Despite the Supreme Court of the United Kingdom limiting the
circumstances in which a court could set aside a trustee's
flawed exercise of power in Pitt v Holt, Futter v
Futter  EWCA Civ 197, a number of offshore jurisdictions
have declined to follow. This has been achieved in some offshore
jurisdictions, including Bermuda, through enacting legislation to
restore the status quo as it existed prior to the Supreme
Court's jurisdiction. In at least one other jurisdiction, the
courts have cast a critical eye over the Supreme Court's
decision. The clear desire in certain offshore jurisdictions to
cure trustees' mistakes in appropriate circumstances is
obviously welcome news for trustees and their indemnity insurers,
as well as settlors and beneficiaries of offshore trusts.
In Re F Trust and Re A Settlement  Bda LR 116,
 SC Civ (Bda) 77, the Supreme Court of Bermuda has confirmed
that section 47A of Bermuda's Trustee Act 1975, being
Bermuda's statutory 'Hastings-Bass' jurisdiction,
confers an "unfettered discretion" on the court
to set aside the flawed exercise of fiduciary powers.
The decision is the first reported decision to be handed down on
section 47A since its enactment, and it confirms the Bermuda
Parliament's statutory intention to maintain in Bermuda law the
rule in Re Hastings-Bass (deceased)  Ch 25 (CA) (the
Hastings-Bass rule) as it existed prior to its limitation
by the Supreme Court of the United Kingdom in Pitt v Holt,
Futter v Futter  EWCA Civ 197.
In his decision, Chief Justice Kawaley had to consider whether
the appointment of a UK resident trustee in the case of two Bermuda
trusts in 2005 and 2008, should be set aside in circumstances where
no legal advice had been sought prior to making the appointments
and the appointments had led, or would lead, to adverse UK tax
In reaching his decision to set aside the appointment of a UK
resident trustee, Chief Justice Kawaley made a number of important
First, he made clear that pursuant to subsection (7), section
47A is applicable retrospectively.
Second, he confirmed that the power of appointment of trustees
falls within the broad definition of fiduciary power under section
Third, Chief Justice Kawaley held that the tax implications of
the appointment was a "financially significant factual and
legal [consideration]" relevant to the appointment, which
was not properly taken into account, and that the appointment would
not have been made, or would have been made in a different manner
(i.e. by appointing a different trustee), had such advice been
The judgment is significant for Bermuda's trusts industry,
as well as for other offshore jurisdictions.
In a separate development, the High Court of the Isle of Man has
also handed down a recent judgment expressing considerable
reservations about the application of Pitt v Holt, Futter v
Futter to a jurisdiction such as the Isle of Man. In AB v
CD [CHP 16/0007], Deemster Doyle set aside certain call
options granted by trustees on the basis that the options would not
have been granted had the trustee taken professional tax advice. On
the facts of the case, the court did not have to decide whether
Pitt v Holt applied as a matter of Manx law, as the court
found that the failure by the trustee to take advice was a breach
of fiduciary duty. The court did express significant reservations
as to whether Pitt v Holt applied in the Isle of Man, and
noted that this area of the law may have to be considered again by
the Privy Council in the future.
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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