For the first time, the Royal Court in Guernsey has granted an order setting aside a transaction made by a trustee of a Guernsey trust on the grounds of what has become known as the rule in Hastings-Bass - a jurisdiction intended to protect beneficiaries from aberrant conduct by trustees.
A team from Bedell Cristin, led by partner Alasdair Davidson and supported by senior associate Jasmin Semlitsch, appeared before the Bailiff, Sir Richard Collas, on a successful application to set aside an appointment of assets between trusts, which has otherwise given rise to disastrous and unintended tax consequences for one of the beneficiaries.
In this landmark case it was argued the trustee was in breach of its fiduciary duty under the Guernsey law obligation to act “en bon père de famile” by failing to consider adequately, if at all, the consequences of the appointment of the assets.
No legal or tax advice was obtained by the trustee and the innocent beneficiary exposed to the dire consequences had played no active role in procuring the transaction.
This case follows hot on the heels of another first instance decision by the Royal Court where the applicant had not been successful. It adds confirmation that the re-statement of the rule laid down by the Supreme Court of England and Wales in Pitt V Holt forms part of Guernsey law.
Commenting on the decision, Alasdair Davidson said: “Ultimately, these decisions demonstrate that applications of this kind will always turn on their facts. The Court was satisfied that the gateway to invoke the Hastings-Bass doctrine had been met, namely that there had been a breach of a trustee’s fiduciary duty.”
He continued: “Further, it was right that the appointment should be set aside and there were no equitable defences or other reasons which precluded the Court from exercising its discretion to grant the relief. The written reasoned judgement is awaited and will provide key guidance in the development and precise formulation of the theory of law on this topic both in Guernsey and other jurisdictions.”
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