The Supreme Court has restricted (or rather ‘corrected’) a discretionary power – which has been likened to emergency contraception – for trustees who make a bad decision.
The rule is centred on the failure of trustees to perform their decision-making function.
The cases of Futter and Pitt allowed the Supreme Court, in line with the Court of Appeal  EWCA Civ 197, to clarify that the courts will only intervene to make-good a bad decision where the inadequate deliberation on the part of the trustees was sufficiently serious as to amount to a breach of fiduciary duty – not where they simply fell short of the highest possible standards.
Futter and another (Appellants) v The Commissioners for Her Majesty’s Revenue and Customs (Respondent); Pitt and another (Appellants) v The Commissioners for Her Majesty’s Revenue and Customs (Respondent)  UKSC 26
In 1985, Mr Futter made two settlements. Initially, both settlements had non-resident trustees until, in 2004, he and Mr Cutbill, both resident in the United Kingdom, were appointed. In 2008, on the advice of solicitors, Mr Futter and Mr Cutbill, in exercise of a power of enlargement, distributed the whole capital of the first settlement to Mr Futter, and, in exercise of a power of advancement, distributed £36,000 from the second settlement to Mr Futter’s three children in equal shares. In so doing, they overlooked the effect of section 2(4) of the Taxation of Chargeable Gains Act 1992 (TCGA), which resulted in a large capital gains tax liability for Mr Futter and a modest one for his children. Mr Futter and Mr Cutbill, as trustees of the two settlements, applied to have the deed of enlargement and the deeds of advancement declared void, which Norris J held them to be on the basis of the rule in Hastings-Bass.
In 1990, Mr Pitt suffered serious head injuries in a car crash, resulting in his mental incapacity. Mr Pitt’s claim for damages for his injuries was compromised by a court-approved settlement in the sum of £1.2 million. Mr Pitt’s solicitors sought advice from Frankel Topping, a firm of financial advisers. They advised that the damages should be settled in a discretionary settlement. This was done in 1994 by the establishment of the Derek Pitt Special Needs Trust (the SNT). The SNT could have been established without any immediate inheritance tax liability, under statutory relief offered by parliament, but it was not. The report from Frankel Topping made no reference whatsoever to inheritance tax. In 2007, Mr Pitt died. His personal representatives, who were also two of the trustees of the SNT, commenced proceedings to have the SNT set aside, which the deputy judge ordered on the basis of the rule in Hastings-Bass. However, in so doing, he indicated that, even if there had been a mistake of any sort, it was only a mistake as to the consequences of the transaction, rather than its effect, and so he would not grant rescission of the SNT on the contractual principle of mistake.
In a nutshell, the rule in Hastings-Bass became a tool to rescue trustees who make decisions which have an unintended effect…
The case went to the Supreme Court which unanimously dismissed the appeal in Futter, and that in Pitt, in so far as they turn on the rule in Hastings-Bass, but allowed the appeal in Pitt on the ground of mistake and set aside the SNT.
The ‘true’ rule in Hastings-Bass
The judgment makes clear that the rule in Hastings-Bass, properly understood, depends on breach of duty in the performance of something that is within the scope of the trustees’ powers, not in the trustees doing something that they had no power to do at all.  The rule is centred on the failure of trustees to perform their decision-making function. It is that which founds the court’s jurisdiction to intervene if it thinks fit to do so. 
As a matter of principle there must be a high degree of flexibility in the range of the court’s possible responses. To lay down a rigid rule would inhibit the court in seeking the best practical solution in the application of the rule in Hastings-Bass in a variety of different factual situations. 
As a matter of principle there must be a high degree of flexibility in the range of the court’s possible responses.
The judgment made clear that for the rule in Hastings-Bass to apply, the inadequate deliberation on the part of the trustees must be sufficiently serious as to amount to a breach of fiduciary duty. It is generally only a breach of duty on the part of the trustees that entitles the court to intervene. It is not enough to show that the trustees’ deliberations have fallen short of the highest possible standards, or that the court would, on a surrender of discretion by the trustees, have acted in a different way. Apart from exceptional circumstances (such as an impasse reached by honest and reasonable trustees) only breach of fiduciary duty justifies judicial intervention.  However, where trustees have been in breach of duty by exercising a discretion with inadequate deliberation, setting aside their decision may not be the only course open to the court. 
It would be contrary to principle and authority to impose a form of strict liability on trustees who conscientiously obtain and follow, in making a decision which is within the scope of their powers, apparently competent professional advice which turns out to be wrong. Such a result cannot be achieved by the route of attributing any fault on the part of professional advisers to the trustees as their supposed principals.  There have been, and no doubt will be in the future, cases in which small variations in the facts lead to surprisingly different outcomes. That is inevitable in an area where the law has to balance the need to protect beneficiaries against aberrant conduct by trustees (the policy behind the rule in Hastings-Bass) with the competing interests of legal certainty and of not imposing too stringent a test in judging trustees’ decision-making. 
Rescission on the ground of mistake
However, it is central to contractual and commercial certainty that a mistake must be distinguished from mere ignorance, inadvertence, and misprediction.
However, it is central to contractual and commercial certainty that a mistake must be distinguished from mere ignorance, inadvertence, and misprediction.  Forgetfulness, inadvertence or ignorance is not, as such, a mistake, but it can lead to a false belief or assumption that the law will recognise it as a mistake.  The difficulty for those making such claims is that this is by no means a clear area of law. The Supreme Court has said that mere ignorance, even if causative, is insufficient.  In order to satisfy the test for setting aside a voluntary disposition on the ground of mistake, the gravity of the mistake must be assessed by a close examination of the facts. The injustice of leaving a mistaken disposition uncorrected must be evaluated objectively, but with an intense focus on the facts of the particular case. The court must make an evaluative judgment about whether it would be unconscionable, or unjust, to leave the mistake uncorrected, and form a judgment about the justice of the case.  It was held that Mrs Pitt had an incorrect conscious belief, or made an incorrect tacit assumption, that the proposed SNT had no adverse tax effects. The SNT could have complied with statutory requirements without any artificiality or abuse of statutory relief. It was precisely the sort of trust that Parliament intended to grant relief for, said the judges, and the SNT was rescinded. 
NB: The numbers in square brackets refer to paragraph numbers in the judgment