News

Reversing Trustee Decisions

Trustees have on occasion relied on the “Hastings Bass” rule to unwind decisions that subsequently transpire to have unintended consequences.   The scope to do so has been narrowed by the recent Supreme Court judgments in the jointly heard cases of Futter and another v HMRC and Pitt and another v HMRC. 

The Supreme Court, confirming the 2011 rulings by the Court of Appeal, dismissed the appeals to have the actions of the trustees set aside on the application of the rule in Hastings Bass.  In both cases, the trustees exercised discretionary powers, having taken professional advice, but their actions gave rise to unintended tax consequences. 

The court confirmed that the rule in Hastings Bass has been taken to be of wider application then the true principle expressed in the original decision.  Further that a distinction should be drawn between an error made by trustees who fail to give proper consideration to relevant matters, but where the decision is within the scope of the trustees’ power and an error made by trustees which goes beyond the scope of their power.

The judgments confirmed that if the trustees act within their powers, taking professional advice as necessary and even where that advice is found to be incorrect, the court will not act to overturn that decision.  The outcome of the Supreme Court ruling is that the courts will only intervene to undo a trustee decision where that decision is made outside of the trustees’ powers.