Voluntary retirement of trustees
Once a trustee has been appointed and has taken up his office, he may subsequently wish to retire from the trust. Although it is possible for the trust to contain an express power permitting retirement, s 39 of the Trustee Act 1925 provides a general power which is usually adequate:
‘Where a trustee is desirous of being discharged from the trust, and after his discharge there will be either a trust corporation or at least two individuals to act as trustees to perform the trust, then, if such trustee as aforesaid be deed declares that he is desirous of being discharged from the trust, and if his co-trustees and such other person, if any, as is empowered to appoint trustees, by deed consent to the discharge of the trustee, and to the vesting in the co-trustees alone of the trust property, the trustee desirous of being discharged shall be deemed to have retired from the trust, and shall, by the deed, be discharged therefrom under this Act, without any new trustee being appointed in his place.’
This provision permits the retirement of a trustee without a replacement being appointed, but this will only be possible if at least two trustees or a trust corporation remain. Where these conditions are not satisfied, a trustee may retire and be replaced under the power contained in s 36 of the Trustee Act 1925. Retirement will not protect a trustee from liability for breaches of trust that he committed whilst he was a trustee, and he will be liable for breaches of trust committed after his retirement if he retired to facilitate those breaches.
Compulsory retirement of trustees at the direction of the beneficiaries
Historically, trustees could not be forced to retire by the beneficiaries of a trust, no matter how much the beneficiaries may have wished to have them replaced, and they could only be forcibly removed on grounds of incapacity or maladministration. However, where the beneficiaries are of age and legally competent it has been seen that they can demand that the trust be brought to an end under the rule in Saunders v Vautier, (1841) 4 Beav 115.
If they wish they could therefore effectively remove the trustees and replace them by settling the property on new trusts. However, this process may be both costly (including potential liability to additional tax) and inefficient, as it requires a transfer of the legal title to the trust property from the original trustees to the beneficiaries, and then from the beneficiaries to the new trustees. The Trusts of Land and Appointment of Trustees Act 1996 therefore introduced a new statutory power enabling the beneficiaries of a trust to require a trustee to retire in circumstances where they could have taken advantage of the rule in Saunders v Vautier to achieve the same result.
For more information on:
- The three conditions