Bedell Cristin secures the first successful Hastings-Bass relief under Guernsey law

19 February 2018

On 16 February 2018 in Re the Achilles Trust, the Royal Court granted - for the first time - 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 had otherwise given rise to disastrous and unintended tax consequences for one of the beneficiaries.

In this landmark case, the trustee was in breach of its fiduciary duty to act "en bon père de famille" by failing to consider adequately, if at all, the consequences of the appointment of the assets. Crucially, no legal or tax advice was obtained by the trustee and the innocent beneficiary exposed to the dire consequences had played no active part in procuring the transaction. 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. 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.

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. Ultimately, though, these decisions demonstrate that applications of this kind will always turn on their facts.

A written reasoned judgment is awaited. We will provide further comment on the impact on the Guernsey trusts landscape when it becomes available as it will provide key guidance in the development and precise formulation of the jurisprudence on this topic both in Guernsey and other jurisdictions.