Uniform Trustee Act Provisions for Removal of Trustee

As I wrote before, the British Columbia Ministry of Justice is seeking comments on the Uniform Law Conference of Canada, Uniform TrusteeAct, which may form the basis of new legislation to replace the current Trustee Act.

One of the changes to the legislation if adopted would be more elaborate provisions on removing trustees.

Currently, there are two provisions in the Trustee Act that apply to the removal of trustees, section 30, which is limited to court appointed trustees and receivers, and section 31, which says:

Power of court to appoint new trustees
 31  If it is expedient to appoint a new trustee and it is found inexpedient, difficult or impracticable to do so without the assistance of the court, it is lawful for the court to make an order appointing a new trustee or trustees, whether there is an existing trustee or not at the time of making the order, and either in substitution for or in addition to any existing trustees.

There are common law principles that the courts have developed in deciding whether to remove a trustee, but the legislation itself does not provide any criteria.

In contrast the Uniform Trustee Act sets out certain conditions that disqualify a person to act as trustee or that make the person unfit. For example, an undischarged bankrupt is not qualified. An example of a person who may be removed as unfit is a trustee who consistently fails to respond to communications from a beneficiary.

As with the current Trustee Act, a person with an interest in the trust could apply to court to remove a trustee. But the Uniform Trustee Act also has a provision that would allow a majority of trustees to remove a trustee if there are three or more trustees. In that case, the person removed as a trustee may apply to court for reinstatement.

The relevant provisions are sections 14 through 17, and 78:

Person not qualified to hold office of trustee

 14 A person ceases to be qualified to hold the office of trustee if any of the following
apply to the person:

 (a) the person is an incapacitated person;

 (b) the person has been convicted of an offence involving dishonest  conduct  under

 (i) an enactment, or
 (ii) a law of Canada or another province of Canada;

 (c) the person is an undischarged bankrupt;

 (d) the person is a corporation that is in liquidation.

 Removal of unfit trustee

 15 (1) A person is not fit to hold the office of trustee if

 (a) the person

 (i) fails to demonstrate the care, diligence and skill that a person of
ordinary prudence would exercise in dealing with the property of another person,
 (ii) consistently fails to respond to communications from a beneficiary or another trustee, or
 (iii) is otherwise unwilling or unable, or unreasonably refuses, to act
cooperatively with other trustees, and

 (b) the person’s conduct is detrimental to the efficient or proper
administration of the trust.

 (2) Subsection (3) applies if there are 3 or more trustees.

 (3) If the fitness of a trustee to hold office is questioned, a majority of the other trustees may remove the trustee from office by a written resolution setting out the reasons for the removal if the majority determines that the trustee is not fit to hold office.

 (4) A resolution under subsection (3) is effective,

 (a) if the trustee that is the subject of the resolution does not request a meeting
under subsection (5), 15 days after a copy of the resolution is delivered to that trustee, or

 (b) if the trustee that is the subject of the resolution requests a meeting under
subsection (5), at the conclusion of the meeting, unless the resolution is rescinded.

 (5) Within the 15-day period after a copy of the resolution is delivered to the trustee that is the subject of the resolution, that trustee, by delivering a written request to another trustee, may request a meeting with the other trustees to respond to the reasons set out in the resolution.

(6) A meeting requested under subsection (5) must take place as soon as practicable.

(7) After the trustee responds to the reasons set out in the resolution, the other trustees may rescind the resolution.
 Power of court to remove trustee

16 (1) The court may remove a person from the office of trustee if

 (a) the person is not fit under section 15 to hold the office of trustee and there
are fewer than 3 trustees, or

 (b) the court is of the opinion that

 (i) the removal of the person under section 15 or under a power
conferred by a trust instrument would be inexpedient, difficult or
impracticable, and
 (ii) the removal of the person is in the best interests of the objects of the
trust.

 (2) If the court considers a reduction in the number of trustees to be in the best
interests of the objects of a trust, the court may

 (a) reduce the number of trustees, and

 (b) to give effect to the decision under paragraph (a), remove a person as
trustee.

 (3) The court may remove a trustee appointed by the court under section 9.

 (4) Despite any other provision of this Act or a power conferred by a trust instrument, a trustee who is designated as a judicial trustee by the court under section 9 (2) (b) may be removed only under subsection (3) of this section.
 Power of court to reinstate trustee

17 (1) A person removed as trustee, except a person removed under section 16 or 78,
may make an application to the court for an order under subsection (3) of this section,

 (a) in the case of a person removed as trustee under section 15, within 60 days
after the date the resolution becomes effective, or

 (b) in any other case, within 60 days after the earlier of

 (i) the date of the appointment of a substitute trustee under section 6  (1), and
 (ii) the date that the removal as trustee comes to the attention of the
person removed.

 (2) On an application under subsection (1), the court may make an order under
subsection (3) if

 (a) the court is satisfied that the person was removed as trustee based on a
mistake of fact or law, and
 (b) the court considers making the order to be in the best interests of the objects of the trust.

 (3) Subject to subsection (2), the court may

 (a) reinstate the person as trustee on a specified date,
 (b) declare that the person did not cease to hold the office of trustee during the
period following the purported removal, or
 (c) dismiss the application.

 (4) If the court makes an order under subsection (3), the court may also give directions or make a declaration as to the person’s status as trustee or the liability of

 (a) a substitute trustee appointed under section 6 (1),

 (b) a person who is the subject of the order under subsection (2), or

 (c) any other person who was a trustee after the person making the application
was removed as trustee.

Non-performance by trustee

78 If, on application by a beneficiary, the court is satisfied that a trustee has refused or
failed to

 (a) perform a duty imposed on the trustee, or

 (b) consider in good faith the exercise of a power conferred on the trustee, the court may

 (c) order the trustee to

 (i) perform the duty, or
 (ii) consider in good faith the exercise of the power and satisfy the court that the trustee has given due consideration to the exercise of   the power, or

 (d) remove the trustee.