Hastings-Bass rule is back in force in Jersey
The rule, which emerged from case law, has traditionally allowed trustees who have made a costly mistake to apply to a court to have their action voided. This allowed the adverse consequences ‒ usually tax-related ‒ to be nullified without the need for the trust beneficiaries to sue the trustees for negligence or breach of trust.
But the value of Hastings-Bass was seriously undermined by the UK Supreme Court in the Pitt and Futter decisions this year. These rulings (2013 UKSC 26) declared that previous court decisions had been wrong in law and that the rule has a much narrower field of application than previously thought.
Jurisdictions with well developed trust industries that have relied upon the rule have been considering how to react. Now Jersey ‒ whose trust industry has GBP400 billion of assets under administration ‒ has become the first to enact a statutory amendment restoring Hastings-Bass's potency. The Trusts (Amendment No.6) (Jersey) Law 2013 confirms the Jersey Royal Court's ability to provide discretionary relief where beneficiaries find themselves materially prejudiced by a trustee's decision. It is not necessary for the fiduciary to be shown to have been at fault. Moreover, the amendment has retrospective effect.
‘This provides a welcome alternative to the uncertainties and costs surrounding classic negligence litigation,’ commented Jersey Finance Chief Executive Geoff Cook.
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