Trustee and protector deadlock: a feature not a bug
Trustee and protector deadlock: a feature not a bug
Background
On 19 March 2026 the Privy Council (the Board) handed down judgment in A and 6 others v C and 13 others [2026] UKPC 11 (A v C). It is an important judgment for protectors, trustees and beneficiaries as it sets out a first principles analysis of the basis upon which a protector may exercise his or her power to veto a trustee’s decision.
Summary of the facts
In 2017 the trustees of various family trusts devised a long-term scheme (the Scheme) for the allocation of trust assets, between two branches of the family (the A and B branches) on a ⅔ to ⅓ basis, respectively.
The protectors, working on the basis that they were entitled to exercise a wide discretion, made it clear that they would not consent to the Scheme because of their concerns about the scheme that centered around the perceived unfairness of the division between the two branches; the revocability or otherwise of the division of the assets; and the potential effect on the value of the trust assets.
The issue
The protectors' effective veto of the Scheme resulted in deadlock that led to the trustees issuing proceedings, in the Bermudan court, to resolve the question of on what basis were the protectors entitled to withhold their consent for the Scheme. The answer to that question was framed by the parties as a choice between:
the protectors being empowered to exercise their independent discretion by reference to their own view on the merits of the Scheme (the so called Wide Role); or
the protectors being limited to reviewing the lawfulness of the trustees' decision (the so called Narrow Role).
Before moving on, it is worth noting that the protectors’ powers in issue were drafted along standard lines, for example:
“...The Trustees shall not exercise any power to appoint, distribute or pay any part of the Trust Fund to or for the benefit of any member of the Appointed Class or any Beneficiary without obtaining the prior written consent of the Protectorate, nor, if the Trustees’ consent is required for any appointment of capital, shall they give their consent without the prior written consent of the Protectorate…”
(Note: the trust documents referred to the protectors as the protectorate).
The protectors and trustees remained formally neutral in the proceedings. The two branches of the family adopted opposing views: the A branch favoured the Narrow Role; the B branch favoured the Wide Role.
The parties did however agree that:
the protectors were fiduciaries;
the settlor was free to choose what role to give the protectors; and
the settlor's intention was an objective matter to be determined on a true construction of the relevant trust instruments.
The Board’s decision
The Board found that the question was not whether the Narrow or Wide Role applied but rather: where the settlor has made provision for a party to exercise certain defined powers, but was silent as to how those powers should be exercised, what if any constraints did the trust instruments (and the general law) impose on the exercise of those powers. The Board’s answer to that question was that the relevant settlements did not by any express language impose any constraints upon the protectors in the exercise of their powers. As such the exercise of those powers was consistent within the Wide Role and came nowhere near confining the protectors to the Narrow Role.
Deadlock: a divergence of judicial opinion
By the time of the Board's judgment, the trustees and protectors had been deadlocked for about 9 years and a particularly interesting aspect of A v C was the significant differences in the courts’ attitudes to the risk of deadlock.
Deadlock considered in the decision of Kawaley AJ (Supreme Court of Bermuda)
Kawaley AJ accepted that at “first blush” the terms of the relevant trusts appeared to support the Wide Role but held that the Narrow Role applied. This decision was based on a reading of the trust instruments as a whole, coupled with an analysis of commentaries on protectors and (of interest in this note) the taking into account the practical consequences of the Wide Role. The practical consequence at the forefront of Kawaley AJ’s mind and, in part a motivation, for the decision was the risk of deadlock between protectors and trustees, particularly where there was no mechanism in place to resolve it.
2021: In the Matter of the Piedmont Trust & Riviera Trust [2021] JRC 248 (Piedmont)
Not only were the Bermudan courts considering the question of the Narrow and Wide Roles, in Jersey the Royal Court was also grappling with question in Piedmont. Indeed, after the judgment in Piedmont had been handed down, but before the final version was published, the court had its attention drawn to Kawaley AJ’s recently issued decision. In the event the Royal Court declined to follow the Bermudan court and affirmed that the Wide Role applied to protectors.
