REMOVING AND REPLACING TRUSTEES AND PERSONAL

REPRESENTATIVES

A PRACTICAL GUIDE

James Weale

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1. The harmonious relations which may have formed the background to the

conception of a trust (or will) do not always last. Moreover, persons who were

initially thought to be capable of carrying out the administration transparently,

efficiently and in the interests of beneficiaries often disappoint. In such cases, it is

essential that the removal of such persons may be secured by the remaining office-

holders or beneficiaries.

2. Sections 1 – 2 of this paper set out the jurisdictional bases and procedure for

removing trustees and personal representatives. Section 3 considers the parallel

jurisdiction for the appointment of a judicial trustee. Section 4 considers the

exercise of the Court’s discretion in standard hostile applications. Finally, points

of practice are considered in Section 5.

3. The following table provides a roadmap through this guide by reference to a

checklist of the questions to ask before issuing a claim or application. Where it is

sought to remove someone who is both trustee and personal representative, both

columns should be referred to1.

1 Alkin v Raymond [2010] W.T.L.R. 1117, provides a recent example in which it was sought to remove

persons who were both executors and trustees.

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ROADMAP

TRUSTEES (Section 1)

PRs (Section 2)

Can removal take place without the

Court’s involvement?

Is there an express power of removal in the trust deed

which can be exercised? (Section 1A)

Is the Trustee dead, abroad or obviously incapable or

unfit (Section 36 TA1925)? (Section 1B)

Are all beneficiaries

unanimous in seeking removal (Section 19

TOLATA 1996)? (Section 1C)

Not possible

[If there is no alternative but to

apply to the Court] Are the facts likely to persuade the Court

to exercise its discretion?

See Section 4

Who has standing to bring a claim?

Existing trustee or any person beneficially interest in the trust (Section 58(1)

TA1925)

Existing PR or any person beneficially

interested in the estate (Section 50(5) AJA1985)

Is the continuing administration of the trust/estate likely to give rise to complex

and contentious issues?

Consideration should be given to applying for the

appointment of a judicial trustee (Section 3).

Practice Points

See Section 5

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SECTION 1 - TRUSTEES

REMOVING TRUSTEES OUT OF COURT

4. The removal of trustees need not be contentious or involve court proceedings at

all. This is obviously to be preferred if the circumstances allow for it. This section

sets out the common circumstances in which removal can be effected without

litigation.

A Express power in the trust deed (removal)

5. It is possible that the trust deed may itself provide a power of removal to a person

named in the trust (such as the settlor). Provided that that power is exercised

properly for the benefit of the beneficiaries and not to serve the interests of the

person holding such a power, there is no reason why the exercise of such a power

should not be effective.

B Section 36 Trustee Act 1925 (substitution only)

6. Section 36 Trustee Act 1925 confers upon the person with a power of

appointment or, if there is no such person or no such person able or willing to

exercise that power, the remaining trustees, the power to substitute an existing

trustee. The circumstances in which that power may be exercised are exhaustively

set out in Section 36(1) which provides for the removal of a trustee who:

a. is dead;

b. remains out of the United Kingdom for more than 12 months;

c. desires to be discharged;

d. refuses to act;

e. is an infant;

f. is unfit to act2; or

g. is incapable of acting3.

7. Section 36 provides a straightforward means of replacing a trustee in non-

contentious cases. Where there is likely to be a dispute over whether, for example

a trustee is “unfit” or “incapable”, however, it would be inadvisable to seek to

2 There is very little authority as to the meaning of “unfitness”. It is clear, however, that it extends beyond mental/physical illness, and includes matters going to general suitability such as bankruptcy and the conviction of a serious criminal offence. 3 “Incapacity” should not be read in light of the Mental Capacity Act 2005, which requires it to be shown that a person is unable to make a decision for himself in relation to the matter (Section 2(1)). Where the person with the power of appointment himself lacks capacity, the appointment should be made by the continuing trustees: Re Coates to Parsons (1886) 34 Ch D 370.

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replace the trustee without the Court’s involvement4. Further, where the basis

relied upon for removing the trustee relates to his mental capacity, it will be

necessary to involve the Court of Protection where the trustee is also a beneficiary

(Sections 36(9) and 54(2)).

C Trusts of Land and Appointment of Trustees Act 1996 (removal and

substitution)

8. Where all the beneficiaries are in agreement, an additional means of removing a

trustee is provided by Section 19 TOLATA5 on the basis of the beneficiaries’

consent. However, this power is subject to significant limitations. First, the trust

instrument must fail to nominate a person with a power to appoint. Second, the

power may only be exercised where all the beneficiaries are of full age and capacity

and (together) are absolutely entitled to the property forming the subject-matter of

the trust6. Third, the beneficiaries must be in unanimous agreement to remove the

trustee. Finally, the operation of Section 19 may be excluded by the deed creating

the trust.

