The Rule in Hastings-Bass Under Jersey Law

The rule in Hastings-Bass, as applied under Jersey law, has been a hot topic among those working in the Jersey fiduciary sphere.

In summary, the rule provides that the courts will set aside an exercise of trustee power or discretion if the effect is not as intended, and it is evident that the trustee's actions would have been different had it taken account of relevant considerations to which it failed to have regard, or had it not taken account of certain irrelevant considerations to which it did have regard.

Of course, the principle of Hastings-Bass relief has its origins in the English courts.  As English trusts law is persuasive of Jersey trusts law, it is unsurprising that the principle as developed under English law has, for some time now, been adopted into Jersey law.

For that reason, from early on in 2013, local trust practitioners have had their eye on the impending decision of the English Supreme Court in the case of Pitt v Holt and Futter v Futter, being keen to know whether it would uphold the earlier decision of the Court of Appeal in that case, and so refuse Hastings-Bass relief where a trustee had relied on negligent advice. 

All the more so, because certain earlier decisions of the Jersey Courts relating to the Hastings-Bass principle suggested Jersey law had broadened the application of the principle beyond that applied under English law.  In contrast to the position taken by the English Court of Appeal in Pitt v Holt and Futter v Futter, the decision of Jersey's Royal Court in Leumi Overseas Trust Corporation Limited-v-Howe [2007] JLR 660, had indicated that the existence of a breach of fiduciary duty on the part of the trustee was not a necessary factor to invoke the principle. 

However, obiter observations of the Royal Court in the subsequent case of Re the B Life Interest Settlement [2012] JRC 229 suggested that, had it been necessary to decide the point, the Court would have rejected the previous Jersey decisions and applied the English law principle as declared by the Court of Appeal in Pitt-v-Holt and Futter v Futter.

It is therefore not unfair to say that, in the lead up to the Supreme Court's judgment in Pitt v Holt and Futter v Futter there was a degree of uncertainty as to the scope of the rule as applied under Jersey law.

The Supreme Court's judgment was delivered in May 2013, and it did indeed uphold the Court of Appeal's decision in finding that a breach of fiduciary duty was a pre-requisite for a successful Hastings-Bass application.

What then did that mean for the application of Hastings-Bass relief under Jersey law?  Having regard to the ordinarily highly persuasive nature of an English Supreme Court judgment, would that reinforce those obiter observations in Re the B Life Interest Settlement [2012] JRC 229, and confirm Jersey's subscription to the narrower English law position, or would the Jersey Courts continue to steer their own course?

In September 2013, Jersey's Royal Court delivered a further judgment in relation to the rule in Hastings-Bass, In the matter of The Onorati Settlement [2013] JRC 182.  It was the first Jersey judgment to consider the principle since the Supreme Court's ruling in Pitt v Holt and Futter v Futter. 

However, because the facts of the case enabled the Royal Court to afford Hastings-Bass relief on the basis of the narrower principles of the rule expounded in Pitt v Holt and Futter v Futter, (ie the case involved a breach of trust), it was not necessary for the Court to decide whether or not broader principles applied as a matter of Jersey law. 

The Court's decision (acknowledging its observations in Re the B Life Interest Settlement [2012] JRC 229) was "to say nothing further on the topic therefore other than to say that the position remains open, although any party wishing to submit that Jersey law should continue to plough its own furrow will have to explain why the closely reasoned judgments [in Pitt v Holt] should not be applied".

The Onorati case cannot be viewed in isolation from the latest draft trusts legislation which had by then already been progressing though the process of adoption into Jersey law, and it would be unsurprising if that had been in the mind of the Royal Court when it gave its decision.

That draft legislation, the Trusts (Amendment No 6) (Jersey) Law 201, was set to put the rule in Hastings-Bass on a statutory footing and, further, confirm the position stated in the Leumi Overseas case, namely, that lack of care or other fault on the part of a trustee or other fiduciary would not be a pre-requisite for the rule to be applied by the Jersey Courts.

The Trusts (Amendment No 6) (Jersey) Law 2013 came into force on 25 October 2013.  It introduces a clear statutory framework for bringing applications to the Royal Court to set aside a transfer into a Jersey trust, or the exercise of a power in relation to a Jersey trust, on the grounds of mistake or those falling within the rule in Hastings-Bass.

It will still be for the Royal Court to decide whether an action is voidable on the grounds of mistake or Hastings-Bass, but Amendment No 6 should provide comfort to settlors, beneficiaries and trustees of Jersey trusts, by reducing the risks associated with mistake and Hastings-Bass applications in Jersey.  The hope among fiduciary practitioners in the island is that a less onerous test for a successful Hastings-Bass application will reinforce Jersey's reputation as an attractive and flexible trust jurisdiction.