“Notwithstanding anything to the contrary herein expressed or implied: ………… (c) No discretion or power conferred on the trustees or any other person by this settlement and no provision of this settlement shall operate so as to cause or permit any part of the income or capital of the trust fund to be lent to or become payable to or applicable for the benefit of any of the excluded persons.”
“In my judgment, these cases show that, wherever there is a voluntary transaction by which one party intends to confer a bounty on another, the deed will be set aside if the court is satisfied that the disponor did not intend the transaction to have the effect which it did. It will be set aside for mistake whether the mistake is a mistake of law or of fact, so long as the mistake is as to the effect of the transaction itself and not merely as to its consequences or the advantages to be gained by entering into it.”
“I do not think it can or ought to be said that if, as I hold, the trustees wrongly thought that section 31 would operate, then a result is produced which is substantially or essentially different from that which was intended.”
“Of course, it may well be that, if the invalidity caused by the operation of the rule against perpetuities is quite small as compared with the parts of the settlement which are unaffected by the rule, the court might be prepared to say that the valid parts of the settlement would survive intact. Thus Lord Evershed M.R. held in the Vestey case that the exercise of the discretion there could be upheld notwithstanding the fact that the trustees were to some extent under a misapprehension as to what its effect would be. But here there is no doubt that the effect of the operation of the rule is wholly to alter the character of the settlement. In my judgment the result of that must be that there never was a valid exercise by the trustees of the power of advancement.”
“Where by the terms of a trust (as under section 32) a trustee is given a discretion as to some matter under which he acts in good faith, the court should not interfere with his action notwithstanding that it does not have the full effect which he intended unless (1) what he achieved is unauthorised by the power conferred upon him or (2) it is clear that he would not have acted as he did (a) had he not taken into account considerations which he should not have taken into account or (b) had he not failed to take into account considerations which he ought to have taken into account.”
“Where a trustee acts under a discretion given to him by the terms of the trust, the court will interfere with his action if it is clear that he would not have acted as he did had he not failed to take into account considerations which he ought to have taken into account.”
“I have come to the conclusion that there is a principle which may be labelled the rule in Hastings-Bass. I do not think that the application of that principle is confined, as Mr Nugee suggested, to cases where an exercise by trustees of a discretion vested in them is partially ineffective because of some rule of law or because of some limit on their discretion which they overlooked. If, as I believe, the reason for the application of the principle is the failure of the trustees to take into account considerations that they ought to have taken into account, it cannot matter whether that failure is due to their having overlooked (or to their legal advisers having overlooked) some relevant rule of law or limit on their discretion, or is due to some other cause. For the principle to apply, however, it is not enough that it should be shown that the trustees did not have a proper understanding of the effect of their act. It must also be clear that, had they had a proper understanding of it, they would not have acted as they did.”
“Where a trustee acts under a discretion given to him by the terms of the trust, but the effect of the exercise is different from that which he intended, the court will interfere with his action if it is clear that he would not have acted as he did had he not failed to take into account considerations which he ought to have taken into account, or taken into account considerations which he ought not to have taken into account.”
“If the board had appreciated that aspect of the case I think that it might materially have affected their decision and that they might well have concluded that the proper course was to defer a decision until more was known about the effect which the remedial steps were having upon Mr Kerr.”
“94. I am not prepared to conclude that the Hastings-Bass principle can have such an extreme and surprising result. The argument that, because of the reference to future adopted children, the appointment was not a paragraph 15 appointment might be seen now to have had some technical force, but it had no merits of a more general nature. It was certainly abstruse and recondite. Those who advised on the 1976 appointment when it was made certainly did not think of the argument, nor did the revenue when the documents were presented to them. Twenty-two years went by without anyone suggesting that there was anything wrong with the appointment and I cannot put out of my mind the difficulties which would arise at this late stage if the argument were to be raised and acted upon. I referred earlier to the analogy between the principle in In re Hastings-Bass and the law concerning judicial review of exercises by public bodies of statutory powers. In judicial review there are tight time limits within which a challenge to some action by a public body must be brought. It would be astonishing, and to my mind unacceptable, for the emergent Hastings-Bass principle to be capable of being invoked in an attempt to upset some action by trustees which may have been taken decades ago (as in this case), and on the basis of which many intervening decisions and actions have been taken. 95. Mr Warren refers to the decision of Jonathan Parker J in Green v Cobham …, the recent case in which an apparently valid appointment of new trustees of a sub-trust was held to have been ineffective because of the unappreciated capital gains tax consequences which it would have had. I do not say that I disagree with the decision, but I would accept Mr Green's comment to the effect that, despite Green v Cobham, there must be limits to how far the courts will allow the principle in In re Hastings-Bass to rescue trustees from the consequences of their tax-planning misjudgments. I do not feel impelled to suggest precisely where the dividing line lies between a case like Green v Cobham, where the court will hold an appointment by trustees to have been invalid, and a case like this one, where in my judgment the court will not. I point out, however, that in Green v Cobham the capital gains tax consequences of the appointment, if it stood, were most serious, and were appreciated at an early date after the appointment had been made. In this case, even if it had occurred to the advisers of the trustees in 1976, rather than in 1998 (when Mr Warren and his colleague wrote their opinion), that the 1976 appointment, once executed, might not have been a valid paragraph 15 appointment after all, no serious CTT consequences would have followed. It is true that the trust fund would still have been potentially subject to the CTT rules for discretionary trusts, not the more favourable rules applicable to accumulation and maintenance trusts within paragraph 15. But no CTT liability would have been incurred yet, and the appointment could have been modified so as to comply with paragraph 15 thereafter. This could have been done before April 1997 at the cost of an exit charge only marginally greater than that which the trustees had expected to pay (and on the actual facts did pay) by reason of the 1976 appointment itself.”
“The financial consequences for the beneficiaries of any intended exercise of a fiduciary power cannot be assessed without reference to their fiscal implications. The two seem to me inseparable. Therefore if the effect of an intended appointment is likely to be to expose the fund or the beneficiaries to a significant charge to tax that is something which the trustees have an obligation to consider when deciding whether it is proper to proceed with the appointment. Once relevance is established then a failure to take those matters into account must vitiate the exercise of the power unless (as in Hastings-Bass itself) it is clear that on a proper consideration of all relevant matters the decision would still have been the same.”
“It cannot be right that whenever trustees do something which they later regret and think that they ought not to have done, they can say that they never did it in the first place.”
“Gifts cannot be revoked, nor can deeds of gift be set aside, simply because the donors wish they had not made them and would like to have back the property given. Where there is no fraud, no undue influence, no fiduciary relation between donor and donee, no mistake induced by those who derive any benefit by it, a gift, whether by mere delivery or by deed, is binding on the donor. It has been contended that even where all those elements are absent the burden in equity is on the donee to show that the donor knew what he was doing and was under no mistake as to the effect of any legal instrument which he may have signed. Passages were cited from judgments of Lord Romilly and Vice-Chancellor Stuart in support of this contention; but their observations must be understood as having reference to the cases before them, and are far too wide if meant to express a general principle of equity applicable to gifts unaccompanied by any of those circumstances of suspicion to which we have alluded. This was pointed out by Kay LJ in Henry v. Armstrong(1881) 18 Ch D 668 . In the absence of all such circumstances of suspicion a donor can only obtain back property which he has given away by showing that he was under some mistake of so serious a character as to render it unjust on the part of the donee to retain the property given to him.”