19 September 2019 - Podcast
This video is about a recent trust dispute success Mourant Ozannes, Andrew Holden of XXIV Old Buildings and we secured in the Guernsey Royal Court for beneficiaries who considered that the very person appointed to protect and guard their interests – the Protector – was no longer doing so. The case, known as the 'K Trust', demonstrates that the courts can and will if necessary remove a protector who the court considers is no longer acting in the best interests of their beneficiaries.
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Hello I'm Dawn Goodman. I'm a lawyer who specialises in trust and estate disputes at Withers in London. My colleague Emma McCall and I are going to discuss the recent groundbreaking case in which we advised the beneficiaries and which saw the Court remove a Protector of a trust for the first time in Guernsey. When someone sets up a trust for the benefit of their family or others they want to provide for they often like to appoint a trusted adviser or a friend to protect the interests of the beneficiaries, particularly where the trustee is a trust company they do not know very well or is situated offshore.
But what happens when the Protector stops protecting? Or even worse where the Protector actually becomes the problem and the beneficiaries need protecting from the Protector. In a number of cases across the world, Protectors who are mad or bad have been removed by the Court. Typically they have taken off with a lot of the trust assets or they've made a claim against the trust itself. But in the case that Emma and I were involved in the situation was less radical. Nonetheless, the Court thought it was right to intervene to prevent a trustee or a Protector from clinging to office for too long.
_ Well by way of background, the K Trust was created in 1990 by a successful businessman. He appointed a lady who was his financial adviser and friend as Protector with wide-ranging powers. When the Settlor died in 2001, his widow was the sole beneficiary of the trust. He requested that following his death, the trust be administered in accordance with her wishes. At the widow's request, a number of beneficiaries were added, including her nephews and niece. The widow requested that the Protector step down. The Protector acknowledged that she had lost her relationship with the widow. However, she believed that the Settlor had wanted a non-family member to be in that role and she considered that she was privy to his wishes and best placed to put them into effect. By 2011 the problems had come to a head and the beneficiaries requested that the trust be wound up. The Protector was not supportive. Having received a formal request threatening her removal, the Protector agreed to step down however only on the basis that she be fully indemnified in relation to any liabilities she may have as Protector and that she receive all of her costs._
Well because the Protector declined to go unless she received these indemnities and all her costs, proceedings were commenced to remove her and the Court decided that it was going to remove her from office. The Court decided to follow the principles which had been set out by the Jersey royal court in a case in 2012 where we also acted for the successful beneficiaries. There the Court decided that the overriding criteria when considering whether to remove a trustee from office, and by analogy a Protector, was first of all what was in the interests of the beneficiaries as a whole and secondly what was important to ensure the efficient administration of the trust in their interest. The Court also removed the Protector in this case without giving her the specific and general indemnities that she wanted.
The message is clear. A Protector can not expect to stay on simply because they were chosen by the Settlor. When asked to set down by all or even a majority of the beneficiaries, a Protector should respond without delay and should seriously consider exiting gracefully.