Knowledge

Jersey's government has approved an amendment to the Island's trusts legislation which will enshrine in statute the existing Jersey case law provisions in relation to mistake and Hastings-Bass.

Those provisions allow for the Royal Court to remedy the adverse effects or consequences of mistakes, or other acts or omissions made by settlors, trustees and others.  The existence of this jurisdiction to offer a remedy is important and can be a very attractive alternative to the option of pursuing hostile litigation against professional advisers, with the attendant concerns in relation to uncertainty of outcome, time delays and expense.

The Trusts (Amendment No. 6) (Jersey) Law 201- identifies four different situations in relation to Jersey law trusts, the first two relating to transfers into trust and the second two relating to the exercise of powers in relation to an existing trust:

(1)    Where a transfer or other disposition (together referred to here as a 'transfer') of property to a trust has been made by a settlor or through another person exercising a power on behalf of a settlor, but the settlor or other person made a mistake in relation to the transfer and would not have made the transfer but for the mistake, and the mistake is so serious that it is just for the court to make a declaration.

(2)    Where a transfer of property to a trust has been made by a settlor through a person exercising a power on behalf of a settlor and owing a fiduciary duty in relation to the exercise of that power, but the person failed to take into account any relevant considerations or took into account irrelevant considerations, and would not have exercised the power as he did, but for such failure.

(3)    Where a power has been exercised by a trustee or by another person in relation to a trust or trust property, but the trustee or other person made a mistake in relation to the exercise of the power, and would not have exercised the power at all, or in the way in which it was exercised, but for the mistake, and the mistake is so serious that it is just for the court to make a declaration.

(4)    Where a power has been exercised by a trustee or by another person in relation to a trust or trust property (where that person owes a fiduciary duty to a beneficiary in relation to the exercise of the power), but the trustee or other person failed to take into account any relevant considerations or took into account irrelevant considerations, and would not have exercised the power at all, or in the way in which it was exercised, but for such failure.

In all of these situations, the court has the power to declare that the transfer of property to a trust, or the exercise of a power, as the case may be, is voidable and has such effect as the court determines, or is of no effect from the time of its exercise.

In the situations referred to at paragraphs (2) and (4) above (which reflect the Hastings-Bass principle), there is no requirement to establish fault by the person exercising the powers or by his advisers.  This is to be contrasted with the position under English law.

Amendment No. 6 has been developed in conjunction with the Island's Trusts Law Working Group (which comprises leading members of industry) and the Society of Trust and Estate Practitioners (STEP) and provides certainty as to the Jersey position in relation to both mistake and Hastings-Bass which is particularly helpful for settlors and beneficiaries in the light of the Supreme Court judgment in Pitt v Holt; Futter v Futter [2013] UKSC 26, [2013] STC 1148.

For further information, please contact Zillah Howard (a member of the Trusts Law Working Group) or Rob Gardner (a member of Bedell Cristin's litigation department who has been involved with a number of successful mistake and Hastings-Bass applications).