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Removal of a trustee who is unwilling to resign
02 June 2014
 

A trust is a structure into which cash or assets (“trust property”) are transferred by the founder of the trust and which trust property is administered by the trustees on behalf of one or more beneficiaries in accordance with the trust deed. As administrators of the trust property, it is extremely important that the trustees work together and act in the best interest of the trust beneficiaries and execute their duties as required by the Trust Property Control Act (”Act”) and the Master of the High Court (“the Master”). The question which arises is what options are available if a trustee does not execute his mandate in the best interest of the trust beneficiaries, but is unwilling to resign as a trustee?

It is important to always look at the trust deed first. Often the trust deed determines the actions to be taken as well as the process on how to remove a trustee that does not want to resign. Such a prescribed process must then be followed in the removal of such a trustee. If, however, the trust deed is silent on the removal of a trustee who is unwilling to resign, there are further options that can be considered.

According to Section 20(1) of the Act, a trustee may, on application of the Master or any person having an interest in the trust property, at any time be removed from his office by a Court if the Court is satisfied that such removal will be in the interests of the trust and its beneficiaries. The Court procedure may be an expensive and lengthy one though, and as such is not always a viable option.

Alternatively, a trustee can be removed from office by an application to the Master. This option, however, is qualified and can only be exercised in specific circumstances. According to Section 20(2) of the Act, a trustee may, at any time, be removed from his office by the Master, if:

(a) he has been convicted in South Africa or elsewhere of any offence of which dishonesty is an element or of any other offence for which he has been sentenced to imprisonment without the option of a fine;

(b) he fails to give security or additional security, as the case may be, to the satisfaction of the Master within two months after having been requested thereto or within such further period as is allowed by the Master;

(c) his estate is sequestrated, liquidated or placed under judicial management;

(d) he has been declared by a competent court to be mentally ill or incapable of managing his own affairs or if he is detained as a patient in an institution or as a State patient; or

(e) he fails to perform satisfactorily any duty imposed upon him by or under this Act or to comply with any lawful request of the Master.

Any person having an interest in the trust property will have to bring an application to the Master, specifically stating one or more of the abovementioned reasons as grounds for their application together with proof thereof. It would be relatively straightforward to provide proof of the first four reasons in paragraphs (a) to (d) above as there should be documentary evidence confirming this.

To remove a trustee on the grounds listed in paragraph (e) above, will be more complex, particularly where the grounds relate to a trustee not performing his duties. Section 9(1) of the Act provides that a trustee must act with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another, in the performance of his duties and the exercise of his powers. Accordingly, proof will have to be provided, for example that the trustee does not attend trustee meetings, does not answer telephone calls or respond to emails, does not act in the best interests of the trust beneficiaries or fails to co-operate in managing the trust property etc. This can be difficult to prove and the Master may also ask the alleged unwilling trustee to respond to the allegations in order to form an overall view of the matter. Supporting evidence will thus be very important to have a trustee removed on this ground.

The above attests that it is possible to remove an unwilling trustee from office. As trustees must always act in the best interests of the trust beneficiaries, a trustee that is failing in his duty should be removed where he is unwilling to step down. The correct approach in the removal of a trustee should however be followed and it is advisable that legal advice be obtained before you commence with any action in this regard.

 
 
Tags: Trust