I have a situation where a client, who is both the Settlor and has an interest in possession, has lost mental capacity. She has a Lasting Power of Attorney (Property & Financial Affairs) in place. She is also a trustee alongside her two sons. The trust contains only property.
The trustees wish to discharge her as a trustee. The trust deed grants the power of removal and appointment to the Settlor while she is alive and retains capacity, but this power passes to the other trustees if she has died or lost capacity. Specifically, the clause states:
“The power of appointing new trustees and removing trustees shall be vested in the Settlor during the life of the Settlor whilst they retain capacity and thereafter in the remaining trustees.”
The trustees are questioning whether her attorney can, on her behalf, exercise the power of removal as trustee.
Am I correct in thinking that her attorney can exercise this removal power using section 1 of the Trustee Delegation Act 1999?
On a separate note, can an attorney acting under section 1 of the Trustee Delegation Act 1999 exercise the power under section 39 of the Trustee Act 1925 to retire a trustee who lacks mental capacity? It might be simpler to use section 20 of the Trustee Act 1925, but section 20 applies only to beneficiaries with absolute entitlement, which raises the question of whether beneficiaries under a discretionary trust can exercise the power.
Any recommendation on good textbooks that covers the topic of trustees lacking mental capacity?
I would have thought the attorney is ruled out of exercising the express power by the wording of the trust deed: i.e. if the settlor’s power is only extant while she retains capacity. If the settlor does not have the power, then her attorney cannot exercise it on her behalf. The power instead falls to the remaining trustees to exercise.
Incidentally, I would hope there is another reference in the trust deed to “the” power to remove trustees otherwise it is a little short on detail. When the power of appointing trustees is given to the settlor/protector, I believe this is usually a reference to the stat power under s.36(1) (“the person or persons nominated for the purpose of appointing new trustees”) but there is no stat power to remove trustees other than s.36 (with an accompanying appointment) and that is subject to s.36(9) which would require reference to the COP.
My background in the law was as much company/commercial as private client. In commercial transactions numerous contractual devices are employed to defuse potentially contentious issues. A typical measure is an agreement to obtain a binding decision from a third party independently appointed, for example, by the President of the Chartered Institute of XYZ.
S. 69 (2) TA 1925 gives the trust drafter total freedom to substitute his/her own exhaustively customised schemata of succession machinery as to trustees or any other person on whom the trust instrument confers powers or requisite consents. This is frequently done in foreign law trusts as regards trustees and protectors, often quite elaborately, sometimes vesting powers in a corporate like family trust-owned private trust company (with director succession machinery, also customised) which will not die or go gaga.
A drafter can easily deal with the growing possibility that a trustee or person with a power may lose capacity by providing definitively how that issue is to be conclusively determined cheaply and expeditiously by a competent third party medic to avoid a costly and extruded fandango before Cocklecarrot J., with our learned friends representing every conceivable interested party. This is even more desirable in a trust than in a contract as it cannot be easily varied later, if at all, merely by agreement of parties, however circumstances cry out for it e.g per the narrow jurisdiction in s57 TA and VTA.
Do domestic drafters not realise that the entirety of s36(1) through (9) is entirely voluntary?