Blog
Practical tips for trustees dealing with breach of trust allegations
Laura Phillips TEP
We are seeing an increase in enquiries from both beneficiaries of trusts seeking the removal of trustees, and from trustees facing allegations that they have not complied with their duties. Sometimes it is clear that a matter has not been dealt with appropriately by a trustee, but on other occasions this stems from a general breakdown of the relationship between the parties.
When considering the removal of trustees under its inherent jurisdiction, the Court will assess a number of factors and exercise its discretion carefully, principally guided by the welfare of the beneficiaries of the trust and the due and proper administration of the trust.
The Court will not make a decision to remove trustees lightly. These types of claims are fact specific and so a Court’s decision is likely to vary on a case by case basis.
- The welfare of the beneficiaries of the trust
The welfare of the beneficiaries of the trust is a paramount factor for the Court’s consideration. In Letterstedt v Broers [1884] the privy council expressly declined to lay down "a more definite rule in a matter so essentially dependent on details often of great nicety". The interests of the beneficiaries as a whole is always a factor for the Court, often taken together with one or more of the other below factors dependent on the facts of the case.
- The due and proper administration of the trust
A key consideration for the Court is whether the trustee or trustees remaining in office prevents the due and proper administration of the trust.
In Re Steel [2010], the executor trustees were removed because the animosity and mistrust between them meant that the due administration of the estate could not be achieved even though there had been no misconduct.
- The Trustee’s conduct and fitness to act
It is not necessary for the Court to find wrongdoing or fault, although if this is found, the Court may be more likely to remove the trustee(s). A Court may remove a trustee if they have abused their position and any misconduct has been dishonest or jeopardised the trust assets.
For example, in Alkin v Raymond [2010], the trustees of a will were removed as it was decided they could not be depended upon to administer the estate in the interests of the beneficiaries rather than in their own interests. They sanctioned a payment to a company one of the trustees owned, but it was clear the invoice was not properly calculated as being due to that company.
- Breakdown of relations between trustees and/or beneficiaries
Hostility between the beneficiary and the trustee(s) alone may not be sufficient to result in the trustee(s)’ removal, particularly where the beneficiary has generated the relevant friction or hostility as was considered in Alkin v Raymond [2010]. Hostility between trustees was relevant in Manton v Manton [2021] as it was deemed to potentially make the administration of the trust unworkable. In that case the relevant trustee had placed himself in a position of conflict by setting up a business in competition with the company held on trust.
- The Settlor’s intentions and the terms of the trust
The fact that a settlor or testator has chosen their trustee or will trustees is also a factor. For example, in Caldicott v Richards [2020], notwithstanding the potential for conflict, the Court decided not to remove the trustee because she had been appointed trustee by the settlor, her mother, who was aware of the potential for conflict. The Court will consider the views of the testator and what they were hoping to achieve if deemed a relevant factor.
Conclusion
Applications to remove trustees are highly fact-sensitive and require careful consideration of both legal principles and practical realities. If you are concerned about the administration of a trust or a trustee facing a removal application, seeking early advice can help clarify your options and protect the interests of the beneficiaries.
About the author
Cally Brosnan is an Associate in the dispute resolution team, specialising in wills, trusts and inheritance disputes.
Share insightLinkedIn X Facebook Email to a friend Print