Are The Rumours Of The Death Of The Rule In Hastings-Bass Greatly Exaggerated?

Advocate Richard Wakeham senior associate and Adam Marshall legal assistant, Sinels Advocates, 13 April 2012


Advocate Richard Wakeham, senior associate, and Adam Marshall, legal assistant at Sinels Advocates, discuss the implications for Jersey following the recent clarification of the English court’s jurisdiction under the supposed rule in Hastings-Bass.

The recent case of In the matter of the S Trust [i] confirms that Jersey law will retain a broad jurisdiction to set aside transactions entered into on the basis of mistake irrespective of whether Jersey follows the recent clarification of the English court’s jurisdiction under the supposed rule in Hastings-Bass (which enables the court to set aside the decision of a trustee because it was either ultra vires or because the trustee had either failed to take into account relevant considerations or had taken into account irrelevant considerations).

The facts of this case may be shortly stated. The settlor, inter alia, applied for leave to set aside a transfer of assets into a discretionary trust on the basis that she had been mistaken as to the fiscal effects of creating the trust. The settlor’s London solicitors advised her that settling the assets on trust would bring certain tax benefits in England. However, she was subjected to an immediate tax of circa £2 million (about $3.2 million)on creating the trust and US-resident beneficiaries faced potential tax charges of up to 100 per cent of accumulated income distributed to them. 

The application gave the Court the opportunity to consider whether it should follow the English ruling in the twinned appeals of Pitt v Holt and Futter v Futter [ii] on this point or whether it should take its own path.

Mistake in English law

In the appeals of Pitt and Futter, the Court of Appeal restated the English rule for setting aside voluntary transactions on the basis of mistake which requires the following:

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