The X Trusts Decision – a Cayman Islands’ perspective
Protectors in the Cayman Islands
Cayman Islands trusts are commonly established with provisions appointing one or more protectors.
A protector derives their role and responsibilities from the terms of trust deed. There are many reasons for the creation of the office of protector. In particular, a settlor may wish to establish an office to exercise some degree of control over the trustees. We are seeing more and more settlors appoint professional fiduciary service providers as protectors.
Typically, the role of the protector will involve monitoring the activities of the trustee; a trust deed may provide that the protector will be required to consent to the exercise of certain trustee powers; and / or the protector may have certain ‘positive’ powers, such as the power to remove and appoint trustees and the power to change the governing law and the forum of administration of the trust.
A protector’s powers will typically be considered to be fiduciary in nature; and will, therefore, carry with them certain fiduciary responsibilities.
The X Trusts Decision and protectors in the Cayman Islands
While the recent Privy Council decision in A and 6 others (Appellants) v C and 13 others (Respondents) [2026] UKPC 11 (“the X Trusts Decision”), is not strictly binding on the Cayman Courts, in our view it will be of particularly persuasive value, and will most likely be followed by the Cayman Courts.
The X Trusts Decision will be especially relevant to any person or entity acting as a protector; any trustee of a trust with a protector; and individuals otherwise considering establishing a trust in the Cayman Islands. In particular, many of the general features or terms of the X Trusts are not dissimilar to those found in Cayman Islands trust deeds.
A trust deed is often silent about how a protector should decide whether to approve or veto a trustee proposal. There have been two competing schools of thought regarding a protector’s decision-making process in such situations.
One view, being the “the Narrow Role”, is that a protector’s task in strictly limited to reviewing the legality of a trustee’s proposal. By contrast, “the Wider Role”, provides that the protector is entitled to form their own view of the merits of a trustee proposal and may legitimately veto the proposal even if it is one within the range of decisions which the trustee could lawfully make.
The Privy Council in the X Trusts Decision, unanimously held that the X Trusts (as defined below) conferred the “Wider Role” on the protectors.
Background to the X Trusts Decision
The appeal from the Court of Appeal of Bermuda concerned the default role of a fiduciary protector in trust administration.
The case concerned a series of discretionary trusts (all non-Cayman law governed) (“the X Trusts”), all except one of the X Trusts had broadly similar provisions regarding the office of the protector. The relevant provisions conferred powers on the protectors to approve or refuse two key trustee decisions, regarding the appointment of capital and dealing with specified securities.
The protectors had determined that they were unlikely to approve the trustees’ proposal regarding the appointment and division of the property of the X Trusts. The protectors had approached the question of whether they should approve the trustees’ proposal on the assumption they had a Wider Role.
While the Bermuda Supreme Court and the Court of Appeal of Bermuda both concluded that the trust deeds confer the Narrow Role on the protectors; on hearing the appeal, the Privy Council unanimously disagreed, and decided that the X Trusts confer a Wider Role on the protectors.
We summarise certain key points from the Privy Council decision below.
Key Points from the Privy Council judgement
The Privy Council, after considering two key legal principles, namely the proper construction of the trust deed; and any implied terms of the trust deed, determined that neither confine the protectors to the Narrow Role.
Construction:
- Where the settlor has provided for the protectors to exercise precisely defined powers but remain silent about how those powers should be exercised, the question is “what if any constraints did the trust instrument actually impose, construed in its context and with regard to any constraints imported by the general law?”.
- The relevant settlements do not by any express language impose any constraints upon the protectors in the exercise of the powers of veto.
- In the X Trusts, the powers conferred on the protectors are fiduciary; and those powers therefore come attached with all the usual fiduciary constraints. These constraints, however, do not confine the protectors to the Narrow Role.
- Even though the protectors are paid professionals (meaning that they were likely subject to a professional duty of care) this constraint again does not confine the protectors to the Narrow Role.
- In addition to there being no terms in the trust deeds which support the Narrow Role, there are several terms which support the Wider Role, including (i) the trust deeds providing for the release and waiver of the protectors powers; (ii) the ability for the trustees to proceed with a proposed decision even where the unanimous consent of joint protectors has not been obtained (provided that the trustees take into account the views expressed before making a final decision); and (iii) the fact that the protectors’ consent is only required for a limited range of trustee actions.
- There were also several broader contextual factors which support the Wider Role.
Implied Terms
- The absence of a more precisely specified role for the protectors must be taken to have been a deliberate gap. It is not a gap which needs to be, or can be, filled by an implied term.
Implications for trust drafting
Appleby anticipates that the X Trusts Decision will have implications for how trust deeds are drafted moving forward. In particular, it will be necessary to specify that the Narrow Role applies if that is the intention.
