Jersey: The Law Of Mistake: In B -v- C, D And E In The Matter Of The A Trust [2009] JRC 245

Last Updated: 24 February 2010
Article by Steve Meiklejohn

Most Read Contributor in Jersey, September 2016

In B -v- C, D and E in the matter of the A Trust the Royal Court took the opportunity to fully review the law of mistake in Jersey concerning the disposal of personal property by an individual into a trust following recent decisions by the English courts.

Following the decision, the Court has confirmed that it may take into account the fiscal consequences of a transaction when dealing with applications of mistake with respect to the disposal of personal property by an individual.

The case of the A Trust (the "Trust") concerned mistake in respect of personal property disposed of by an individual, Mrs B, to the trust. It does not concern a Hastings Bass application where the trustee has by mistake disposed of assets. The court clearly noted that a mistake involving the disposal of personal property by an individual into a trust required a higher test than the "might have" test in Hastings Bass. The justification for this differing approach emanates from case law and in particular the principle that gifts cannot be revoked simply because the donors wish they had not made them and would like to have back the property given.

The Facts

Mrs B was born in 1957 in Kenya. Her parents moved with her to England in 1967 where she still resides. On 26 August 1984, she married Mr F and they had one child, E.

Following the dissolution of her marriage, her advisor, Mr G of H, practising from offices in London advised Mrs B to confirm her non domiciled status and to place assets in an offshore trust. Accordingly Mrs B instructed Mr G to set up the Trust. The Royal Court noted that Mr G never fully explained the terms of the declaration of trust to Mrs B. In fact, Mrs B was not a party to any of the deeds (other than the letter of wishes). Mr G essentially set up the A Trust for Mrs B.

Before setting up the Trust, Mr G gave advice on the UK tax implications. However, in 2007 and 2008 following the appointment of new accountants, Mrs B learned that Mr G had failed to advise that whilst Mrs B had non domiciled status for Income and Capital Gains Tax purposes, she did not have that status for Inheritance Tax purposes ("IHT"). This meant that her entire world-wide estate was subject to IHT, meaning that the disposition into the Trust was immediately chargeable to IHT at lifetime rates, which gave rise to a liability for Mrs B.

Mrs B applied to the court under Article 11 (2) of the Trusts (Jersey) Law 1984 ("the Trusts Law") for a declaration that the Trust established by C, a trust company, was established by mistake and that mistake invalidated the Trust in its entirety. The Trust was governed by Jersey law and therefore the Court had jurisdiction to hear the matter under Article 5 of the Trust Law. The dispositions by Mrs B of the funds into the Trust were also governed by Jersey law on the basis that Jersey was the jurisdiction with which the transaction had its closest and most real connection.


The Court noted that the traditional test for mistake was set out in Gibbon v Mitchell (1991) WLR 1304 that there was mistake where the donor did not intend the transaction to have the effect that it did, whether the mistake is a mistake of law or of fact, so long as the mistake is as to the effect of the transaction itself and not merely as to its consequences or the advantages to be gained by entering into it.

In the recent case of Sieff v Fox (2005) 1 WLR 3811, a review was carried out of the English Law of Mistake. In particular significant reference was made to the case of Ogilvie v Littleboy (1897) 13 TLR 399 in the Court of Appeal, a case which was not referred to in Gibbon v Mitchell. This case set out that to have the property returned to him a donor must show that he was under some mistake of so serious a character as to render it unjust on the part of the donee to retain the property given to him. Therefore a broad principle of injustice was set out as the test for setting aside a voluntary disposition.

In short, this test allows fiscal consequences to be taken into account, if they were sufficiently serious. Contrast this approach to the traditional Gibbon v Mitchell test where a mistake must be as to the effect of the disposition, and a mistake as to its consequences is not sufficient. Therefore under the old test, fiscal consequences of the transaction are probably irrelevant and accordingly a misunderstanding of such fiscal consequences would probably not justify setting the disposition aside.

Whilst Sieff v Fox did not deal with this point as the case involved a Hastings Bass application made by a trustee, in an obiter statement, Lloyd LJ gave his support to the Ogilvie v Littleboy test by stating that "mistake as to the tax consequences ... are quite sufficient to vitiate the giving of ... consent". Since Sieff v Fox, the Isle of Man Courts have applied the Ogilvie test in Petition of McBurnie, the Betsam Trust (2008) unreported, and found that fiscal consequences were sufficient to set aside a transaction, and in the recent decision of Ogden v Trustees of the RHS Griffiths 2003 Settlement (2008) EWHC 118; (2009) 2 WLR 394 the Ogilvie test was applied as being the correct test, but that in applying the Ogilvie test, the Court must be satisfied that the donor or settlor would not have entered into the transaction "but for" the mistake.

Turning to the facts of the case, Mrs B's mistake was not one which concerned the effect of the disposition into the Trust. It was a mistake as to the fiscal consequences. Indeed, it was a mistake of law in that, unbeknown to her, she was in fact deemed domiciled for IHT purposes giving rise to an immediate and substantial charge. But for the mistake, Mrs B would not have made the disposition. On the balance of probabilities the Royal Court concluded that Mrs B had not been advised of and did not understand the terms of the trust and was mistaken as to its effect. For that reason, the Royal Court declared the Trust to be invalid and that the disposition of the full sum should be set aside.

Is the disposition void or voidable?

Commissioner Clyde Smith assessed the position in some detail as to whether the disposition was void ab initio or voidable. The reason for so doing is based on tax reporting obligations. If the dispositions are declared void ab initio, there would be no reporting obligation, since there would have been no transfer of value. If the disposition was voidable and subsequently declared void, this would imply that there is a reporting obligation exists. The tax liability would have arisen and Mrs B would have to claim a repayment from the tax authorities.

Where the exercise of a fiduciary power is open to challenge on a Hastings Bass principle, the exercise is void ab initio. However, as already noted above, there is a distinction between mistakes by individuals with their own property and mistakes by trustees exercising fiduciary powers since an individual is not obliged to take account of all relevant considerations and is free to take account of irrelevant considerations. In Ogden, Lewison J commented that the transaction must have had some legal effect and accordingly the transaction ought to be declared voidable as opposed to void ab initio. The Royal Court found his argument persuasive. The Trust was accordingly declared voidable.

Implications for Trustees

Trustees should ensure that donors disposing of personal property into a trust are properly advised and in circumstances where a trust is established, trustees should ensure that donors understand the terms of the trust and its effects. To avoid difficulties in proving such advice, if any matter should proceed to court, detailed notes should be taken at all times. It may also be prudent for trustees to obtain written legal and tax advice which they are able to pass onto the donor.

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.