Vivian v Koningsveld & Ors

Rectification of a deed of variation is available where clear and cogent evidence establishes that the document fails to give effect to the parties’ specific common intention. It is insufficient to show only that the document failed to secure an intended fiscal advantage. The claimant must show how the fiscal objective was intended to be achieved and that the mistake concerns the meaning or effect of the document, rather than merely its fiscal consequences. A tax advantage does not justify refusing relief where rectification gives effect to the parties’ true intention and the advantage is incidental to that correction. A prior voluntary deed of rectification is not an absolute bar where a live issue remains which requires a court order, including because HMRC does not accept the deed’s retrospective fiscal effect.

The claimant sought rectification of a deed varying the wills of her late father, John, and stepmother, Violet. The deed was intended to reduce inheritance tax by transferring value into John’s estate and creating specified legacies. Through a mistaken understanding of the assets held jointly by John and Violet, it failed to sever the relevant joint tenancies. A later deed of rectification corrected that omission, but a court order was required for the intended retrospective tax treatment. HMRC did not oppose the application but required the court’s attention to authorities concerning rectification for fiscal purposes. The central issues were whether the parties had a sufficiently specific common intention, whether the mistake concerned the effect of the deed, and whether the later deed prevented relief.

1. Relief granted. The court ordered rectification of the deed of variation in terms mirroring the deed of rectification already executed by the parties.
2. Rectification requires clear or strong evidence that the document failed to carry out the parties’ common intention. It is not necessary that the parties had formulated the precise words to be inserted, provided they had a common intention as to the substance of what was to be achieved. The principles stated in Grand Metropolitan plc v The William Hill Group Ltd and Swainland Builders Ltd v Freehold Properties Limited Ltd supported that approach.
3. The claimant had to establish a specific intention as to how the fiscal objective was to be achieved. A mere misapprehension about the tax consequences of the deed was insufficient. The relevant distinction, explained by reference to Gibbon v Mitchell, was between a mistake about the effect of the transaction and a mistake concerning only the consequences or advantages of entering into it.
4. The evidence established a specific common intention: specified joint tenancies were to be severed so that John’s estate contained assets sufficient to use the inheritance tax nil-rate band, which was then to be used for specific legacies. The omission of the severance provisions was therefore a mistake in the way that intention had been expressed in the deed.
5. The court adopted the analysis in Re Slocock’s Will Trusts and Ashcroft v Lonsdale & Others. The fact that rectification would produce a legitimate tax saving did not justify withholding relief. The principle in Whiteside v Whiteside was limited to circumstances where the parties’ common intention to secure the tax benefit had not been established, or where no live issue remained between them.
6. The later deed did not prevent relief because HMRC did not accept its efficacy for inheritance tax purposes and a contested issue remained which could be resolved by a court order. The reasoning in Re Colebrook’s Conveyances reinforced that distinction.