Hastings-Bass is a 35-year old ruling which has been used for the last decade in Jersey and elsewhere to unwind mistakes by trustees – including adverse tax consequences they had not anticipated – that would otherwise end up costing their clients money.
The legislation – The Trusts (Amendment No 6) (Jersey) Law 2013 – came into force last Friday and also incorporates the existing Trusts Law 1984 on mistakes.
In the UK, use of the Hastings-Bass rule formally ended in May this year following the outcome of two cases in the Supreme Court – Pitt Vs Hold and Futter v Futter, both of which challenged the use of the rule in Hastings-Bass to un-do trust decisions that results in tax consequences for respective clients.
As reported in May, despite these rulings, the island announced plans to codify the rule – making it the only jurisdiction globally to have such a law on its books.
Geoff Cook, chief executive of Jersey Finance, said in a statement that the main effect of the amendment was to provide greater clarity for courts, practitioners and those that who work within or benefit through Jersey Trusts.
“Since its enactment in 1984, the Trusts (Jersey) Law has proved to be a highly effective and hugely influential piece of legislation. This latest amendment, only the sixth in nearly 30 years, provides welcome clarity for the Royal Court and for the many settlors, trustees and beneficiaries, all over the world, who enjoy the benefits of having Jersey law as the governing law of their trusts,” he said.
Cook added that the advantages to Jersey and its trusts industry in keeping a Hastings-Bass law to hand was that it would be a cheaper and more efficient way to resolve disputes that arise as a result of a trustee’s error – rather than the alternative – lengthy negligence proceedings.
“The ability for the Royal Court to give discretionary relief when a beneficiary finds itself materially prejudiced by a trustee’s decision – made, perhaps, in good faith but unfortunately founded upon erroneous advice – provides a welcome alternative to the uncertainties and costs which surround ‘classic negligence litigation’,” he said.
Cook added that, with an estimated £400bn of trust assets under administration in Jersey, “…this amendment can only serve to further bolster Jersey’s already highly regarded international private wealth offering".