Commentary on Sections Part 1 – Trusts Chapter 7 – Protectors
85.Section 53 of the Act, which implements recommendations 41, 42 and 72(1) to (6), allows for the appointment of a protector. In essence, the role of a protector is to ensure that the trustees are discharging their duties efficiently and effectively. By subsection (1)(a), the truster has a choice as to whether to provide in the trust deed for the appointment of a protector (or, by subsection (8), more than one). Subsection (6) provides that the protector may not be a trustee, and vice versa, but by subsection (7) the truster may be the protector. The truster may confer powers on the protector in the trust deed (subsection (2)). As the institution of the protector is, for practical purposes, a novelty in Scots law, a list of powers that a truster may wish to include is provided in subsection (3). In implementation of recommendation 41, the protector has the power to inspect trust documents (subsection (4)), though this may be excluded by the trust deed. Importantly, the truster may require the trustees to obtain the consent of the protector before exercising such of their functions as may be specified, either generally or in particular circumstances (subsection (1)(b)). The duties of the protector are fiduciary and the protector is subject to a duty of care (by subsection (5)); in this respect the protector is on a par with a trustee. There is flexibility for the law to develop in this area to cater for the way that protectors may be used. This provision applies irrespective of when the trust was created (subsection (9), implementing recommendation 42).
86.Section 54 of the Act implements recommendation 72(7) and provides for the appointment of a new protector. The truster may appoint a new protector where, by the trust deed, the truster had originally appointed a protector but where no protector now exists or is traceable who is legally capable, and is willing and fit to carry out the duties of that office (subsections (1) and (2)). (References to a protector who is incapable or untraceable are to be read with sections 83 and 84 respectively.) Where the truster has died or is incapable, then – unless the trust deed provides otherwise – the trustees may, by subsection (3), appoint a new protector in the circumstances specified in subsection (1). Where subsections (2) or (3) apply, the effect of the appointment is also to remove any existing protector from office (subsection (4)). This provision applies irrespective of when the trust was created (subsection (5)).
87.Section 55 of the Act provides that the power of a court to remove a trustee (section 7 of the Act) and the provisions on decision making (sections 13 and 14 of the Act) apply to protectors. The provisions on decision making will only be relevant where there is more than one protector in office at any given time. In such a situation, protectors’ decisions will be regulated in the same way as decisions to be taken by trustees.
88.Section 56 of the Act implements recommendation 72(7) and provides that all protectors have power to resign office. The resignation must be by notice in writing sent to the trustees and takes effect on receipt. See section 26 of the Interpretation and Legislation Reform (Scotland) Act 2010 for the interpretation rules on the service of documents. The exception to the power of resignation in subsection (1) is where a protector’s resignation is in order to facilitate a breach of trust; in such a case any notice is of no effect. This is broadly similar to the position of trustees at common law, where a resignation in order to facilitate a breach of trust is likely to result in the trustee still retaining liability flowing from the breach.
89.Section 57 of the Act implements recommendation 72(8). It assumes that the protector has the power to direct the trustees, for example in relation to some or all of the matters mentioned in paragraphs (a) and (b) of section 53(3). Subject to any contrary provision in the trust deed, where a trustee complies timeously and correctly with the direction of a protector, the trustee will incur no personal liability for any resultant harm, provided that it is a direction which the protector has power to give; rather, such liability will fall on the protector. In every case of breach of fiduciary duty or breach of trust, including failure to exercise proper skill and care, either the protector or the trustees will be liable for any resulting harm. This provision applies irrespective of when the trust was created (subsection (3)).