It is perhaps inevitable that occasionally disagreements will arise between trustees as to how to administer and manage the trust and its assets under your control. If those disagreements escalate to the extent that trustees can no longer work together, and if attempts at negotiating a peaceful departure fail, an approach to the High Court for a trustee’s removal may be unavoidable.
But who can apply to court and what must you prove in order to succeed? We discuss the “determinative test” applied in such matters in the context of a recent Supreme Court of Appeal case which involved substantial assets, accusations of criminal and oppressive conduct, vendettas, conflicts of interest and the like.
“…where there is disharmony, the essential test is whether it imperils the Trust estate or its proper administration” (extract from judgment below)
Trustees are of course supposed to work together to protect and further the interests of their trust and its beneficiaries, but the fact is that on occasion serious disputes can and do arise.
If settlement negotiations fail and if there is no alternative but to forcibly remove a trustee our courts have the power to do so, on the application of either the Master of the High Court or of “any person having an interest in the Trust property”.
What must you prove for removal?
As to the grounds on which a court will agree to remove a trustee, a recent Supreme Court of Appeal (SCA) judgment confirms that “loss of mutual trust and respect does not, without more, translate to a ground for the removal of a trustee, or to a conclusion that the Trust property has been imperiled [Put at risk of being harmed, injured, or destroyed]. It must further be established that, as a result, the Trust property has been imperiled or the administration of the Trust and the management of its property are at risk. That is a factual enquiry… The determinative test is always whether any state of affairs – be it incompetence, misconduct, incapacity, or lack of trust and respect among trustees or beneficiaries – has resulted in the Trust property or its proper administration being placed at risk.” (Emphasis supplied).
Importantly the Court added that in exercising its power to remove a trustee, “the courts do so with circumspection”.
Your work, in other words, is cut out for you.
Fighting in a family trust – the outcome
PS Family disputes should generally never go to court. Facilitated negotiation (aka Mediation) with an accredited and experienced mediator, has a very high success rate, can be attended to without undue delay, and at a fraction of the cost of High Court litigation. Chat to us for more information in this regard. Call Chris at 021 424 3937 ext 313, or 082 491 0032 or email us at firstname.lastname@example.org.
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