Correcting Mistakes in Trust Planning: A Comparative Post-Pitt Analysis

Abstract

Since Pitt v Holt; Futter v Futter , claimants have sought to set aside voluntary dispositions by way of trusts on the alternative ground of equitable mistake. This article analyses post- Pitt cases, both in England and major offshore jurisdictions, in order to examine and critique the scope and application of the doctrine of mistake. It argues that both the categorisation and characterisation of mistake in Pitt are defective in handling mistakes in trust planning, with the unintended result that despite Pitt ’s restriction of the use of the rule in Hastings-Bass to set aside a trustee’s exercise of fiduciary discretion which resulted in unexpected tax consequences, the courts are now correcting tax mistakes through a simple application of the mistake doctrine. Secondly, this article argues that noticeable differences remain in the test of mistake between English and offshore jurisdictions, largely in terms of the judicial attitudes towards tax mistakes and the techniques adopted by the courts in correcting them. While offshore courts have adopted a simpler and more consistent approach in correcting tax mistakes, whether onshore English courts should follow the more generous approach of these offshore tax havens should require a policy debate of its own.