Maher v Maher & Anor

The removal of a trustee is a drastic remedy. It is justified where necessary to secure the welfare of beneficiaries and the competent administration of the trust. Serious friction alone is insufficient, but conflict which creates a substantial and continuing impasse may justify removal.

The court must assess each trustee’s conduct separately. A trustee’s persistent obstruction of decisions concerning trust assets, remuneration or distributions may demonstrate unfitness. Continuing trustees must consider proposals affecting trust property fairly and in the interests of all beneficiaries, even where they have previously expressed a firm view.

The claimant and defendants were brothers and trustees of a family settlement trust whose principal asset was the shares in W Maher and Sons Ltd. The dispute concerned an alleged agreement to sell the company, the fitness of the three brothers to remain trustees, and the future administration of the trust.

The claimant alleged that the defendants had acted improperly and should be removed, while the defendants alleged that the claimant had obstructed the company and trust’s affairs. The court determined whether any agreement to sell existed and whether any trustee should be removed or replaced.

1. Alleged agreement to sell. The claimant had not proved that the trustees reached a concluded agreement to sell the company. His evidence was inconsistent as to the date, circumstances and legal effect of the alleged agreement. The contemporaneous recordings and documents showed, at most, that the defendants tolerated exploration of a possible sale. No binding agreement had been reached.
2. Applicable approach to removal. The court’s duty to ensure that a trust is properly carried out includes jurisdiction to remove or replace trustees. Removal is a drastic step, appropriate only in a clear case. The guiding consideration is the welfare of the beneficiaries and the competent administration of the trust. Actual misconduct, want of honesty, fidelity or capacity, or conduct which impedes proper administration, may justify removal. Friction or hostility is insufficient unless it has that effect.
3. Application to the trustees. The brothers’ conflict had produced a serious impasse. They could not agree proper directors’ remuneration or dividends for the trust. The claimant had repeatedly obstructed the administration of the trust and company, failed to attend meetings, opposed dividends and remuneration without proposing workable alternatives, pursued the sale issue and related litigation at substantial expense, and acted in competition with the trust’s company. His conduct demonstrated that he was not fit to continue as trustee.
4. The defendants’ conduct involved governance failings and an insufficient separation between their personal interests, directorships and trusteeships. However, their conduct was not sufficiently improper to require removal. They remained under a duty to consider any future proposal to sell the shares fairly and in the interests of all beneficiaries.
5. The claimant was removed as trustee. The defendants remained trustees. The court considered that appointment of a professional trustee might assist future administration, but further submissions were required on that issue and on consequential matters and costs.