Jersey: Clarity On The Rules Of Hastings-Bass And Mistake - The Supreme Court Rules On Pitt v Holt And Futter v Futter

Last Updated: 17 June 2013
Article by Bethan Boscher and Simon A. Hurry

In a decision that will impact on both trustees and beneficiaries, the Supreme Court of England and Wales has given its judgment in the combined cases of Pitt v Holt and Futter v Futter, resolving debate about the rule in re Hastings-Bass and the doctrine of mistake, which have been much debated by both courts and academics alike.

Despite the criticism of many, the Hastings- Bass rule has been used for many years to relieve trustees of the consequences of their errors, being most commonly used for unforeseen tax liabilities. A succession of first instance cases developed a principle that the exercise of a discretionary power by trustees may be declared void and set aside on the basis that the trustees failed to take into account relevant matters when exercising the power. The principle has been adapted and has been applied to circumstances quite different to those in the Hastings-Bass case. The Supreme Court's decision has now reviewed and restricted the use of this rule, narrowing the scope of the Hastings-Bass rule to that which was originally intended. As a result trustees may no longer rely on the Hastings-Bass rule where they have acted within their powers and in accordance with professional advice, even if that advice proves to have been erroneous.

The facts of both Pitt v Holt and Futter v Futter are well known. Pitt v Holt concerned a discretionary trust that was established in accordance with legal advice and intended to be a tax efficient structure. However, the advice had failed to take into consideration inheritance tax consequences and consequently there was a significant tax liability due. The trustees sought to have the trust set aside under the Hastings-Bass rule or on the ground of mistake. Similarly, Futter v Futter again concerned an unforeseen tax consequence, this time capital gains tax, which resulted when powers of advancement were exercised. Again, incorrect legal advice had been given that the advancements would be tax efficient and the trustees sought to rely on Hastings-Bass to have the transactions declared void. Mistake was not pleaded in Futter.

At first instance, both cases were successful in using Hastings-Bass to relieve the trusts of the tax consequences. However, both the Court of Appeal and, now, the Supreme Court held the rule in Hastings-Bass had been incorrectly applied in both of these cases, suggesting that the rule has been misapplied by the lower courts in other cases.

The Supreme Court held that the rule in Hastings-Bass should only apply where the trustees exercise a discretionary power, and act within the terms of that power, but in some way breach their duties in respect of that exercise. In such circumstances the act may be voidable at the instance of the beneficiaries. The act will not be void.

What is important is whether the trustee has failed to consider what he was under a duty to consider. If the Trustee has used proper care and diligence in obtaining information and advice, the Trustee cannot be in breach of its duties merely because that advice was incorrect. This would be contrary to principle, to subject trustees who conscientiously follow advice to a strict form of liability.

In the two cases the Court noted it would be unfair to find that the trustees had breached their duty, when they had taken all relevant considerations into account by obtaining and relying upon professional advice.

The Court did, however, allow Pitt v Holt to succeed on the ground of mistake and in doing so created a simplified test for mistake, removing the effect/consequence distinction. To undo a disposition on the grounds of mistake, there must be a causative mistake of sufficient gravity and it must be unjust to leave the mistake uncorrected. To establish gravity, there must be a mistake as to either the legal character or nature of the transaction or to some matter of fact/law that is basic to the transaction. This could be a mistake relating to the effect of the transaction or to its wider consequences. Ignorance, although not itself a mistake, can in certain circumstances result in a false assumption that is a mistake in law.

Of particular note is that the Supreme Court has shifted the English test for mistake into near alignment with the Jersey test (being that in Re the A Trust), notwithstanding that Lloyd LJ expressly considered and rejected the Jersey test in Pitt v Holt and Futter v Futter at Court of Appeal level. Despite Lloyd LJ's views, the Jersey Court maintained its position after the English Court of Appeal decision, whilst it was pending appeal to the Supreme Court. In the case of Re S Settlement, the Jersey Court gave detailed reasons for preferring its own prior, and more simple, approach. It has now been borne out by the Supreme Court that this was the right approach to take. We wait to see whether the Guernsey Court decides to re-visit its reliance on the effect/consequence distinction, currently adopted in Dervan and MD Events v Concept Fiduciaries Ltd and Others.

How the Hastings-Bass rule will be developed in Guernsey and Jersey will remain to be seen, but the Jersey court has decided obiter in Re B Life Interest Settlement that the new, narrower view of the test is the better one. Furthermore, trustees will benefit from clarity that they will not be liable for breach of duty if they have acted in reliance on apparently competent professional advice.

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

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

In association with
Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.