9. The procedure under Section 19 is straightforward. The beneficiaries simply need

to serve their direction upon the retiring trustee (in the case of retirement) or all of

the trustees (in the case of replacement). Following such a direction, the trustee

must retire.

REMOVAL BY THE COURT

JURISDICTION

10. Where removal cannot be achieved without resort to litigation then (save for the

appointment of a judicial trustee considered in Section 3, below) there are

essentially two possibilities:

A. Substitution7 under Section 41 Trustee Act 1925

B. Removal/Substitution under the Court’s inherent jurisdiction 4 An application should instead be made pursuant to Section 41 Trustee Act 1985 (see below). 5 Further provision for the removal of a trustee is provided for by Section 20. However, in order to succeed it is necessary to establish that the trustee is “incapable by reason of mental disorder of exercising his functions as trustee.” 6 It is not at all clear whether the consent of those who are mere objects of a discretionary trust, rather than those who have a life or remainder interest, is required. It is tentatively suggested that, by analogy with the principle in Saunders v Vautier, the consent of discretionary beneficiaries is required. 7 No jurisdiction is provided under Section 41 for the Court simply to remove a trustee without a replacement.

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11. Put shortly, a claim under Section 41 is likely to be appropriate where it is sought

to appoint a new trustee in place of the existing trustee and where there is no

substantial factual dispute8. In all other cases, recourse should be had to the

Court’s inherent jurisdiction. Even where Section 41 is relied upon, however, it is

always sensible to plead the Court’s inherent jurisdiction in the alternative.

A. Section 41 Trustee Act 1925 (substitution only)

12. Section 41(1) is by far the most common instrument used to remove trustees

through the Court. The broad powers conferred by that section are as follows:

The court may, whenever it is expedient to appoint a new trustee or new trustees, and it

is found inexpedient difficult or impracticable so to do without the assistance of the court,

make an order appointing a new trustee or new trustees either in substitution for or in

addition to any existing trustee or trustees, or although there is no existing trustee.

In particular and without prejudice to the generality of the foregoing provision, the court

may make an order appointing a new trustee in substitution for a trustee who lacks

capacity to exercise his functions as trustee, or is a bankrupt, or is a corporation which

is in liquidation or has been dissolved.

13. It should be noted that Section 41(1) will only be exercised where there is no

other means by which a trustee may be substituted. Thus, if the trustee could be

removed pursuant to an express power or Section 36 and there is a person who is

able and willing to exercise that power, an application under Section 41 is not

appropriate9.

14. The specific examples listed in the second section of Section 41(1) should pose no

difficulty in principle: the question of whether or not a trustee has been made

bankrupt or has been assessed as incapable in accordance with the Mental Health

Act is likely to be relatively straightforward to ascertain. Aside from those specific

examples, however, Section 41(1) is silent as to when it may be “expedient” to

replace a trustee. Further, those authorities which indicate the Court’s approach to

Section 41 are few and far between. The Court’s approach under Section 41(1) is

considered in Section 4, below.

8 In Re Henderson [1940] 1 Ch 764, Bennett J held at 767-768: “Whenever there is a dispute as to some fact, as in that case, it may be that the Court should not exercise the jurisdiction under s. 41 against the will of a trustee who wants to continue to act as such”. It is therefore advisable to plead both Section 41 and the Court’s inherent jurisdiction in the alternative if there is any indication of a potential dispute of fact. 9 Re Higginbottom [1892] 3 Ch 132. In cases of doubt, or where it is sought to remove the person who has the power of appointment, Section 41 should be used.

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B. The Court’s inherent jurisdiction (substitution or removal)

15. In the leading case, Letterstedt v Broers10, Lord Blackburn noted that: “It is not

disputed that there is a jurisdiction [to remove and substitute trustees]” and “that the

jurisdiction... is merely ancillary to its principal duty - to see that the trusts are properly

executed.”

16. The inherent jurisdiction has been relied upon in a number of recent decisions

including Isaac v Isaac11 and Jones v Firkin-Flood12.

17. It is now clear that those general principles which govern the application of

Section 41 are no different from those which apply to the Court’s inherent

jurisdiction. These are considered together in Section 4, below.

PROCEDURE

18. In many cases, the decision to remove trustee will have been taken following the

commencement of proceedings against a trustee on other grounds. If so, the

appropriate course is to issue an application within those proceedings rather than

to initiate a new claim.

