Wyatt & Ors v Tyrrell & Ors

Where trustees deliberately exercise a power but fail to consider reasonably foreseeable consequences, the defect may engage the Hastings Bass principle. The court may intervene where the trustees would not have acted as they did had they considered matters which they ought to have considered. A mistake about non-fiscal consequences can suffice. Such defective decision-making is distinct from a failure to record the transaction intended, and therefore does not ordinarily justify rectification, or relief under the general law of mistake. Where the original rationale for an exclusion has disappeared, the preferable remedy may be to set aside the transaction as voidable, while recognising its initial validity.

The trustees of the Wyatt Family Discretionary Settlement sought relief concerning a deed which irrevocably excluded Jonathan Wyatt from benefit while the trust fund contained unlisted securities. They sought rectification, alternatively relief for mistake, and alternatively a declaration or order under the Hastings Bass principle.

The claim was unopposed. Following directions by Master Teverson and observations by David Richards J, the matter proceeded to an oral hearing. The central issue was whether the trustees’ failure to consider what would happen if the commercial restrictions disappeared, while the relevant shares remained in the trust, justified intervention.

1. The application succeeded on the Hastings Bass ground. The deed accurately recorded and achieved what the trustees deliberately intended: Jonathan was excluded while the shares remained Restricted Securities. The defect was not a failure of expression or a mistake about the transaction, but defective decision-making and failure to consider its foreseeable consequences.
2. Following the formulation in Sieff v Fox [2005] 1 WLR 3811, the court may intervene where trustees exercise a discretion and it is clear that they would not have acted as they did had they considered matters which they ought to have considered. A mistake, misunderstanding or oversight about consequences may suffice, including consequences which are non-fiscal.
3. The trustees failed to consider the possibility that the proposed flotation would not occur, or that the restrictions in the company’s articles would be removed while the shares remained in the trust. Those were important considerations. Had they been considered, the trustees would not have executed the deed in its existing form. The deed would have been modified so that the exclusion ceased or became revocable when its commercial rationale ended.
4. Rectification and the general law of mistake did not provide a remedy because the deed did not fail to record the intended transaction and did not produce an unintended effect in the relevant sense. The court did not resolve whether relief under the principle rendered the transaction void or voidable. It considered voidability preferable, because the initial exclusion was valid and only its continued operation after the rationale had expired was defective.
5. The deed of exclusion was therefore set aside. The court also emphasised that trustees seeking the court’s assistance in an unopposed trust application must fairly present arguments on both sides and assist the court with the relevant facts and law.

This was a first-instance decision. The judgment records earlier directions by Master Teverson and observations by David Richards J, but no appeal or appellate decision is stated.