5.01  The office of trustee is the central administrative cog that exists above and beyond any person who assumes that office for the time being until such time as the trust is performed. Given its centrality to trust administration, the Court’s power to regulate the office of trustee is an important part of the supervisory jurisdiction over trust administration, which can be disassembled into three main aspects:

1. 1.  appointment of trustees;

2. 2.  removal and retirement of trustees; and

3. 3.  fixing the remuneration of trustees.

As administrative and protective functions that regulate the office of trustee to facilitate the performance of trusts, these functions are key aspects of the supervisory jurisdiction over trust administration.

5.02  Thomas Haddan observed the traditional basis of the judicial regulation of the office of trustee as follows:¹

[I]t is and ever has been, one of the ordinary incidents of an administration of trust property by the Court of Chancery, to appoint, in the administration suit, whenever requisite, fresh trustees to carry on and execute the trust. Such a step is, in fact, a necessary part of the administration of the trust. Whether the vacancy in the trust be occasioned by death, or by voluntary retirement, or absence out of the jurisdiction, or the like event external to the suit, or whether the vacancy be made by the removal or discharge in the suit of a former trustee for misconduct or other cause, the Court of Chancery, in the regular course of the administration, and as a part of that administration, fills up the trusteeship. So, in like manner also is it part of the same administration to discharge effectually a retiring trustee, and to remove a delinquent one.

5.03  The remuneration of trustees was taboo at the time of Haddan’s treatise on the administrative jurisdiction of the Court.² Once the traditional notion of gratuitous trusteeship (p. 124) was relaxed to allow trustees to receive remuneration for services rendered in performing trusts, the Court logically assumed the function of regulating the remuneration of trustees as an aspect of its supervisory jurisdiction over trust administration, which evidences the evolutionary nature of that jurisdiction and its ability to adapt to changes in underlying principles of public policy concerning trusteeship. As an administrative and protective function of the Court that facilitates the performance of trusts, the judicial supervision of the remuneration of trustees is conveniently dealt with as part of regulating the office of trustee.

5.04  The principal power of appointing trustees rests with the settlor as the creator of express trusts and a power often conferred on a private person to appoint new trustees thereafter (eg an ‘appointor’). Where there is no appointor or the appointor is unable or unwilling to act, continuing or surviving trustees, or the personal representative of the last surviving trustee, may also appoint trustees in various circumstances.³ An additional trustee may be appointed where there are not more than three trustees (four being the maximum).⁴ Beneficiaries who are sui juris and absolutely entitled to the trust property can collectively appoint new trustees.⁵ These situations evidence a bias toward expediency in appointing trustees by allowing such appointments to take place extrajudicially. If an appointor is willing to exercise a power to appoint new trustees in good faith for the benefit of the beneficiaries, the Court will generally decline to exercise its supervisory powers to make an appointment.⁶ The Court is not deprived of its powers to appoint trustees merely because a power of appointment is held by another person, but the Court will generally defer to extrajudicial appointment.⁷ There are many situations in which it will be necessary for the Court to exercise its supervisory powers to appoint trustees. However, the bias against judicial appointment is evident from the key statutory provision, which relevantly provides as follows:⁸

(p. 125) 5.05  The administrative and protective nature of the Court’s power to appoint new trustees is underscored by the condition that the Court will do so only where it is ‘expedient’, which has been construed to mean ‘conducive to, or fit or proper or suitable’ having regard to ‘the interests of the beneficiaries, to the security of the trust property and to a sufficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee’.⁹ It is also intrinsic in the further requirement that it be ‘inexpedient, difficult or impracticable’ to appoint new trustees without judicial intervention to do so.

5.06  As an ‘expediency’ jurisdiction, beneficiaries and trustees with standing to apply for the appointment of a new trustee may use an expedited procedural route where there is no dispute as to facts and also where a trustee resists.¹⁰ However, where there is a dispute as to facts, the Court may decline to exercise the statutory power and the inherent jurisdiction of the Court to appoint trustees may be invoked.¹¹ The Court may appoint an additional trustee to avoid deficiencies in trust administration.¹² ‘There can be no doubt that the relevant provisions of the Act were intended to be enabling and facilitative,’ said Olsson J of the analogue South Australian provision, ‘so that the Court would be empowered to resolve practical difficulties arising in the administration of trusts without having to make an order for the general administration of a trust.’¹³ Further, ‘the inherent power [to appoint trustees] stems from the general jurisdiction of the court to supervise trusts and trustees’ which ‘arises even short of the making of a formal order for general administration of a trust’.¹⁴

5.07  The administrative and protective nature of appointing new trustees is also apparent from the prescribed circumstances listed in the statutory power, including where a person ‘is incapable, by reason of mental disorder [ … ] of exercising his functions as trustee, or is a bankrupt, or is a corporation which is in liquidation or has been dissolved’.¹⁵ The prescribed circumstances do not require any allegation or proof of wrongdoing as a precondition to the exercise of the statutory power to appoint trustees, but arise in situations where there might be cause for concern as to whether the trust will be duly performed. The statutory regime of appointing ‘judicial trustees’ also still exists in which ‘the court may, in its discretion, appoint a person (in this Act called a judicial trustee) to be a trustee of that trust, either jointly with any other person or as sole trustee, and, if sufficient cause is shown, in place of all or any existing trustees’.¹⁶ The application need only be served on the (p. 126) trustee and on such beneficiaries as the applicant thinks fit.¹⁷ There are no statutory preconditions to the exercise of that power beyond the need for an application to be made by, or on behalf of, the settlor, beneficiary, or trustee, subject to the discretion of the Court. In appointing ‘judicial trustees’, the Court does not simply rubber-stamp proposed appointments, but considers the fitness for office of the proposed appointee, thereby reflecting the protective nature of the judicial function in appointing new trustees, which facilitates the ongoing performance of trusts:¹⁸

