Newsflash- Royal Court blesses a Protector's decision to 'onshore' a Guernsey trust despite the significant negative financial consequences

In the recent re  X Trusts case [civil no. 2632 22.05.26] the Royal Court in Guernsey considered an unusual request to bless a momentous decision by the Protector to replace a Guernsey trustee with a UK trustee, thereby 'onshoring' the trust. This despite the fact that such a change would result in significant tax and other liabilies for the trust assets. Indeed, the Court noted that by 2134, assuming the continuation of the modest distribution policy and the size of the fund , the offshore the value of the trust would have the potential to reach £ 82 billion. In contrast if moved onshore, taking account of taxation rates, IHT and inflation, the trust would probably be empty of assets

Why then did the Protector make such a seemingly unreasonable decision, and why did the Court decide to bless it? Well, it was the very strongly held opinion of all the adult beneficiaries of the trust that as they and their families were all UK resident, it was important to them that their family contribute fully to UK society, and that included paying their first share of tax to the society in which they all live.

The decision as to whether to remove the Guernsey trustee was in the hands of the corporate Protector (some members of the Board of which were beneficiaries) and the power was held to be fiduciary in nature.

As such, the Court recognized and applied the classic test when blessing a decision (finding it the relevant test for a Protector and not just a Trustee) namely (a)  did the Protector have the power to make the momentous decision? (b) was the Court satisfied that the Protector formed its opinion in good faith and that it was a 'proper' one for it to make/ (c) was the Court satisfied that the opinion formed by the Protector was one which a reasonable protector, properly instructed, could have arrived at? (d) was the Court satisfied that the opinion arrived up by the Protector, was not vitiated by any actual or potential conflict of interests, which either had or might affect its decision?

The Royal Court held on the facts of the case that the Protector did have the power, and that it was exercising it in good faith, and for a proper purpose. The Protector was relying on the views of all the adult beneficiaries, supported by the opinion of the advocate acting for the minors and unborns.  The Protector was relying on very thorough legal advice from both Guernsey and senior London Counsel. It was done for a proper purpose because it was in the 'benefit' of the beneficiaries in a broader sense than just financial interests. The Court considered that future generations, having been raised by the present adult beneficiaries would most likely hold similar views, and it would not be irrational for the Protector to also take that view. The Court was satisfied that aside from legal opinion, the decision was reasonable, including taking account of the comprehensive process of consultation undertaken by the Protector, including with the beneficiaries and the outgoing trustee. The decision was held to be taken made by taking into account only relevant considerations and was rational in outcome. There was a potential conflict of interest, in that certain family members set on the board of the Protector, but this has been recognized and addressed in a transparent and open manner. The Court accordingly blessed the, on the face of it, surprising decision to approve and bless the appointment of the UK trustee and to 'onshore'the trust.

Perhaps a significant footnote is that the family sat within a wider family trust structure, and none of the beneficiaries was financially dependent on this trust. The Court also noted that because of the continued availability of the assets of the other family trusts any financial dilution was likely to be negligible, at least for the next century.