On 21 June 2011 the Royal Court of Jersey decided Re R which may be found at

http://www.jerseylaw.je/Judgments/UnreportedJudgments/Documents/Display.aspx
?url=2011/11-06-21_In_the_matter_of_the_Representation_of_R_117.htm&Judgemen
tNo=[2011]JRC117

A settlor (resident and domiciled in England) transferred substantial
property to Jersey trustees, to be held on trusts governed by English law,
on the basis of very bad advice about the taxation consequences. £2 million
in unforeseen UK tax became payable (and was paid) and there was evidence
that distributions to the beneficiaries (who lived in the US) would be
subject to US tax of "up to" 100% of the distributions to them. The settlor
now sought a declaration that the transfer was voidable for mistake.

The Royal Court applied Dicey & Morris rule 230 to hold that the question
was governed by Jersey law not English law as the place of the enrichment.
This involved the assumption that the trust was not a contract for the
purposes of that rule.

Jersey law was laid down by the Royal Court in Re the A Trust [2009] JLR
447, applying Ogilvie v Littleboy, as allowing recovery by mistake if three
conditions were satisfied:

(i) Was there a mistake?;
(ii) Would the settlor/donor not have entered the transaction Œbut for¹ the
mistake?; and
(iii) Was the mistake of so serious a character as to render it unjust on
the part of the donee to retain the property?

The Court in Re R reviewed the recent English CA decision in Pitt v Holt but
decided to reject that approach in favour of its own holding in Re the A
Trust. In particular, the court rejected the Gibbon v Mitchell/Pitt v Holt
distinction between mistakes as to legal effects and those as to
consequences.

The transfers of property were declared voidable and the settlor executed a
Deed of Avoidance.

Lionel

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