Pitt v Holt in the Isle of Man
The Duke of Wellington is reported, when it was suggested that a mistake had been made by him, to have responded: “There is no mistake; there has been no mistake, and there shall be no mistake.” Unfortunately, however, mistakes do happen and the question is to what extent the law is available to retrieve the position.
This article considers the English Supreme Court’s decision in Pitt v Holt; Futter v Futter  UKSC 26 (on appeal from the Court of Appeal in Pitt v Holt; Futter v Futter  EWCA Civ 197 in which Lloyd LJ gave the leading judgment) was given on May 9 2013. Both cases raised issues about the“Hastings-Bass rule” relating to mistaken decisions made by trustees (often as to tax). Pitt v Holt, in addition, concerned the court’s equitable jurisdiction to rescind a voluntary disposition on the grounds of mistake, in relation to which there is an interesting Isle of Man aspect to the judgment. This article also considers some aspects of the related statutory jurisdiction introduced in Jersey.
Summary of this article
We consider it likely that the Isle of Man High Court will follow the Court of Appeal’s restatement of the Hastings-Bass rule as approved by the Supreme Court; that is, an act will be voidable if there was inadequate deliberation on the part of the trustee which was sufficiently serious as to amount to a breach of fiduciary duty, and that normally if the trustees take and follow tax advice, there is no breach of fiduciary duty allowing the rule to be invoked even if the tax advice is incorrect.
In relation to equitable rescission of a voluntary disposition on the grounds of mistake, the Supreme Court has brought English law in line with Isle of Man law, by confirming that the true requirement is for there to be a causative mistake of sufficient gravity as to make it unjust (or unfair or unconscionable) to leave it uncorrected (the Gibbon v Mitchell distinction between effect and consequences falling away).
We note below that Jersey has introduced a wide statutory discretion to set aside the exercise of trustee powers, and consider that this exposes third parties dealing with trustees of Jersey trusts to uncertainty as to whether transactions (including contracts) may be set aside by a Jersey court if the Jersey trustee (or a beneficiary) suffers “buyer’s remorse”. This seems likely to increase the frictional costs of contracting with Jersey trustees.
Read the full article here: Mistaken about mistake