5.08  The ‘control and supervision’ of judicial trustees, especially court officials, is stronger than is usually provided for in facilitating the performance of trusts by private trustees. The Court may give directions to judicial trustees as it thinks fit, including as to the custody of trust funds, property, and documents and the Court may ‘either on request or without request, give to a judicial trustee any general or special directions in regard to the trust or the administration thereof’.¹⁹ Annual accounts must be prepared for examination by, or on behalf of, the Court.²⁰ A judicial trustee has the powers of an ordinary trustee.²¹ An official of the Court will not be appointed as a judicial trustee ‘of a trust which involves the carrying on of any trade or business unless the Court, with or without special conditions to ensure the proper supervision of the trade or business, specifically directs’.²² The ‘judicial trustees’ regime struck a middle ground between judicial supervision of private trust administration as required and the full control of trust administration by an order for general administration of trusts by the Court or by the Public Trustee.²³ However, the regime was recognized to be a failure soon after the enactment of the statutory regime, with only forty-nine judicial trustees appointed from 14 August 1896 to 20 March 1903.²⁴ It is difficult to audit publicly how frequently judicial trustees are appointed in modern practice, as such appointments are made in chambers and controlled privately thereafter.²⁵ The appointment of judicial trustees may be useful where close supervision is desirable, without general administration of the trust, especially where the complexity of trust affairs requires frequent judicial intervention.²⁶

5.09  The protective nature of the judicial appointment of new trustees is generally revealed by the selection process and the relevant principles applied therein which are concerned (p. 127) with appointing fit and proper persons to the office of trustee with a view to facilitating due performance of the trust. Traditionally, the Court adhered stringently to the settlor’s wishes in appointing new trustees.²⁷ That approach has been relaxed over time to allow for suitable appointments to be made by the Court.²⁸ The Court will usually require evidence of the fitness of the proposed appointee to assume the office of trustee, so that it can undertake a sensitive appraisal of candidacy, rather than a blunt assessment of strict legality.²⁹ In Re Koczorowski, Dunn J refused to appoint a new trustee where, inter alia, no material demonstrating the fitness of the proposed appointee was placed before the Court.³⁰ In those circumstances, his Honour said, ‘[he had] no way of knowing whether [the proposed trustee] who has a poor grasp of the English language, has the faintest idea of the functions and obligations of a trustee’.³¹ The dominant consideration is (and ought to be) finding fit and proper persons to assume the office of trustee to reasonably assure due administration and the performance of the trust. In Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd, an issue arose as to whether the Court had power to appoint a natural person as trustee where the relevant trust deeds required a corporate trustee and ‘[t]he uncontradicted evidence was that no corporate trustee would agree to being the trustee of the trusts’.³² After finding no such prohibition in the trust deeds, Rolfe J said, ‘[e]ven if there was an express prohibition, [there was] authority for the proposition that it will not, of itself, lead to the result that a trustee falling within the prohibited class will not be appointed’.³³ A key criterion emphasized by Rolfe J in making the appointment was whether it was ‘expedient for a new trustee to be appointed, particularly having regard to the interests of the beneficiaries’.³⁴

5.10  The principles upon which the Court will appoint new trustees are threefold.³⁵ First, new trustees will be appointed with the aim of achieving even-handedness between the beneficiaries.³⁶ Second, whether the appointment will promote or impede the performance of the trust. An appointment will not be undermined because the continuing trustee refuses to deal with the new trustee, as that would be tantamount to a veto power in continuing trustees and fetter the Court’s powers to appoint suitable candidates to the office of trustee.³⁷ Third, conflicts of duty and interest are to be avoided, if possible.³⁸ Those requirements are not concerned with strict legality per se, but with facilitating performance, which may involve pragmatic considerations. The Court will also take note of whether (p. 128) there is anything that can be said against the suitability of the proposed appointee, especially by the beneficiaries, who cannot dictate who is to be appointed trustee unless they are empowered to do so, but may voice objections.³⁹

5.11  Another example of the pragmatic evolution of appointments to, and the regulation of, the office of trustee is evident from foreign trustees. Traditionally, the Court seems to have embraced the notion that foreign residents might need to be appointed as trustees if it was in the best interests of the beneficiaries to do so, especially where the beneficiaries were themselves all foreign residents, and thus for better workability of the relevant trust.⁴⁰ In Re Liddiard, for example, all of the beneficiaries of the testator, some of whom were infants, were resident in Australia.⁴¹ The residuary estate had been invested in English railways and was worth about £6,000 at the time in 1880.⁴² The Court appointed two Australian residents, both of whom would sell the English investments and invest the money in Australia, thereby effectively exporting trust administration from England to Australia.⁴³ It is, however, suboptimal for the only English aspect of a trust to be the governing law where the beneficiaries, trustees, and trust property are situated in a foreign jurisdiction because this places an additional burden on the foreign jurisdiction to facilitate the performance of trusts according to the intricacies of English trust law.⁴⁴ Some jurisdictions have, however, been receptive to supervising trusts governed by foreign law by, for example, giving judicial advice to trustees, ordering accounts to be taken, and even varying the terms of the trust.⁴⁵

5.12  In the 20th century, the appointment of foreign trustees came to be motivated by a desire to avoid the levying of new taxes that were introduced, rather than simply to shift trust administration to where beneficiaries were genuinely located overseas.⁴⁶ Responsively, the Court became more reluctant to appoint foreign trustees, thereby effectively exporting trust administration offshore in respect of English trusts, where the sole motivation for doing so was the avoidance of tax.⁴⁷ In doing so, the Court allowed peripheral public policies to (p. 129) influence whether to exercise its supervisory powers to appoint trustees, recharacterizing the cases in which foreign trustees were appointed because beneficiaries were all (genuinely) resident outside the jurisdiction as ‘exceptional circumstances’.⁴⁸ The gradual relaxation of the rules concerning appointing foreign resident trustees where offshore trust administration furthers the due performance of the trust evidences a trend toward ensuring that proper persons are appointed as trustees to facilitate performance of the relevant trust as required.⁴⁹

