6.51The following persons may remove a trustee under section 43 of the Trustee Act:
6.52In most cases, continuing trustees or someone with the power to appoint or remove trustees under the trust deed will be able to remove trustees where necessary. However, issues may arise where there is no such person, or where they are unavailable. This would be a particular problem if a sole trustee becomes subject to a property order or a corporate trustee enters into liquidation.
6.53The options are:
6.54Most submitters expressed support for including liquidators of corporate trustees in the category of persons who can remove and replace a trustee. Those in support argued that this would avoid the costs of court proceedings that might otherwise be necessary. Those opposed considered that there was no basis for giving this power to the liquidator. The NZLS noted that there may be issues with a conflict of interest arising from the trustee’s right of indemnity against the trust assets and that the liquidator should therefore be entitled to seek direction from the court.
6.55Some submitters supported including those with an enduring power of attorney or property managers under the PPPRA in the category of persons who can remove and replace a trustee. They considered that it would be helpful as it would avoid court proceedings that might otherwise be necessary. The Ministry of Social Development (MSD) was not in favour because they considered that the role of the property manager or holder of an enduring power of attorney is to look after the incapacitated person’s personal affairs. The property manager or attorney owes specific duties to the person who is unable to manage their own property; and it is not appropriate to extend the role of these personal representatives and impose duties in respect of a trust.
6.56There are practical advantages in allowing a personal representative to remove a trustee in some circumstances. However, there are also risks in this approach and it is important that these are adequately addressed.
6.57The removal of a sole trustee who is subject to a property order or for whom a trustee corporation has been appointed to act as a property manager is likely to raise particular issues, as these trustees may be unable to participate meaningfully in their own removal. The obvious person to remove a trustee if there is no-one else available is the personal representative of the trustee being removed, whether the holder of an enduring power of attorney or a court appointed property manager. Adding these categories would prevent the need for court proceedings to remove a trustee in non-contentious cases, and thereby reduce the costs to the trust and the risk that the trustee may continue in office despite the incapacity. We consider that these representatives would be in good position to remove the trustee and appoint a replacement because they would already be familiar with the affairs of the trustee being removed.
6.58Despite the points made by the MSD, our view is that the power to remove the trustee is consistent with the existing roles of these personal representatives. The power to appoint new trustees is an extension of the role. It is consistent with the current approach of allowing the personal representative of a deceased trustee to appoint a replacement. Given that these issues only arise if there is a sole trustee in office and no-one with the power to appoint and remove trustees, the personal representative of the trustee is likely to have some level of involvement, and may be the only person aware of the situation and competent to act. If the property manager fails to remove the trustee, it will put the incapacitated trustee at risk of liability, something from which a property manager is required to protect the trustee.
6.59Supervision by the Public Trust under the proposal would follow a similar process to that provided when a sole trustee retires. The Public Trust will be empowered to advise the personal representative as to the process and factors which should be considered in selecting a suitable replacement trustee. The personal representative will select a replacement and notify beneficiaries of the proposed appointment. If no beneficiaries object, the personal representative would then apply to the Public Trust to confirm that the notice provisions have been complied with and the accounts are in order. The personal representative will then execute the removal and replacement from office by deed.
6.60If the Public Trust determines that the accounts are in disarray or if the beneficiaries object to the proposed appointment, the personal representative will need to apply to the court to approve the appointment. The court will also be able to make other necessary orders in respect to the trust, for example directing the newly appointed trustee to undertake an independent audit.