Pitt v Holt [2010] EWHC 45 (Ch)
The principle in Hastings-Bass, originally applied only to trustees, applies equally to receivers under the MHA 1983. Therefore Mrs Pitt, who as a receiver had put her husband's money into a settlement without considering the inheritance tax position, could have the settlement set aside as an ineffective transaction. (The principle in Hastings-Bass has been summarised as: "Where trustees act under a discretion given to them by the terms of the trust, in circumstances in which they are free to decide whether or not to exercise that discretion, but the effect of the exercise is different from that which they intended, the court will interfere with their action if it is clear that they would not have acted as they did had they not failed to take into account considerations which they ought to have taken into account, or taken into account considerations which they ought not to have taken into account.") [Caution.]
Related judgments
Pitt v Holt [2013] UKSC 26, [2013] MHLO 46
ICLR
The ICLR have kindly agreed for their WLR (D) case report to be reproduced below.
Catchwords
MENTAL DISORDER — Court of Protection — Settlement — Receiver — Receiver failing to take into account inheritance tax position when settlement established — Whether settlement to be set aside
Headnote
A receiver appointed under the Mental Health Act 1983 by the Court of Protection was entitled to rely on the principle that, where a trustee exercised a discretion pursuant to the terms of the trust and the effect of the exercise was different from that intended, the court would set aside his action if it was clear that he would not have acted as he had, had he not failed to take into account considerations which he ought to have taken into account, or taken into account considerations which he ought not to have taken into account (“the Hastings-Bass principle”).
Robert Englehart QC, sitting as a deputy Chancery Division judge, so held when allowing the Part 8 claim by the first claimant, Patricia Madge Pitt, and granting declarations to the effect that a settlement made by her as receiver for her late husband might be set aside because the inheritance tax position was not taken into account when the settlement was established. The second claimant, David Neville Waite Shores, was a personal representative of the deceased and a trustee of the settlement. The first defendant did not appear and was not represented. The second defendant, the Revenue and Customs Commissioners, resisted the claim.
ROBERT ENGLEHART QC said that whilst there was no decided authority applying the Hastings-Bass principle (see In re Hastings-Bass, decd [1975] I Ch 25) to anyone other than trustees strictly so called, in principle there was no material distinction between a trustee exercising a power for the benefit of a beneficiary under a trust instrument and a receiver exercising a power for the benefit of a patient pursuant to the Mental Health Act 1983. In each case the power was, as was common ground, a fiduciary one. In each case, the person exercising the power was doing so in the interests of another but was not acting on the instructions of that other. The critical point in the present circumstances was that it was for the first claimant to decide whether or not it was in her husband’s interest for her to dispose of his property to trustees under the settlement. Applying the threefold test suggested by Warner J in Mettoy Pension Trustees v Evans [1990] 1 WLR 1587Not on Bailii! and the principles summarised by Lloyd LJ in Sieff v Fox [2005] 1 WLR 3811B, the present case was a clear cut case on the facts for the application of the rule in Hastings-Bass.
Other
[2010] WLR (D) 2
Ch D: Robert Englehart QC sitting as a deputy High Court judge: 18 January 2010
Appearances: William Henderson (instructed by Thring Townsend Lee & Pembertons, Bath) for the claimants; Sarah Harman (instructed by Solicitor, Revenue and Customs) for the second defendant.
Reported by: Celia Fox, barrister