REVISITING TRUSTEES' DECISIONS: IS PITT V HOLT THE FINAL WORD ON THE RULE IN RE HASTINGS-BASS?

Abstract

Not every decision we make is a good one. The power to make decisions includes the power to make bad choices as well as good ones. Unless there is some other factor, such as the exercise of undue influence, the overbearing of will through duress, or a mistake, good and bad decisions are equally enforceable in law. It might be thought that the same rule applies to decisions made by trustees, even though their decisions generally relate to the interests of the beneficiaries, rather than to their own interests. Of course, if the decision is so bad that it amounts to a breach of trust, and loss is thereby caused to the trust fund, then the breach might expose the trustees to liability to the beneficiaries. It was against this background that what became known as the rule in Re Hastings-Bass achieved prominence. A series of first instance decisions permitted trustees in some instances to backtrack on a decision which had unintended effects or consequences. The rule became subject to criticism, and was reviewed by the Supreme Court in Futter v HMRC on appeal from Pitt v Holt in the Court of Appeal. The decision of the Supreme Court substantially limits the scope of the rule, and identifies three circumstances where the decisions of trustees can be reversed: namely where there has been an operative mistake; excessive execution; or inadequate deliberation. This article explores the three dimensions to the rule in Re Hastings-Bass and identifies a number  of difficulties with the decision in Futter v HMRC.