List members may be interested in the recent decisions of the English CA, Pitt v Holt and Futter v Futter, decided and reported together at [2011] EWCA Civ 197, 9 March 2011, available on bailii.

Lloyd LJ considered the so-called Rule in Re Hastings-Bass at excruciating length and concluded more or less that it does not exist:

127. The cases which I am now considering concern acts which are within the powers of the trustees but are said to be vitiated by the failure of the trustees to take into account a relevant factor to which they should have had regard – usually tax consequences - or by their taking into account some irrelevant matter. It seems to me that the principled and correct approach to these cases is, first, that the trustees’ act is not void, but that it may be voidable. It will be voidable if, and only if, it can be shown to have been done in breach of fiduciary duty on the part of the trustees. If it is voidable, then it may be capable of being set aside at the suit of a beneficiary, but this would be subject to equitable defences and to the court’s discretion. The trustees’ duty to take relevant matters into account is a fiduciary duty, so an act done as a result of a breach of that duty is voidable. Fiscal considerations will often be among the relevant matters which ought to be taken into account. However, if the trustees seek advice (in general or in specific terms) from apparently competent advisers as to the implications of the course they are considering taking, and follow the advice so obtained, then, in the absence of any other basis for a challenge, I would hold that the trustees are not in breach of their fiduciary duty for failure to have regard to relevant matters if the failure occurs because it turns out that the advice given to them was materially wrong. Accordingly, in such a case I would not regard the trustees’ act, done in reliance on that advice, as being vitiated by the error and therefore voidable.

Those of us who were sceptical of HB may feel somewhat vindicated.

Relief was denied in both of the cases as the trustees had not acted in breach of their fiduciary duties even though they, through their advisors, had misunderstood the taxation position

In Pitt, there was an alternative argument that a settlement should be set aside for mistake. On this point there is also a very thorough review of the authorities leading to this conclusion:

210. I would therefore hold that, for the equitable jurisdiction to set aside a voluntary disposition for mistake to be invoked, there must be a mistake on the part of the donor either as to the legal effect of the disposition or as to an existing fact which is basic to the transaction. (I leave aside cases where there is an additional vitiating factor such as some misrepresentation or concealment in relation to the transaction, among which I include Dutton v Armstrong.) Moreover the mistake must be of sufficient gravity as to satisfy the Ogilvie v Littleboy test, which provides protection to the recipient against too ready an ability of the donor to seek to recall his gift. The fact that the transaction gives rise to unforeseen fiscal liabilities is a consequence, not an effect, for this purpose, and is not sufficient to bring the jurisdiction into play.

The claim framed in mistake was therefore rejected as well. Longmore and Mummery LJJ concurred, the latter adding some trenchant commentary on “some elementary distinctions and principles applicable to the validity of a disposition pursuant to a fiduciary power and to the discretionary remedy of rescission setting aside a disposition of property.”

Warning, it’s long (60 pages single spaced).

Lionel

====

This message was delivered through the Restitution Discussion Group,
an international internet LISTSERV devoted to all aspects of the law
of unjust enrichment. To subscribe, send "subscribe enrichment" in
the body of a message to <listserv@lists.mcgill.ca>. To unsubscribe,
send "signoff enrichment" to the same address. To make a posting to
all group members, send to <enrichment@lists.mcgill.ca>. The list is
run by Lionel Smith of McGill University, <lionel.smith@mcgill.ca>.