Royal Court of Jersey sets aside trustee and protector appointments
In the recent case of Re Piedmont & Riviera Trusts; Jasmine Trustees Limited v L [2015] JRC 196, the Royal Court of Jersey has set aside purported appointments of trustees and protectors on the grounds that the appointments were irrational and made in breach of duty.
The case concerned two private family trusts. The father of the family was the original protector, and his children and remoter issue were beneficiaries. His daughter was involved in litigation with her father and brothers in the United States. In that context, the father purported to appoint a new trustee of the trusts, and to appoint his sons as the replacement protector of one of the trusts. The father also resigned as protector of the other trust, with his sons being appointed as protector of that trust by the majority of the adult beneficiaries.
In those circumstances, the daughter applied to the court to set aside the appointment of the new trustee and protectors.
The proposed successor trustee was a New Zealand company called Kairos. Kairos had failed to answer basic due diligence queries posed to it by the existing trustee. The Royal Court found that, in purporting to appoint Kairos, the father had failed to take into account material considerations, such as Kairos’ expertise, experience and financial standing, and had instead acted on the basis of an irrelevant concern regarding the need to have a trustee in a jurisdiction that was ‘white-listed’ by Italy. The appointment was therefore set aside on the basis of the father’s failure to take into account relevant considerations.
In relation to the appointment of new protectors: in each case the daughter was engaged in litigation with her brothers. In addition, her brothers had historically acted in a way that was not independent from their father, and as a result the relationship between the parties had irretrievably broken down. In those circumstances, the Royal Court held that the purported appointment of the brothers as protectors of the trusts was likely to have a “seriously detrimental effect on the administration of the trusts“, with the daughter inevitably challenging any decision taken by her brothers in the future.
For that reason, the court held that the purported appointments of the brothers as protectors of the trusts was irrational, and declared them to be invalid. The court encouraged the parties to work together to find new trustees and protectors of unimpeachable independence.
The case is an important example of the lengths to which the court will go to ensure that a trust is administered independently and in a manner that is not ‘tainted’ by an underlying dispute between the beneficiaries. It provides important guidance concerning the duties of persons appointing new trustees and protectors.
Andrew Holden was instructed by Appleby Jersey on behalf of the successful applicant.
