Jersey: Jersey Declines To Follow Decision Of English Court Of Appeal On Mistake

Last Updated: 6 December 2011
Article by Appleby  

In the matter of the Representation of R, which was heard by the Royal Court of Jersey on 21 June 2011, the Royal Court was called upon to decide whether to uphold or depart from the recent decision of the English Court of Appeal in Pitt v. Holt [2011] EWCA Civ. 197. The case of Pitt v. Holt considered the equitable principles under English law for avoiding a voluntary disposition entered into under a mistake.

The Court of Appeal held that in order to be voidable under English law a mistake must relate to the legal 'effect' of a transaction, and it is not sufficient for a transaction to be set aside because of a mistake as to the 'consequences' of the transaction. In reaching this decision the Court of Appeal criticised the position under Jersey law where the Royal Court has "set its face against the 'effects/consequences' distinction." It stated that the case of Re A [2009] JLR 447, in which the Royal Court had ruled that a transaction could be set aside under Jersey law on the basis of a mistake as to the tax consequences of the transaction, was "a great deal too relaxed."

Bold Step

The Representation of R was the first case following the decision in Pitt v. Holt, where the Royal Court was presented with the opportunity to re-visit the Jersey approach to the law of mistake in light of judicial developments in England. Having had the opportunity to consider the position of the English Court of Appeal, however, the Royal Court took the bold step of declining to follow the English position. Instead, it re-affirmed the earlier judgments of the Royal Court in the case of the Re A Trust and the Re Lochmore Trust [2010] JRC 068.

In the context of trust applications under Jersey law it remains the position that a voluntary disposition, including a transfer of assets into trust, can be set aside by a donor on the basis that the transaction was entered into under a mistake as to the consequences of the transaction. It is also necessary under Jersey law to demonstrate that the gift would not have been entered into but for the mistake, and that the mistake is of so serious a character that it would be unjust on the part of the donee to retain the gift.

Tax Planning is Not a Vice

In applications seeking to set aside a transfer of assets into trust, the mistake in question will often relate to the tax consequences of a transaction. In the Representation of R the donor was able to satisfy the Royal Court that a transfer of assets into trust should be set aside on the basis that the donor had been mistaken as to both the English and US tax consequences of the transaction.

In adopting a broader test to that under English law, the Royal Court recognised that there may now be an advantage in choosing one jurisdiction over another when making applications of this nature and accordingly felt that it was necessary to satisfy itself that the judicial approach being followed under Jersey law should be maintained.

The Royal Court went on to find that the test applied under Jersey law was not only fair and just but also presented significant hurdles, which meant that it was not too easy for the donor to retrieve a gift simply because things did not turn out precisely as he had anticipated. The Royal Court also expressed concern at the weight given to the interests of the tax authority under English law and, in defending its position not to follow the English Court of Appeal's decision, Bailhache Commissioner stated:

"... in Jersey it is still open to citizens so to arrange their affairs, so long as the arrangement is transparent and within the law, as to involve the lowest possible payment to the tax authority. We see no vice in this approach. We accordingly see no reason to adopting a judicial policy in this country which favours the position of the tax authority to the prejudice of the individual citizen, and excludes from the ambit of discretionary equitable relief mistakes giving rise to unforeseen fiscal liabilities."

Voidable or Void?

The Royal Court stated that whilst its role will often be to declare that a donor is entitled to avoid a gift on the basis of mistake, the action which avoids the gift under the equitable doctrine remains the action of the donor and not the court. As a consequence, transfers into trust are likely to be held to be voidable at the instance of the settlor and not void.

Consideration was also given to the role of HMRC in applications to set aside trusts on the grounds of mistake. On the facts of the present case it was not deemed appropriate to inform HMRC, but this is something that applicants will need to give consideration to on a case by case basis.

Scope of Judgment

Whilst this judgment is a seminal one, its application is limited purely to the doctrine of voluntary dispositions made by mistake. The Representation of R was not a Hastings Bass application and it remains to be seen what stance the Royal Court will take following Pitt v. Holt and Futter v. Futter in relation to applications to set aside discretionary decisions of trustees.

It is also worth highlighting that appeals to the Supreme Court are pending in both Pitt v. Holt and Futter v. Futter and that until these appeals are heard the position under English law remains subject to further review.

This article was originally published in Finance, Offshore – Autumn 2011

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Baker & Partners
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Baker & Partners
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions