Wolff v Wolff

A voluntary transaction may be set aside in equity where the disponor makes a serious mistake about its legal effect, whether the mistake is one of law or fact. The relevant distinction is between a mistake as to the transaction itself and a mere mistake about its commercial consequences or advantages.

A transaction may confer a greater interest than the disponor intended. That is a mistake as to effect where the legal rights transferred are materially more extensive than those understood by the disponor. An alternative jurisdiction based merely on inadequate explanation and lack of understanding is doubtful if it is not founded on mistake.

Edward and Brigitte Wolff applied to set aside a reversionary lease granted to their daughters as part of an inheritance tax scheme. They also sought orders concerning a related trust deed and a declaration as to whether the lease was held on the trusts of that deed.

The Wolffs alleged that they had not understood that the lease would deprive them of their right to occupy their home from 2017, or that the trust deed gave their daughters no meaningful access to capital. The defendants did not oppose the application. The central issue was whether the Wolffs’ misunderstanding concerned the legal effect of the transaction and was sufficiently serious to justify equitable relief.

1. The lease was set aside. The court found that the Wolffs did not understand that, when the reversionary lease commenced, they would lose their right to occupy the property. They would not have entered into the transaction had that effect been explained.
2. Following the principle stated by Millett J in Gibbon v Mitchell [1990] 1 WLR 1304, a voluntary transaction may be set aside where the disponor did not intend it to have the effect which it had. The mistake may be one of law or fact, but must concern the effect of the transaction itself rather than merely its consequences or the advantages expected from it.
3. The distinction between effect and consequence was applied to the lease. The Wolffs intended to give their daughters a future interest, but subject to retaining their existing rights of occupation without charge. The lease legally transferred more than they intended. That was a serious mistake as to legal effect, not merely a mistake about the transaction’s practical or tax consequences. The reasoning in AMP (UK) plc v Barker [2001] PLR 77 at paragraph 70 supported that conclusion.
4. The court expressed doubt about a separate jurisdiction based solely on inadequate explanation and lack of understanding. The apparent high-water-mark authority, Philippson v Kerry (1863) 32 Beav 628, could instead be analysed as a mistake case.
5. Had it been necessary to decide the issue, the trust deed would also have been set aside because the Wolffs intended their daughters to have access to capital, whereas the deed did not provide that in any meaningful way. The lease was not held on the trusts of the deed: it had been granted to the daughters, not conveyed to the trustees, and no nominee or equitable obligation had been established.

Further consequential orders were to be addressed after submissions from counsel.