Freyja McLoughlin of Five Paper’s Private Client team, has provided the following article to how to remove Trustsees.
Trusts are set up a for a wealth of reasons and often their trustees perform their duties diligently. However, as with all good things, they may come to an end and trustees may need to be removed willingly, or perhaps less willingly. There are numerous ways in which this can be done. This article will examine 3 mechanisms which can be utilised to bring a trustee’s appointment to an end; the express power of the trust instrument, the powers under the Trustee Act 1925 and the Court’s inherent jurisdiction.
Any application to the court for the removal of trustees is made through part 8 of the Civil Procedure Rules and must be supported by a witness statement setting out the grounds for removal, any evidence of misconduct, a draft order and the consent from the proposed replacement trustee. It is worth noting that any replacement will not come into effect until the consent of the proposed replacement has been obtained.
The below is not an exhaustive list of removal mechanisms and removal is a relatively complex exercise, it is recommended that specialist advice is always sought when considering the same.
The Trust Instrument
It may be that the author of your trust has thought ahead and considered the circumstances in which a trustee[s] may need to be removed. This is possible and is somewhat common in family trusts. In these circumstances, the express provision in the trust instrument can be utilised, which may save any trip to the Court. However, any express provision must be followed in the manner in which it has been drafted – there is not a flexibility to read between the lines or remove specific caveats. If the specific process laid out in the deed is not followed, the removal may very well be invalidated. Furthermore, if a settlor or protector who has no beneficial interest under the trust has an express power to remove trustees, the power is typically a fiduciary one. The power must therefore be exercised in accordance with their fiduciary duties, with the best interest and benefit of the beneficiaries at the forefront of their mind. Always check the trust carefully, as although it may not be possible to utilised, it may also circumvent the court’s power under the Trustee Act 1925.
The Trustee Act 1925
The Trustee Act 1925 has two specific provisions that can be utilised in these circumstances; s.36 and s.41. It may be safer to rely on a statutory provision if the express clause is unclear or of course if for some reason, it is impossible to rely on the same although the circumvention of any power needs to be considered.
S.36
The effect of s.36 is to replace a trustee, as opposed to a pure removal. Such power can typically be exercised if a trustee has died, has remained outside the UK continuously for 12 months, wishes to be discharged from duty, refuses to act, is unfit or is unsound or is not yet 18. Any replaced trustee needs to consent to act.
s.41
s.41 provides the Court with a slightly broader jurisdiction to intervene and appoint, when specific circumstances arise, these being if 1) it is expedient to appoint a new trustee[s] and 2) it is inexpedient, difficult or impracticable to do so without the assistance of the court. For example, the section can be utilised if a trustee is made bankrupt or if a corporation, has gone into liquidation.
The Broader Jurisdiction
Even broader than s.41 TA 1925, the Court maintains an inherent jurisdiction to replace or remove trustees. When the court is exercising the same, the welfare of the beneficiaries is the main consideration. The court will also consider the security of the trust property, an efficient and satisfactory execution of the trust and a faithful and sound exercise of the power conferred. It is not necessarily the case that a court has to make any finding relation to misconduct or breach before the remove a trustee and similarly a breach alone will not necessarily justify removal by the court.