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English Supreme Court rules on Mistake and Hastings Bass

May 2013 - Finance. Legal Developments by Ogier .

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On 9 May 2013 the English Supreme Court handed down a unanimous judgment on the seminal cases of Pitt-v- Holt and Futter -v- Futter , with Lord Walker's valedictory judgment conclusively resolving the English position on the rule in Hastings Bass and rescission on the ground of mistake.

In respect of the rule in Hastings Bass, the Supreme Court held that there must be an inadequate deliberation on the part of the trustee which was sufficiently serious to amount to a breach of fiduciary duty.

In respect of rescission for mistake, the Supreme Court has done away with the "effect/consequence distinction" which has vexed so many judges and legal practitioners down the years, and arrived at a simple test: there must be a causative mistake of sufficient gravity to render it unjust for the transaction to stand.  The Supreme Court specifically held that mistakes as to tax consequences of a transaction can, depending on the facts, fall within the test, although in the case of "artificial tax avoidance" the Supreme Court suggested that a court might think it appropriate to refuse relief on the grounds of public policy.