The Applicant applied to the Court to have an Employee Benefit
Trust ("EBT") set aside and all the monies held by the
trustees to be returned to the Applicant. The EBT had been set up
to provide the Applicant's employees with incentive and pension
benefits. While the EBT was not driven by tax mitigation purposes,
the Applicant had believed that it would be entitled to claim a
deduction for corporate tax purposes. However, following a letter
from HMRC that the Applicant would not be able to claim tax
deductions and following the decision of Gresh v RBC Trust
Company (Guernsey) Limited and HMRC (16th September 2009), the
Applicant sought to have the EBT deed set aside based on an error
contained in one of the clauses.
The first issue the Court considered is whether it should have
contacted any of the beneficiaries of the EBT who were entitled to
receive benefits under Letters of Allocation. The Court, in
applying the Jersey cases of Re DLS Remuneration Trust
 JRC 164A, Re the R Remuneration Trust  JRC 164A and
the Guernsey case of H Sossen 1969 Settlement (24th May
2004, Royal Court), considered this to be unnecessary since the
nine named beneficiaries had consented to the application. There
was also a class of beneficiaries that included former employees
and their relatives which the Court further held to be too numerous
to obtain consent and in any event would be bound by the
Court's decision pursuant to Rule 35 of the Royal Court Civil
The Court also declared jurisdiction over the EBT pursuant to
s.4 (1)(b) of the Trusts (Guernsey) Law, 2007 and the EBT Deed.
Nonetheless the EBT Deed also declared the proper law to be that of
England and Wales so the Court considered the application of the
principle in Gibbon v Mitchell  1 WLR 1304 which
holds that a voluntary deed which confers an interest on a party
that becomes frustrated may be set aside on the grounds of mistake.
Accordingly the Court applied the principle in Gibbon,
being satisfied that a fundamental error in the drafting of the EBT
deed prevented the purpose of the EBT from being effective.
This was confirmed by the Jurats who unanimously agreed that had
the Appellant known of the error in the EBT deed he would not have
executed it. The Jurats further rejected the Respondent's
submission that a new trust should be set up to preserve the
interests of the beneficiaries as the Jurats believed that the
beneficiaries were in a position to safeguard the beneficial
interests they had held previously in the trust fund.
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