As in Bermuda the issue of deadlock was before the Royal Court. In adopting the Wide Role analysis the court conceded that whilst its conclusion might increase the risk of deadlock it was a natural outcome of the decision to appoint a protector. The court put it bluntly:
“…there is the potential for deadlock where the natural consequence of the settlor’s decision to introduce the office of protector into the trust deed. A settlor must be taken to have intended (by imposing a requirement for consent) that a trustee should not be able to make certain decisions unless the protector consents. If consent is refused, the trustee’s decision cannot be put into effect…”
Deadlock considered in the decision of the Court of Appeal
Back to A v C, the Bermudan Court of Appeal affirmed that the protectors had the Narrow Role. Again deadlock was a real concern, as explained by Gloster J.A.:
“…What is clear to me, is that the obstacles and uncertainties which would lie in the way of the Trustees attempting to set aside, or overcome, a refusal of the Protectors to consent to a decision which the Trustees considered manifestly in the best interests of the beneficiaries, strongly support the conclusion that the Narrow Review Role is the correct one. Problems about impasse do not arise when the criteria entitling the Protectors to refuse their consent are clear – namely a decision by the Trustees which the Protectors regard as not reasonable, tainted by improper process or which has failed to take into account relevant considerations…”
The Board's approach to deadlock
The Board took a far more pragmatic and I would argue sensible and realistic approach to the question of deadlock, essentially viewing it as a deliberate feature of a protector’s appointment:
"...the A Branch refers to the prospect of deadlock if the Protectors do not consent to the Trustees’ proposal. In many, probably most, cases it should be possible for trustees and protectors acting in accordance with their respective fiduciary duties to find common ground. There may be cases, and it appears that the present case is one, where common ground cannot be found. That, however, is not a reason for rejecting the Wider Role. Ultimately, the purpose of a protector with the Wider Role is to prevent a major transaction which the protector considers to be an inappropriate exercise of the trustees’ powers...the possibility of deadlock is deliberately built into the structure….."
The Board’s approach reflects the refreshingly candid analysis put by counsel for the B Branch to the Court of Appeal, that did not shy away from the real purpose of deadlock:
“…Mr Taube, on behalf of the Appellants, argued that the Protectors’ role was to create an impasse where the Trustees have proposed a course of action that the Protectors do not believe conforms to the settlors’ wishes. Once one accepted that the Protectors indeed had an independent discretion as to whether (for example) an appointment should be made and were in position precisely to block such proposals by the Trustees, then the concept of impasse no longer presented a problem for the operation of the X Trusts. The draftsmen of the consent provisions had given the Protectors a veto power to force the Trustees to listen to the Protectors…”
Dealing with deadlock and recourse to the court
It is not difficult to see why protector/trustee deadlock may represent at least an interim method of forcing the issues and as means provoking a resolution of tensions between the settlor’s intentions as enforced by the protector and the trustee’s exercise of their powers. But that does not mean that either protectors or trustees can deploy deadlock willy-nilly as a means of getting their way.
Below are some important factors that protectors and trustees should consider when and if deadlock raises its head.
Limitations on protectors
The starting point is to ensure that the protector is acting within the limits or their office. The protector’s role is that of a watchdog and not of a joint decision maker with the trustee. As it was put in Piedmont:
“…It is for the trustee to make a decision in the first place as to distributions or in relation to the exercise of any other discretionary power conferred on the trustee. It is emphatically not the duty of the protector to take that decision himself or to force the trustee into making the decision which the protector would make if he were the trustee by stating that he will only consent to a particular decision…”
Provision of trust documents to the protectors
One question that might be overlooked is what documents is a protector entitled to from the trustee to make a properly informed decision? The only authority on this question is Piedmont, which determined that as a protector owes fiduciary duties to the beneficiaries and in order to fulfil those duties, he must have access to such documents and information as are reasonably necessary for him to do so. As a starting its starting point for the type of documents a protector might require Piedmont affirmed the approach set out in Holden on Trust Protectors:
“A protector will normally need a copy of the trust instrument; any ancillary instruments modifying the beneficial interests or the terms of the trusts; deeds of appointment, removal or retirement of trustees and protectors; and any letters of wishes addressed to the protector [or we would add, the trustees]. The protector might also require trust accounts and documents relating to the investment of trust assets; correspondence and minutes of the meetings of outgoing protectors; correspondence and minutes of trustee meetings; and documents revealing the deliberation of former protectors and/or trustees where those discussions might impact on how the protector exercises his or her power.”
I would add that in the event that a deadlock arises it would be difficult to see how any attempt at resolution could be made without, at least at that stage, the trustee providing documents to the protector, not least in order to support the rationale behind his decisions.
Court intervention to resolve a deadlock?
