Appointment and Removal of Trustees

The trust instrument will generally prescribe who has the power to remove and appoint the Trustee or Trustees.

The power to remove and appoint trustees is generally considered to be a fiduciary power even when the holder of the power is not a fiduciary, such as an employer.

In Pope v DPR Nominees Pty Ltd [1999] SASC 337 the Full Court of South Australia  (Duggan, Debelle and Bleby JJ) making reference to the power to remove and appoint Trustees stated at [46]:

“A power of appointment has therefore been described as a power of a fiduciary character and its exercise as a duty of a fiduciary nature to the cestuis que trust: Re Skeats’ Settlement; Skeats v Evans  (1889) 42 Ch. D. 522  per Kay J at 527. That is a decision which was followed by Kekewich J in Re Newen; Newen v Barnes [1894] 2 Ch. 297 at 308. In Re Burton; Wily v Burton [1994] FCA 1146(1994) 126 ALR 557 Davies J cited those two decisions with approval and said at 559:

But perhaps the more important point is that the power to remove a trustee and to appoint a new trustee is neither a general power of appointment nor a power which may be executed in the interests of the appointor. The interests of persons other than the appointor must be taken into account. The power is a trust or fiduciary power, being a power conferred by a deed of trust, and must be exercised accordingly, in the interests of the beneficiaries. A power, even though not a fiduciary power, must be exercised solely in furtherance of the purpose for which it was conferred

Hillcrest (Ilford) Pty Ltd v Kingsford (Ilford) Pty Ltd (No 2) [2010] NSWSC 285 Biscoe AJ stated in the New South Wales Supreme Court at [38]:

“The power in cl 7(5) is generally consistent with authority to the effect that the removal and appointment power must be exercised for the benefit of beneficiaries, not for the benefit of the person upon whom the power is conferred: see Mowbray et al, Lewin on Trusts, 18th ed (2008) Law Book Co at 13-44. In Fitzwood Pty Ltd v Unique Goal Pty Ltd [2001] FCA 1628(2002) 188 ALR 566 (reversed on other grounds at [2002] FCAFC 285) Finkelstein J held, at [98]:

“I am prepared to accept that a power of removal of a trustee may be a fiduciary power that must be exercised for the benefit of the beneficiaries and not for the benefit of the donee of the power, at least when the donee is not a beneficiary, although much will depend upon the terms of the trust instrument: Re Skeats’ Settlement (1889) 42 Ch D 522 at 526; [1886-90] All ER Rep 989 at 990;Inland Revenue Commissioners v Schroder [1983] STC 480 at 500.”

In Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146 the Western Australian Court of Appeal {Buss JA, Murphy JA, Hall J} making reference to the power to remove and appoint Trustees stated at [147]:

“ In a discretionary trust (and subject to the terms of the instrument) the power to appoint trustees may be construed as a ‘fiduciary power': In re Skeats’ Settlement (1889) 42 Ch D 522, 526; In re Newen (1894) 2 Ch 297, 309; Re Burton [1994] FCA 1146(1994) 126 ALR 557, 559 – 560; Pope v DRP Nominees Pty Ltd [1999] SASC 337(1999) 74 SASR 78 [46] – [48].”

 In the matter of the Bird Trust [2008] JRC 013 the Royal Jersey Court held at [80]:

“There seems to be general acceptance in the text books that the power to appoint new or additional trustees is normally to be regarded as a fiduciary power even where the power is conferred upon someone who is not a trustee (e.g. a protector).  See for example Thomas & Hudson, para 22-36, Snell’s Equity (13th Edition) para 10-11, Underhill para 1.83.  The leading judicial authority in support of the proposition is Re Skeat’s Settlement (1889) 42 Ch D 522.  More recent cases to like effect are Re Osiris Trustees 2 ITELR 404 (power to appoint new or additional trustees vested in the settlor); von Knierem v Bermuda Trust Co Limited (1994) Butterworth Offshore Cases Vol 1, 116 (power to remove and appoint trustees vested in the protector); IRC v Schroder [1983] STC 480 (power to remove and appoint trustees vested in a committee of protectors)”.

In an employer-sponsored superannuation trust the power to remove and appoint Trustees may be given to:

  • the Board of the sponsoring Employer
  • the other Trustees
  • the Beneficiaries
  • a combination of the above.

There are now statutory provisions for large Government Regulated Superannuation Funds for the “equal representation rule” to be complied with.

If the Trustees are natural person Trustees then an equal number must be elected by the members as are nominated by the sponsoring Employer.

If the Trustee is a corporate Trustee, then an equal number of Directors must be elected by the members as are nominated by the sponsoring Employer.

The “equal representation rule” is covered by Part 9 of the Superannuation Industry (Supervision) Act 1993.

A related Regulation is “the voting rule” that requires a majority of all the Member and Employer Representatives to agree on any Resolution.

 

 

 

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