• Kylie Simmonds-Cox

Correcting Mistakes in Trusts

The court has an inherent power to rectify a trust deed, where words are wrongly inserted into or omitted from it so that it does not reflect the true intentions of the parties. Such errors might be described as clerical errors. The leading case on rectification is Re Butlin's Settlement Trusts. [1976] Ch 251, where it states that rectification will be permitted where words have been added, omitted or wrongly written as a result of a careless mistake or where they were used on purpose but it was because it was thought they had a different meaning to that which they actually did.

A recent decision on rectification can be found in Millar v Millar [2018] EWHC 1926 (Ch). In this case, a solicitor drafted a Trust in 2005 and included two contradictory clauses. Two of the early clauses in the trust gave vested interests in reversion to the settlors and created a power of appointment exercisable in favour of the settlors (amongst other beneficiaries). A later clause in the trust flatly contradicted the earlier provisions, namely the settlors were excluded from receiving any benefit from the trust. The settlors of the trust and its trustees sought guidance from the Court on how (if at all) to resolve the contradiction.

The judge confirmed that the principles for the correct construction of wills, as set out in the decision of the Supreme Court in Ma rley v Rawlings, could be applied in this case. In that case Lord Neuberger stated that "whether the document in question is a commercial contract or a will, the aim is to identify the intention of the party or parties to the document by interpreting the words used in their documentary, factual and commercial context". The judge adopted this approach in this case, stating that "there can be no reason to suppose that the construction of a family trust deed… should be construed along different lines". The judge found that there was "clear evidence in this case of the true intention of the settlors". He ruled that the clause that was inconsistent with that intention should therefore, as a matter of construction, be disregarded completely.

This is a good example of the risks associated with using precedents for trust drafting without checking whether every clause is appropriate for the particular trust. An important point for practitioners in this particular case, is that the judge named the solicitor who drafted the deed as well as her firm. The solicitor and her firm would have avoided the reputational damage and, quite possibly, the costs of the claim, if the deed had been read carefully when it had been completed.

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