19. A claim/application may be brought by an existing trustee or “any person

beneficially interested” in the subject-matter of the trust13. It is likely that the latter

covers those who are merely the object of a fiduciary power14.

20. As noted above, reliance upon Section 41 is not appropriate where there is likely

to be a substantial dispute of fact. Ordinarily, therefore, a claim pursuant to

Section 41 should be by way of a Part 8 Claim (notwithstanding that the trustee

may oppose his removal). Where it is sought to remove a trustee under the

Court’s inherent jurisdiction either a Part 8 or Part 7 Claim may be used

depending upon the nature of the dispute. In either case, the claim will normally

be issued in the High Court15. Where the Claimant is a beneficiary, all the trustees

10 [1881-85] All ER Rep 882 at 886.

11 [2005] EWHC 535 (Ch). Park J considered the applicable principles at [65] – [72]. 12 [2008] EWHC 2417 (Ch). 13 Section 58(1) Trustee Act 1925. 14 See Freeman v Ansbacher Trustees (Jersey) Ltd [2009] 12 ITELR 207. 15 Section 23 County Courts Act 1984 provides for the County Court to have all the jurisdiction of the High Court to hear and determine proceedings for the administration of the estate of a deceased person, where the estate does not exceed in amount or value the county court limit (£30,000).

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should be joined as parties. Regardless of the Claimant, all beneficiaries should

also be jointed as Defendants.

21. A signed consent to act by the proposed replacement should be included in the

evidence filed in support of the claim together with a witness statement (ideally

from a close associate of the replacement) attesting to his fitness to act as

trustee16.

SECTION 2 –PERSONAL REPRESENTATIVES

22. The options open to a party seeking removal of personal representatives (as

compared with trustees) are far more limited.

23. In particular, there is no statutory provision for a beneficiary or personal

representatives to procure removal or substitution without the Court’s

involvement17. Further, Section 41(4) Trustee Act 1985 explicitly precludes the

appointment by the Court of an executor or administrator18.

JURISDICTION

24. In the absence of the Court taking over the administration of the estate pursuant

to Part 64 or the appointment of a judicial trustee, Section 50 Administration of

Justice Act 1985 constitutes the only jurisdictional basis for the removal or

substitution of personal representatives.

25. Wide discretionary powers are conferred upon the Court under Section 50(1) AJA

1985 as follows:

(1) Where an application relating to the estate of a deceased person is made to the High

Court under this subsection by or on behalf of a personal representative of the deceased

or a beneficiary of the estate, the court may in its discretion—

(a) appoint a person (in this section called a substituted personal representative) to

act as personal representative of the deceased in place of the existing personal

representative or representatives of the deceased or any of them; or

16 Where it is sought to appoint a corporate trustee, the court should be provided for the basis upon which remuneration is to be paid in order to be in a position to make an order pursuant to Section 42 Trustee Act 1925. 17 Historically, personal representatives were assumed to hold their position for life and there was no jurisdiction which provided for their retirement: Re Ratcliff [1898] 2 Ch 352 at 356. 18 That sub-section states: “Nothing in this section gives power to appoint an executor or administrator.”

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(b) if there are two or more existing personal representatives of the deceased,

terminate the appointment of one or more, but not all, of those persons.

26. The principles on which the Court may exercise its discretion under Section 50 are

reviewed in Section 4, below.

PROCEDURE

27. The persons with standing under Section 50 are existing personal representatives

and those who are “beneficially interested” in the Deceased’s estate19. The latter

covers discretionary beneficiaries as well as those with a direct entitlement.

28. As with trustees, the removal of personal representatives may be sought either

from the outset or in the context of ongoing litigation. In either case, the

procedure is exhaustively set out in CPR Part 57.13 together with paragraphs 12-

13 of the Practice Direction to Part 57.

29. Those requirements may be summarised as follows:

(1) The claim/application must be accompanied by a sealed copy of the grant

of probate or letters of administration;

(2) Written evidence should be filed setting out the grounds of the claim and

should include details (so far as they are known) of the following:

(i) brief details of the property comprised in the estate, with an

approximate estimate of its capital value and any income that is

received from it;

(ii) brief details of the liabilities of the estate;

(iii) the names and addresses of the persons who are in possession of

the documents relating to the estate;

(iv) the names of the beneficiaries and their respective interests in the

estate; and

19 Section 50(5) Administration of Justice Act 1985.

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(v) the name, address and occupation of any proposed substituted

personal representative.

(3) Finally, if it is sought to substitute the personal representative with

another individual, the latter’s signed consent to act, together with written

evidence as to the fitness to act should be appended to the claim

form/application notice20.

