In the Representation of the Jasmine Trustees Limited [2015] JRC 196 the Royal Court had to consider whether or not new trustees and protectors had been validly appointed to two trusts; the P Trust and the R Trust.
In doing so the Court gave guidance on how fiduciary powers should be exercised.
The two trusts were family trusts and the case is set against a backdrop of acrimonious relationships between a father and his two sons on the one hand, and the father’s daughter on the other, and involving long-running disputes and litigation in the US.
Each of the trusts had the same original protector, the father, who had the power to appoint and remove trustees.
The P Trust also specifically provided that the first successor to the original protector was to be the eldest son and the daughter jointly.
The father, as protector of the P Trust, purported to remove the incumbent trustees – Jasmine Trustees Limited – and appoint a New Zealand trustee (K) in its place.
He also purported to do the same in respect of the R Trust of which Jasmine and Lutea Trustees Limited were the trustees. Later, the father retired as protector of the P Trust.
The power to appoint a successor was vested in all the adult beneficiaries and they (including the two sons but not the daughter) appointed the two sons jointly as protector of the P Trust.
The father, as protector of the R Trust and in whom the power of appointment of a successor was vested, and the two sons, also executed a deed whereby the father retired as protector of the R Trust and appointed the two sons as joint protector.
Following the issuing of proceedings by the daughter, the two sons, as protectors of the trusts, removed K as trustee of both trusts but did not appoint a successor.
The Court considered what the duties for the exercise of a fiduciary power by a trustee were, and considered that such duties should apply to the holder of any fiduciary power, not just a trustee.
Whilst it did not suggest an exhaustive list, the Court held that when exercising the power to appoint a new trustee, a protector was under a duty to:
- to act in good faith and in the interests of the beneficiaries as a whole;
- to reach a decision open to a reasonable appointor (i.e. not to exercise the power irrationally; the decision must not be one at which no reasonable power holder could arrive);
- to take into account relevant matters and only those matters; and
- not to act for an ulterior purpose.
The Court found that the father failed to take into account material matters, and took irrelevant matters into account, so that the decision to appoint K was one no reasonable appointor could have taken.
The appointment of K was therefore invalid and Jasmine and Lutea remained in office.
It went on to use the above formulation when considering the appointment of the two sons as protector of the trusts.
The court found that the daughter had legitimate fears over how her two brothers would perform their function as a protector.
They had a history of being willing to do exactly as their father wished, and it had been shown in the US litigation that they paid little attention to fiduciary duties.
The Court therefore held that the appointment of the brothers as protectors of the two trusts was outside the band within which reasonable disagreement is possible and was a decision to which no reasonable appointor could come i.e. it was irrational. Their appointments were therefore invalid.
The case is a valuable reminder of the approach the courts in Jersey will adopt where there is disagreement concerning the exercise by any holder of a fiduciary power of that power, not just by a trustee.
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