5.13  Aside from the various statutory powers that empower the Court to appoint new trustees in prescribed circumstances, the Court has broad inherent powers that also reveal the underlying administrative and protective nature of this aspect of the supervisory jurisdiction over trust administration. The Court’s inherent power to appoint trustees stems from the maxim of Equity that a trust will not fail for want of a trustee and also from the foundational principle of the supervisory jurisdiction over trust administration that the Court will ensure that a trust is lawfully performed.⁵⁰ Indeed, a plea will often be included for the trust to be administered, ‘if and insofar as necessary, by the Court’.⁵¹ The Court also has an inherent power to appoint a person to exercise a fiduciary power in a trust.⁵² That power extends to the appointment of other fiduciary office holders involved with the administration of a trust, including protectors.⁵³ The power of appointing trustees corresponds to the fiduciary nature of the office that is the object of the appointment in respect of which ‘beneficiaries are entitled to have a trustee who would not only be, but also appear to be, completely independent’.⁵⁴ That correspondence founds the notion that the power to appoint new trustees is itself a fiduciary power demanding objectivity in assessing the fitness of appointees and is grounded in the general rule against self-appointment.⁵⁵ Thus, a ‘most salutary’ rule remains against self-appointment, which should only occur in ‘exceptional circumstances’ or ‘special circumstances’.⁵⁶ The Court may scrutinize a self-appointment to determine whether the power was properly exercised having regard to the competing interests of the beneficiaries and without taking into account improper, irrational, or irrelevant considerations.⁵⁷

(p. 130) 5.14  In Pope v DRP Nominees Pty Ltd, a discretionary family trust was settled in broad terms by Oliver Edgar Pope in 1974 appointing DRP Nominees Pty Ltd as trustee, the directors of which were WB Finne & Co Pty Ltd and Desmond Roy Pope (‘Desmond Snr’), who was the settlor’s son.⁵⁸ Desmond Snr was also a director of WB Finne Co Pty Ltd. The power to appoint new trustees was reserved by the settlor and ‘failing him’ conferred on Desmond Snr during his lifetime. The settlor died in 1977. Desmond Snr’s son, Desmond Oliver Pope (‘Desmond Jnr’) was a beneficiary who had not received any distribution from the trust since 1983 and deposed that his father told him in 1996 that there would be nothing in the trust for him. An inspector was appointed to audit the trust and reported extensive maladministration. Thereafter, Desmond Jnr sought, inter alia, the removal of the trustees and appointment of new trustees. At the hearing, Desmond Snr expressed his desire to retire as trustee and appoint two new trustees, who were his business associates. Desmond Jnr objected to the appointments and sought the appointment of two independent trustees. Desmond Snr argued that the Court lacked jurisdiction to make the orders sought by Desmond Jnr as the relevant statutory provision was ‘no more than a reflection of the inherent jurisdiction [of the Court]’ and had virtually been subsumed by statute.⁵⁹ As such, the Court must defer to Desmond Snr and had no power to appoint new trustees as he was willing to do so.⁶⁰ The Court could also not proceed on a summary basis as the matter must first proceed to trial.⁶¹ To the contrary, the Court held that the inherent and statutory powers were not co-extensive and ‘the inherent power [to appoint new trustees] stems from the general jurisdiction of the court to supervise trusts and trustees’.⁶² The Court could appoint and remove trustees on a summary basis without a trial.⁶³ The trust ought not be put to the expense of a trial or ‘an unending vista of continuing litigation’ before it could be performed.⁶⁴ Justice Olsson further observed:⁶⁵

5.15  Desmond Snr appealed on jurisdictional grounds: that orders could not be made ‘without resolving the factual disputes on oral evidence’.⁶⁶ The Full Court observed the demise of the general administration of trusts in Equity, which ‘has now virtually been superseded by actions of the type the subject of this appeal, where nominated and specific relief is claimed rather than by way of the cumbersome process of general administration by the court’ and held that it was ‘expedient’ for its supervisory powers to be exercised in the circumstances.⁶⁷ ‘Regardless of the [relevant statutory] powers,’ said Bleby J, ‘the court has and may exercise a general supervisory jurisdiction over the administration of trusts, in (p. 131) order to ensure that the trusts are properly executed.’⁶⁸ As the ‘interests of the beneficiaries required the appointment of a trustee who would properly carry out the terms of the trust’, including potentially taking action for recovery against Desmond Snr, Desmond Snr was in a position of conflict and ‘it became both inexpedient and impracticable to appoint new trustees without the assistance of the court’.⁶⁹ In dismissing the appeal, the Court noted that ‘[t]here is no doubt that there such jurisdiction associated with the inherent power to make an order for general administration of a trust’, which ‘is at least as wide as the [statutory] power conferred [on the Court]’.⁷⁰

5.16  Following the Pope litigation, the relevant legislative provision was amended to broaden the statutory power of the Court to make, inter alia ‘an order appointing a trustee or trustees, or an additional trustee or trustees, of a trust [ … ] if it is satisfied that the order is desirable—(a) in the interests of the persons (whether identified or not) who are to benefit from the trust; or (b) to advance the purposes of the trust’.⁷¹ Further, ‘[t]here is no need for the Court to find any fault or inadequacy on the part of the existing trustees before making an order [inter alia, appointing a new trustee]’.⁷² Those amendments supplement, rather than supplant, the inherent supervisory jurisdiction over trust administration of the Court.

