$2.$ James and Henry are brothers. They are the children of Barry Anderson and Sally Anderson. In May $2001$ twelve discretionary settlements were established: six by Barry and six by Sally Anderson. In each case Morris Trust Limited $($Morris$)$ was the corporate trustee. These twelve trusts are referred to as the $$family trusts$.$ The settlor of each trust settled one share in a company $($the company$).$ The company is the parent company of a group of companies which carry on a successful business. James is the chairman and chief executive of the company. By reason of the exercise of various options, the family trusts between them hold approximately $89\%$ of the issued share capital of the company. Apart from modest amounts of cash, the sole asset of each family trust is its shareholding in the company.

The family trusts were all in broadly similar form. The beneficiaries included $($a$)$ the widow or widower of the settlor as appropriate; $($b$)$ the children and remoter issue of the settlor. Furthermore, there was a power in each case for the trustees revocably or irrevocably to declare that the beneficiaries should cease to include any particular beneficiary or class of beneficiaries, in which case such persons became excluded person and not entitled to benefit. In the case of a revocable exclusion, such persons remained excluded persons for so long as the exclusion remained unrevoked. Therefore, James and Henry and their families were initially beneficiaries of all twelve of the family trusts. However, some were earmarked for the benefit of James$$ family and some for that of Henry.

In the case of the trusts marked for the benefit of James, the trustee was instructed to consult James and follow his wishes on the investment and distribution of funds. Subsequently by deed the two sets of trusts were separated out as Henry wished for greater independence and certainty. The H family trusts $(4$ trusts$)$ owned approximately $20\%$ of the share capital of the company and are held only for Henry and his family. The J family trusts $(8$ trusts$)$ owned $69\%$ of the share capital of the company and are held for the benefit of James and his family. In each case the settlor$$s widow or widower may still benefit. For the past five years James and Henry have been in dispute about the affairs of the company and had been holding negotiations about settling these differences which appeared sometimes to be approaching fruition but never with any results.

Owing to these disagreements, the settlors of the trusts appointed two new trustees, one to be co$-$trustee with Morris for the H family trusts and one for the J family trusts. Two months later, representatives of Morris, H family trust and their attorneys met to discuss the potential conflict for Morris remaining as trustee of all twelve trusts. The representative of Morris stated that if Morris were to step down, it could prejudice its position because other parties could state that its action in stepping down could be prejudicial to the value of the other trusts of which it was trustee. It was also made clear at the meeting that Henry wanted the meeting to be kept confidential from James. Morris at first refused on the grounds that there had been no criticism of Morris$$ management of Henry$$s trusts; that the negotiations might resolve the problems without litigation; and also, that problems could be avoided by Henry by telling Morris anything he did not want communicated to James.

Eventually Morris applied to the court for directions as to whether it should resign. It then withdrew the application and agreed to resign but Henry applied to the court for an order that Morris not be able to draw its costs from the trust fund and also pay Henry$$s costs on the ground that the legal action had been unnecessary.

Discuss whether Morris should resign or be removed from the trusts and who should pay the costs of the trustees$$ application.