In the Matter of Seaton Trustees Limited [2009] JRC050


Seaton Trustees Limited (the "Trustee") was the sole trustee of the Clarugci Trust, a Jersey governed law trust. The Trustee had invested in several Canada Life Bonds in the Isle of Man. The Trustee had two options how to make withdrawals from these bonds, namely partial withdrawal of the premiums or surrendering whole policies. Due to incorrectly interpreted tax advice the Trustee chose the option that was tax inefficient. The Trustee applied to the Royal Court in Jersey to set aside the decision to use the tax inefficient method of withdrawal using the Hastings-Bass principle.


The Royal Court confirmed that the Hastings-Bass principle is well established under Jersey law and the Court should ask the following questions:

  1. What were trustees under a duty to consider?
  2. Did they fail to consider this?
  3. If so, what action would they have taken if they had considered it?

The Court held there was clear evidence that the Trustee was under a duty to consider the tax effect of the two options for withdrawal, it had failed to consider this and would have used the alternative method of withdrawal if proper consideration had been given. It was also confirmed that the Hastings-Bass principle could apply to administrative decisions.

However, there were two additional aspects that the Court considered.

1. Can the Jersey Court Set Aside a Transaction Governed by Another Law?

The first aspect concerned the fact that the documents to make the withdrawals from the Canada Life Bonds were governed by Isle of Man law and the relevant Canada Life company was registered in the Isle of Man. Although the case appeared to meet the test for Hastings-Bass, the Court was concerned about its ability to set aside a transaction governed other than by the law of Jersey. It was accepted by the parties that the withdrawal from the Bonds had been governed by the law of the Isle of Man. The Jersey Court Order, if made, would not bind Canada Life as it had not submitted to the jurisdiction of the Jersey Courts. Canada Life in fact consented to the application so in this case the Order was made and the relief granted. The Court however said that if there had been no such consent it would likely have declined to grant the application for two reasons:

  1. It would be wrong in principle for the Court to make an order that it knew would be ineffective as it would not bind Canada Life in the Isle of Man.
  2. The Court was concerned about comity, which requires courts to show respect to other states, which in this case would be the Isle of Man, whose laws governed the transaction.

2. Representations made by HMRC

The second aspect concerned representations made to the Court by HMRC. The Court held that HMRC had no standing to intervene in the case but the Court was prepared to extend a courtesy to HMRC by considering the points raised. HMRC had argued that Hastings-Bass should not apply as the Trustee had not fundamentally misunderstood the transaction. However, the Court stated that there was no need for a fundamental misunderstanding. Instead the test was whether the Trustee would have acted differently if it had taken into account the appropriate considerations. The Court stated it was not relevant whether the tax burden would fall on the Settlor or the Trustee. In this case HMRC also suggested that the Settlor or Trustee should take action against the tax advisers rather than seek relief pursuant to a Hastings-Bass application. However, the Court considered that it was not clear the tax advisers had been at fault but even if they had, there had been previous case law to say that this was not a reason to prevent relief under the Hastings-Bass principle.


This is a useful case to reiterate the principles required for a successful Hastings-Bass application.. However, the case does show that there are limits to the use of Hastings-Bass and that the Jersey Courts may be reluctant to use the doctrine where overseas third parties are involved. Careful consideration should therefore be given to the appropriate court to which to make such an application and again demonstrates that Hastings-Bass applications may not always be successful.

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