“Happily, this rectification claim is not opposed by anyone” may have been the position as far as the parties were concerned, but that was not the reason His Honourable Judge Hodge QC permitted rectification in this case. Rectifying a mistake in the drafting of a trust deed still needed to be permissible as a matter of law. Happily again, this was the case here.
Andrews v Andrews5 is a straightforward and useful case that demonstrates a recent application of the correct test when deciding whether to permit equitable rectification of a trust settlement, as set out recently by the Court of Appeal in Day v Day6.
Mr and Mrs Andrews settled a trust deed creating a lifetime settlement in favour of their granddaughter, Zoe. The Andrews, along with their son, were appointed as trustees. Unfortunately, the Andrews had intended to benefit not only Zoe, but all of their unborn grandchildren as well. The fixed life-interest granted to Zoe meant that the settlement could benefit only her for as long as she lived.
The Andrews had not appreciated that the trust deed they signed would have this effect, and they argued that it had always been their intention to benefit all of their grandchildren equally.
Accordingly, they sought rectification for mistake in Liverpool Chancery District Registry. As the changes would not be to Zoe’s benefit, an independently-advised litigation friend represented her.
The court found little difficulty in granting the requested rectification. Undoubtedly it helped that, after they saw the evidence of the settlors’ intentions, the defendants no longer opposed rectification. Yet the court could not grant rectification on this basis alone; as a matter of law, HHJ Hodge had to apply the correct principles in deciding whether to permit rectification.
The test from Day v Day provides that the subjective intention of the donor or settlor counts when dealing with a voluntary disposition. This can be usefully contrasted with the case of rectification of a contract or mutual mistake, in which the outward expression and communication of the parties are objectively viewed. The court noted, however, that
discharging the burden of proof for subjective intention may be difficult without any evidence of outward expression.
Fortunately, in this case, there was enough evidence for the Andrews to discharge the burden and demonstrate that their subjective intention had always been to benefit all their grandchildren equally, including those not yet born. The letters to their financial and legal advisers helped them to prove this.
This case is a straightforward and useful demonstration of the correct test of subjective intention when dealing with a voluntary disposition, as laid down by the Court of Appeal recently.
On a practice note, the solicitors in this case generally took instructions from the clients’ financial advisers, rather than the client directly and this may have contributed to the mistake in the first place.