5.17  Traditionally, one of the principal means by which the Court has regulated trusteeship is through the removal of trustees from office absent alleged or proven wrongdoing and simply to facilitate the due performance of trusts. In Uvedale v Ettrick, a bill was filed for the execution of a trust under the direction of the Court and the trustee, Ettrick, insisted on continuing as trustee and committed to ‘attend a Master from Time to Time to get a purchaser, and to do all reasonable Acts, &c’.⁷³ Absent wrongdoing, Lord Nottingham LC removed Ettrick as trustee and said, ‘I like not that a Man should be ambitious of a Trust, when he can get nothing but Trouble by it; and declared that without any Reflection on Ettrick, he should meddle no further in the Trust, &c.’⁷⁴ The Court continues to rely on a broad inherent jurisdiction to remove trustees to facilitate the performance of trusts. Thus, like Uvedale, where a trustee is able to continue in office and resists removal, the Court continues to rely on its inherent power to remove trustees from office, if necessary.⁷⁵ It has, therefore, been held that the (inherent and statutory) jurisdiction to remove trustees, as with other fiduciary office-holders such as executors, ‘is a supervisory and (p. 132) protective one [ … ] the overriding object of the power remains the due and proper administration of estates’.⁷⁶

5.18  The statutory powers to remove trustees are generally incomplete. A partial statutory power to remove trustees exists in the power to appoint new trustees where it is expedient to do so ‘in substitution for’ existing trustees.⁷⁷ The power to appoint ‘judicial trustees’ is also couched in substitutive language where the Court may appoint a judicial trustee ‘if sufficient cause is shown, in place of all or any existing trustees’.⁷⁸ That substitutive language in the classical design of trusts legislation implies a removal power, but does not provide a complete power to remove trustees where, for example, new trustees are not appointed. In some jurisdictions, statutory reform has addressed the distinct function of removing trustees in supervising trust administration.⁷⁹ In doing so, the administrative and protective nature of the power is evident where the Court may make an order, inter alia, removing a trustee, ‘if it is satisfied that the order is desirable—in the interests of the persons (whether identified or not) who are to benefit from the trust; or [ … ] to advance the purposes of the trust’.⁸⁰ Further, ‘[t]here is no need for the Court to find any fault or inadequacy on the part of the existing trustees before making an order under this section’.⁸¹ Elsewhere, the Court relies on broad inherent powers to remove trustees, which also exhibit administrative and protective qualities and exercised with the principal aim of due trust administration.⁸² The removal of trustees is an aspect of the supervisory jurisdiction over trust administration which may be used interchangeably with other aspects to facilitate performance through targeted intervention.⁸³

5.19  The nature and purpose of the judicial function to remove trustees is evident from the circumstances justifying removal where trustees may be removed from office absent alleged or proven wrongdoing, but simply to facilitate performance.⁸⁴ Cases of proven wrongdoing by a trustee are generally straightforward cases for removal, but those cases do not define the function of removing trustees, which is performative, not punitive.⁸⁵ It is ultimately an exercise of discretion by the Court as to whether or not a trustee ought to be removed from office in the circumstances and, in particular, whether it is in the best interests of the beneficiaries for the trustee to continue in office. In Letterstedt v Broers, a testator had carried on (p. 133) a brewing distillery and malting business in Mariedahl and Cape Town, which he wished to be carried on after his death. To that end, he made provision in his will for the payment of up to £10,000 and included elaborate provisions on how the business should be run.⁸⁶ A Board of Executors became the sole executors and trustees and managed the business. The testator’s daughter and sole beneficiary commenced an action alleging maladministration, seeking an investigation of the accounts and control of the business. A request for removal of the Board of Executors was reserved, but later refused. On appeal, the Privy Council expressed ‘much anxiety’ over the refusal to remove the Board of Executors.⁸⁷ Lord Blackburn said:⁸⁸

5.20  As to the administrative nature of removing trustees and the privacy afforded to such proceedings, Lord Blackburn observed that ‘[t]he reason why there is so little to be found in the books on this subject’ was that:

5.21  The protective nature of the judicial function of removing trustees from office was also emphasized by the Privy Council. ‘In exercising so delicate a jurisdiction as that of removing trustees,’ said Lord Blackburn, ‘[we] do not venture to lay down any general rule beyond the very broad principle above enunciated, that their main guide must be the welfare of the beneficiaries’.⁸⁹ The Privy Council was content to ‘acquit the Board [of Executors] of concealment in these accounts’, but held that ‘the spirit which permits such charges is naturally offensive to the [plaintiff] and unfair towards the trust estate’.⁹⁰ Even though ‘friction or hostility between trustees and the immediate possessor of the trust estate is not of itself a reason for the removal of the trustees’, the Privy Council considered that ‘where (p. 134) the hostility is grounded on the mode in which the trust has been administered, where it has been caused wholly or partially by substantial overcharges against the trust estate, it is certainly not to be disregarded’.⁹¹ As such, the Privy Council held that ‘it [was] necessary, for the welfare of the beneficiaries, that the Board should no longer be trustees’.⁹²

5.22  In Miller v Cameron, the beneficiaries successfully sought the removal of the sole surviving trustee, Miller, who had assigned his entire estate for the benefit of his general creditors under the Bankruptcy Act 1924–27.⁹³ Despite his impecuniosity and requests to do so, Miller refused to resign as trustee. He stood to gain over £300 in commission as trustee. Miller failed in resisting his removal at all levels, with the case ultimately making its way to the High Court of Australia, in which three separate opinions were delivered, each dismissing Miller’s appeal with costs. Following Letterstedt, Latham CJ said, ‘[i]t has long been settled that, in determining whether or not it is proper to remove a trustee, the Court will regard the welfare of the beneficiaries as the dominant consideration’.⁹⁴ He continued:⁹⁵

