REMOVAL OF TRUSTEE – WHETHER TRUSTEE’S EQUITABLE RIGHT TO AN INDEMNITY INCLUDES THE RIGHT TO RETAIN SUFFICIENT ASSETS TO MEET ACTUAL AND CONTINGENT LIABILITIES AND THE RIGHT TO A CONTRACTUAL INDEMNITY
The Plaintiff (the successor trustee) sought an order requiring the Defendant (the former trustee) to transfer and vest title to the assets of two trusts in the Plaintiff.
The Defendant had been removed as trustee and the Plaintiff appointed in its place in December 2016. The change took place in the context of a threatened claim against the Defendant in respect of its management of the trust assets. Hence the transfer process was, in the words of Kawaley CJ, “somewhat prickly”.
Firstly, the Defendant asserted that it was entitled to retain sufficient trust assets against which to enforce its indemnity in relation to the contingent costs liability in relation to the defence of the threatened claim. The Plaintiff contended that, as a matter of law, the right of indemnity did not confer such retention rights.
Secondly, the Defendant asserted that it was entitled to a contractual indemnity, while the Plaintiff countered that no such entitlement existed.