Guernsey's Court of Appeal Delivers Landmark Judgement

Monday 25 June 2018

Guernsey’s Court of Appeal has delivered a landmark judgement clarifying the scope of the so-called rule in Hastings-Bass relief in Guernsey law.

There had previously been uncertainty as to the precise legal test to be applied and the exact circumstances in which fiduciaries could seek to avoid transactions giving rise to adverse fiscal charges.

The Court of Appeal handed down the judgment in M v. St Anne’s Trustees Limited on June 20th, in which Carey Olsen acted for the trustee. 

M, a member of the Richmond Retirement Plan, appealed against the Royal Court judgment of Lieutenant Bailiff Marshall QC, in which the Lieutenant Bailiff refused to exercise jurisdiction under the rule in Hastings-Bass to set aside a transaction between M and the trustees of the Scheme, which had attracted a significant liability to UK tax for M.

The Court of Appeal allowed the appeal against the Royal Court judgment and exercised its discretion to set aside the transaction. Without expressly deciding the point, the Court of Appeal proceeded on the assumption Guernsey law in respect of the rule in Hastings-Bass is to “like effect” as per the revised approach established in Pitt v. Holt. The Court left the door open to further argument as to whether any breach of duty is required, as is the case under the current English position. 

It found that for the rule in Hastings-Bass to apply, it is sufficient that there has been a breach of duty, and the court took the position that adequate deliberation is a fiduciary duty, meaning Guernsey as a jurisdiction is ‘engaged’.

The decision is important as it is the first time that the Guernsey Court of Appeal has considered the scope of the rule under Guernsey law, and the extent to which it will follow the English law position as established by the UK Supreme Court in Pitt v. Holt.

Notably the Court of Appeal has departed from the strict requirement set out in Pitt v. Holt for there to be a breach of fiduciary duty, finding that a breach of duty, whether fiduciary or not, will suffice as long as it is of sufficient seriousness for the Court to exercise its discretion. While the Court of Appeal considered that the scope of the rule in Hastings Bass applies in Guernsey to “like effect” as in England, the door remains open to further adaptation of the rule by the Guernsey Courts.