In the Matter of Seaton Trustees Limited  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
The Royal Court confirmed that the Hastings-Bass principle is
well established under Jersey law and the Court should ask the
What were trustees under a duty to consider?
Did they fail to consider this?
If so, what action would they have taken if they had considered
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
1. Can the Jersey Court Set Aside a Transaction Governed by
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:
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.
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
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.
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.
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