30. The claim21/application should be made in the Chancery Division of the High

Court22 and every personal representative (together with all named beneficiaries)

should be joined as Defendants to the claim. It is likely that the Court will wish

to consider the views of the other personal representatives. Therefore, insofar as

they are likely to support the application, it is obviously sensible to adduce

witness statements on their behalf.

Removal of an executor prior to a grant of probate

31. Until very recently, it was not possible to rely upon Section 50 where an executor

had failed to a take out a grant of probate. This followed from the Court of

Appeal’s decision in Perotti v Watson [2001] EWCA Civ 116 which had determined

that no claim could be made for the removal of an executor prior to a grant of

probate having been taken out on the basis that until the executor had taken out a

grant, there was nothing from which to remove him. However, that decision has

now effectively been overturned by a 2010 amendment to PD57 which now

provides (at paragraph 13.1(1)(b)) for an executor to be removed prior to a grant.

20 The written evidence of fitness to act should ideally be set out in a witness statement of someone who has been closely associated for a significant period with the person whom it is sought to appoint. 21 The Claim may be either Part 7 or Part 8. However, given the requirements for the filing of evidence, it is usually sensible to initiate the claim under Part 8. 22 CPR 57.13(2). In most cases, the matter will considered by a Chancery Master. However, it will be appropriate for the matter to be referred to a judge if it is particularly complex or where fraud has been alleged.

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SECTION 3 – JUDICIAL TRUSTEES

32. The Court enjoys a parallel jurisdiction to substitute a personal representative or

trustee with a judicial trustee pursuant to the Judicial Trustees Act 1896. The

purpose of the 1896 Act was described by Jenkins J in Re Ridsdel23 as “to provide

a middle course in cases where the administration of the estate by the ordinary trustees had

broken down and it was not desired to put the estate to the expense of a full administration”.

33. Prior to 1985, the only means by which the Court could replace a personal

representative was under the 1896 Act. Since the coming into force of the AJA

1985, the 1896 Act has largely been superseded. Furthermore, an application for

the appointment of a judicial trustee is liable to be more costly insofar as the

judicial trustee (unless a corporate trustee) is required to provide accounts to the

Court24.

34. The principal advantage conferred by the appointment of a judicial trustee is the

ability of the latter to obtain directions quickly and informally from the Court

(Section 1(4)). Thus where the continuing administration of the trust or estate is

liable to throw up contentious or complex issues, or where the administration is in

disarray following historic mismanagement, serious consideration should be given

to the appointment of a judicial trustee. In the usual case, however, the

appointment of a judicial trustee is unlikely to afford any advantage.

JURISDICTION

35. Jurisdiction for the appointment of a judicial trustee is provide for by Section 1

JTA 1896 as follows:

(1) Where application is made to the court by or on behalf of the person creating or

intending to create a trust, or by or on behalf of a trustee or beneficiary, the court

may, in its discretion, appoint a person (in this Act called a judicial trustee) to be a

trustee of that trust, either jointly with any other person or as sole trustee, and, if

sufficient cause is shown, in place of all or any existing trustees.

23 [1947] Ch. 597, at 605. 24 Sections 9, 10 and 12 Judicial Trustee Rules 1983. It should also be noted that Section 11 Judicial Trustee Rules 1983 expressly provides for remuneration up to 15% of the capital value of the trust property.

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(2) The administration of the property of a deceased person, whether a testator or

intestate, shall be a trust, and the executor or administrator a trustee, within the

meaning of this Act.

(3) Any fit and proper person nominated for the purpose in the application may be

appointed a judicial trustee, and, in the absence of such nomination, or if the court is

not satisfied of the fitness of a person so nominated, an official of the court may be

appointed, and in any case a judicial trustee shall be subject to the control and

supervision of the court as an officer thereof.

(4) The court may, either on request or without request, give to a judicial trustee any

general or special directions in regard to the trust or the administration thereof.

36. It is generally preferable for the judicial trustee to act alone, however, there is

nothing in the Act to prevent the judicial trustee acting alongside an existing

trustee.

PROCEDURE

37. The application is made by way of a Part 8 claim (or as an application within

existing proceedings) to the Chancery Division of the High Court. The procedure

is governed by the Judicial Trustee Rules 1983. In brief, the claim/application

should be supported by an affidavit which includes the following matters:

(1) a short description of the trust and instrument by which it is, or is to be,

created;

(2) short particulars of the trust property, with an approximate estimate of its

income, and capital value;

(3) short particulars of the incumbrances (if any) affecting the trust property;

(4) particulars as to the persons who are in possession of the documents relating

to the trust;

(5) the names and addresses of the beneficiaries and short particulars of their

respective interests; and

(6) the name, address and description of the proposed judicial trustee (if any)

together with any proposal the applicant may make for his remuneration.