The jurisdiction to intervene in relation to the discretionary actions of trustees (as fiduciaries) is in general governed by the “non-intervention principle”, namely that in the absence of evidence of breach of duty the court does not intervene in the exercise by a fiduciary of a discretion. The leading case on the non-intervention principle is Pitt v Holt [2013] UKSC 26; [2013] 2 AC 108 (Pitt) where Lord Walker held that a breach of duty was necessary before the court could intervene with respect to matters that fell to trustees to do or decide:
“…for the rule to apply the inadequate deliberation on the part of the trustees must be sufficiently serious as to amount to a breach of fiduciary duty. Breach of duty is essential (in the full sense of that word) because it is only a breach of duty on the part of the trustees that entitles the court to intervene…”
Critically, Lord Walker did point out that there may be exceptional circumstances that, absent a breach of fiduciary duty warranted judicial intervention:
“…Apart from exceptional circumstances (such as an impasse reached by honest and reasonable trustees) only breach of fiduciary duty justifies judicial intervention….”
So there is an exception to the non-intervention rule where there is an impasse between trustees. I can find no authorities that deal with an impasse between trustees and protectors and whether the court would intervene is debatable. However, this is a distinct possibility (at least in Jersey) as was explained in Piedmont:
“… In the event of complete deadlock where such deadlock is causing real damage to the interests of the beneficiaries, we leave open the possibility of recourse to the Court. The Court has power to break a deadlock where this is caused by lack of agreement among trustees…It may be arguable that the Court has a similar jurisdiction in the event of damaging deadlock between a trustee and a protector. However, we say no more about that…”
The fiduciary duty to seek a solution when there is deadlock
When deadlock arises the protectors and trustees are duty bound to at least try to reach agreement. The Board put it this way:
"...the possibility of deadlock is deliberately built into the structure but the Board repeats that it is the duty of both the trustees and protectors to seek to find common ground..."
It is to be supposed that a failure to seek to find common ground might, in of itself, represent a breach of fiduciary duty sufficient enough to found a claim that an exceptional circumstance for the purposes of the non-intervention rule has arisen.
This poses a practical question for the settlor and those drafting the trust instruments: is there a case for some form of dispute resolution between trustee and protector to be baked into the settlement, not least in order to take and potential heat out of the issue at an early stage; perhaps saving costs and avoid the need for proceedings. Indeed the very integration of a disputes procedure within the trust instruments might set an expectation from the outset that a cooperative mindset is required.
Good faith
In exercising what is effectively a power of veto where there are no constraints the Board accepted that there may be an obligation to act in good faith. That is as far as the Board went on this question. It would be difficult to imagine that where a protector has acted in accordance with his or her fiduciary duties and has sought to reach agreement with a trustee over a dispute between them how this might arise as an issue.
A use for the Narrow Role?
Of course the simplest way of reducing the risk of deadlock is to draft the protector’s powers such as to conform with the Narrow Role. In such a case the only question that needs to be resolved is the legality or otherwise of the trustee’s decision. This might be a workable solution where the settlor’s concern is to ensure technical compliance with the terms of the trust instruments and the proper exercise of the trustee’s duties.
A Narrow Role clause in a settlement might well be drafted in to reflect the description of it in the originating summons in A v C:
"...to satisfy themselves that the proposed exercise of a power by the plaintiffs (as trustees of the X Trusts) (or any of them) is an exercise which a reasonable body of properly informed trustees is entitled to undertake and, if so satisfied, to consent to the same..."
Conclusion
Whilst prospect of deadlock is clearly something the Board saw as a feature of the appointment of a protector, the court’s willingness to tolerate deadlock is likely to be subject to:
The terms of the relevant trust instruments;
The parties acting in good faith within the scope of their powers and in accordance with their fiduciary duties, one of which being the duty to demonstrate a willingness to at least seek to resolve their disagreements. A failure to perform this duty may justify the intervention of the court pursuant to Pitt.
Intervention by the court in the case of deadlock may well be justified on the basis that deadlock is one of the exceptional circumstances identified in Pitt.
As a practical matter and in the exercise of their fiduciary duties the protector should seek and the trustee should provide sufficient relevant information and documents to ensure that his decision making is made in good faith.
Not written with the help of AI.
This note is for educational purposes only and must not be taken as legal advice. Please consult a qualified professional should you need any advice on the issues discussed above.