Rectification of mistake

The Matter of the Representation of Virtue Trustees (Switzerland) AG and Anor re The C Trust (the Trust) heard in the Royal Court of Jersey relates to a trust where a beneficiary named in the deed was also appointed a protector (by a hand amendment when the deed was executed) where the terms of the deed provide that the protector is an “excluded person.”  By virtue of that appointment it was arguable that related beneficiaries were also “excluded persons.”

Rectification was sought to address the mistake.  Rectification is not a matter that is taken lightly by the court, and does not allow for a trust deed to be re-written but rather to bring the deed in line with the settlor’s true intensions.  As noted at para 19 of the decision:

19. In the English Court of Appeal case of Allnutt and another –v- Wilding and others [2007] EWCA Civ 412 Monery LJ, at paragraph 11, said this:-

“In other words rectification is about putting the record straight.  In the case of voluntary settlement, rectification involves bringing the trust document into line with the true intentions of the settlor as held by him at the date when he executed the document.  This can be done by the court when, owing to a mistake in the drafting of the document, it fails to record the settlor’s true intentions.  The mistake may, for example, consist of leaving out words that were intended to be put into the document; or putting in words that were not intended to be in the document; or through a misunderstanding by those involved about the meanings of the words or expression that were used in the document.  Mistakes of this kind have the effect that the document, as executed, is not a true record of the settlor’s intentions.”

The decision usefully canvasses the evidence taken into consideration to determine the deceased settlor’s true intentions, which included a consideration of who distributions were made to.  Evidence was given by the Trustee’s director who had the closest involvement with the Trust and who observed that the appointment of the protector  had unintended consequences which were “inadvertently inconsistent with both the First Letter of Wishes and the Second Letter of Wishes.”

Perhaps the biggest take home message is the importance of reading and understanding the terms of a trust deed.  And in line with the builder’s adage – measure twice, cut once; it is always appropriate to read the trust deed again.

The decision was upheld on appeal.  Although as noted in the appeal decision, the route by which the Royal Court arrived at its conclusion was open to criticism.  Particular attention was drawn to the fact that the settlor was an economic settlor who was not party to the declaration of trust.   Accordingly, “If rectification were to be granted, therefore, it was necessary for the Royal Court to be satisfied by convincing evidence that the Settlement did not represent the true intention of Virtue Jersey as the only party to the declaration of trust.”  Another aspect of the decision that was fond unsatisfactory was that the rectification granted went further than necessary the Court of Appeal noting that “In principle rectification should be granted to the extent, but no further than to the extent necessary to give effect to the true intention.”

References:

• Representation of Virtue Trustees (Switzerland) AG and Anor re The C Trust 11-June-2018 [2018] JRC100
• In Re Madge’s Settlement [1994] JLR Note 16b
• Allnutt and another v Wilding and others [2007] EWCA Civ 412 Monery LJ
• B and C v Virtue Trustees (Switzerland) AG and Ors re The C Trust 29-Nov-2018 [2018] JCA219