5.23  No alleged or proven wrongdoing was required to remove Miller as trustee and no pleadings of misconduct had been filed.⁹⁶ Evidence was, however, led that Miller was prone to the incursion of debts he could not pay and was not a savvy business operator of a dairy farm, Myrtle Grove, which he owned and had run into debt of about £12,000, without the knowledge of his business partner. Miller had also been denied partnership powers in a firm, Miller & Miller. A power of sale was in the ‘absolute and uncontrolled discretion’ of Miller as trustee in respect of the trust property of £30,000 and annual income of £1,700. ‘No general rule can be laid down for the removal of trustees from their office’, said Starke J, before stating that Letterstedt stood for the proposition that ‘[t]he only guide is the welfare of the beneficiaries and a trustee may be removed if the Court is satisfied that his continuance in office would be detrimental to their interest’.⁹⁷ No suggestion was made that Miller had misapplied trust property, but evidence of misapplied client money from the partnership was relevant and could be relied upon in determining whether Miller was a fit and proper person to remain as trustee absent any pleadings. In his leading opinion, Dixon J said:⁹⁸

(p. 135) 5.24  Furthermore, ‘where enough appears to authorize the Court to act,’ said Dixon J, ‘the delicate question whether it should act and proceed to remove the trustee is one upon which the decision of a primary judge is entitled to especial weight’.⁹⁹ Although the pleadings did not allege as grounds for removal any dishonesty or misbehaviour, Miller’s attempt to combine the pursuits of an orchardist with the practice of his profession as solicitor, thereby resulting in ever-increasing indebtedness as orchardist to the firm, and the misuse of client monies toward the dairy farm, Myrtle Grove, were matters that ‘the primary Judge was fully entitled, if not bound, to take into account’.¹⁰⁰ These matters, Dixon J held, ‘impair the confidence felt in his further administration of the trusts [and further] discussion in detail of these matters is unnecessary’.¹⁰¹ Miller was removed as trustee and visited with costs.¹⁰²

5.25  Following Letterstedt and Miller, the Court continues to exercise broad powers to remove trustees to facilitate the performance of trusts and overcome administrative difficulties.¹⁰³ For example, the Court may remove a trustee to break a deadlock between trustees.¹⁰⁴ In Tomasevic v Jovetic, a deadlock arose between four trustees of a charitable trust for religious purposes, which produced acrimonious and protracted litigation, in which two of the trustees applied for the removal of the other two trustees by reason of their alleged hostility toward the purpose of the trust.¹⁰⁵ Pursuant to its inherent powers, only one of the trustees was removed, even though similar allegations had been made against both of them.¹⁰⁶ In removing that trustee, the Court stressed that the removal was ‘not punitive’ but was ‘to provide for a more workable situation in relation to the functioning of the [t]rust. That is, to ensure that the trust can now function in an efficient and satisfactory manner.’¹⁰⁷ Justice Sifris observed ‘the importance of the office of Trustee [and] the supervisory jurisdiction of the Court and that resort to this jurisdiction is preferable to any self help or unilateral action that would be bound to lead to disputation’.¹⁰⁸ Thus, judicial intervention in the administration of the trust was required in order to bring about a change in the office of trustee so that the trust could continue to be performed; the ongoing performance of the trust was paramount.

5.26  Friction between the beneficiaries and trustee will not of itself justify the removal of a trustee.¹⁰⁹ Beneficiaries will not be permitted to remove trustees whimsically or to control trust administration, which is a matter for the trustee in performing the trust.¹¹⁰ However, a breakdown in relations between trustees and beneficiaries is a relevant, if (p. 136) that breakdown impedes the due administration of the trust.¹¹¹ Hostility between beneficiaries and trustees may distract a trustee from performing the trust, especially where the hostility relates to allegations of impropriety or excessive charging, which the trustee feels compelled to defend.¹¹² As such, a balance must be struck between removing trustees from office in appropriate cases and supporting trustees in performing trusts without unnecessary interference.¹¹³ A trustee will not be removed from office without good reason or because beneficiaries have merely requested that the trustee be removed.¹¹⁴ Any applicable procedures for removal of trustees must be followed.¹¹⁵ The Court may declare that a purported removal of trustees is invalid and that incumbent trustees continue to hold office.¹¹⁶ Insofar as friction is concerned, the Court will endeavour to assess whether the trustee’s judgement is clouded by reason of the conflict with the beneficiaries in such a way as to reasonably threaten the performance of the trust.¹¹⁷ In See v Hardman, Bryson J said:

[w]ithin the principle so stated [in Letterstedt and Miller] the [C]ourt has power to remove a trustee who has not acted in breach of trust and has not been guilty of misconduct, and the court might decide, for the purpose of seeing that trusts are properly executed, to remove a trustee whose conduct had not been improper in any way.¹¹⁸

His Honour further observed:¹¹⁹

5.27  The ‘true issue’ identified by Bryson J underscores the administrative and protective nature of this aspect of the supervisory jurisdiction over trust administration, which is tied to facilitating the performance of trusts.¹²⁰ Judicial intervention was not corrective of any wrongdoing or responsive to the wrongdoing of any person. Indeed, a trustee who is ‘undoubtedly guilty of a breach of trust’ may still not be removed from office where the Court considers that removal of the trustee is not for the welfare of the beneficiaries generally or necessary for the protection of the trust estate, especially having regard to the expense that will be incurred in appointing new trustees to take over trust administration and continue with the performance of the trust.¹²¹ The focus must, therefore, be on facilitating the ongoing performance of the trust in the best interests of the beneficiaries generally. In Re Whitehouse, a family feud erupted between two sons, Mac and Wilson, who were (p. 137) the beneficiaries of a trust with significant hotel interests in Brisbane, and their father, Mr Whitehouse, who was co-trustee with Mrs Whitehouse, who divorced Mr Whitehouse and suffered a mental breakdown.¹²² ‘[O]ne of the things I am concerned with,’ said Macrossan J, ‘is to consider the desirability of making some alteration within the area of the trust relationship, with a view to improving the administration of the trusts for the future’.¹²³ Absent wrongdoing, Mr Whitehouse was removed as trustee, so that the trust could continue to be performed.¹²⁴

