In the Matter of the Representation of Scarlett Investment Holdings Limited addresses an application for rectification by a de facto trustee in circumstances where the settlor of three trusts settled by declarations of trust dated 23 February 1982 had died and the original trustee, a BVI private company was believed to have been struck off from the register of companies. Prior to being struck off the BVI company purported to retire in favour of another BVI company (Athol) (understood to be subsequently liquidated). This appointment was effected by the settlor, notwithstanding that he had no power to do so. Accordingly, as noted in the judgment “There is … a substantial question mark over the validity of Athol’s appointment.” Athol then purported to retire in favour of Scarlett Investment Holdings Limited (Scarlett) again notwithstanding that Athol did not have the power to do so.
Scarlett purported to act as trustee and appointed each trust a beneficiary of the other, again notwithstanding that there was no power for Scarlett to do so. Scarlett also purported to settle further property onto each trust.
Scarlett then sought rectification of the trust instruments.
Scarlett as de facto trustee was considered to have standing to make an application pursuant to Article 51 of the Trusts (Jersey) Law 1984, which has some facets of s 66 of the Trustee Act 1956 (Right of trustee to apply for directions)
At the time of the application for rectification, B was the sole default beneficiary. The rectification sought included the appointment of a protector. The matter is interesting as the judgment identifies the scope for correction of “clerical blunders” where there is no need for a formal order for rectification and the scope for citing “an error on the part of the settlor” to allow a properly constituted trust.
In the context of obvious mistakes the following passages from the judgment provide useful guidance:
30. In the matter of the Representation of H1 Trust Company Limited  JRC 039, the Court at paragraph 17 of the judgment said this:-
31. And, at paragraph 22:-
In the case at hand, while the matter was rather more significant than a clerical blunder, a pragmatic view was taken to allow the rectification sought, the court noting at  that:
“This is a highly unusual set of circumstances where a trust clearly exists but it has proved impossible to find anyone connected with it or who might be interested in it other than the default beneficiary. In the circumstances, the Court would wish to do what it can to assist and put in place a trust which clearly was the intention of the settlor when created, namely a properly constituted trust with a protector. There is no suggestion that what has been done in the intervening period from the creation of the trust, although not valid because of a want of validity of appointment, has been wrong or other than in the interests of the trust and should not be to the extent necessary validated.”
While it could be argued the that the case should be limited to its facts, given the number of trusts in New Zealand and the vast range of drafting competencies employed, the decision may provide useful guidance more commonly that might be wished for.
- In the Matter of Representation of the Scarlett Investment Holdings Limited  JRC198
- Re Shinorvic Trust  JRC 081
- Professor Paul Matthews Nothing up my sleeve at  Jersey and Guernsey Law Review 357
- In Snell’s Principles of Equity 27th Ed p 611
- East v Pantiles (Plant Hire) Limited  2 EGLR 111