Just how much power does your Protector have? Settlors beware!

Last week, the Judicial Committee of the Privy Council gave a hugely significant judgment which has finally settled a long running debate about the extent of the powers of the Protector of a trust [Re the X Trusts March 2026 JCPC/2024/0094].

The Court held that if the trust deed does not carefully define the extent, and crucially, the limitation on the Protector's powers then the 'default position' will be that those powers will be construed in a 'wide' sense and not in a 'narrow' sense.

The sadly flawless logic of the Court was that it could not see why a Settlor would think it necessary to appoint a protector just to 'narrowly' ensure the lawful conduct of a trust by a professional trust corporation, which would be expected to have taken and complied with its own legal advice. Instead under the 'default' wide basis, where the Protector is asked for its consent by a trustee, it can reach its own (and possibly contrary) decision.

The Bermudan case considered by the Court resulted from just such dissent arising between the decision of the Trustee as compared to that of the Protector asked for consent. The Court found on the facts of the case that the Protector had the power to veto the Trustee's decision on the 'wide' basis, in that the Protector would have reached a different decision.

The good news is that even on the 'wide' basis the Protector's fiduciary powers will not be unlimited, but will be constrained by normal fiduciary duties such as the requirement to act in good faith, to avoid conflict and to only act for a proper purpose. But if the trust deed is otherwise silent, no further constraints will be imposed on the Protector's exercise of its powers, and nor will they be implied whatever the Settlor subjectively intended.

This therefore means in practice that unless the Trust deed expressly says otherwise, there will be joint decision-making between Trustees and Protectors, especially where Protector consent is required to give effect to any trustee decision. Such decisions could relate to such central trust matters as distributions to beneficiaries and investment and property management decisions. Disputes will inevitably arise if the Protector disagrees with the way in which a Trustee is proposing to exercise its discretion and powers. The practical implications of this outcome on the administration of trusts are huge.

Practical takeaways for Settlors 

This judgment makes it imperative that new Settlors are properly advised when they set up the structure as to the extent of the powers they intend that their Protector should have. Those with an existing trust should review the trust deed to ensure it acts in accordance with their wishes as to how the trust will operate. If not, the Settlor should now consider whether there is any scope to vary the trust deed to appropriately define and limit the Protector's powers. In our opinion this judgment, the logic of which is difficult to argue against, will almost inevitably lead to significant further litigation where trustees and protectors reach a deadlock.