5.28  Trustees may also be removed where they are ‘antagonistic’ towards a beneficiary or the purpose of the trust.¹²⁵ For example, where the trustee has established a rival business, the trustee may be removed from office.¹²⁶ Outside the commercial sphere, the Court may scrutinize the fitness of a trustee in a charitable trust of a religious kind where, for example, a trustee ceases to hold religious views that it is the purpose of the trust to promote.¹²⁷ A trustee will not be permitted to remain in belligerent occupation of that office to the detriment of the due performance of the trust irrespective of personal gain or remuneration the trustee stands to receive in the future.¹²⁸ A prospective trustee might ‘bargain’ with the settlor for remuneration, but there is nothing that binds the beneficiaries to that bargain between settlor and trustee nor can that bargain be used as a basis to undermine the due performance of the trust. In truth, the trustee has only bargained for an initial appointment as trustee and continuation in office for so long as it is conducive to the performance of the trust.¹²⁹ As a broad discretionary jurisdiction, the considerations may vary, with special weight given to the primary judge who answers the delicate question of whether to remove a person from the office of trustee.¹³⁰ The Court undertakes a sensitive assessment of the circumstances and will be ‘entitled to place [the trustee’s] conduct so to speak under a microscope’ to determine whether the trustee ought properly to continue in office.¹³¹ ‘The critical question’, as Olsson J put it, ‘is whether, on facts beyond real dispute, such has been the mode of conduct of the trust that the administration has been unsatisfactory to the degree that, on any view, the Trustee ought to be removed and replaced.’¹³² The discretion to remove a trustee is, therefore, a sensitive one for the Court to exercise and even where the Court considers that the trustee’s continuation is undesirable in the future, the Court may allow the trustee to remain in office until a convenient time arises for their removal—for example, after an impending sale is complete.¹³³

5.29  Trustees are generally entitled to retire from office and thereby be released from the onerous duties and extensive personal liability attendant to that office.¹³⁴ Where a trustee wishes to retire, and there remains a trust corporation or two persons to perform the trust who consent to discharging the trustee, the retiring trustee may declare his intention to retire by deed and thereby be deemed to be discharged from office.¹³⁵ However, where an administrative difficulty prevents a trustee retiring from office, the Court may exercise an inherent jurisdiction to supervise such retirement, thereby making an order permitting the trustee to retire on appropriate terms as to costs.¹³⁶ Such difficulties might arise where an appointor is unable or unwilling to appoint a new trustee for some reason.¹³⁷ A trustee may apply for an order permitting the trustee to retire in a summary way using a Part 8 claim form.¹³⁸ The trustee will generally be allowed costs as administrative expenses properly incurred in trust administration.¹³⁹ As the Court has no express statutory power to make orders discharging trustees from office, the inherent source of the Court’s supervisory jurisdiction supplies that deficiency.¹⁴⁰ Judicial supervision of the retirement of trustees is a logical extension of the supervisory jurisdiction over trust administration.¹⁴¹

5.30  In Re Chetwynd’s Settlement, one of four trustees, who had been a trustee for ten years, was upwards of sixty years of age, and no longer in good health, wished to be discharged from trusteeship.¹⁴² He applied for discharge pursuant to the statutory jurisdiction of the Court to appoint new trustees.¹⁴³ In chambers and unopposed, the Court held that it lacked jurisdiction to merely discharge a trustee from office under the statutory appointment power.¹⁴⁴ However, Farwell J suggested that ‘in an action to administer a trust, the Court always had inherent jurisdiction to discharge a trustee without appointing a new trustee in his place, and the summons was accordingly amended by joining all parties interested and asking for administration’.¹⁴⁵ The trustee’s wish to retire was ‘quite reasonable’, in Farwell J’s view.¹⁴⁶ ‘No trustee accepts the responsibility for the term of his natural life, or for more than a reasonable time’, said Farwell J, who felt ‘no difficulty in exercising my jurisdiction, and discharging the [trustee] from his trusteeship without appointing a new trustee’.¹⁴⁷ (p. 139) Chetwynd is a logical, and indeed sensible, exercise of the supervisory jurisdiction in furtherance of the principle of performance: yoking trust administration to trustees for life would deter honest persons from assuming the office of trustee, thereby threatening the performance of trusts.¹⁴⁸

5.31  Trustees have a ‘right’ to an indemnity from the trust funds for expenses properly incurred in trust administration.¹⁴⁹ ‘It is commonplace that persons who take the onerous and sometimes dangerous duty of being trustees are not expected to do any of the work on their own expense’, observed Danckwerts J. ‘[T]hey are entitled to be indemnified against the costs and expenses which they incur in the course of their office; of course, that necessarily means that such costs and expenses are properly incurred and not improperly incurred’.¹⁵⁰ The ‘general rule’, therefore, is that trustees ‘are entitled to be paid back all that they have had to pay out’.¹⁵¹ Traditionally, the office of trustee was otherwise gratuitous.¹⁵² A trustee was not entitled to any remuneration for services rendered in performing a trust.¹⁵³ That position was gradually relaxed in the late 19th century to allow reasonable remuneration for trustees to attract competent and suitably skilled persons to assume offices of trusteeship, especially in complex trust administration, thereby facilitating performance.¹⁵⁴ The general rules of Equity that forbid a trustee to make a profit do not prevent the Court from authorizing remuneration to facilitate the due performance of a trust.¹⁵⁵ Thus, it is no longer expected that the ‘onerous and sometimes dangerous duty of being trustees’ will be undertaken gratuitously, but often for fair remuneration.¹⁵⁶ By extension of the logic of the supervisory jurisdiction over trust administration, the Court assumed the function of regulating the remuneration of trustees as an inherent jurisdiction.¹⁵⁷ Trust instruments often provide for the remuneration of trustees where necessary,¹⁵⁸ but that is not always so. Rather than risking the performance of those trusts, the Court may intervene to fix reasonable remuneration of a trustee, if necessary.¹⁵⁹ Even where (p. 140) remuneration of the trustee has been provided for in the trust instrument, the Court may increase the level of remuneration where it is expedient and necessary to do so.¹⁶⁰

