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Trustees: Men of straw?

Straw men of both the literal and metaphorical kind have been employed in literature over the years. A straw man, although in the shape of a man, contains nothing but symbolically worthless straw.

The question must be asked, given the direction of current jurisprudence in New Zealand regarding effective control, whether trustees have become the equitable equivalent of men of straw.

Consider, the recent decision in Official Assignee v Sanctuary Propvest Limited (11 June 2009, High Court, Auckland, CIV 2009-404-0852), Justice Asher (referring to the Supreme Court decision in Kain v Hutton [2008] 3 NZLR 589) stated at para.  55 that:

“It is implicit in the [Supreme Court’s judgment in Kain v Hutton] that it is permissible for a person who has the powers of appointment of trustees and discretionary beneficiaries to exercise control of the Trust.”

Significant commentary has followed regarding the consequences of such control.  However, little has been said regarding the position of trustees in the face of the same.

In the face of such control, can the non-controlling trustee seek the assistance of the Court to safeguard the interests of other beneficiaries?  Is the trustee liable to the beneficiaries for failing to protect their interests in the face of the prevailing control?  Or is that the position of the non-controlling trustee is no more than a man of straw?

2 Responses

D J Marshall on September 3, 2009 at 1:22 pm

Any trustee who permits him or herself to be treated as a “man of straw” does so at his or her own risk as any lawyer or accountant who accepts appointment as a trustee surely knows.
Any trust deed I prepare requires there always to be an independent, non-beneficiary.
Kain assumes the other trustee was prepared to be a “man of straw”but what evidence was there of that?

Vicki Ammundsen on September 17, 2009 at 4:29 pm

I absolutely agree with your comments regarding the duties owed by a trustee. However, reconciling these duties with the approach taken by some judges is difficult. Consider for example the Family Court decision in Kennon v Spry where the primary judge in criticising the “children’s attempts to in effect hold onto assets which they had no direct input in accumlating” completely disregards the trustee owners of the assets referred to.

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