LWB Murray McCarthy

Week 10
CAPACITY, APPOINTMENT AND REMOVAL OF TRUSTEES

ELEMENT 1: State the Parties

ELEMENT 2: CAPACITY

 The general principle is that in Queensland any person who is capable at law of holding property
may be a trustee.

Section 6 of the Trusts Act 1973, defines the persons by whom the statutory powers of a trustee may be
exercised as follows:
 Natural Persons: TA s.6
 Corporations TA s.5
 Custodian Trustees: TA s.19
 Public Trustee: Public Trustee Ac 1978
 Statutory Trustee Companies: Trustee Companies Act 1974
- Qld Trustees Lt and The Union Fidelity Trustee Co. of Australia can be trustee companies
 Crown
- can be trustee if chooses (Civilian War Claimants) but not compelled to (R v Mason)

Examples of People who don’t have capacity include:

 People of unsound mind
 Infants
- The general law, whilst not prohibiting an infant from being a trustee prevents the infant from effectively
doing any act which involves the exercise of a discretion, and because of this an infant trustee could be
removed on application to the Court. Provision is made in s12(1)(g) for appointment of new trustees on
the ground of infancy.
 Bankrupts
- There is no rule of law which prevents a bankrupt being a trustee but bankruptcy is a ground of removal
and a bankrupt may lack capacity to exercise necessary power.
- Refer s.12(1)(e)

ELEMENT 3: APPOINTMENT

Original Trustees

 A person can become a trustee either expressly (under an express trust), by implication (under an
implied trust), or by operation of law (under a constructive trust).

 A person who has been appointed expressly as trustee does not assume that office until acceptance of the
trust expressly (eg., by executing the trust deed) or impliedly (by conduct inconsistent with disclaimer).
 A person cannot be compelled to accept appointment, but if he or she wishes to disclaim, s/he must do so
before taking any action in respect of the trust.

New Trustees

New trustees can be appointed either 3 ways:

 Under an express power contained in the trust instrument;
 Under statutory power; OR
 By the Court.

1. Express

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 Usually there is a power of appointment clause in the trust instrument which gives someone a right to
choose new trustees in the event of certain prescribed circumstances
2. Appointment under Statutory Power
 Appointment under statutory power is governed generally by the provisions of the Trusts Act 1973.
 In QLD, the Trust Act takes precedence over the trust instrument – s.10 “applies whether or not a contrary
intention is expressed in the trust instrument”

A new trustee may be appointed in the following circumstances:s.12(1)

(a) Dead s.12(1)(a)

(b) Remains out of the State for more than one year without having delegated the execution of the trust;
Re Walker
- D tried to appoint a new trustee in place of his co-trustee under a similar statutory provision
- Co-trustee had remained out of UK for more than 12 months but for a 1 week period during that 12
months, he had returned to London to attend business of the trust.
Held
- Court held that the power to appoint had NOT arisen because he came back for 1 week.

(c) Trustee seeks to be discharged

(d) Trustee refuses to Act

Re Birchall
- Trustee refused to act unless he was remunerated
- Trustee just did nothing for 9yrs
- Court held that this was a disclaimer by conduct
- So the power to appoint arose

(e) Trustee unfit to act

 Eg – Bankruptcy
Miller v Cameron
- Authority for proposition that in determining whether it is proper to remove the trustee, the court will
regard the welfare of beneficiaries as the dominant consideration
- Sole trustee was solicitor with wide discretionary powers under trust instrument
- The trust property was worth about 40 000 pounds
- Trustee had no money and had assigned his estate to the benefit of his creditors
- He had been found to have defrauded his partner in a legal practice
- All beneficiaries unanimously asked him to retire – he refused
- Bankruptcy was a persuasive factor that he wasn’t a fit and proper person.
 Trustee absconds
 Trustee committed a breach of trust – in exam if a trustee has breached trust, can use s.12 to remove the
trustee.

(f) Trustee is incapable of acting

Re East
- East became of unsound mind
- Wasn’t officially declared insane but court considered there was sufficient evidence
- Therefore no official finding necessary

(g) Trustee is an infant

(h) Trustee is a corporation and has ceased business or is under official management, is in liquidation or
has been disolved

 Assuming that the right to appoint has been triggered because it falls within one of the
categories in s.12(1) – you then need to establish who can exercise the right to appoint.

WHO may appoint?? Section 12 authorises the following persons to appoint new trustees:
 the person nominated by the trust instrument (if any); - if not THEN

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 the surviving or continuing trustee or trustees; - if not THEN
 the personal representative of the last surviving or continuing trustee.

