Mistake in Jersey trust law - sometimes ignorance is bliss

In giving its reasons for setting aside transfers into a Jersey trust on grounds of mistake, the Royal Court of Jersey has provided a helpful distinction between the law of mistake as it is applies in Jersey as against its English law counterpart such that it is now expressly clear that in Jersey, relief can be granted for a mistake made out of mere “causative ignorance”. The Court also confirmed that it has a real discretion when deciding whether or not it is just to make a declaration that a transaction be set aside on grounds of mistake.

Background to the Application
In the Matter of the G Trust [2019] JRC 056 concerned a Jersey law discretionary trust which had been established by the Representors for the benefit of themselves, their three adult children and their four grandchildren with provision for future issue. Over the years, various transfers were made into trust; however, between November 2008 and January 2014 the Representors made four transfers to two BVI companies solely owned by the trustee, from two different UK bank accounts (maintained by a banking arm of the trustee entity) which was held in the Representors’ joint names (the Transfers). The evidence before the Court was that the Representors did not contemplate that the Transfers would expose them to a UK tax liability; neither of the Representors were British citizens, nor were they resident, ordinarily resident or domiciled in the UK. Further, neither the Trustee nor the bank had given them any warning as to the potential tax consequences of the Transfers. Indeed, the evidence was clear that had the Representors been aware of the tax exposure, expert advice would have been sought and the Transfers structured so that monies came from non-UK accounts. Accordingly, the Representors applied to the Royal Court, seeking orders that the Transfers were made by mistake and should be set aside. HMRC was notified of the application and the Attorney General was convened; however, neither participated.

 

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Nigel SandersPartnerT +44 (0) 1534 700 862nigel.sanders@walkersglobal.com
Fritha FordSenior AssociateT +44 (0) 1534 700 899fritha.ford@walkersglobal.com