BY: VALERIE DYE
It is important to note that although trustees own and control assets given to them by a settlor, these assets are held for the benefit of the beneficiaries. As such trustees have a duty to act in a manner that will not jeopardize or prejudice the rights of the beneficiaries. Trustees have a fiduciary duty to act in the best interest of the beneficiaries. In that regard, trustees must manage trust property in an effective and responsible manner and not deplete the trust property either for their own use or through carelessness. Trustees also have a duty to act honestly in that they should not profit from their role and to act impartially in that all beneficiaries should be treated in the same way.
Given the fact that trustees must perform their role in a certain manner one may question whether beneficiaries are stuck with a trustee or trustees once they are appointed. In Ontario, trusts are governed by the Trustee Act. Under that Act, a trustee or trustees may be removed by the court upon application to the court by a beneficiary or anyone else who has an interest in the estate. However, it is not to be assumed that beneficiaries can successfully make an application for the removal of a trustee if they simply do not like or get along with the trustee. Section 37 of the Trustee Act states that “the court may remove a personal representative upon any ground which the court may remove any other Trustee and may appoint some other proper person or persons to act in the place of the Executor or administrator removed”.
In determining whether or not to remove a Trustee the court will be primarily concerned with whether the trust is being properly executed so as not to deplete the assets or adversely affect the rights of the beneficiaries. The courts will also inquire as to whether the trustee or trustees are acting in a fair and honest manner. While the courts are not overly concerned about the relationship between the beneficiaries and the trustee, where the relationship has deteriorated to the point where it interferes with the effective administration of the trust the courts may intervene to remove the trustee or trustees. For instance, in Bunn v Gordon the court found that the relationship between the trustee and the beneficiary had broken down to such an extent that the hostility between the parties would affect the proper administration of the estate.
Notwithstanding, the power of the court to remove trustees and appoint new trustees, the overriding principle that guides the courts is that of respect for the wishes of the settlor or of the testator. In Bunn v Gordon the court stated that: “The Courts….are reluctant to exercise its discretion to interfere with the discretion exercised by a testator in choosing his or her trustee or executors and thus only in rare circumstances will the Courts intervene to remove a trustee.”
While the court will not easily interfere with the wishes of the settlor or testator, it will do so where the welfare of the beneficiaries is at risk.