A not-so-trusty trustee’s process

Some years ago, a family trust was settled and the beneficiaries were Louise, and Louise’s children Leanne and John. The trustees were Louise, and a professional trustee company. By December 2015, the family had decided the professional trustee was no longer required. It was decided the trustee company would be removed as a trustee, and Leanne and John would be appointed as trustees. 

 

On 4 February 2016, the trustee company sent a copy of the Trust Deed to Louise. On 12 February, Louise formally notified the trustee company in writing she wanted it removed as trustee. On 15 February, Louise requested the trustee company to pay the $130,000 trust funds to the Trust’s bank account. On 24 February, the family’s solicitor sent the trustee company Louise’s signed authority to uplift all the trust documentation.

 

On 8 March, the trustee company transferred the trust funds to the Trust’s bank account, however the trust documentation had not been received and the solicitor followed this up in March and April. On 29 April, the solicitor sent a deed of retirement of trustee to the trustee company. The trustee company said the deed was not required, because it was not retiring as a trustee and Louise had the ability under the Trust Deed to remove trustees by providing written notice.

 

The original trust documentation including the Trust Deed was eventually received by the family on 18 May, and on 16 June the signed deed of retirement of trustee was received.

 

The complaint

Leanne complained to the trustee company about the delays in receiving the trust funds and in sending all the trust documentation to their solicitor. In particular, Leanne and John said the delays resulted in them being unable to provide the necessary documentation to an Australian bank to invest in shares. This resulted in the Trust missing out on investment income of $2,542.50.

 

The trustee company’s response

The trustee company acknowledged there had been delays in forwarding the original trust documentation. The trustee company offered to pay $540 as compensation for the delay.

 

However, the trustee company did not compensate the family for the loss of investment income because it said not being in possession of the original trust documentation was no impediment to purchasing the shares. As Louise could remove the trustee company as trustee, and appoint Leanne and John as trustees, the solicitor could have arranged the necessary documentation to provide to the Australian bank.

 

Our review

The Trust Deed was clear that Louise had the power to remove and appoint trustees. After Louise gave written notice of the removal of the trustee company as trustee on 12 February, the solicitor could have prepared a deed of appointment of new trustees.

 

The email the family received from the bank when they were looking to invest said the bank needed to receive a certified copy of the Trust Deed. It followed that in order for the family’s solicitor to certify a copy of the Trust Deed, she would have needed to see the original Trust Deed, which was only provided on 18 May 2016.

 

Although we considered the delays were unjustified and that best practice would have been to have sent the trust documents to the solicitor much faster, there was no evidence that the family told the trustee company about the particular urgency around receiving the trust documentation, in particular the original trust deed.

 

Negotiated resolution

On this basis, we spoke with the trustee company and asked whether it would consider making a contribution to the loss on the investment along with the $540 existing offer. The trustee company offered 25% of the loss on the investment which, along with the $540, was an offer of $1,175.63.

 

We spoke to Leanne and explained there was contribution from both parties to the loss on the investment. We explained that if the complaint went to a decision, it may be decided the family contributed more to the loss because they did not tell the trustee company about the urgency in receiving the trust documentation.

 

The family considered the trustee company’s offer, and came back with a counter-offer of a 50% split in the investment loss. The trustee company agreed to contribute 50%, as a goodwill gesture. The parties agreed on a final figure of $1,811.25, and the complaint was resolved.

 

Our insight

Maladministration is a common cause of complaints investigated by FSCL. This complaint could have been avoided if the trustee company had a more streamlined process around sending documentation to customers.