01 February 2021

The Supreme Court of Bermuda exercises "statutory Hastings-Bass" jurisdiction in setting aside a flawed variation to a trust deed

In a judgment dated 25 January 2021, the Supreme Court has exercised the jurisdiction arising under section 47A of the Trustee Act 1975 to set aside a variation of a trust (which itself had followed a successful application under section 47 of the Trustee Act 1975), on the basis that it resulted in a flaw in the operation of the amended trust instrument. As such, the variation by the trustee was a flawed exercise of fiduciary power, within the remit of the Court's jurisdiction.

In the Matter of GC Settlement [2021] SC (Bda) 63 Civ

In his ruling, Chief Justice Hargun outlined the two conditions that must be satisfied in order for the Court to intervene in a fiduciary's decision, as follows:

  1. that the person who holds the fiduciary power (in this case the trustee) did not take into account one or more considerations that were relevant to the exercise of the power; and
  2. that the Court is satisfied that, but for his failure to take into account such relevant considerations, the person would not have exercised the power, or would have exercised it in a different manner.

The judgment also affirmed the position, outlined in the 2015 judgment in In the Matter of the F Trust [2015] SC (Bda) 77 Civ, that the purpose of the relatively recent enactment of section 47A (by the Trustee Amendment Act 2014) was to establish in Bermuda the common law principle outlined in the English decision in Re Hastings-Bass [1975] Ch.25, as it was applied prior to 2011. That is, the law relating to the defective exercise of fiduciary powers as it was understood before Pitt v Holt [2013] UKSC 26. Section 47A therefore confers a discretionary jurisdiction on the Court.

On the facts of this case, the judge was satisfied that, in exercising the power to vary the terms of the trust pursuant to a power granted in earlier proceedings pursuant to section 47 of the Trustee Act 1975, the trustee had failed to take into account relevant considerations (concerning the effect of certain provisions upon the death of one of the beneficiaries). The judge was also satisfied that, had the trustee taken those considerations into account, it would not have exercised its power to vary in this way. Rather, it would have effected a variation that had the intended outcome. On the basis that the conditions in section 47A(2) were met, the judge exercised the Court's discretion in deciding it was appropriate to set aside the trustee's exercise of power.

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