Modern day trust deeds often contain substantial powers in favour of a third party, usually referred to as a protector. A protector is introduced into the trust in order to oversee the actions of the trustee.A protector has a fiduciary duty to exercise his powers for the purpose for which they were conferred. Broadly, this means that they must be exercised in the best interests of the beneficiaries.Sometimes, however, a protector abuses his powers. The writer came across an example of such abuse in a recent case he was involved in.The basic facts were as follows. The settlor had appointed one of his trusted professional advisors as protector of his trust. The protector did not have as close a relationship with the settlor's family and following the settlor's death, there had been a gradual deterioration in that relationship.The trust had run relatively smoothly since its inception. However, for the last few years the family (and the trustee) had become increasingly concerned about what they felt had been a startling depletion in the value of the trust fund portfolio of investments, which they firmly attributed to the poor performance of the investment manager. They asked the trustee to remove the investment manager and appoint another. Although vested in the trustee, the power to replace him was, however, subject to the prior consent of the protector.The protector disagreed with the family's assessment of the investment manager's performance and his consent was, therefore, not forthcoming. The family was horrified that the portfolio losses were now being compounded by the protector's refusal to sanction the replacement of the investment manager.The family remained adamant that immediate action was necessary to safeguard what little remained of the trust fund and continued to press for the removal of the portfolio manager. The trustee also tried to press matters although it felt vulnerable that its position as trustee was at risk by virtue of the protector having the power (under the terms of the trust) to remove it and perhaps to appoint, someone who would in the protector's eyes, be a more amenable trustee.It later transpired that the investment manager was the son of the protector and thus the protector had clearly been in a position of conflict for some time.It has long been decided by the courts that a protector's powers are not unrestricted. One of the chief principles governing the exercise by a protector of his powers (often referred to as fiduciary powers) is that the protector's decisions should be made without regard to private interests; seeking to benefit personally from the exercise of fiduciary powers is forbidden.As a rule, any conflict of interest would need to be disclosed to the trustees and the beneficiaries as soon as it arose. An assessment would then be made to assess whether the protector could still act in the best interests of the beneficiaries notwithstanding the conflict. He would only be able to remain in office if it was in the beneficiaries' best interests that he so remain and then only if he honestly believed that he could continue to faithfully serve in their best interests. Where he was unable to do this, he would have to resign and where he failed to step down, the trustee would be obliged to apply to the court to have him removed.For instance, in the facts of the case above, the protector could not arbitrarily dismiss the trustee and then appoint another merely to secure a more compliant trustee (unless the replacement was also in the beneficiaries' best interests).So, in our client's predicament, the beneficiaries were successfully able to challenge the protector's refusal to remove the portfolio manager. The protector's conduct had been motivated by (albeit indirect) personal gain and was in flagrant breach of his fiduciary duties to the beneficiaries, clearly being contrary to their best interests.This was plainly against the spirit in which his powers were granted to him and because his actions had led to such a pervasive conflict, it made his position wholly untenable. It was difficult to contemplate him remaining in office in view of this.Attorney Naresh Chand is a Senior Associate in the Private Client and Trusts Practice at Appleby. A copy of Mr Chand's column can be obtained on the Appleby website at www.applebyglobal.com.This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.