Last week, we had a situation where under the terms of a trust deed, the principal or appointor (ie the person with the right to unilaterally remove the trustee) had become automatically disqualified.
This type of provision is not unusual in a trust deed, however the exact mechanisms by which the disqualification took place were somewhat unique.
In this particular situation, the appointor was disqualified from acting if they left the jurisdiction that the trust was set up in (which was New South Wales).
The issue had never come up before until it was an issue, with the appointor now wanting to exercise its powers to remove the existing trustee; and the trustee wanting to resist their removal.
The trustee challenged the proposed unilateral removal by the appointor on the basis that the trust deed no longer gave the appointor the relevant power because the appointor was living in Victoria.
On a plain reading of the deed, the advice to the trustee was; yes, they were correct, and the appointor had been automatically disqualified.
Therefore, not only could the (former) appointor not remove the trustee, there was likely the ability for the trustee to proceed with a variation to appoint a new (friendly) appointor. An approach assisted by the fact that variations under the deed did not require appointor consent.
The situation is (yet) another reminder that before taking any step in relation to a trust; read the deed.
** for the trainspotters, the title here is riffed from the only song I could find with the word disqualification in it, ‘The Winner’ by Coolio.