In the matter of R

This is a representation brought by R ("the representor") as de facto settlor of the S Trust ("the Trust"), which is a discretionary trust established by declaration of trust by B Limited on 3 rd April 1997. The representor seeks orders that the transfer of assets by her to B Limited is voidable at her instance on the ground of mistake, and that subsequent transfers of assets from the Trust to three new trusts established in the USA ("the New Trusts") are similarly voidable at her instance. On 19 th April 2011, the Court announced that it would make those orders. Our reasons are set out below.

The representor was at the time of the transfer to the Trust deemed to be domiciled in England, and an immediate charge to IHT arose in the sum of £1,943,689, including interest. That liability was met by the representor. Subsequently, she instituted proceedings against Norton Rose which were apparently compromised on terms that have not been disclosed.

In April 2001, the representor sought advice from tax counsel in England as to whether it was possible to rescind the transfer of the C shares to the Trust, and as to the fiscal consequences of any such rescission. The US tax consequences were not at that stage considered. The representor was advised that, on the basis of the law as it then stood in England, such an application would probably fail, and merely add to the costs incurred in pursuing an action against her former legal advisers. On the basis of that advice, she took no action in 2001.

In 2007, the New Trusts were established by the representor in accordance with the laws of the State of Delaware in the USA. They were the F Trust, the G Trust, and the H Trust. The representor was named as the grantor of the New Trusts on the basis that she was the source of the S Trust Funds. In February 2008, substantial funds were transferred by the trustee of the Trust to the trustees of the New Trusts. The beneficiaries of the New Trusts are the representor's children and their issue. No other distributions from the Trust have been made since its creation.

The transfer of funds from the Trust to the New Trusts did not give rise to any further liability to IHT. Both the Trust and the New Trusts remain within the IHT net, and a 10 year anniversary charge and tax charges on distribution apply to all the trusts.