Protectors: Are Their Powers Fiduciary And Does The Court Have Power To Intervene?

Protectors feature regularly in Jersey trusts, being appointed by settlors as a means of ensuring that there will be some element of control over the exercise of the trustees' powers.

However, before choosing to appoint a protector, careful thought should be given to ensure that the role is fully understood and is consistent with the settlor's overall objectives for the trust structure. It will also be helpful to consider whether the protector will be able to exercise his powers as he wishes or only in the interests of the beneficiaries, and whether the court will be able to intervene. This briefing focuses on three questions in this context:

Does a protector hold powers as a fiduciary? Can the court remove and appoint protectors with fiduciary powers? Can the court control the exercise of a protector's powers? 1. Does a protector hold powers as a fiduciary?

In relation to the first question, perhaps the first point to note is that the word "protector" is not a term of art and, although power-holders such as protectors are implicitly recognized by the Trusts (Jersey) Law 1984 (the "Trusts Law"), the term is not expressly defined. The word "protector" can be used to describe a person holding a variety of different powers. Some of those powers can be positive, such as the power to appoint trustees or successor protectors. Other powers may be negative powers or powers of veto, so that the trustees cannot exercise certain of their powers - such as the power to make distributions, or to sell a key trust asset - without the protector's consent.

As the powers held by a protector vary from one trust to another, it is a question of construction of each trust instrument to determine the nature of the powers held. A protector might hold some powers in a beneficial or personal capacity (so that he can exercise them for his own benefit, without restriction); some powers in a limited capacity (in which case he is not required to consider from time to time whether or not to exercise his powers but, if he does exercise them, he must only do so for the purposes for which the power was conferred, for the benefit of one or more of the beneficiaries); and other powers in a fiduciary capacity. Where powers are held in a fiduciary capacity, the protector will be required to consider from time to time whether or not to exercise his powers and, when he does exercise them, he must do so in the interests of the beneficiaries as a whole.

A trust instrument may state expressly that the protector's powers are held in a fiduciary capacity but that will not always be the case. In the recent Jersey case of re Jasmine Trustees Limited [2015] JRC 196, the Royal Court was called upon to consider the power to appoint successor protectors. The case involved two family trusts - the Piedmond Trust and the Riviera Trust. In the Piedmont Trust, a majority of the adult beneficiaries had the power to appoint successor protectors; in the Riviera Trust, this power was vested in the protector. The court agreed with the parties that the power to appoint successor protectors was a fiduciary power for the following reasons:

The protector's role was fiduciary in both trusts. This was stated expressly in the Piedmont Trust. Although there was no express statement in the Riviera Trust, various factors pointed to the role being fiduciary: an analysis of the nature and extent of the protector's powers (for example, the protector had wide-ranging powers, including the power to appoint trustees which is generally accepted to be a fiduciary power); the fact that the powers were given to an office holder with provision for succession; there were provisions enabling the protector to release a power notwithstanding its fiduciary nature; and there were provisions allowing the protector to charge. Earlier authorities support the proposition that...