Appointment and removal of trustees
Acceptance and rejection of trusteeship
R18 The new Trusts Act should provide that:
(1) A person who is appointed as a trustee of an express trust may accept or reject the trusteeship.
(2) Acceptance of a trusteeship must be either express (in writing or oral) or clearly implied through conduct, unless otherwise specified in the terms of the trust.
(3) Rejection of trusteeship need not be in writing (unless the terms of the trust specify otherwise), but must be communicated to the person specified under the terms of the trust (such as the settlor or appointer) in clear and unambiguous terms.
(4) If a trustee does nothing to accept or reject a trusteeship within three months of receiving notice of the appointment, the trustee will be deemed to have rejected the trusteeship.
(5) If a trustee rejects the trusteeship, the property vests in the remaining trustees.
Accepting or rejecting the role of a trustee
8.3 The recommendations in this area reflect and clarify the current case law. Currently, no one can be compelled to be a trustee of an express trust. To give effect to this principle, trusteeship does not commence until the appointment is accepted. Acceptance may be express or implied by conduct such as dealing with the trust property. An appointed trustee who does not want to accept the trusteeship may reject the office. If this happens, the trust property will either vest in the remaining trustees, or, if there are no other trustees, revert to the settlor. There is no time limit for rejection, but once the trusteeship has been accepted it cannot later be rejected, but must be resigned.
8.4 The law is ambiguous and in need of clarification regarding the effect of inaction. There is case law that supports the proposition that inaction for a long period will be presumed to constitute rejection. There is also case law for the proposition that a long period of inaction will be presumed to constitute acceptance (because there has been no express rejection). Whether the court finds there has been an implied acceptance or an implied rejection is assessed on the facts.
8.5Our recommendation retains the settled position under case law that a trustee does not assume trusteeship until the office is accepted, while clarifying that inactivity is considered to be rejection. Acceptance will continue to be able to be implied through conduct. A trust deed could provide an alternative approach with respect to whether acceptance or disclaimer needs to be in writing.
8.6It is useful to stipulate a defined period of time after which inaction will be treated as rejection, to ensure that a named trustee has clear warning of the date by which trusteeship must be accepted. Three months provides the appointed trustee with a sufficient opportunity to accept the appointment and is consistent with the period in section 19 of the Administration Act 1969 for the proof of a will by an executor.
8.7Submitters did not take issue with this proposal. A few considered it to be unnecessary, but we prefer that the law be more certain in this area. As a result of submitter feedback, we have altered the order of the proposal so that it follows a more logical progression. We have decided not to include the previous example draft provision because it was unduly prescriptive. The provision, when drafted, should not be too prescriptive of the types of conduct that may imply acceptance as the case law should continue to apply.