Introduction to Trusts Litigation
Trusts are widely used to manipulate the facets of ownership of property, and because of the multitude of benefits they may offer in certain circumstances. Given their wide use it is almost inevitable that sometimes disputes arise regarding their management and administration. This article briefly discusses some of the topics on which trusts are litigated before the courts.
Judicial Advice
Sometimes a trustee should quite appropriately seek advice from the court about whether the trustee is justified in taking a particular course of action. For instance if a trustee pursues litigation unreasonably and incurs significant costs in so doing it is possible the court may order that the trustee is not justified in exercising a right to reimbursement out of trust property such circumstances.
To obtain protection from the court can have significant advantages where a decision is being made on whether to commence or defend litigation.
Removal of a Trustee
Where a trustee has died, retired or perhaps even committed a crime the beneficiaries under the trust may want to approach the court for an order to remove the existing trustee. After the trustee is removed it will be necessary to replace the trustee and obtain an order from the court that the trust property vests in the new trustee.
Excusing Breaches of Trust
It is possible that a trustee can quite innocently breach the terms of a trust by perhaps having a reasonable but flawed understanding of how a trust instrument should be construed. This is but one example of how a trustee can breach of trust and in such circumstances the trustee might want to approach the court and ask for forgiveness.
Obviously, where a trustee is guilty of serious misconduct a court would be less inclined to excuse the trustee in respect of any such breaches.
Disputes about Reimbursement
Generally, as a principal of law a trustee is entitled to be indemnified out of trust property for expenses incurred in the administration of the trust. Questions can, and do arise about whether in defined circumstances a trustee is entitled to be reimbursed out of trust property. Questions about indemnification also arise where a liquidator is appointed to an insolvent company and the High Court has fairly recently provided guidance on how the right to indemnification works in such circumstances.
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