustees

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CONTROL OF TRUSTEES

s Trustee Act 1925 s 36(1) permits a new trustee to be appointed in the place of a trustee who:

s is dead,

s or remains out of the United Kingdom for more than 12 months,

s or desires to be discharged from all or any of the trusts or powers reposed in or conferred on him,

s or refuses or is unfit to act therein,

s or is incapable of acting therein,

s or is an infant.

10.3.2 Who does the appointing of new trustees?

s Section 36(1)(a)(b) gives the order of appointment:

s Section 36(1)(a) – the person nominated in the trust instrument to appoint trustees.

s This can be a general appointment for all situations when an appointment is to be made, or

s only in a specific situation (such as if the trustee becomes incap-able; Re Wheeler (1896)).

s Section 36(1)(b) – the Surviving or Continuing Trustees.

s If there is no person appointed in the trust instrument to appoint new trustees or if, as in Re Wheeler above, the specific situation for appointment has not risen then the next persons with the right to appoint new trustees are the surviving or continuing trustee or trustees.

s The continuing trustees can also include a retiring trustee (Trustee Act 1925 s 36(8)), but not, it appears, one who has been removed as a trustee against their will.

s If there is nobody satisfying the criteria then Trustee Act 1925 s 36(1)(b) continues that personal representatives of the last or continuing trustee to die has power to appoint new trustees.

s Note that Trustee Act 1925 s 36(1) only gives the power to appoint when a new trustee replaces an existing trustee who is no longer serving for any of the reasons given above.

s New trustees should always be appointed by deed so that the trust property will then vest in them (Trustee Act 1925 s 40); though where land is concerned the land register will need to reflect the change in legal ownership also.

s Additional trustees can be appointed under Trustee Act 1925 s 36(6).

This applies to trusts with three or fewer trustees. The person nominated

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10.3 APPOINTMENT OF TRUSTEES

in the trust instrument for appointing trustees, or if none, the surviving or continuing trustees, can appoint an additional trustee or trustees but the total number of trustees must not exceed four.

10.3.3 An independent right for the beneficiaries to appoint trustees under Trusts of Land and Appointment of Trustees Act 1996 s 19 (‘TOLATA’)

s TOLATA 1996 s 19 allows the beneficiaries to appoint new trustees where:

s all the beneficiaries are of full age and capacity;

s all are absolutely entitled to the trust property;

s the trust instrument makes no provision for appointment.

s Note that this section is broader in scope than the Trustee Act 1925 s 36 as TOLATA 1996 s 19 does not require specific instances or reasons for appointment as does s 36.

Note the similarity with the Saunders v Vautier (see Chapter 2) criteria where beneficiaries can terminate a trust providing they are all of majority age, mentally competent and collectively entitled to the trust property.

Reflection Point

10.3.4 The power of the court to appoint new trustees

s Trustee Act 1925 s 41 permits the court to appoint new trustees either in substitution for an existing trustee or in addition to the exist-ing trustees or where there is no trustee.

Workpoint

Read Trustee Act 1925 s 41.

s It must be ‘inexpedient, difficult or impracticable to do so without the assistance of the court’.

s However, the court will not normally exercise its jurisdiction to do so when the s 36 mechanism could be used (Re Gibbons’ Trusts (1882)).

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CONTROL OF TRUSTEES

s Often the court will exercise its powers when

s the sole trustee dies intestate (and hence s 36 cannot be used), or

s where all the trustees of a testamentary trust predecease the testator (Re Smirthwaite’s Trust (1871)), or

s where a sole trustee is incapable of acting (Re Phelps Settlement Trusts (1885), where the trustee was in his mid- 80s and deaf and unsound in mind), or

s where there is significant friction between trustees (who must usually act unanimously) (Re Lemann’s Trust (1883)).

10.3.5 Rules about order of appointment

s The rules are applied strictly in order.

Case:

Re Higginbottom (1892) (A pre- s 19 TOLATA 1996 case)

The executor of a sole surviving trustee who had now died was intending to appoint a new trustee under the relevant statutory power. However, the beneficiaries wanted their own choice and petitioned the court to appoint instead.

Held

The statutory power to appoint took precedence over the court’s power; hence the executor’s choice of trustee was appointed.

s If two or more persons have power to appoint trustees they must exercise it jointly.

s In Re Sheppard’s Settlement Trusts (1888), two persons were appointed in the trust instrument to nominate new trustees. They disagreed on who to appoint, and consequently they lost their priority and the exist-ing trustees were now entitled to appoint under the statutory power.

10.4 Removal of trustees

10.4.1 Trustee Act 1925 s 36(1) permits a trustee to be removed who is

s out of the United Kingdom for at least 12 months, s refusing to act,

s unfit to act, s incapable of acting,

providing the trustee is replaced with a new trustee.

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10.4 REMOVAL OF TRUSTEES

10.4.2 TOLATA 1996 s 19 permits the beneficiaries who are

s all of sound mind, s have full capacity and

s are collectively entitled to the trust property (and nobody is nomi-nated in the trust instrument to appoint new trustees),

to remove a trustee for ‘any reason’.

10.4.3 The court also has an inherent jurisdiction to remove trustees where

s the court is satisfied that the trustee’s conduct is such to be prejudi-cial to the due performance of the trust and to the beneficiaries (E v E (1990));

s where the trustee is ignoring his duties to the trust (Walker v Walker (2010));

s dishonesty by the trustee (Re Lemann’s Trust (1883));

s bankruptcy by the trustee (Re Barker’s Trust (1875));

s where the trustee is guilty of a serious conflict of interest (Moore v M’Glynn (1894)).

An important point to consider is whether hostility or difficulties between the trustee and the beneficiaries is a valid ground for removal.

s The general rule is that such things are not a valid ground for removal unless the proper execution of the trust was being affected.

s In Letterstedt v Broers (1884) it was held that the courts’ main guide must be the welfare of the beneficiaries; hence if there is serious ongoing friction the court will remove the trustees.

In Kershaw v Micklethwaite (2011) the judge stated that a relevant con-sideration was the intention of the testator in appointing the trustee:

s Would the testator have appointed the trustee if he did not think the trustee would be competent?

s Also the costs of administration in appointing the new trustee was a further factor.