5.32  The statutory provisions are generally incomplete and fall short of conferring a general power on the Court to fix the remuneration of trustees, thereby requiring reliance on an inherent jurisdiction to buttress any broader judicial intervention in trust administration. In 1925, a statutory provision was introduced providing that ‘[w]here the court appoints a corporation, other than the Public Trustee, to be a trustee either solely or jointly with another person, the court may authorise the corporation to charge such remuneration for its services as trustee as the court may think fit’.¹⁶¹ That statutory power, which continues in force, was limited to fixing the remuneration of corporate trustees, which the Court had appointed. In 2000, a new statutory power was introduced providing that ‘a trustee who [ … ] is a trust corporation, but [ … ] is not a trustee of a charitable trust, is entitled to receive reasonable remuneration out of the trust funds for any services that the trust corporation provides to or on behalf of the trust’.¹⁶² Furthermore, ‘a trustee who [ … ] acts in a professional capacity, but [ … ] is not a trust corporation, a trustee of a charitable trust or a sole trustee, is entitled to receive reasonable remuneration out of the trust funds for any services that he provides to or on behalf of the trust if each other trustee has agreed in writing that he may be remunerated for the services’.¹⁶³ There are four qualifications. First, the provisions do not apply to all trustees. Second, the provisions are default rules subject to the provisions of the trust instrument or applicable subordinate legislation.¹⁶⁴ Third, remuneration requires written agreement of the other trustees. Fourth, legitimate minds may differ as to what constitutes ‘reasonable remuneration’, which must be determined having regard to the circumstances and the services required for the trust to be performed.¹⁶⁵ The Court also fixes the remuneration of ‘judicial trustees’, which cannot exceed 15 per cent of the capital value of the trust.¹⁶⁶

5.33  All Australian jurisdictions, save New South Wales, confer a statutory power on the Court to fix the remuneration of trustees, although the provisions differ slightly.¹⁶⁷ In Queensland and South Australia, the broadest powers are conferred on the Court to remunerate trustees.¹⁶⁸ In Tasmania, a broad statutory power is also conferred, although the power is expressed to be subject to the terms of the ‘trust instrument or otherwise’ and remuneration is said to be for the trustee’s ‘pains and trouble’ in performing the trust.¹⁶⁹ In the Northern Territory and Victoria, remuneration may also be fixed by the Court for the trustee’s ‘pains and trouble’, but such remuneration must not exceed 5 per cent.¹⁷⁰ In Western Australia, the most extensive guidance is provided where the provision begins with (p. 141) a broad conferral of power on the Court to fix a trustee’s remuneration.¹⁷¹ The aggregate commission must not, however, exceed 5 per cent of the gross value of the trust property, which may be allowed by the Court from time-to-time as the Court thinks fit.¹⁷² Where two or more persons have been trustees at the same time or different times, ‘the Court may, in its discretion, apportion the total amount allowed among the trustees in such manner as it thinks fit, and, in particular, may divide the amount in unequal shares or may make the allowance to one or more of the trustees to the exclusion of the other or others’.¹⁷³ That final proviso reflects the breadth of the power to fix remuneration, even unequally between co-trustees.

5.34  To demonstrate the administrative and protective nature of the judicial function in remunerating trustees as an aspect of the supervisory jurisdiction over trust administration, three situations will be considered from various jurisdictions: first, where there is a broad statutory power to remunerate trustees; second, where there is an incomplete or qualified statutory power; and third, where there is no statutory power to remunerate trustees.

5.35  The first situation is demonstrated in Queensland where a broad statutory provision exists to remunerate trustees, which has been held not to limit the inherent jurisdiction of the Court to regulate the remuneration of trustees.¹⁷⁴ In Queensland Oil Shale Mining Industry (Superannuation) Ltd, the applicant was a corporate trustee of a fund comprising award-based superannuation for employees in the Queensland coal mining industry.¹⁷⁵ When the trust was settled in 1988, the remuneration of six trustees—three employer and three union representatives—was not provided for in the trust deed. The remuneration of directors of the corporate trustee was also not provided for in the articles of association. A decade later, the fund had grown in value and comprised AU$690 million in assets. Given the complexity and size of the trust fund, highly qualified persons were required to act as directors and trustees. The trustees were empowered to vary the trust but were unable to do so owing to an obvious conflict of interest and duty. A special resolution was passed at a general meeting to allow remuneration for directors ‘subject to the Supreme Court of Queensland making an order approving of remuneration of the Company as trustee of the fund’.¹⁷⁶ Trusteeship was traditionally gratuitous, Williams J observed, ‘[b]ut times have changed and it is now clearly accepted that a court of [E]quity has inherent jurisdiction to authorise remuneration of a trustee even where no such power exists in the trust instrument’.¹⁷⁷ Further, ‘[the relevant statutory provision] should not be regarded as in any way limiting the inherent jurisdiction of this court nor the general power [to vary a trust]’.¹⁷⁸ By virtue of the inherent or statutory jurisdiction, ‘[the Court] will generally require specific evidence that the administration of the trust has required some particular exertion on the part of the trustee which justifies remuneration’.¹⁷⁹ ‘The task (p. 142) of administering this trust is now beyond the capacity of the people who were originally envisaged as being appropriate directors of the trustee’, said Williams J.¹⁸⁰ Remuneration was justified as ‘a high degree of expertise is required if this particular trust is to continue to operate as effectively as possible for the benefit of all its members [and that] expertise can [ … ] only be acquired at a price’.¹⁸¹

