We have been asked to look at a trust where the Trust Deed confers the power of appointment of new/additional trustees on the Settlor.
The Trust Deed provided that the Settlor and one other person (A) were Trustees and there has been a Deed of appointment and retirement executed in the past to retire A and appoint B. The retirement looks valid in accordance with the powers conferred by the Trust Deed, but we are not sure about the appointment . This has come to light as B wishes to retire and the Settlor wishes C to be appointed.
The Deed refers to the continuing Trustee (who is also the Settlor) and retiring Trustee (A) wishing to appoint the new Trustee (B) and refers to statutory powers of appointment, whereas clearly the Trust Deed confers the power of appointment on the Settlor. The Settlor and the Continuing Trustee are the same person. So The Settlor has executed the deed, but under their title as trustee.
We are not clear if the appointment of B could be valid based on the continuing trustee and Settlor being the same person despite the incorrect powers being referred to and/or whether reference to the retiring trustee also wishing to appoint under the statutory powers would invalidate it anyway. We are also not clear if referring to the incorrect powers would automatically invalidate the appointment in any event.
If the appointment of B were valid then would we need to ratify the Deed in any way?
If the appointment of B is invalid then would the only course of action be to ratify actions that have occurred since the erroneous deed and then deal with the Deed of appointment of an additional trustee by the Settlor (assuming of course that the retirement of A was valid).
Is the deed of appointment valid? & what further action if any should be taken?
It’s usual in an appointment for the appointors to appoint in exercise of their statutory powers and of every power them enabling. I think this would cover the power in your case in the Trust Deed.
I understand that where the settlor has retained the power to appoint new or additional trustees, unless s.36(1)(b) Trustee Act 1925 is engaged, any purported appointment made other than under that power is void.
Whilst, in the instance quoted, the settlor has executed the deed of appointment and retirement (DART), the appointment is purported to have been made under the statutory power, and not the power reserved to the settlor.
The way forward may well depend on the time that has elapsed once the purported appointment of B as trustee. If recent and/or the trustees have done very little since that time, it might be appropriate to consider the settlor and A entering into a deed of ratification of the actions undertaken by the settlor and B. A will need to be a party to any further exercise of the trustees’ powers, until properly discharged from office.
However, if some time has elapsed since the date of the DART and/or the settlor and B have purported to exercise the trustees’ powers on a number of occasions (and/or their actions have been “significant”), it might be more appropriate to apply to court for rectification of the DART, so that the appointment of B is made under the correct power. This would avoid potential for any of the actions taken to be set aside, or for A to refuse to ratify.
In either case, it sounds like the draftsman of the DART should be put on notice of the issues, in the hope that there can be an early discussion with their insurers on the attribution of costs for sorting out the issues.
It’s worth looking closely at the wording of the trust deed. Sometimes, what may appear to be an express power to appoint trustees is in fact a nomination of a person to exercise the statutory powers.