The protector's right to indemnity

When can a protector expect to be indemnified from trust property for the costs of acting in the role? And what should a trustee do when faced with a demand by a protector for payment from the trust? Both the Isle of Man and Jersey courts have recently considered the office of protector and the protector’s right to indemnity. They provide an interesting contrast to one another and add to the growing understanding of the position of a protector.

A Manx case, IFG International Trust Company Ltd and others v French (2012) CHP 2012/0048, sprang from the US Securities and Exchange Commission’s (SEC’s) investigation into the affairs of two brothers who had settled trusts in the Isle of Man and engaged Manx trustees. F, an individual, had been a protector for the trusts. He became embroiled in the SEC litigation and claimed that the trusts should indemnify him for the costs of his defence. The trustees asked the court for directions as to their response.

There were broadly two forms of express indemnity among the trust deeds: the first gave the trustee power to grant an indemnity ‘upon such terms as the trustee may think fit’; and the second conferred an automatic right of indemnity on the protector ‘for any liability loss or expense… recovered against and paid by such person other than liability loss expense or judgment arising out of his own wilful and individual fraud or dishonesty’…

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