The rule in Re Hastings-Bass,  Ch. 25 (CA), has
been understood to permit the court to declare void and set aside
the exercise of a discretionary power under a trust, either because
the trustees considered factors they ought not to have considered
or because they failed to consider factors they ought to have
considered. The typical case concerns unforeseen tax consequences.
As Lloyd LJ points out in the combined appeals in Pitt v
Holt and Futter v Futter,  EWCA Civ 197,
Hastings-Bass did not turn on the this sort of fact
pattern and the ratio of the case is actually much narrower than
the rule that subsequently developed.
Lord Justice Lloyd, in the Court of Appeal, held that cases in
which the acts of trustees are found to be void should be kept to a
minimum. In his judgment, 'the principled and correct approach
to these cases is, first, that the trustees' act is not void,
but that it may be voidable. It will be voidable if, and only if,
it can be shown to have been done in breach of fiduciary duty on
the part of the trustees. If it is voidable, then it may be capable
of being set aside at the suit of a beneficiary, but this would be
subject to equitable defences and to the court's discretion.
The trustees' duty to take relevant matters into account is a
fiduciary duty, so an act done as a result of a breach of that duty
is voidable [not void]'. In effect, a kind of business judgment
rule for trustees, under which trustees may fulfil their duties by
seeking professional advice -- even if that advice turns later out
to be incorrect. In both appeals, there was no breach of fiduciary
duty because there was entirely proper reliance on professional tax
advice, even if that advice was misunderstood and misapplied by the
The appellants in Pitt also sought to set aside the
transactions on the grounds of mistake. Lloyd LJ held that relief
for mistake is confined to narrow circumstances: 'a mistake on
the part of the donor either as to the legal effect of the
disposition or as to an existing fact which is basic to the
transaction'. Unforeseen tax liabilities do not fit the bill,
being a consequence but not the 'legal effect' of the
The UKSC has affirmed the Court of Appeal's approach to
trustees' mistakes, holding that inadequate deliberation on the
part of trustees must be 'sufficiently serious' as to
amount to a breach of trust; it is not enough to say that the
trustees did not meet the highest standards in their deliberations
or that the court would have acted differently had it been in their
shoes. Generally speaking, only a breach of fiduciary duty will
justify the court's intervention -- for example where they
breach their duty by exercising their discretion with inadequate
deliberation. An exception to this general rule would be where
honest and reasonable trustees reach an impasse. Good news for
trustees there, but the test does seem rather subjective.
On mistake, the UKSC allowed the appeal. The 'true
requirement' for the rescission of a voluntary disposition is
'a causative mistake of sufficient gravity', the gravity of
being assessed by what Lord Walker called 'a close examination
of the facts' (including tax consequences). The test will
normally be satisfied only where there is a mistake as to the legal
character or nature of a transaction; mere ignorance, inadvertence
or misprediction won't do. The court must ultimately evaluate
whether it would be unconscionable or unjust to leave the mistake
uncorrected, based on the particular facts. On the Pitt
facts, an incorrect conscious belief or tacit assumption about the
tax consequences of the disposition was sufficient to give rise to
relief. Nice for Mrs Pitt, the claimant, but here again isn't
the test for rescission a subjective one?
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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