The Royal Court of Jersey has issued a recent judgment, In the matter of the P Trust and the R Trust  JRC 196, in which it considered whether a protector of two Jersey law discretionary trusts had validly exercised fiduciary powers of appointment and removal of trustees and a fiduciary power of appointment of a protector.
In declaring the exercise of powers invalid, the Court noted that there is a distinction between "formal" validity, that is whether the exercise complies with formal or procedural requirements, and "essential" validity, which is a qualitative test concerned with the propriety of the decision. The Court declined to define an exhaustive list of factors which determine whether a power has been exercised in a manner which is essentially valid, but held that a power-holder exercising a fiduciary power should:
- act in good faith and in the best interests of the beneficiaries as a whole;
- reach a decision open to a reasonable power-holder;
- take into account relevant matters and only those matters; and
- not act for an ulterior purpose.
The case illustrates that the Jersey courts are willing to allow a wide degree of latitude to beneficiaries in holding fiduciaries to account for their decisions and are prepared to intervene to assist them as part of its supervisory jurisdiction in appropriate circumstances. In doing so, the court will look to the substance of a decision rather than just the form when assessing validity.
For a more detailed look at the case, including discussion of the facts which persuaded the Court to declare the decisions invalid, please see the Mourant Ozannes briefing, "The P Trust and the R Trust".