5.36  The second situation is shown in England and Wales where the statutory provision is incomplete or qualified and the Court relies on the inherent jurisdiction to remunerate trustees where necessary.¹⁸² In Re Duke Norfolk’s Settlement Trusts, trustees were appointed to administer a discretionary trust settled by the 16th Duke of Norfolk, which comprised shares in an estates company with significant freehold property, 3,000 acres of land in Yorkshire, and four blocks of land lying between the Strand and the River Thames in London. The ultimate distribution from the trust might not occur until 2038 and the corporate trustee was entitled to remuneration at the ‘usual scale of fees in force at the date [of the settlement—ie 1 April 1958]’. An additional block of land was added to the trust property in 1969, which paved the way for a comprehensive redevelopment of the Strand, but ‘this development involved the trustees in work, as trustees, which was entirely outside anything which could reasonably have been foreseen when they accepted office’.¹⁸³ The introduction of new tax legislation also precipitated restructuring designed to minimize capital gains tax.¹⁸⁴ An originating summons was issued on 10 January 1975 seeking the authorization of the Court in the exercise of its inherent jurisdiction to award reasonable remuneration for the trustee’s services, but the settlor died on 31 January1975, causing further administrative work to be undertaken. The summons was not heard for another three years in February 1978. Relying on Lord Simonds’ restrictive approach to the inherent jurisdiction of the Court in Chapman v Chapman, Walton J considered that, ‘[t]he scope of the inherent jurisdiction of the court must therefore rest upon the usual twin pillars of principle and authority’.¹⁸⁵ As to ‘principle’:¹⁸⁶

5.37  In awarding remuneration for past services, but refusing to fix remuneration for future services and services not provided for in the trust, Walton J said:

it would be extremely odd if there were any such general inherent jurisdiction to raise the remuneration of trustees save in the most exceptional case, having regard to the oft repeated view of equity, that the office of a trustee is prima facie an unremunerated one, however diligent he may be in the performance of his duties.¹⁸⁷

(p. 143) That approach is, however, counterintuitive to the logic of the supervisory jurisdiction over trust administration as it fails to do what is necessary to facilitate the performance of the trust, especially the long-term performance of a large discretionary trust if remuneration could not be fixed prospectively and a corporate trustee must be held to the scale of its fees in 1958 with a vesting date some seventy years later.

5.38  Justice Walton was overruled on appeal.¹⁸⁸ ‘When the court authorises payment of remuneration to a trustee under its inherent jurisdiction it is,’ said Fox LJ, ‘exercising its ancient jurisdiction to secure the competent administration of the trust property just as it has done when it appoints or removes a trustee under its inherent jurisdiction.’¹⁸⁹ He added:¹⁹⁰

5.39  The administrative nature of the proceedings caused the Court to hear submissions from Romer QC ‘in the unwelcome role of advocatus diaboli’ to argue that the Court lacked jurisdiction, which Brightman LJ acknowledged in his separate, concurring opinion.¹⁹¹ As the Court has an inherent power to remunerate a trustee who had assumed office on a gratuitous basis and a prospective trustee for future services,¹⁹² Brightman LJ expressed ‘difficulty in appreciating the logic of the principle that the court has no power to increase or otherwise vary the future remuneration of a trustee who has already accepted office’.¹⁹³ The supposed logic that the Court could fix a higher level of remuneration for a substitute trustee, but could not award that same level of remuneration to the incumbent trustee, his Lordship observed, ‘[as a] result appears to me bizarre, and to call in question the validity of the principle upon which it is supposedly based’.¹⁹⁴ The robust endorsement of a broad inherent jurisdiction to fix remuneration was an important development in affirming the Court’s ability to provide regulatory oversight of complex and long-term trust (p. 144) administration without which such trusts would effectively be left to fail for want of a (suitable) trustee, in contradiction of the central principle of performance that defines the supervisory jurisdiction over trust administration.

5.40  The third situation is supplied by New South Wales where there is no statutory power to fix a trustee’s remuneration, but the Court nevertheless does so on the basis of an inherent jurisdiction to supervise trust administration, thereby facilitating performance. A broad statutory power exists to enlarge the powers of a trustee with respect to ‘advantageous dealings’, including expenditures and transactions that are expedient, which could possibly be relied upon to effectively fix the remuneration of a trustee.¹⁹⁵ However, given the breath of the inherent jurisdiction to fix a trustee’s remuneration, recourse to the statutory enlargement power is unnecessary.¹⁹⁶ For analytic clarity, it is preferable for a stream of jurisprudence to develop as a distinct aspect of the supervisory jurisdiction over trust administration on remuneration, rather than inviting distractions over the interpretation of statutory provisions. In an encouraging turn towards analytic and jurisdictional clarity, recent cases in New South Wales have relied on the inherent jurisdiction to remunerate trustees rather than the statutory enlargement power.¹⁹⁷

5.41  The point is pronounced in the insolvency of a trustee, where another person must take control of trust administration and the Court will allow reasonable remuneration to a person who has assisted the performance of the trust.¹⁹⁸ In Re Application of Sutherland, Mr Sutherland was both the administrator and liquidator of a company that had acted as a corporate trustee of two trusts.¹⁹⁹ Separately, Campbell J had rejected Mr Sutherland’s contention that he was entitled to all expenses incurred of whatever nature in connection with the company’s liquidation, but later relied on a ‘wide’ inherent jurisdiction of the Court to allow remuneration for trustee services.²⁰⁰ ‘There was no practical alternative available, of having the trusts administered by someone who would act gratuitously,’ said Campbell J, ‘and the work needed to be done by someone if the trusts were to be administered at all.’²⁰¹ This statement of Campbell J demonstrates the continued relevance and resonance of the principle of performance as an organizing principle for the evolution of the supervisory jurisdiction over trust administration in modern times. As the Court had relied on its inherent jurisdiction to remunerate Mr Sutherland for performing the trusts on an ex parte application, a registrar of the Court would examine the accounts and certify the reasonableness of the remuneration awarded and beneficiaries would be given an opportunity to be heard.²⁰²