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Trusts, probate and estates: contentious, International / offshoreWednesday 5 April 2023

Brian Green KC and Anna Littler successful in Bermuda Court of Appeal in decision on breadth of standard form consent powers of fiduciary protectors of trusts

Judgment has just been handed down in the Court of Appeal in Bermuda (Clarke P, Kay JA, Gloster JA) in the X Trusts in which the Court reached a unanimous decision following full argument that the role of a fiduciary protector having a power of consent in relation to the exercise of trustee powers is “narrow” rather than “wide”.

This highly anticipated judgment has decisively clarified a question which has come to the fore in courts in recent years: is a fiduciary protector’s role as regards the provision of consent to a proposed exercise of a trustee power (a) to satisfy itself as to whether the trustee’s proposed exercise of the power vested in the trustee is a proper one (the “narrow role”), or (b) to decide of its own separate and independent fiduciary discretion whether the trustee’s otherwise entirely proper proposed exercise of its power may proceed  (the “wide role”).

Giving the leading judgment in the Court of Appeal, Gloster JA considered three recent decisions of different courts in which the question had arisen: (1) PTNZ  – a decision by Master Shuman in 2020 in which it was decided on the basis of little argument that a protector had a wide role in the nature of a joint power with the trustee; (2) the 2021 X Trusts decision at first instance in which Kawaley AJ in the Bermuda Supreme Court following full argument decided that a protector had the narrow role; and (3) a decision of the Royal Court of Jersey – Re Piedmont – given shortly after the decision in  X Trusts at first instance, and again on the basis of little argument, in which Sir Michael Birt decided that the protector had the wide role.

In a wide-ranging 80 page judgment surveying the detailed arguments which had been advanced, Gloster JA held that PTNZ and Piedmont had been wrongly decided, and that a provision for protector consent to the exercise of a trustee power in its standard conventionally encountered form (i.e. without further wording conferring a wider duplicative role) was to be interpreted as providing for protector sign-off that the power is being properly exercised by the fiduciary in whom it is vested (i.e., the trustee, not the protector).  Clarke P gave a short incisive judgment to the same effect.

Brian Green KC and Anna Littler acted for the successful respondent to the appeal, instructed by Macfarlanes and Cox Hallett Wilkinson (Bermuda).

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