When a Trustee Goes Rogue: How to Remove a Trustee for Self-Interest and Harm to Trust Assets

We’ve all heard the saying, "With great power comes great responsibility." Well, in the world of trusts, trustees hold that power, and when they start acting like they're in a?Netflix drama, messing with trust assets or lining their own pockets, it's time to bring them back to reality. So, what happens when a trustee abuses their position, harms trust assets, or pursues personal interests? Enter:?trustee removal.

Let’s break it down—step by step, sass included—and dive into the?legal grounds?and?real cases?that show trustees the door when they fail to play by the rules.

The Fiduciary Duty of Trustees: No Time for Shenanigans

As trustees, the job is simple:?protect the trust?and act in the best interest of the beneficiaries. The?Trust Property Control Act 57 of 1988?in South Africa lays down the law: trustees must act with?care, skill, and diligence?and avoid using their position to?enrich themselves. But not all trustees play nice. When a trustee forgets these duties and harms the trust, the court is more than happy to step in and handle business.

Trustees owe several fiduciary duties:

• Act?bona fide?(in good faith) and in the?best interests?of the trust.
• Avoid?conflicts of interest?and personal financial gain (aka?self-dealing).
• Preserve and protect the trust’s assets.

Break these rules, and it’s game over for the trustee.

Legal Grounds for Trustee Removal: When Trustees Overplay Their Hand

If you’re dealing with a rogue trustee,?Section 20?of the?Trust Property Control Act?and?common law?allow the court to?remove the trustee. But the court needs some receipts—solid evidence that the trustee is failing in their duties. Here’s what courts look at:

1. Neglecting Fiduciary DutiesWhen a trustee neglects their duty to protect trust assets or manage them responsibly, they can be removed. This includes failing to make prudent investments or allowing assets to lose value. Trustees need to be smart, not reckless.Example: If a trustee lets a prime piece of trust property deteriorate without making reasonable efforts to maintain it, they’re setting themselves up for removal.
2. Pursuing Personal Gain?(The “It’s All About Me” Problem)When trustees act in their own interest rather than the trust’s, they’re in breach. Trustees are there to protect the trust, not profit from it. Using trust assets for personal gain? Yeah, the courts won’t let that slide.Real Case:?Phillips v Fieldstone Africa (Pty) Ltd and Another (2004) 1 All SA 150 (SCA)—in this case, the court made it crystal clear that trustees cannot profit from their role unless the trust deed specifically allows it. Any personal benefit gained at the expense of the trust is a breach of fiduciary duty.
3. Gross IncompetenceTrustees who show that they are out of their depth or grossly incompetent when managing trust assets can be removed. Let’s face it—trustees should not be running the trust like a weekend hobby.Example: Investing trust assets in high-risk speculative ventures without due diligence is a sure way for a trustee to find themselves out of a job.
4. Conflicts of InterestTrustees must avoid?conflicts of interest. This means not being on both sides of a deal or benefiting personally from transactions involving trust assets.Real Case: In?Tijmstra v Blunt-Mackenzie N.O. and Others (2002) 1 All SA 248 (T), the court removed a trustee who had placed himself in a position of conflict by pursuing his own financial interests at the expense of the trust. The trustee had failed to act impartially and had mixed his personal interests with those of the trust.

When the Trustee Harms Trust Assets: Courts Don’t Play

The courts take?trust asset mismanagement?seriously. If trustees harm trust assets, whether through incompetence or self-interest, they’re toast. Trustees can’t claim ignorance when they allow trust property to deteriorate or fail to maintain investments.

• Example: In?Georgiou v Trustees for the Time Being of the Geogroup Trust 2013 (5) SA 426 (GSJ), a trustee was removed after misusing trust funds for personal investments. The trustee also failed to properly account for trust assets—serious no-nos. The court emphasized that trustees must act?impartially?and in the trust’s best interest, or risk being removed.

Removing a Trustee: How It’s Done

So, how do you kick a rogue trustee out the door? Here’s the?playbook:

1. Apply to the High CourtBeneficiaries or co-trustees can apply to the?High Court?to remove a trustee. You’ll need to show?evidence—mismanagement of assets, conflicts of interest, or self-dealing are all fair game.Evidence?might include financial statements, reports, and communications proving that the trustee isn’t upholding their fiduciary duties.
2. Court DiscretionThe court has the power to remove trustees if they are causing?harm?to the trust or if it's in the best interest of the beneficiaries. Even if there’s no smoking gun (like outright fraud), the court can still remove trustees if their continued presence would?damage?the trust.Real Case: In?Sackville West v Nourse (1925 AD 516), the court established that even where there is no direct misconduct, a trustee may be removed if it’s in the best interest of the trust or the beneficiaries. The standard isn’t perfection, but trustees need to be competent and loyal.
3. Who Takes Over?If the trust deed doesn’t specify a replacement trustee, the court can appoint someone to fill the role. This ensures that the trust doesn’t fall into disrepair due to a lack of leadership.

Consequences for the Trustee: Personal Liability and Possible Jail Time

Getting removed is just the beginning for a rogue trustee. There are real?consequences:

1. Personal LiabilityIf a trustee causes harm to the trust—whether through mismanagement, fraud, or self-dealing—they could be held personally liable for losses. In cases of?breach of fiduciary duty, the court can order the trustee to?repay the trust?for any losses they caused.
2. Criminal ChargesTrustees who engage in?fraud?or?misappropriate funds?could face?criminal charges. Trust law isn’t just about civil remedies—there’s real jail time on the line if trustees get too greedy.

Conclusion: Trust Law Has No Room for Egos or Incompetence

Being a trustee isn’t a game, and when trustees forget that they’re responsible for?someone else’s money?and start acting out of self-interest, the law steps in. South African courts have a long track record of holding trustees accountable, from?Phillips v Fieldstone?to?Georgiou, making it clear: trustees are expected to act?impartially, manage the trust with?care, and stay far away from anything resembling?self-dealing.

At the end of the day, when a trustee can’t keep their hands out of the cookie jar, beneficiaries have the power to show them the door—and the courts will back them up.

If you suspect your trustee is harming trust assets or acting in their own interest, don’t wait until the damage is done.?Take action. It’s time to protect what’s rightfully yours and?remove?the bad apples from the trust.

Final Word:?At?June Stacey Marks Attorneys, we specialize in holding trustees accountable and ensuring that trust assets remain protected. If your trustee isn’t playing by the rules, we’re ready to step in and make sure justice is served—swiftly and with impact. Reach out to us today to see how we can help you?turn the tables?and protect your assets.