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38. Unlike an application under Section 50, there is no requirement to provide a

signed consent to act or evidence as to fitness in respect of the prospective judicial

trustee. However, where it is sought to appoint someone other than a court

official (usually the Official Solicitor)25, it would be sensible to provide evidence

of fitness in order to satisfy Section 1(3) JTA26.

39. Where an application is made under Section 50, the Court may treat such an

application as though it were made pursuant to the Judicial Trustee Act (Section

50(4) AJA 1985) and vice versa (Section 1(7) JTA 1896). Thus, there is scope to

rely upon either provision notwithstanding that it has not been pleaded.

SECTION 4 – PRINCIPLES TO BE APPLIED

CONTENTIOUS CASES

40. This section considers the factors which a court will consider in the exercise of its

discretion in contentious applications to remove a trustee or personal

representative. It will be apparent that there is a substantial (if not complete)

overlap between Court’s approach under Section 50 AJA 1985, Section 41(1)

TA1925, Section 1 JTA 1896 and the Court’s inherent jurisdiction.

COMMON GENERAL PRINCIPLES APPLY TO ALL CASES

41. Those cases which have been reported tend to suggest that, whatever the

jurisdictional basis relied upon by a claimant, the overall approach is

fundamentally the same. This is not surprising in view of the similarity in scope of

the legislative regimes which respectively provide for removal/replacement:

“whenever it is expedient” (s.41), “may in its discretion” (s.50) and “may in its discretion”

(s.1).

42. Given the breadth of those provisions, and in the absence of any indication as to

manner in which the Court’s jurisdiction should be employed, it is unsurprising

that the Courts have sought to develop common general principles to be applied

in all cases based upon the jurisprudence governing the long-standing inherent

jurisdiction to remove trustees.

25 There is no restriction on the persons who may appointed as judicial trustee provided they are a “fit and proper” person (Section 1(3) Judicial Trustee Act 1983). 26 It should be noted that the Court is not bound to appoint an official trustee in the event that it is not satisfied as to the fitness of the person sought to be appointed by the applicant, but may appoint some other person: Douglas v Bolam [1900] 2 Ch 749.

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43. In Thomas & Agnes Carvel Foundation v Carvel27 the Claimant foundation, a

beneficiary under the deceased’s will, sought the replacement of a personal based

upon, alternatively, Section 50 AJA and Section 1 JTA. Lewison J noted (at

paragraph 44):

It is common ground that, in the case of removal of a trustee, the court should act on the

principles laid down by Lord Blackburn in Letterstedt v Broers (1884) 9 App

Cas 371, and that in the case of removing a personal representative similar principles

should apply. Whether I am right in concluding that Pamela [the first defendant] is a

trustee; or whether she is no more than a personal representative, the principles are

therefore the same.

44. In the recent decision in Kershaw v Micklewhaite28, it was argued that a stricter

test should apply to the removal of a trustee than to the removal of an executor

on the basis that trustees (unlike executors) are often required to exercise a

discretion and individuals may be chosen because of the particular qualities that

they may bring in exercising that discretion. However, that suggestion was

explicitly rejected by Newey J who confirmed that the test was the same

irrespective of whether it was sought to remove a trustee or executor. His

Lordship held at [9]:

“In any case, I can see no good reason for the court to apply a stricter test when

considering whether to remove a trustee than it would apply with an executor. That an

executor might not be expected to exercise discretion to the same extent as a trustee, and

that an executor’s role is likely to be more transient than a trustee’s, suggest to me that,

if anything, the court should remove a trustee more readily than an executor.”

45. To the above, it might be added that a further reason for not applying a different

test is that it is liable to give rise to strange results in the event that the same

individual is appointed as both executor and trustee under the same will. In such

case, a disparity between the tests may result in that individual being removed as

executor whilst remaining as trustee.

27 [2008] Ch 395. See also Heyman v Dobson [2007] EWHC 3503 (Ch) at [18]. 28 [2010] EWHC 506 (Ch).

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SUMMARY OF THE APPLICABLE PRINCIPLES

46. There is a surprising dearth of reported cases which provide guidance as to the

Court’s approach pursuant to the specific provisions for removal provided for by

s.41 TA192529, Section 50 AJA198530 and s.1 JTA1896 or the Court’s inherent

jurisdiction31. The scarcity of authority may be explained in part by the fact that

the preponderance of cases are heard before Chancery Masters and that the

outcome of such cases is largely dependent upon findings of fact and/or the

exercise of the Court’s discretion. Furthermore, sensible trustees will often retire

of their own volition once a substantial question has been raised over their

continuation in office.

