Many trust disputes are not about what a trustee may or may not have done but about who should or shouldn't be the trustee. A common situation is where one member of a family has the power (for example as protector or settlor) to hire and fire the trustee.
Where the family is itself in dispute, the exercise of that power of removal and appointment can be seen as a nuclear option for one faction to look to take control or scupper envisaged trustee decisions.
For the potentially outgoing trustee caught in the middle, it presents a difficult matter that could end up in protracted proceedings analysing the regularity or rationality of the decision to remove and replace the trustee, particularly where different groups of beneficiaries are making polar opposite demands – hand over the reins versus stay and protect the trust.
These disputes can sit on their own – in the reported case of "In the matter of the Piedmont Trust and The Riviera Trust" from 2015, the protector pushed on to get his way on trustee and new protector and failed all round. Whilst the old trustee did what it could to get information to be comfortable about the change the incoming trustee failed to provide diligence and because the family were at war, different factions supported the change but one didn't hence the proceedings.
Alternatively they can sit within other disputes - for example, if a trustee is proposing to do something momentous, it would likely look to get the blessing of the court for the decision – that will protect the trustee from future action by a beneficiary or successor trustee saying the decision was a breach of trust. If a momentous decision application is brought, it is not unheard of for an attempt to be made to remove the trustee and thereby thwart the process – that would typically be because the protector or settlor (often a beneficiary too) does not like what is being proposed but fears the court is likely to give the trustee the approval it seeks.
Not only will a diligent approach by the trustee in the firing line protect it from allegations that it has not fulfilled its own fiduciary obligation to ensure that any incoming trustee is a suitable party in whom to vest the trust assets and give the trustee in office sufficient comfort to accept the change, but it might well bring the warring family to the table and avoid litigation over whether or not the removal and appointment is valid.
What could constitute a diligent approach will always depend on the circumstances but key questions to pose and areas to explore (especially if the trustee is an unregulated) should include: understanding the corporate structure or ownership of the trustee; seeking details of experience of the trustee and the proposed trust directors (possibly asking for CVs); seeking insurance details. Ultimately, obtaining the views of the adult beneficiaries will also enable the potential litigation temperature to be tested.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.