Amarjit Bhaur & Ors v Equity First Trustees (Nevis) Limited & Ors
[2023] EWCA Civ 534
Richard David Ernest Hopes & Anor. v Kate Burton & Ors.
9 November 2022
[2022] EWHC 2770 (Ch)
High Court
The trustees messed up some legal documents, accidentally causing a big tax problem. The judge fixed the mistake but refused to add extra conditions because it wasn't fair to everyone involved.
Key Facts
- •Part 8 claim to set aside two deeds of appointment (2013 and 2014) made by trustees of a trust created by Hilary Marsden.
- •Grounds for setting aside: operative mistake by trustees, exceeding powers, uncertainty, insufficient consideration.
- •Claimants are current trustees (not beneficiaries).
- •Defendants are the settlor's children, former partner, and their children/grandchildren (some minors).
- •Trust involved a £2.15 million Skandia life policy.
- •Trustees' intention was to exclude Amanda as a beneficiary and create discretionary trusts, but not to alter the interests of Kate, Adam, and Lillie.
- •2013 Appointment mistakenly terminated existing interests in possession, creating adverse tax consequences.
- •2014 Appointment involved a further appointment from Lillie's share.
- •Tax counsel advised that the appointments likely created non-qualifying interests in possession and gifts with reservation of benefit, leading to significant tax liabilities.
Legal Principles
Rescission of a voluntary disposition on the grounds of mistake (Pitt v Holt principles)
Pitt v Holt [2013] UKSC 26; Kennedy v Kennedy [2014] EWHC 4129
Purposive interpretation of tax legislation
RFC 2012 plc v Advocate General for Scotland [2017] UKSC 45
Meaning of 'interest in possession' in Inheritance Tax Act 1984
HMRC's Inheritance Tax Manual, IHTM16062; Pearson v IRC [1981] A.C. 753
Outcomes
2013 and 2014 Appointments set aside.
Trustees made an operative mistake as to the substance and effect of the appointments, unintentionally altering the beneficiaries' interests and creating adverse tax consequences. The mistake was sufficiently serious to make it unconscionable to leave the dispositions uncorrected.
Rescission not granted on terms.
Imposing terms requiring similar appointments would be unfair due to lack of proper evidence, late raising of the issue, and the intended retirement of the current trustees. Other beneficiaries were not given notice or opportunity to comment.