A senior Manx advocate says that trustees should make sure correct legal and tax advice is obtained before making any decisions.

Gillian Christian of Keystone Law was commenting on what she described as a ’pioneering’ and ’ground-breaking’ case which will be of particular interests to the island’s finance sector.

The case took place in the Isle of Man by video hearing with the two claimants who were witnesses being in England.

Mrs Christian told Business News the case was important as it settled the ’Law of Mistake’ which is a legal term.

Asked what the case meant for the island she said: ’A party seeking equitable relief for a mistake which has triggered unintended and significant tax consequences will have to show that it would be unconscionable for the mistake not to be set aside.

’Therefore, there is no longer any doubt as to whether the Isle of Man courts might apply a lower threshold than the English courts.

’The key message is that trustees should ensure that correct legal and tax advice should be obtained before making any decisions.

’HMRC provided submissions in the proceedings but again, declined to participate.’

Mrs Christian advised the successful party in a case known as Oliver and Oths v Fedelta Trustees.

The case in question involved a claim to set aside the additions of two trusts, of which the defendant was the sole trustee, on the grounds of mistake.

Prior to the pioneering decision in Oliver & Oths v Fedelta Trustees, the Manx cases of Clarkson and Re Betsam provided that the courts would enable a transaction to be reversed if it were shown that it would not have been made but for the mistake.

In Pitt v Holt, the UK’s Supreme Court clarified the law of mistake and considerations of public policy and introduced a requirement that the claimant must show that it would be unconscionable to allow the mistake not to be reversed.

In the Manx case of AB v CD in 2006, Deemster Doyle cast doubt upon the approach of the English Court in Pitt v Holt applying UK policy concerns about artificial tax avoidance but left open the question as to whether Pitt v Holt would be considered good law in the Isle of Man.

Whilst the court did not consider whether the law of mistake principles of Pitt v Holt were part of Isle of Man law (because the court was satisfied that the Pitt v Holt principles of unconscionability were met in any event), Deemster Corlett stated it would be beneficial for him to voice that the Isle of Man court should follow the Supreme Court authority of Pitt v Holt. This therefore settled the debate, explained Mrs Christian.