47. In all cases, however, the overall test to be applied is summarised by the leading

judgment of Lord Blackburn in Letterstedt v Broers as follows32:

“In exercising so delicate a jurisdiction as that of removing trustees, their lordships do not

venture to lay down any general rule beyond the very broad principle... that their main

guide must be the welfare of the beneficiaries... If it appears clear that the

continuance of the trustee would be detrimental to the execution of the trusts,

even if for no other reason than that of human infirmity would prevent those beneficially

interested, or those who act for them, from working in harmony with the trustee, and if

there is no reason to the contrary from the intentions of the framer of the trust... it seems

to their lordships that the court might think proper to remove him.” [emphasis added]

48. Lord Blackburn’s seminal judgment has been consistently approved and relied

upon in later authorities. Thus the overarching guide governing the exercise of the

Court’s jurisdiction in all cases is whether the trust (or estate) is being properly

administered in the interests of the beneficiaries33.

29 In Re Weston’s Settlement [1968] 3 All E.R. 338, Lord Denning MR complained (at page 342) that: “with the appointment of new trustees, the Trustee Act, 1925, gives no guide. It simply says the court may appoint new trustees “whenever it is expedient”. There being no guidance in the statutes, it remains for the court to do the best it can.” 30 In the recent decision of the High Court in Angus v Emmott [2010] EWHC 154 (Ch), Richard Snowdon QC (sitting as a deputy High Court judge) noted at [107]: “Authority on the exercise of discretion under section 50 is sparse…” This followed the observation of Evans-Lombe J in Heyman & Ors v Dobson & Ors [2007] EWHC 3503 (Ch) at [18]: “That section [50 AJA] or its predecessors has been the subject of very little authority to guide the court as to how its provisions are to be applied.” 31 In Letterstedt, Lord Blackburn expressed concern (at p.886) that “there is very little to be found to guide us in saying what are the cases requiring such a remedy- so little that their Lordships are compelled to have recourse to general principles.” The passing of over a century of jurisprudence has done little to address Lord Blackburn’s concerns. 32 (1884) 9 App Cas 371 at 386, 387. 33 The overall test is referred to in inter alia Alkin v Raymond [2010] W.T.L.R. 1117 at [26]; Thomas Agnes Carvel Foundation v Carvel [2007] EWHC 1314 (Ch) at [46]; Heyman v Dobson [2007] EWHC 3503 (Ch) at [20]; and Re Wrightson [1908] 1 Ch 789 at 803.

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49. It is not possible to summarise the circumstances in which that underlying test will

be met. However, it is possible to divine from the case law, certain factors which

may be sufficient to the trigger the Court’s jurisdiction. A helpful summary of

such cases is provided by the authors of Lewin on Trusts (18th ed) at 13-54. Whilst

the examples given related specifically to trustees, the same principles apply by

analogy to personal representatives. Examples of successful applications to

remove include the following:

(1) Permanent residence outside of the UK

(2) Insolvency (whether an individual or corporation)

(3) Conflict of interest34

(4) General misconduct

(5) Non-cooperation

(6) Friction between trustees/personal representatives

50. The first two categories overlap with Section 36. However, if the requirements of

Section 36 are not satisfied or there is likely to be a substantial dispute, the Court’s

approval should be sought through Section 41. In practice, the last 4 categories

constitute the most common bases for removing a trustee or personal

representative.

Removal in the absence of misconduct

51. It is clear that there is no requirement to show misconduct on the part of a trustee

or personal representative in order justify their removal. This was recently put

beyond doubt by Briggs J in his decision in Jones v Firkin-Flood as follows at [284]:

“The submission that trustees should not be removed otherwise than for deliberate default

is in my judgment unsupported by any authority, and contrary to the principles emerging

virtually unanimously from all of them...”

52. The mere fact that, by reason of mutual hostility, the trustees are unable to work

together constructively in the interests of the trust is sufficient in principle.

Moreover, there is authority for the proposition that the Court is duty bound in

such cases to cases to order the removal of a trustee. In Re Consiglio’s Trusts35

34 The fact that the trustee/executor is also a beneficiary is not, of itself, sufficient. Thus in Kershaw v Micklethwaite [2010] EWHC 506 (Ch), Newey J considered (at [26]) that such conflicts were inevitable in family settlements and did not necessitate removal. 35 (1973) 36 DLR (3d) 658. Re Consiglio was cited with approval in the recent decision of the High Court in Angus v Emmott [2010] EWHC 154 (Ch) at [109].