How to Appoint?
 Appointment Of New Trustee Must Be Made In Writing – S.12(1)
 Powers of new Trustees are the same as if trustee originally appointed – s.12(6) TA

3. Judicial Appointment
 The courts power is derived either from Inherent Power or Statutory Power

Inherent Power: Expedience

 The court also has an inherent power to appoint new trustees either as replacements or additional trustees.
 If its expedient in the best interest of the beneficiary to appoint a new trustee then that is what the court is
allowed to do in the exercise of its discretion
Princess Ann of Hest v Fields
- Testator’s widow sought to have the trustees of her husband’s estate removed
- She asserted that there were conflicts of duty and interest and duty and duty
- Court will consider the situation very broadly from the position of the estate and the welfare of the estate
- Trustee in fact administered the estate well – also this estate was complex.
Held
- Even though there were potential conflicts, the knowledge required led the court to leave the people as they
were.
- Thus mere friction and desire of beneficiary insufficient.

Statutory Power – s.80 TA

 S.80(1) - Court may appoint a new trustee where it would be inexpedient, difficult or impracticable to
appoint a new trustee without the court’s assistance.

 S.80(2) gives the court broad power to appoint new trustees in substitution of an old trustee where the
existing trustee is one of the following:
- seeking discharge
- has been convicted of a crime or misdemeanour
- is a bankrupt
- is a corporation in trouble
- or is otherwise undesirable as a trustee

 s 81 newly appointed trustees has same powers and discretion as original appointment
 s 79 states that TA takes precedence over the statutory instrument.

Vesting of Trust Property

 generally instrument of appointment will vest trust property in new trustee
 obligation of new trustee to ensure that all registrations and notices are effected to vest property in
themselves
 if there are any difficulty encountered – e.g. uncooperative previous trustee
- s 82 – court can make vesting order
- s 83-89 gives court extensive power to make vesting orders in particular situations
- s 90 – effect of vesting order is that it vests property to new trustee without need for conveyance,
transfer or assignment.

ELEMENT 4: Termination of Trusteeship

A person may cease to be a trustee in four ways:

1. By death;
2. By retirement;
3. By removal by the Court; and
4. By completion of the Trust purpose or termination by the beneficiaries.

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(i) Death
 Where there’s more than 2 trustees, survivor can continue to act and appoint new trustee
 if there is only 1 trustee, office of trustee does not go to deceased trustee’s legal representative. But s 12
TA gives legal representation power to appoint new trustee.
 in Qld, if you have 1 trustee and they die, trust assets devolve upon public trustee until new trustee is
appointed.
 proper practice is to vest trust property in trustees as joint tenants

(ii) Retirement

Once trustee accepts office, can only retire via

(a) Trust instrument
- The trust instrument may permit the trustee to do so – ie specific provision
(b) Trust Act
 s 12 – trustee may retire upon appointment of replacement trustee
 s 14 – expands this, trustee may retire where
1. there will be 2 remaining individual trustees or a trustee corporation and
2. the trustee has to retire by writing and
3. co-trustees must consent by writing
 s 80 – court may make order allowing trustee to be discharged and appoint a replacement.
(c) court’s inherent power
 court has inherent jurisdiction to permit trustees to retire and discharge duties.

 A retiring trustees may be liable for any losses caused by their retirement or handling over their trust
property before a new trustee has been validly appointed

(iii) Removal

A trustee may be removed in the following ways:

(a) trust instrument
 note s 10 and 79 – TA takes precedence over trust instrument
 trust instrument cannot restrict statutory grounds for removal, but it may add more.
(b) Trust Act
 s 12 – permits replacement for the reasons listed above in s 12 discussion
(c) court’s inherent power
 s 80 – permits court to remove where ‘expedient’
 s 80(2) – some circumstances which will warrant removal – if trustee  see above
 mere conflict with beneficiaries is insufficient to remove trustees – court’s principle consideration will
be the welfare of the beneficiaries and may factors will be considered –
Re Whitehouse
- W and wife were trustees of family trust for sons
- wife had mental breakdown, W had history of animosity with sons
- sons applied for removal of their father as trustee on numerous grounds, including failure to keep proper
accounts.
Held
- father found difficulty from making transition as a parent to that as a trustee which requires a different
approach
- followed Lettersted v Brewers that main guide for removing trustees must be the welfare of the
beneficiaries
- held that father’s bad attitude has carried over to duty of trustee,
- if all there existed were disputes and animosity between trustee and beneficiary, and the trust was
satisfactorily administered, then trustee should not be removed
- so court will remove trustee if friction between beneficiaries and trustees obstructs administration of the
estate and there’s no hope of improvement
- but importantly, court will be wary not to remove trustees if the friction is not the fault of the trustee –
otherwise beneficiaries would be too powerful

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(iv) Completion of Trust Purpose

Rule in Saunders v Vautier

 Trustee can receive formal discharge from duties when their trusteeship is complete
 Trustee can call for his account to be settled and receive a formal discharge if:
- beneficiaries must be suis juris (of legal age) and
- beneficiaries must be absolutely entitled (not discretionary trust – fixed only)
- beneficiary can call upon the trustee to transfer the trust property and terminate the trust.

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