Blenkinsop v Blenkinsop Nominees Pty Ltd as Trustee for the Blenkinsop Family Trust

In our Might of the Trustee series, Allawdocs looked at trustees, their appointment and removal, their powers and duties, and liabilities that they may incur. The Supreme Court of Western Australia recently handed down the Blenkinsop decision, in which it reaffirmed the principles relating to the removal of trustees.

Facts

This case concerned two trusts: the 'Blenkinsop Family Trust' and the 'Blenkinsop Family Trust No. 2' (trusts). The trusts were created during the lifetime of Mr Blenkinsop, now deceased.

The trustee of each trust is a trust company. The directors of the trust companies were initially Mr Blenkinsop and his wife, the plaintiff. However in 2009, following Mr Blenkinsop's death, the plaintiff, and the five adult children of Mr Blenkinsop and the plaintiff (children), were made directors of the trust companies (directors).

The directors were also made guardians of the trust. Some trustee powers required unanimous guardian approval, meaning any one guardian had the significant power to veto decisions in some cases.

In 2009, the family began to make changes to the trusts with the goal of achieving equality in terms of trust governance and entitlement between the family members. Changes included:

(a)        variation to ensure the plaintiff and the children had equal shareholding in and control of the trust companies;

(b)        execution of a shareholder agreement and a trust distribution policy.

From this point onwards, there was hostility between some family members in relation to the trusts and the 'conduct' of other directors (i.e. other family members). This hostility escalated over time.

In September 2013 the directors signed a deed of settlement in relation to the disagreements, however this did not improve the operation of the trust companies.

The plaintiff therefore sought removal of the trustees and guardians of the trusts, and the appointment of an alternative trustee.

Decision

The Court confirmed that its jurisdiction (i.e. power) to remove a trustee is derived from:

(a)        its inherent jurisdiction; and

(b)        the State trustees legislation (in Western Australia, section 77 of the Trustees Act 1962 (WA)),

and that regardless of the source of jurisdiction, the principles applied in removing a trustee are largely the same.

The Court confirmed that its primary concern when deciding to remove a trustee is the interests of the beneficiaries: If the trustee remaining in office is contrary to those interests, the trustee should be removed.

Other factors that the Court will look to in deciding to remove a trustee include:

(a)        whether the trustee is acting within its powers (i.e. whether the trustee has committed a breach of trust); and

(b)        security of the trust property.

In these circumstances, the Court found that the ongoing disputes between the directors meant the trust companies' capacity to effectively operate the trusts was long gone. As such, the trustees could not serve the interests of the beneficiaries or ensure security of the trust assets.

Therefore, the Court found that the trustees were not carrying out their role as trustee "except in a very limited and inadequate way", and thus should be removed and replaced.

Conclusion

This case illustrates the importance of the trustee acting in the interests of the beneficiaries, and reaffirm's the Court's approach to removing trustees. Allawdocs is proudly supported by GV Lawyers. If you have concerns relating to the operation of your trust, don't hesitate to reach out for advice on 1300 729 914.

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