In a recent decision by the Royal Court of Jersey, the Court blessed a trustee decision to split assets equally between three branches of a family despite protestations that this was contrary to the settlor’s wishes and the family’s customs and culture. Despite declining to make a decision on the scope of protector consent powers, the Court offered some useful guidance on the protector’s role, including that the protector’s office is subsidiary to that of the trustee.

In this article, Emma Holland and Gemma Walton consider the decision in the Representation of Summit Services [2024] JRC 222.

Background

Before he died in 1991, the settlor (“JLS”) established several Jersey law family trusts (the “Trusts”). JLS had four sons: BJ, who pre-deceased him, DJ, MJ, and JJ, all of whom have now passed away.

The current class of beneficiaries consists of the lineal descendants of the four sons. At the time of judgment, the net assets of the Trusts were worth approximately £75m and consisted primarily of a property portfolio and cash.

Proceedings

Following extensive consultations with the family members, Summit Services Limited (the “Trustee”) asked the Jersey Royal Court in November 2020 to “bless” certain decisions relating to the separation of the assets within the Trusts. At a hearing on 17 May 2021, the Court blessed the decision to split the Trusts into four uneven proportions in accordance with JLS’s wishes, as well as the creation of 10 new Jersey law trusts to facilitate the separation. The terms of the 10 new trusts were approved by the Court on 31 May 2022.

At the time of the judgment, separation of the assets between the BJ, DJ and JJ families was almost complete. However, the allocation of assets between the members of the MJ family (referred to as “H”, “J” and “K” branches) had not been agreed. Therefore, the assets were held in a single Jersey law trust for the benefit of all members of the MJ family pending resolution of the dispute.

In the absence of an agreement between members of the MJ family, the Trustee decided that subject to the Court’s approval, the assets should be split equally between the H, J and K branches. However, the protector (a company run by the son of a family friend of JLS) refused to consent to the exercise of the Trustee’s power in this way. Under Jersey law, the role of a protector is to provide an additional layer of oversight and control over the trustees’ actions.

H and J said that the Trustees should implement the purported wishes of their father and allocate a fixed sum of £1.8m to K and her family, splitting the remainder equally between them. K contended that the assets should be split equally.

Public Trustee v Cooper: blessings

Where trustees intend to make a “momentous decision”, the trustees are advised to apply to the Court for a blessing. Examples of momentous decisions include one that significantly affects the interests of the beneficiaries, the sale of a primary business asset, the division of the trust assets or a particularly large distribution.

In order to grant a blessing, the Court must be satisfied that the decision:

• was made in good faith,
• was one which a reasonable trustee properly instructed could have reached, and
• was not vitiated by any actual or potential conflict of interests.

(The test for a blessing under Jersey law was laid out in Re S Settlement [2001] JLR N 37.)

In this case, the Trustee identified five considerations relevant to their decision: (i) JLS’s wishes, (ii) MJ’s wishes, (iii) the views of H, J and K, including their financial needs and reasonable expectations, (iv) the contribution made to the family business by H and J and the benefits received by them, and (v) the application of “Country 1’s” cultural rules and values to the governance of the affairs of the MJ family.

In reaching its decision to grant the blessing, the Court noted that MJ was neither a settlor nor a beneficiary. The Court also found that if the cultural values of Country 1 had been so ingrained in the family, JLS would have mentioned this in his letter of wishes, and the other branches of the family would not have so readily divided their assets equally. MJ, H and J had been in no doubt that K would contend MJ’s wishes, and she “had not been conditioned to expect a lesser share” than H and J. The Trustee conducted extensive research and put a carefully drafted set of questions to the male members of the MJ branch. As a result, the Trustee decided that Country 1’s cultural values did not need to be given any real weight in its overall deliberation.

Protector powers

The Trustee did not make a formal application in respect of the protector’s decision to refuse to consent to the proposed plan. Instead, the Trustee asked the Court in its skeleton argument to consider the propriety of the protector’s refusal and, if the decision was blessed, either direct the protector to consent or give directions to break the deadlock.

Citing the non-intervention principle, the Court declined to make the orders sought by the Trustee. However, the advocate on behalf of the protector indicated that if the Court decided to comment, the protector would give those comments careful consideration.

The extent of protector powers has been considered in recent years by the Jersey and Bermuda courts. The “Narrow View Role” was favoured by the Bermuda Court of Appeal in Re X Trusts [2023] CA (Bda) 4 Civ, whereas the “Wide View Role” was adopted by the Jersey Royal Court in Re Piedmont and Riviera Trusts [2021] JRC 248.

Under the “Wide View Role” the protector must exercise independent discretion, taking into account relevant considerations and disregarding irrelevant considerations such that the protector may withhold their consent to a proposed exercise of power even if that proposed exercise of power is one that a reasonable body of properly informed trustees was entitled to reach. The “Narrow View Role” only requires the protector to be satisfied that the proposed exercise of power is one that a reasonable body of trustees properly informed is entitled to take.

In the present case, as the issue was not argued before it, the Court declined to comment on the debate over the “Wide View Role” vs the “Narrow View Role”, leaving the matter for the Privy Council in the upcoming X Trusts appeal. The issue of the “Wide View Role” vs “Narrow View Role” has been granted permission to appeal to the Privy Council in the X Trusts case (Re the X Trusts [2024] CA (Bda) 1 Civ).

Instead, the Court offered the following guidance:

• The protector’s function, whether wide or narrow, is clearly subsidiary to the trustee’s discretion.
• In determining whether to consent to a trustee’s decision, the protector should not consider how it would have exercised the trustee’s power. Nor should the protector refuse consent on the basis that the protector might have exercised that power differently. The protector should make a determination on the basis of an evaluation as to whether the exercise of power by the trustee is in the best interests of the beneficiaries as a whole.
• If a protector’s refusal to give consent is irrational or otherwise legally flawed, the Court has jurisdiction to overturn the protector’s veto.
• Where the protector has properly exercised its function, the Court can either (i) give directions for further discussions between the trustee and protector, or (ii) break the deadlock that has arisen by directing the protector’s exercise of its power.

In this instance, the Court noted there was little indication that the protector was conscious of the need to review the Trustee’s decision rather than taking its own decision. The Court suggested that the protector’s views were heavily influenced by the views of the father of the director of the protector (the previous protector and friend of JLS) and that a sense of family loyalty may have obscured the need to fully consider the role of the protector. In essence, the protector regarded itself as a co-trustee.

Ultimately, the office of protector is subsidiary to that of the trustee, albeit the case law relating to protectors is limited and currently offers little guidance on the matter.