The decision adds to the growing body of authority on the statutory Hastings-Bass  jurisdiction in the Cayman Islands, and includes guidance on the good faith requirement, standing by successor trustees, notification to tax authorities, and whether section 64A applications should be dealt with on the papers.

The D Trust is a Cayman Islands discretionary trust with a broad class of beneficiaries. It was originally governed by New Zealand law, but its proper law and forum were changed to the Cayman Islands in November 2019.

The trust formed part of a wider estate planning structure. When the D Trust was settled in 2011, the Settlor transferred non-UK situs property into it. A connected trust (the H Trust, governed by Guernsey law) borrowed those funds to purchase a residential property in England. The arrangement was designed to ensure the loan owed by the H Trust to the D Trust remained “excluded property” for UK inheritance tax (IHT) purposes, shielding the value of the UK property from any charge on the Settlor’s death.

In early 2017, proposed changes to the IHT regime threatened to undermine that planning. The previous trustees instructed a specialist London firm, which recommended (among other options) executing a deed of exclusion to declare the Settlor an “Excluded Person” under the trust deed. The Deed of Exclusion was executed on 30 March 2017, shortly before the new rules took effect on 6 April 2017.

In January 2025, a different London firm reviewed the arrangements and concluded that the original advice had been incomplete and in places erroneous. It had failed to consider: (i) the risk that section 102 of the UK Finance Act 1986 would treat the Settlor as having incurred the H Trust’s liabilities; (ii) whether the charge over the UK property was an “incumbrance created by a disposition made by [the Settlor]” within section 103 of that Act; and (iii) how the General Anti-Abuse Rule might apply to the 2017 arrangements. The D Trust faced the very IHT exposure the Deed of Exclusion was supposed to prevent.

The current trustee applied by originating summons for a declaration that the Deed of Exclusion was void ab initio  under section 64A of the Act. The application was dealt with on the papers. The principal issues were: (i) whether the current trustee had standing; (ii) whether the statutory conditions in section 64A(2) were satisfied; (iii) the scope of the court’s residual discretion (including the good faith requirement and notification of HMRC); and (iv) whether it was appropriate to determine a section 64A application without an oral hearing.

The applicable law

Justice Segal adopted the analysis of Justice Kawaley in Maples Trustee Services v AB (In Re Settlements), describing it as “a clear and authoritative summary of the applicable law”. Justice Kawaley had identified three strands of the statutory language:

1. the power must be a fiduciary power;
2. but for the mistake the power would not have been exercised in the same way, at the same time, or at all; and
3. the person exercising the power must have failed to take into account relevant considerations, or taken into account irrelevant ones.

Justice Segal adopted Justice Kawaley’s tentative view (that section 64A contains an implied good faith requirement), reasoning that such a qualification is necessary to keep the jurisdiction within proper bounds and avoid what Lord Neuberger extrajudicially described as giving trustees a “get out of jail free card”.

He disagreed, however, with Justice Kawaley’s observation that the circumstances required for section 64A relief are “likely in many (if not most) cases to be indistinguishable (legal labelling apart) from having to establish a breach of the fiduciary duty of due deliberation in conceptual terms.” Instead, Justice Segal considered this “unwise and potentially misleading” because section 64A(4) makes clear there is no need to allege or prove a breach of trust.

Erroneous tax advice

Justice Segal addressed the position where trustees have relied in good faith on wrong tax advice. Although the trustees did “take into account” tax issues, the authorities treat them as having failed to consider the relevant matters because they did not take into account the true consequences of their action. As Lloyd LJ put it in Sieff v Fox: if the trustees had received correct advice, they would not have acted as they did.

Standing

Justice Segal confirmed that a current trustee has standing to apply under section 64A in respect of a fiduciary power exercised by its predecessors. Section 64A(5) permits an application by “any trustee,” which must include a successor trustee. There was no need to join the previous trustees.

Decision on the merits

The conditions in section 64A(2)(a) and (b) were satisfied. The previous trustees had exercised the power of exclusion without the benefit of complete advice and would not have done so had they been properly informed. The court was satisfied that both the previous trustees and the current trustee acted in good faith.

Notification of HMRC

The trustee did not notify HMRC on the basis that the relief would not give rise to any live tax issues, since any IHT charge would arise only on the Settlor’s death. Justice Segal accepted this but left open the question whether notice should be given as a matter of course in future cases.

Paper applications

Justice Segal noted that other section 64A applications have been dealt with on the papers (including In Re Settlements) and acknowledged that the practice saves costs. He observed, however, that the presiding judge will benefit from oral explanation and suspected applications may be dealt with “more expeditiously” at a hearing. He cautioned that there should be no suggestion these applications will be granted “without careful scrutiny and as a rubber-stamping exercise” and invited attorneys to pause for thought before applying on the papers.

Section 64A does not require proof of breach of trust and its jurisdiction should not be treated as importing a requirement to establish facts analogous to a breach of fiduciary duty. The statutory conditions are self-contained.

Good faith is an implied requirement for relief under section 64A, and evidence addressing the applicant’s good faith should be a standard feature of any section 64A application.

Erroneous tax advice can ground relief even where the trustees “considered” tax. The relevant question is whether the trustees took into account the correct position, not merely whether they turned their minds to tax at all. Trustees who follow professional advice in good faith remain protected, but the quality of that advice is what determines whether the statutory conditions are met.

A current trustee may apply under section 64A to set aside the exercise of a fiduciary power by its predecessors. This is a practical reading of the statute and confirms that changes in trusteeship do not deprive beneficiaries of a remedy.

It is also worth noting that the court may consider an oral hearing to be of more assistance than seeking section 64A relief ‘on the papers’, particularly where the factual background is detailed or the legal points are not straightforward.

The court has also left open the question of whether notice should be given to a tax authority, in this case because no tax liability existed. This point may be decided in future applications to the court.