Application To Remove The Protector Of A Trust ' Relevant Test To Remove Protector ' First Such Case In Bermuda (In The Matters Of Fa Trust And Fb Trust)

• Published date: 04 March 2021
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, Money Laundering, Trusts
• Law Firm: Appleby
• Author: Hannah Tildesley

PRIVATE CLIENT ANALYSIS

The Bermuda Court has confirmed that it has the jurisdiction to remove the protector of a Bermuda trust. The test for removal is the same as that for trustees, as set out in the Privy Council case of Letterstedt v Broers and another, namely that removal is appropriate where the protector's continuation in office would be detrimental to the execution of the trust.

PRIVATE CLIENT ANALYSIS CONT.

The court concluded that the overriding consideration is the welfare of the beneficiaries and the competent administration of the trust. The judge held that the breakdown in the relationship between the trustee and the protector and the trustee's unwillingness to work with the protector going forwards was sufficient basis for his removal. The trustee's view of the protector's conduct was therefore of central importance. The case also highlighted the importance of the trustee's regulatory obligations and that it is entitled to conclude it cannot work with a protector who might cause it to infringe those obligations. The protector's service to the trust for some 20 years without issue could not justify his continuance in office.

In the matters of FA Trust and FB Trust [2021] SC (Bda) 2 Civ

WHAT ARE THE PRACTICAL IMPLICATIONS OF THE CASE?

The case confirms that the Bermuda Court has the jurisdiction to remove the protector of a trust and concluded that the test for the removal of a protector mirrors the test for the removal of trustees. Removal is appropriate where the protector's continuation in office would be detrimental to the execution of the trust. The overriding consideration is the welfare of the beneficiaries and the competent administration of the trust.

The trustee's view of the protector's conduct will be of central importance in assessing whether the test is met. If the trustee considers it is unable to work with the protector, removal is likely to follow because of the resulting detrimental impact on the administration of the trust. The Court also underlined the importance of the trustees' regulatory obligations and the fact that a trustee is entitled to conclude it cannot work with a protector who might cause it to infringe those obligations.

In the case at hand, removal was appropriate even though the matter giving rise to the application did not directly concern the Trusts and the Protector had served the Trusts for twenty years without issue. The decision therefore serves to underline that a protector's historic association with...