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In giving its reasons for rescinding transfers to a Jersey trust on account of error, the Royal Court of Jersey made a useful distinction between the law of error as applied in Jersey and its equivalent in law English, so that it is now expressly clear that in Jersey, relief can be granted for an error made by simple “causal ignorance”. The Court also confirmed that it has real discretion to decide whether or not it is fair to declare that a trade should be canceled on the grounds of error.

Context of the request

In the case of the G Trust [2019] JRC 056 involved a discretionary Jersey law trust that had been established by the Representatives for the benefit of themselves, their three adult children and their four grandchildren with provision for future broadcast. Over the years, various transfers have been made in trust; however, between November 2008 and January 2014, representatives made four transfers to two BVI companies owned exclusively by the Trustee, from two different UK bank accounts (maintained by a bank branch of the Trust Entity) that were held at common name of representatives (the Transfers). The evidence presented to the Court was that the Representatives did not foresee that the Transfers would expose them to a UK tax liability; none of the representatives were British citizens, nor were they resident, ordinarily resident or domiciled in the United Kingdom. In addition, neither the Trustee nor the bank had warned them about the potential tax consequences of the Transfers. Indeed, the evidence was clear that had the representatives been aware of the tax exposure, expert advice would have been sought and the transfers structured so that the funds came from non-UK accounts. As a result, representatives turned to the Royal Court, asking for orders that the transfers had been made in error and should be rescinded. HMRC was informed of the request and the Attorney General was summoned; however, neither of them participated.

Questions to the Court While the application was presented under the two Article 11 and Article 47Eof Trust Act (Jersey) 1984 (as amended), there was no suggestion that the creation of the trust itself was in error and, therefore, the issues were dealt with under Section 47E. The Court was therefore led to ask:

  1. Did the Representatives make a mistake regarding the Transfers? ;
  2. Would the transfers have been made “without” the error? ; and
  3. Was the error of a nature serious enough that it was fair to make a statement?

What constitutes an “error” for the purposes of
Article 47E is defined in Article 47B (2) and understands an error as to the effect, consequences or benefits to be derived from a transfer to a trust.

The difference between the Jersey law approach and that of English law In considering these three questions, the Royal Court found it important to distinguish Jersey’s law of error from its equivalent in English law, which is governed by the decision of the Supreme Court in Pitt -v- Holt [2013] UKSC 26. English law distinguishes three different situations, namely:

  1. Incorrect conscious belief;
  2. Incorrect unspoken assumptions; and
  3. Simple causal ignorance.

In Pitt -v- Holt, the Supreme Court held that in equity, the Court does not have the power to grant a remedy to a plaintiff who acted out of simple causal ignorance and this remains the position in English law. Conversely, the Royal Court stated that this was not the position to be taken under Jersey law when considering claims under Article 47E, since the jurisdiction to grant legal relief requires the Court to decide whether there has been an error, as defined by
Article 47B (2). In Jersey, the manner error is irrelevant and it is therefore inappropriate to make the distinctions applied in English law. The Royal Court further noted that the phrase “simple causal ignorance“is not one that can be said to reflect the reason why erroneous claims are made to the Court – ignorance does not cause a transfer and cannot really be considered to be the cause of On the contrary, the cause of the transfer is usually the intention to benefit the trust and this wish will rarely be suppressed through ignorance on the part of the person making the transfer.

The question of justice

Having established that distinctions in English law have no place in Jersey law, the Royal Court added some additional comments as to the third question it must ask itself when considering claims under Article 47E, whether the error was so serious that it was fair for the Court to make a statement. The Court said that the grammar of the question made it clear that there were two elements and that while the seriousness of the error is often analyzed in terms of the effect on the assignor and, potentially, on the trustees and other beneficiaries, the question of justice is more nuanced. The Court has examined a number of its own previous judgments and made it clear that in deciding the question of justice, the Court has real discretion, having considered all the facts available.

The court’s decision

Moving on to the facts of In the
The G Trust case, the Court ruled that the representatives had erred in making the transfers and that, without this error, they would not have transferred money from UK accounts. Given the level of tax liability occasioned by the error, the Court found the error to be so serious that it requires it to exercise its discretion and declare the transfers voidable.

Comment

Not only does this case make an important distinction between Jersey law and English law, it also highlights the Court’s desire to achieve a fair result for all. The Court has frequently stated that it is there to help, through its broad supervisory jurisdiction over trust matters, and its flexible approach to the law of error only reinforces that.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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