A and 6 Others (Appellants) v C and 13 Others (Respondents)

Why It Matters

The decision expands protectors’ discretionary power, reshaping offshore trust governance and potentially affecting asset‑allocation decisions for high‑net‑worth families.

Key Takeaways

• Protectors' role hinges on trust deed interpretation, not default law.
• Courts rejected narrow veto view, endorsing broader discretionary authority.
• Fiduciary duties limit protectors but do not restrict merit judgments.
• Wider protector role avoids deadlock, aligns with offshore family trust practices.
• Decision impacts future offshore trust governance and beneficiary transparency.

Summary

The Bermuda Court of Appeal considered an appeal concerning the function of protectors in a series of offshore discretionary family trusts. The trusts granted protectors a veto over trustee proposals but were silent on whether that veto should be exercised merely to ensure legality (the narrow role) or to assess the merits of the trustees’ decisions (the wider role).

The lower courts applied the narrow interpretation, arguing that a broader protector role would create deadlock and unnecessary costs. The Supreme Court, however, reversed that view, holding that absent explicit limitation, a protector’s veto power carries the wider, fiduciary‑based authority to evaluate the substance of trustee actions, subject only to good‑faith and conflict‑of‑interest constraints.

Lord Richards, writing for the majority, emphasized that the term “protector” does not carry a fixed legal definition and that any constraints must be expressly or implicitly found in the deed. Fiduciary duties—no profit, no conflict, proper purpose—were deemed sufficient to prevent abuse without imposing the narrow, purely procedural role.

The ruling clarifies that, where trust deeds are silent, protectors may exercise a broader discretionary function, reinforcing their purpose as a bridge between offshore trustees and the settlor’s family. This interpretation is likely to influence the drafting of future offshore trusts and the governance expectations of beneficiaries and professional trustees alike.

Original Description

Background to the Appeal

This appeal concerns the default role of a fiduciary protector in the administration of a trust.

Since the mid to late 1980s, it has become common practice for trust deeds created in offshore jurisdictions to include provisions enabling the appointment of a person known as a “protector”. A protector is a natural or legal person (eg a company) upon whom the person creating the trust (“the settlor”) has conferred powers in relation to the exercise of powers by the trustees. Local trustees in offshore trusts, which are often professional trust companies, are unlikely to have any close connection with or personal knowledge of the settlor’s family. Accordingly, settlors may wish to appoint a protector to monitor the trustees’ actions and/or serve as a form of communications bridge between the family and the offshore trustees. To this end, the protector may be given any powers which the settlor chooses to confer on them, but typically they include powers of veto over some or all of the trustees’ more important decisions.

However, the trust deed is usually silent about how the protector should decide whether to approve or veto a trustee proposal, a subject which has generated much academic debate. On one view, referred to as “the Narrow Role”, the protector’s task is strictly limited to reviewing the legality of the trustees’ proposal. By contrast, according to what has been termed “the Wider Role”, the protector is entitled to form his or her own view of the merits of the trustees’ proposal and may legitimately veto the proposal even if it is one within the range of decisions which the trustees could lawfully make.

The present case concerns a series of discretionary trusts, some governed by English law, some by the law of Bermuda and one by Jersey law (“the X Trusts”), which were originally established by a wealthy businessman (“Mr X”) and his relatives. The X Trusts are now held for the principal benefit of A and B and their families. All except one of the X Trusts now broadly have identical provisions governing the appointment of one or more protectors. Those provisions conferred two main powers on the protectors: (1) the power to approve or refuse any appointment of capital to the beneficiaries proposed by the trustees and (2) the power to approve or disapprove any dealing with, or exercise by the trustees of voting powers derived from certain “Specified Securities”, the most important of which were shares in a company (“OpCo”).

In 2017, the trustees of the X Trusts produced proposals, the essential feature of which was the exercise of the trustees’ wide discretionary powers of appointment by a division of the property of the X Trusts upon A and A’s family (“the A branch”) and B and B’s family (“the B branch”) in unequal proportions. However, aspects of this scheme required the written approval of the protectors. After consultation, the protectors determined that they were unlikely to approve the proposals. Crucially, the protectors approached the question whether they should approve the scheme on the assumption that they had the Wider Role.

The proceedings in the courts below focused on the question whether the protectors of the X Trusts had the Narrow Role or the Wider Role. The A branch argued in favour of the Narrow Role and the B branch in favour of the Wider Role. Both the Bermuda Supreme Court at first instance and the Court of Appeal of Bermuda unanimously concluded that these trust deeds conferred the Narrow Role upon their protectors. The B branch now appeals to the Board.

Judgment

The Board unanimously disagrees with the courts below and will therefore humbly advise His Majesty to allow the appeal. Lord Briggs and Lord Richards give the judgment, with which Lord Reed, Lord Stephens and Lady Rose agree.