Jersey Revives Rule in Re Hastings Bass

An amendment to Jersey’s trust law came into force on Friday 25th October 2013 to incorporate what has become known as the rule in Hastings-Bass into statute.

The rule in Re Hastings Bass had been described as a magic morning-after pill for trustees.

The rule, which has emerged from nearly 40 years of case law, has traditionally allowed trustees who have made a mistake as to their dispositive powers 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.

The scope of the Hastings-Bass jurisdiction was seriously pared back by the UK Supreme Court in the Pitt v Holt and Futter v Futter decisions this year. These rulings (cited at 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 such as Jersey, with well developed trust industries that have relied upon the rule, have been considering how to react. Jersey ‒ whose trust industry has over £400 billion of assets under administration ‒ has become the first to enact a statutory amendment restoring Hastings-Bass’s potency but on a statutory footing – the case law basis for the rule having been hollowed out by the English Court of Appeal in 2011.

The Trusts (Amendment No.6) (Jersey) Law 2013 confirms the Jersey Royal Court’s power to provide discretionary relief where beneficiaries find themselves materially prejudiced by a trustee’s decision. The drafting of the new provision does not require the fiduciary to be shown to have been at fault. The amendment has retrospective effect providing seamless coverage from the old regime to the new.

This will no doubt provide welcome comfort to the island’s thriving fiduciary industry to the risk and costs presented by a negligence action. The re-introduction of the rule on a statutory footing will no doubt make Jersey an attractive jurisdiction in which to establish a trust vis-à-vis England and Wales.