Tuesday, April 11, 2023

Court's unilaterally removing trustees - the Judge will carry the Weight**

Posts over the last 2 weeks have explored a number of aspects of the super death benefit case of Marsella.

One other key aspect of the case also explored what issues a court will consider before a trustee is removed against their will.

Another View post considers a number of the key issues in this regard, as explained in the decision about one aspect of the Lang Hancock and Gina Rinehart saga (namely Hancock v Rinehart [2015] NSWSC 646).

The Marsella case quotes the decision in Elovalis v Elovalis [2008] WASCA 141 and summarises the approach the courts must take in this area as follows:
  1. In determining whether a trustee should be removed the chief consideration is the welfare of the beneficiaries.
  2. The Court will have regard to the security of the trust property, the efficient and satisfactory execution of the trust and the faithful and sound exercise of powers conferred upon the trustee.
  3. A breach of trust will not necessarily lead to the removal of a trustee, nor will the existence of a conflict between duty and interest.
  4. At times, however, such factors may be sufficient to justify the trustee’s removal.
  5. Ultimately, whether the Court exercises its discretion turns upon the circumstances of each case - or, as quoted from the case of Miller v Cameron (1936) 54 CLR 572:
'a judgment (to remove a trustee against their will) must be largely discretionary.

A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised.
But in a case where enough appears to authorise the Court to act, the delicate question whether it should act and proceed to remove the trustee is one upon which the decision of a primary Judge is entitled to especial weight.'
Thus, in Owies and Owies v JJE Nominees Pty Ltd (ACN 004 856 366) (in its capacity as trustee for the Owies Family Trust) [2022] VSCA 142 (a case also featured in other View posts) the trustee was removed due to the court concluding that over a number of years the trustee had failed to:
  1. act impartially;
  2. give real and genuine consideration to the interests of two of the three primary beneficiaries;
  3. appreciate that the relations between the beneficiaries and the trustee were irreconcilably damaged.
Therefore, it was not in the best interests of the beneficiaries for the trustee to continue in office.

Similarly, in JPD as Guardian v DMS as Trustee [2022] QSC 181 a trustee of testamentary trusts set up for infant children, who was a friend of the deceased mother, was removed by the court at the request of the father (who was divorced from the mother at the time of her death).

The reasons included the trustee:
  1. demonstrating a pattern of holding a very low opinion of the father (who had no wealth and was not in paid employment) and giving no genuine weight to the importance of his position in the children’s lives as their sole guardian and surviving parent;
  2. not making any attempt to consult with the father adequately;
  3. unilaterally reducing income distributions to the children by around 75%;
  4. purporting to evict the father and the children from a home owned by the trust, and requiring a move to a new property owned by the trust;
  5. rejecting a request (which the court believed was reasonable) by the father to move the family to Brisbane;
  6. regularly and inappropriately intervening in parenting aspects of the children.
As usual, please contact me if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Aretha Franklin song 'The Weight'.

Listen here: