What is a Trust?
A trust is an entity that is created for the benefit of the beneficiaries when one passes away. A trust appoints a trustee to hold any assets and properties, and to distribute those assets and properties to the beneficiaries of the trust.
What happens if a Trustee goes rogue?
Despite the trustee meaning to act in the best interest of the trust and its beneficiaries, the opposite can occur, and a trustee may be completely mismanaging the trust and abusing it for their own financial benefit, thus prejudicing the beneficiaries.
Can you remove the rogue Trustee?
The Trust Property Control Act places a duty on a trustee to act “with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another”. Where a trustee is breaching this duty of care, it is possible to have them removed.
Although the Act does not provide other reasons for removing a trustee other than that they must act with care, diligence and skill, there has been recent case law which stresses reasons why. The court stressed four grounds for the removal of a trustee:
- The power of the trustee must be exercised with circumspection (i.e. care);
- That mala fides (bad faith) and misconduct is not required to be proven;
- The overriding question is whether or not the conduct of the trustee imperils the trust property or its proper administration; and
- The decisive consideration is the welfare of the trust beneficiaries.
If the above four requirements are present, a trustee can be removed as they are not acting in the best interests of the trust and its beneficiaries, and new trustees must be appointed who will act in the best interests of the beneficiaries.
