8.39The power to appoint and remove trustees is of increasing importance. Sometimes the settlor retains this power in order to keep a final level of control over the trust. There are questions regarding the appropriate bounds of this role, in particular, whether those exercising a power to appoint trustees (either under the trust deed or legislation) should be subject to any duties and whether the court should be able to remove and appoint someone with the power to remove and appoint trustees under the trust deed.
8.40Feedback received on the proposal reflected differing understandings of the current law and therefore differing perceptions about the extent to which we were suggesting changes to the law. We had intended that the proposed duty would simply set out the standard the courts currently expect from those with the power to appoint and remove trustees. A number of submitters considered that the proposed duty extended the law by making persons with the power to appoint and remove trustees subject to the court’s oversight. Some considered that these powers could currently be exercised with unfettered discretion, for instance where a settlor may have reserved the powers for him or herself. Other submitters favoured the duties on those with powers to appoint and remove trustees being more extensive, and including a requirement that the powers be exercised for a proper purpose.
8.41It would seem that the law in this area is still unsettled. The extent of the duties applying to a person with the power to appoint and remove trustees is dependent on the circumstances of the particular trust. We now consider that it is not helpful to set down general duties for anyone exercising these powers. We think it is still necessary to settle the duties in relation to those who will be empowered by the new Act to discharge and appoint trustees. Consequently, we recommend that these people be subject to the duty to exercise the powers in good faith, honestly and for a proper purpose. Those who are also trustees will be subject to more extensive duties.
8.42The recommendation leaves open to the courts the question of what duties, if any, apply in respect of persons given the power to appoint and remove trustees by a trust deed, and whether honesty and good faith, and more rigorous fiduciary duties apply in the circumstances of a particular trust.
8.43The recommendation does clarify that the court exercises supervision by having the power to remove and replace a person with the power to appoint and remove trustees if that power is exercised unlawfully, or that person has been removed as a trustee, or it is otherwise expedient. A person with the power to appoint trustees would also be entitled to apply to the court for directions in the exercise of that power.