There are a number of sources governing the retirement and removal of trustees in Jersey, including the terms of the trust instrument itself, the Trusts (Jersey) Law 1984 (the "Trusts Law") and case law. There are different mechanisms depending on whether a removal or retirement is voluntary or involuntary. In this briefing we be focusing on the involuntary removal of trustees.
Voluntary Retirement of Trustees
The removal or retirement and appointment of trustees is usually a non-contentious process, achieved in accordance with the powers and procedures set out in the trust instrument. The general position as set out in Article 19 of the Trusts Law is that, provided it is not a sole trustee, a trustee may resign by notice in writing to his co-trustees. If the trust instrument provides for a minimum number of trustees, then the retirement must not reduce the remaining number of trustees below that threshold.
Removal pursuant to power under the trust instrument
If the trust instrument grants a power to appoint and/or remove trustees to a particular person, that person can remove a trustee in accordance with the procedure set out in the trust instrument.
A power of appointment and/or removal of a trustee is a fiduciary power, even if the holder of the power was a person other than a trustee, such as a protector (Jasmine Trustees Limited and Lutea Trustees Limited v L and Others [2015] (2) JLR 52).
Removal by court
In situations where there is no power of removal under the trust instrument, or it is impractical to exercise such a power, an application can be made to the Royal Court for the removal of a trustee pursuant to Article 51(2)(a)(ii) of the Trusts Law. The Court also retains an inherent jurisdiction to remove a trustee and appoint a new trustee in its place.
An application for removal may be brought as of right by the Attorney General, a trustee, an enforcer or a beneficiary, or, with the leave of the court, by any other person.
Where an application is made to the Court for the removal of a trustee, the Court will be guided by the welfare of the beneficiaries in deciding whether to exercise its power. The Court will only remove a trustee if it is in the best interests of the beneficiaries to do so. The fundamental principles applicable to an application for removal were first expounded in the 19th century decision of Letterstedt v Broers [1884] 9 App Cas 371, and may be distilled down to the following:
- in cases of positive misconduct, the Court will have no difficulty in removing trustees who have abused their trust
- where trustees are merely incompetent that is not enough to remove them; trustees must breach the confidence that comes with a fiduciary relationship
- removal of a trustee will be appropriate when the continuance of the trustee would prevent the proper administration of the trust
- hostility between trustees and beneficiaries is not of itself a reason for the removal of trustees
The need for more than friction or hostility between beneficiaries was reiterated in In Re Wrightson [1908] 1 Ch. 789, where the court said that the touchstone was whether the trust property will not be safe, or that the trust will not be properly executed in the interests of the beneficiaries.
The Royal Court has applied Letterstedt on a number of occasions, including in Trilogy Management Limited v YT Charitable Foundation (International) Ltd [2014] JRC 214. The Royal Court observed that, while Letterstedt made clear that the court has jurisdiction to replace a trustee if the beneficiaries of the trust have lost confidence in him by reason of its administration and management of the trust, loss of confidence alone is not enough. The Royal Court did however note that a breakdown in relations between a trustee and a beneficiary will be a factor to be taken into account in the exercise of the court's discretion, if that hostility is obstructing the administration of the estate, or even sometimes if it is merely capable of doing so.
More recently, the removal of a trustee was considered in Erinvale PTC Limited v B [2021] JRC 241, where the Royal Court reiterated that the general principle guiding the court is the welfare of the beneficiaries and the competent administration of the trust in their favour. The Court noted that the views of the beneficiaries may be relevant but again reiterated that 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. However, where the hostility arises from the manner of administration or overcharges to the trust, or where it is likely to 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. Moreover, where the hostility is between a beneficiary and an original trustee, the fact that that trustee was chosen by the settlor is also a factor the Court will take into account.
The principles governing an application for removal were again considered in the Representation of B and C [2022] JRC 086, where the Royal Court reflected on the older authorities and how they apply in the modern world, observing that these principles were established before the time of the modern trust and financial services industry (Letterstedt having been decided over 140 years ago). Back then, fixed trusts prevailed but in the last 60 years the discretionary trust has become increasingly ubiquitous.
The Court noted that a discretionary beneficiary has comparatively few legal rights: a discretionary beneficiary only has the right to be considered for benefit, but not a right to actual benefit, whereas a beneficiary of a fixed trust has a choate equitable interest. Where then there is an application for removal of a trustee of a discretionary trust, more weight may be given to considerations such as a beneficiary's lack of trust and confidence in the trustee, or 'personal antipathy' which may exist between the trustee and a beneficiary, as it may be relevant to the question of whether the trustee can be expected to exercise his discretion fairly.
Conversely, the Court suggested that less weight should be allocated to the issue of whether the trustee is guilty of misconduct, or the extent to which the breakdown in relations is the fault of the beneficiary, especially where the beneficiaries have 'understandable expectations' which go beyond their legal rights.
Protectors
Just as it has jurisdiction to remove a trustee from office, the Court has a similar power to remove a protector or other fiduciary power holder (In re The Freiburg Trust [2004] JRC 056). This is because a protector is also in the position of a fiduciary and the Court must have the power to supervise any fiduciary in relation to a trust in order to protect the interests of beneficiaries and to ensure that the wishes of the settlor are given due consideration.
In the matter of A and B Trusts [2012] (2) JLR 253, beneficiaries of two Jersey trusts sought the removal of the protector on the grounds that hostility and distrust between the protector and those beneficiaries had led to the irretrievable breakdown of the relationship. The protector insisted there was no hostility on his part towards the beneficiaries, but this was contradicted by his conduct towards them. The Court concluded it was difficult to see how relations could ever have been restored to an acceptable level and, while the protector was not solely to blame, he was mainly responsible for the irretrievable breakdown in the relationship, which was having a seriously detrimental effect on the execution of the trusts and was likely to continue to do so. The Court therefore granted the application for removal. It is worth noting that the application was supported by the overwhelming majority of the other beneficiaries.
Conclusion
The core principles applicable to an application for removal of a trustee (or a protector or other fiduciary) are clear and well established. Where a trustee is guilty of misconduct, the Court will have no difficulty exercising its power of removal but where he is merely incompetent that alone will not be sufficient. The key question for the Court will be whether continuance of the trustee would prevent the proper administration of the trust.
The position in the older, established authorities was that acrimony between a trustee and beneficiaries is not of itself grounds for removal of a trustee but it is a factor the court will take into account. However, the more recent Jersey cases show that hostility may lead to the removal of a trustee where:
- the hostility arises from the manner of administration or overcharges to the trust
- it is obstructing the administration of the trust, or even sometimes if it is merely capable of doing so
- where the removal is supported by the majority of beneficiaries
There is also the practical reality that a beneficiary with a hostile animus towards a trustee can simply make the administration of the trust so difficult or fraught that it becomes a self-fulfilling prophecy.
Finally, the dicta of the Court in B and C suggests that more weight should be given to hostility where the trust is discretionary. As discretionary trusts are the paradigm trust model in Jersey, if the Court continues to follow the approach set out in B and C, hostility between a trustee and beneficiaries will become a much more significant factor in applications for removal of a trustee. Where friction does arise between a trustee and a beneficiary, it is always better to seek legal advice early on, rather than wait until the hostility boils over.
