Pitt v Holt and Futter v Futter (aka Hastings-Bass revisited) – one up to the Revenue

The story so far. Hastings-Bass, a case decided in 1975, gave life in legal terms to the proposition that should a trustee (or a person acting in a similar capacity such as a Court of Protection deputy) make a decision (otherwise known as “the exercise of a discretionary dispositive power”) with unforeseen but adverse fiscal consequences through, say, mistake or ignorance that decision could be reiewed by the Courts and revised, usually saving the parties concerned a great deal of tax. The logic applied was that the trustees would be acting in breach of trust unless corrected.

As you may imagine, such a power when exercised in favour of a tax-payer, is not highly regarded by the Revenue, who view it as a “Get out of Jail Card”, purchased at their expense. As Hastings-Bass applications and the circumstances in which they are granted have increased, the Revenue have looked for an opportunity to overturn or limit its scope. With these two cases, decided by the Court of Appeal on 9 March 2011, the Revenue’s moment looks to have arrived.

The Court of Appeal took the view, as must we all until we are told otherwise, that the trustees in these two cases having taken and acted upon specialist advice in making the releveant decisions, they could not be said to have acted in breach of trust, so it wasn’t for the Court to grant them relief. The trustees had another route to recovery, in the court’s view, a negligence action against their professional advisers. 1-0 to the Revenue, pending appeal to the Supreme Court.

Jeremy Abraham