The recent Jersey case In the matter of the P Trust and the R Trust  JRC demonstrates that the Court has jurisdiction to declare the exercise of fiduciary powers invalid even where all formal requirements have been complied with.
In its judgment, the Court drew a distinction between formal validity and essential validity. The former refers to the exercise of powers by a power holder in accordance with the formal requirements set out in the trust deed. The latter is established by applying a qualitative test designed to ensure fiduciary powers have been exercised in accordance with a set of duties all fiduciaries must abide by.
The JRC suggested such duties would include (but not be limited to):
- acting in good faith and in the interests of the beneficiaries as a whole;
- reaching a decision that is open to be reached by a power holder acting reasonably;
- taking into account only relevant matters; and
- not acting for an ulterior purpose.
Those exercising fiduciary powers should be wary as this decision shows that the Court has wide latitude in assessing essential validity.
In this case, that latitude extended to taking into account a breakdown in family relations and acrimonious litigation brought by one beneficiary against the power holder (her father). In the litigation, the beneficiary alleged serious malfeasance by her father and her brothers.
The brothers (who were also beneficiaries) had been appointed by the father as new protectors. The court found that the father had exercised his power to appoint the brothers as protectors in an irrational manner which was incongruent with the requirements of essential validity.
This decision could pave the way for interested parties to challenge the exercise of fiduciary powers with far greater ease.