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the trustees, who were at enmity, were unable to agree on the management of the

trust. Kelly CA held (at page 660):

“... the Court is justified in interfering, and indeed required to interfere, when the

continued administration of the trust with due regard to the interests of the cestui que

trust has by virtue of the situation arising between the trustees has become impossible or

improbable.”

The burden to be satisfied the claimant

53. Whatever the ground relied upon by the claimant, it will be necessary to

demonstrate that the continued administration of the trust/estate will be

materially prejudiced. The Court’s unwillingness to remove on the basis of minor

breaches or of mere difficulties in the relations between trustees was expressed in

the recent decision of the New Zealand Court of Appeal in Kain v Hutton36 as

follows at [267]:

“Merely showing breaches of trust would not necessarily be sufficient to justify removal of

trustees. This would depend on the gravity and nature of the breaches and the particular

circumstances of the trust and the trustees, including the level of culpability of the

trustees... To allow trustees to be removed for relatively inconsequential mistakes would

be to usurp the settlor’s wishes in entrusting the assets to the trustees. In the same way,

mere incompatibility between trustees and beneficiaries is not enough... Any

incompatibility must be at such a level that the proper administration of the trust is

seriously adversely affected and it has become difficult for a trustee to act in the interests

of the beneficiary.”

54. Thus the wrongdoing required must either be of a serious nature in itself (for

example, demonstrating dishonesty on the part of the executor) or must be such

as to endanger the trust property. Simply failing to properly value the estate or to

keep beneficiaries properly informed as to the administration of the estate will

not, of itself, be sufficient37.

55. The burden is correspondingly higher where the only ground relied upon is

friction or hostility in the absence of any wrongdoing. In such a case it will be

36 [2007] N.Z.C.A. 199.

37 Kershaw v Mickelthwaite [2010] EWHC 506 (Ch).

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necessary to point to serious prejudice to the continuing administration of the

trust or estate38.

56. Whatever conclusion may follow from a strict application of the legal principles,

the practice of the Courts has been to treat removal as a last resort in the absence

of an alternative means of enabling the administration to continue39. That

approach is reflected in the commentary in the Civil Court Practice (The Green

Book) to CPR 57.13 (in the context of applications under Section 50 AJA) as

follows40:

Applications for the replacement or substitution of personal representatives are intended,

in the main, to be made where there has been serious default in the administration of an

estate, or a complete breakdown in the relationship between personal representatives and

beneficiaries such as to obstruct the administration of the relevant estate. Application

under section 50 should not be made where there is a simple disagreement as to how to

proceed. In such cases, the proportionate approach, absent compromise, is to seek

directions from the court under Part 64. [emphasis added]

57. The kind of hostility between personal representatives necessary to trigger removal is

demonstrated by the recent decision of the High Court in Angus v Emmott41. In that

case a total impasse had been reached as to the basis on which the estate was to make

a claim against a third party on behalf of the estate. The Court ordered the

replacement of all the personal representatives on the basis that:

“a situation has been reached in which there is such a degree of animosity and distrust

between the executors that the due administration of Mr Steel’s estate is unlikely to be

achieved expeditiously in the interests of the beneficiaries unless some change is made.”

58. Where there is friction, not between individual trustees, but between beneficiaries and

trustees, the Court is unlikely to order removal in the absence of other factors unless

the breakdown in that relationship is liable to prejudice the administration of the

38 The position was set out in Letterstedt v Broers (1884) 9 App. Cas. 371 at 386-387 as follows: “Friction or hostility between trustees and beneficiaries, or between a trustee and his co-trustees, is not of itself a reason for the removal of a trustee. But where hostility is grounded on the mode in which the trust has been administered, where it is caused wholly or partially by overcharges against the trust estate, or where it is likely to obstruct or hinder the due performance of the trustee's duties, the court may come to the conclusion that it is necessary, for the welfare of the beneficiaries, that a trustee should be removed.” 39 In Isaac v Isaac [2005] EWHC 435 (Ch) at [66], Park J described the removal of a trustee as “a drastic step for the court to take” and one that should only be taken “in a clear case”. 40 In a similar vein, the authors of Williams, Mortimer and Sunnocks (19th Ed) refer (at 60-14) to the “the administration having come to a standstill” and it having “become impossible or difficult for the administration to be completed” as the basis for removal. 41 [2010] EWHC 154 (Ch).

19

estate42. Finally, where factors are evenly balanced, the Court is entitled to consider

the fact that the testator or settlor has chosen the executor/trustee as a reason for

maintaining them in office43.

