The evolving role of trust protectors: case law developments

A protector plays an important role in a trust structure, overseeing how a trustee exercises its powers. Case law in Jersey, Bermuda and the Cayman Islands has clarified how that role should operate in practice and whether a protector’s consent function should be viewed narrowly or more widely.

In this briefing, we outline how the courts have approached the role of trust protectors and what this means when appointing and drafting for the position.

What is a protector?

A protector is appointed in respect of a trust to oversee how a trustee exercises its powers. A protector is not a trustee but is often appointed to ensure that the trustee fulfils its duties and exercises its powers properly. 

Why appoint a protector?

The protector's role: wider or narrower views

Courts have taken two different approaches to a protector’s consent function. Under the “wider view”, a protector exercises an independent discretion and may refuse consent even if the trustee’s decision is rational. Under the “narrower view”, the protector’s role is limited to reviewing whether the trustee’s decision is valid and rational.

Two key decisions have considered a protector’s role when giving consent to trustee powers: In the matter of The Piedmont and Riviera Trusts [2021] JRC 248 (Piedmont and Riviera) in Jersey and The X Trusts [2021] SC (Bva) 72 Civ. (X Trusts) in Bermuda.

In Piedmont and Riviera, the Royal Court of Jersey (the Royal Court) determined its “wider view”, holding that it is for the protector to decide whether to give consent to a trustee decision. A protector can therefore withhold consent to the trustee’s exercise of power, even if that exercise of power is one which a reasonable body of properly informed trustees could take. Under this approach the protector’s role goes beyond simply assessing rationality. 

The approach differs from the "narrower view" of the protector role adopted in X Trusts. In X Trusts, the Supreme Court of Bermuda held that the protector's role is limited to ensuring that the trustee's decision was valid and rational.  

Read more on the Piedmont and Riviera Trust decision.

The trust instrument should confirm whether the “wider” or “narrower” view applies. At the outset, the settlor should decide the role they want the protector to perform so that the trust instrument can clearly reflect that decision in the terms of the trust. 

If the role is “narrow” and the protector is simply assessing the rationality of the trustee’s decision, a professional protector familiar with the trust law and the duties of trustees may be the better option.  

If a settlor would prefer to give their protector more discretion, following the "wider view" approach, then a more trusted adviser who is familiar with the settlor/family's circumstances may be more appropriate, as the protector can exercise their own discretion beyond a “rationality” check.

There is no one size fits all when it comes to deciding who should be appointed as a protector. The trust instrument should clearly define the role of the protector as this can also assist in choosing the correct person for the role. 

In B Trust [2024] CIFSd 70 in the Cayman Islands, the Court blessed a momentous decision around the restructuring of the trust where the new trust instrument explicitly gave wide consent powers to the protector.  

Kawaley J of the Grand Court of the Cayman Islands, in considering the protector consent provisions, noted that the scope of a protector's consent power – whether wide or narrow – remained controversial and highlighted that the new trust deed featured an "elegant example of how such uncertainties can by circumnavigated through clearer language”, by expressly adopting the wider view for the protector’s consent provisions. 

While not directly binding, Cayman authorities are likely to be persuasive in the Royal Court of Jersey as clear drafting of the protector role provides greater certainty for that trust. 

Choosing a protector

Depending on the protector’s responsibilities in the trust instrument, the role may require a degree of technical understanding in a trust context.   

Some individuals may accept appointment without fully understanding the role. This may increase the risk of a protector's decision being challenged at a later date. The settlor and trustee should consider who is best placed to carry out the role and whether it would be more appropriate to appoint a trust professional, rather than a friend or family member. 

While there are potentially additional cost implications with this approach, the settlor will likely feel that mitigating the risk against future claims outweighs these costs.      

It is also important to assess whether taking on the role of protector could lead to any conflict of interest for that person. For example, if the protector is among the beneficiaries or has another professional role, such as the investment adviser to the trust, it should be considered whether this is compatible with the protector's duties and whether they can act in the best interests of the beneficiaries where they have personal interest. 

When there is tension within the family, the appointment of a family member (who may also be a beneficiary) as protector of a trust can exacerbate underlying conflicts and lead to significant complications. Family dynamics are often complex, and pre-existing disputes or rivalries can influence the actions and decisions of a beneficiary acting as a protector.  

These risks can be mitigated by appointing an independent protector who is not a family member or a beneficiary and can act impartially. 

Further case law guidance

In The Representation of Summit Services Limited [2024] JRC 222, the Royal Court did not determine whether the narrow or wider view applied. However, it noted that:  

• the protector’s consent function (regardless of whether the narrow view or the wider view applies) is secondary to the trustee’s decision, so there is no joint power being exercised with the trustee
• the protector should not consider how it would have exercised the trustee’s power (nor refuse to give consent on the basis that the protector might have exercised that power differently if in the trustee's shoes), rather it should simply evaluate whether the trustee’s decision is in the best interests of the beneficiaries
• if the protector’s refusal is irrational or flawed, the Court can overturn that decision 

The Court acknowledged merit in the trustee's submission that, if a protector's refusal to consent is in fact a proper exercise of its powers, the Court may either direct further dialogue between the trustee and protector or resolve the deadlock itself – similar to its role in disputes between co-trustees. 

Drafting considerations

To avoid any misunderstandings, if a trust has a protector, the trust instrument should clearly define the protector role. The preferred role of the protector should be on the checklist of matters to be determined before the trust is established. 

Clear drafting from the outset reduces the risk of future disputes over how the protector exercises their powers. The most straightforward and appropriate time to do this is at the establishment of the trust. 

For existing trusts, the amendment power may be utilised to clarify the protector role in trusts going forward if the trust instrument is unclear or silent on this issue. 

How Ogier can help

Ogier advises settlors, trustees and family offices on the establishment, restructuring and administration of trust structures across leading offshore jurisdictions. 

We regularly advise on the appointment and role of protectors, including drafting consent provisions that reflect the preferred approach in light of recent case law. 

Our team also acts in court applications concerning trustee powers and protector consent functions, ensuring that trust structures remain robust, clear and aligned with clients’ long-term objectives. 

For more information, contact a member of our team.

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Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

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