Overview - Trust protectors: watchdogs or independent decision makers?

In this mini-series of articles, we explore the role of protectors insofar as the same can be identified in general terms, although it will, of course, always be necessary to have regard to the express terms of the trust instrument in order to ascertain the precise scope of a protector’s role in relation to any given trust.

The term “protector” is not a term of art.[1] It has been described by at least one commentator as an ‘etymological chameleon’,[2] presumably on account of its ability to change its appearance according to its circumstances. It can mean different things for different trusts depending on the powers granted to the protector and the role envisaged for him as set out in the trust instrument.[3] Notwithstanding the scope for variation, the use of protectors is common in offshore trusts and the construction of the powers granted to protectors therefore takes place against the backdrop of what the fiduciary services industry and its clients have come to expect from the term.[4]

There are many features that are common to protectors, even allowing for variety in individual trust instruments, such as the power to appoint and remove trustees and the requirement for the trustees to obtain the protector’s consent before taking certain decisions. Indeed, ‘whilst the literal wording of the powers conferred on protectors may vary (just as it may vary in the case of trustees), there is continuity in the core nature of what is being provided for (just as in the case of trustees).’[5]

In particular, this mini-series will consider:

1. An introduction to the use of protectors;
2. Protector consent provisions as they have been interpreted in recent case law;
3. An analysis of the arguments in favour of the wide and narrow view of protector consent provisions;
4. The possibility of drafting to remove any uncertainty; and
5. The consequences for the protector who oversteps his role.

 

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[1] Lynton, T., Le Poidevin, N., and Brightwell, J., (2020) Lewin on Trusts, (20^th ed.), London Sweet & Maxwell, § 28-044.

[2] Harney, P., and McCallum, M., (2022) The role of protectors: a UK perspective. Trusts & Trustees. 28 (9), 862-870, at 862

[3] Per Sir Michael Birt in In the matter of the Piedmont Trust & Riviera Trust [2021] JRC 248 at [88]: ‘the role of a protector varies so much, depending on the nature and extent of the powers conferred by the trust deed’. See, also: Renouf, M., and Flavin, M., (2022) Piedmont and X-Trusts: ‘what are protectors for?’ Trusts & Trustees. 28 (2), 76-81 at 77: ‘Protectors, unlike trustees, are not creatures of the general law but creatures of particular instruments and it does not necessarily follow that just because a particular settlor has said that a person to whom they give powers is called a ‘protector’, those powers must be construed in the same way as other powers given to other people whom other settlors have called ‘protectors’ in other trusts.’

[4] : Renouf, M., and Flavin, M., Loc.cit. (n 3)

[5] In the matter of the X Trusts [2023] CA (Bda) 4 Civ at [129(iv)].