SECTION 5 – PRACTICE POINTS

59. It is important to bear in mind that, whatever the factor relied upon by claimant, the

circumstances must be of a fairly extreme nature before the Court will be prepared to

exercise its discretion. In many cases, there will be some degree of friction between

trustees and/or it will be possible to point to numerous examples of a trustee failing

to adhere to the standards set out in legal text-books. However, the removal of a

trustee or personal representative is not lightly undertaken and the guidance in the

Green Book (paragraph 55, above) reflects the nature of the burden to be overcome

by a claimant. Therefore, it is important to be realistic from the outset as to whether a

claim stands any prospect of success.

60. If it is considered appropriate to proceed with a claim, the following two matters

should always be considered.

61. First, it is sensible to provide the Court with alternative options for the replacement

of a trustee. Except in clear cases, a court is unlikely to simply replace one hostile

party with another. Therefore, thought should be given to the appointment of a

“neutral” third party44. With that in mind, the claimant should provide a number of

suitable alternative candidates who could take over the administration of the trust or

estate.

62. Second, where the cause of an impasse rests upon the resolution of a discrete issue(s)

such as whether a portion of a fund should be applied in a particular way, it is usually

sensible to apply for directions in the alternative: a court will be unlikely to remove a

trustee where directions will provide an effective remedy. Furthermore, in such cases

it may be that limiting an application to directions (rather than removal) would

provide for a more effective remedy for the claimant insofar as the substituted

trustee/executor may disagree with the claimant as to best way to progress the

administration. Finally, as the authors of Williams Mortimer and Sunnocks (19th ed) note

42 Kershaw v Micklethwaite [2010] EWHC 506 (Ch) at [11]. The view of the beneficiaries is, however, a relevant factor to be considered: Green v Gaul [2005] EWHC 406 (Ch) at [200]. 43 e.g. Kershaw v Mickelthwaite at [14] and Alkin v Raymond [2010] W.T.L.R. 1117. 44 In high value trusts/estates, the appointment of a professional fiduciary should be considered.

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(at 60-14): “The removal of a representative tends directly or indirectly from his responsibilities and

may not therefore be a wise step to take.”

Court not restricted to pleaded case

63. When acting for a trustee or personal representative it should be noted that the Court

is entitled to remove a trustee or personal representative on grounds that are not

pleaded. Thus, it should not be thought that a trustee is safe merely because the

pleaded case against him is weak or unfocused. The Court is entitled to look into all

matters relating to the trust and form its own view. This is demonstrated by the

leading decision of the Privy Council in Letterstedt. In that case, the claimant

beneficiary made wide-ranging allegations of misconduct and breaches of trust. In the

event their Lordships were not satisfied as to existence of any bad faith. Instead the

decision to remove the remaining trustee was based on the friction which had

developed between the parties as a consequence of the way in which the trustee board

had remunerated itself.

Contentious Claims

64. It is often the case that, lying behind an application for removal, there is a long and

involved history of animosity between the parties. Moreover, many such claims

necessarily involve an assessment of the character of the person whom it is sought to

remove. As a consequence, it is tempting for litigants to seek to introduce a wide-

ranging factual inquiry into each other’s conduct as a way of undermining character

and credibility. It should be borne in mind, however, that such a course is likely to be

counterproductive. Such issues detract from the central issue which the Court must

determine. Further, unless backed up with cogent evidence, allegations of misconduct

are likely to undermine the accuser as much the accused. Therefore, allegations of

misconduct unrelated to the administration of the trust/estate, and which will require

lengthy cross-examination to make good, should be avoided.

65. Conversely, it is clear from the reported cases that the Courts are more interested in

the correspondence that has passed between the parties. Such correspondence often

relates directly the administration of the trust/estate and speaks for itself. This

enables the Court to reach its conclusions on evidence which is difficult to dispute.

66. The above propositions are demonstrated by the recent decision in Jones v Firkin-

Flood45 in which the parties were locked in conflict. Briggs J found that none of the

main witnesses were satisfactory, having been “consumed in passionate hatred of

45 [2008] EWHC 2417 (Ch).

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their opponents”. His Lordship therefore placed significant weight on the

correspondence which was considered to speak for itself. In Heyman v Dobson46,

the deputy master (and subsequently the Judge) considered it appropriate to remove

the executor solely on the basis of correspondence, disregarding allegations of

misconduct.

67. It follows that parties can significantly help or hinder their case by the manner in

which they approach correspondence. If acting for the person whom it is sought to

remove, an aggressive (or uncooperative) approach clearly plays into the hands of the

claimant. Therefore great care should be taken in building up a body of

correspondence which makes one’s client look reasonable and objective whilst

seeking to elicit responses from the other side that are the opposite.

JAMES WEALE

3 Stone Buildings

T - 020 7242 4937

M – 07737500866

jweale@3sb.law.co.uk

11 November 2010

46 [2007] EWHC 3503 (Ch).