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Palmer v Palmer [2018] QSC 217

In Palmer, a principal beneficiary under the trust applied to the court to replace his brother and join his son (who was in USA at that time) as a co-trustee of a trust and secondly, to have the appointor under the will’s testamentary trust removed.

In observations and reasons for decision the trial judge provided a helpful review of the legal principles:

PRINCIPLES OF REMOVING AND SUBSTITUTING A TRUSTEE

The removal and appointment of a trustee is based either on section 80 of the Trusts Act 1973 or on the court’s inherent jurisdiction. Under section 80, the court may appoint a new trustee, either in substitution or in addition, whenever it is expedient to do so. The primary consideration should be the interests of the beneficiaries.

There were two steps involved in the application of the beneficiary: the first was whether his brother should be removed from the position of a trustee and the second whether the beneficiary himself should be substituted for him.

In deciding on the first step, the crucial matters were that a trustee intended to resign as trustee soon and his co-trustee was in the process of relocating from the United States to Australia. The court held that in view of the necessity for an Australian based trustee until a co-trustee returns to Australia, it was not expedient to remove a trustee from his position so close to imminent resignation.

In regard to the second step, the court took into account the difficulty of communication between the principal beneficiary and other beneficiaries under the trust and the mismanagement of the trust by the principal beneficiary that was proposed for review by the co-trustee. Relying on the abovementioned considerations, the court held that it was not in the best interests of the beneficiaries to appoint an applicant as a trustee.

PRINCIPLES OF REMOVING AND REPLACING AN APPOINTER

Regarding the removal of an appointor, the court noted that no other beneficiary under the trust was seeking the removal of the appointer, apart from the principal beneficiary, who is the applicant in the present matter.

The use of an appointor in the set-up of a family discretionary trust is a means to provide some external control on the discretionary trust through the removal and appointment of trustees. The position of the appointer is an entrenched role in respect of the trust under the testator’s will.

Relying on the authority of Jenkins v Ellett [2007] QSC 154, the power of the trustees to add, delete, amend or vary any of the powers given to the trustee under the will does not extend to a power to replace the appointor. The trustee has no power to amend the clause in the trust instrument which specifies the appointment of the appointor and his/her powers.

In its inherent jurisdiction the court could have removed the appointor if he had abused the granted power or exercised it for an improper purpose (the obiter dictum of Jessel MR in Tempest v Lord Camoys (1882) 21 Ch D 571, 578). However, the mere fact that the applicant considers his relationship has broken down with the appointer falls far short of establishing the circumstances that would enable the court to exercise the jurisdiction to prevent the appointor’s power being exercised for an improper purpose. Therefore, his application for the removal and substitution of the appointer could not be successful.

CONCLUSION

Wills and Estates, including testamentary trusts, can be a volatile mix of emotion and money.  It is best to take early advice from independent lawyers and other professionals that are not personally involved. Sometimes adversarial litigation is indicated but with mediation and other dispute resolution options, it is not the only path to a solution.