Pitt v Holt; Futter v Futter  EWCA Civ 197
1. In a remarkably detailed judgment Lloyd LJ has returned to first principles, examining both the source of the so called principle in Re Hastings Bass and its rationale. He has then found both that the principle never truly existed and that it lacks a sufficient policy rationale. In doing so he has overruled a long series of first instance decisions (including his own in Sieff v Fox  1 WLR 3811).
2. Previously, we had thought that there was a reasonably well established set of principles that meant that a decision by trustees (or other fiduciaries) where the trustees failed to take into account all relevant matters could be set aside. That was because their fiduciary decision making was flawed. The principle applied even where the trustees were advised regarding the relevant consideration but where that advice turned out to be wrong. The principle was used regularly to save trustees from the consequences of decisions that had unfortunate (usually tax) consequences, sometimes many years after the relevant decision.
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3. Following the Court of Appeal’s decision we are in a very different world:
(2) Where trustees take a decision that is within the scope of their power but fail to take into account all relevant considerations that will be a breach of their fiduciary duty and so voidable at the instance of those affected. Trustees will not be expected to bring such claims unless seeking assistance at the urging of affected beneficiaries.
(3) Where the trustees have taken a relevant matter into account (such as tax) but the view they have formed is wrong because the advice they have received is wrong they will nevertheless have properly exercised their duties. Accordingly, they (or the beneficiaries) will not be able to set the decision aside.
4. The implications of the decision will need to be worked through. It is obvious, though, that there are areas which are going to present real difficulties in future and which may not in fact fit with previous principles. These include:
(1) The boundaries of “void” decisions are yet to be worked out. There is likely to be much thought (and litigation) regarding the exercise of powers for the “benefit” of beneficiaries as well as a dusting off of the principles of fraud on a power.
(2) The dividing line between breaches of fiduciary powers and negligent advice are going to be hotly contested. This is particularly difficult where the advisers are also trustees (as in Futter).
(3) The dividing line has implications in the law of limitation, since trustees breaches of duty can be “resurrected” by interests falling in (see Limitation Act 1980 section 21(3)) whereas this is not the case for negligent advisers. And how does section 14A operate where the advisers were also trustees?
(4) It is also to be seen whether trustees will truly avoid being forced to bring claims in the future. The door is partially ajar, in the ability to seek directions, and this may be used as a cloak to hide applications (perhaps by new trustees?) that are not so different as before.
(5) Whilst justifiable, the distinction between effects and consequences remains a difficult one and likely to be the subject of future litigation.
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