Fine v Fine

Trust instruments should be construed to give effect to the settlors’ objectively established intention where the wording, read in context, supports that construction. Rectification is unnecessary if construction resolves the uncertainty. Statutory trustee powers apply subject to a contrary intention in the trust instrument. That intention may be implicit, but it must be sufficiently clear. A vested interest in income does not, by itself, exclude the statutory accumulation rule. Rectification is available where the document fails to give effect to an intended legal arrangement, including an intended interest in possession. A mistake about the legal effect of the deed is distinct from a mistake merely about its fiscal consequences.

The claimants sought rectification of two 1992 settlement trust deeds and two deeds of appointment made under them. The first issue was whether the expression “and remoter issue” included grandchildren born after the settlements were executed, or whether rectification was required.

The second issue concerned appointments intended to create interest in possession trusts. The deeds incorporated statutory powers under the Trustee Act 1925, including the accumulation rule in section 31(2)(ii). The claimants contended that the omission of words excluding that rule resulted from a mistake about the legal effect of the deeds.

1. Construction of settlement deeds. The words “and remoter issue”, read with the surrounding beneficiary provisions and the explanatory memorandum prepared at the time, included grandchildren born within the trust period in addition to Maxwell, the grandchild then living. The deeds therefore required no rectification.
2. Effect of statutory powers. The appointments expressly incorporated the statutory powers of maintenance, accumulation and advancement under section 31 of the Trustee Act 1925. Section 69(2) makes those statutory powers subject to the terms of the trust instrument. Under Re Delamere [1984] 1 WLR 813, exclusion of a statutory power need not be express if a contrary intention is sufficiently and clearly implicit.
3. A vested interest in income was insufficient, without more, to exclude section 31(2)(ii), because that provision applies notwithstanding that the beneficiary has a vested interest in the income. If it applied, accumulations would become an accretion to capital where the beneficiary died unmarried before 18, defeating the intended interest in possession.
4. The evidence established that the claimants intended to create interests in possession, understood as entitlements to income. Their mistake concerned the legal effect of the deeds, not merely the tax consequences which had prompted the restructuring. The deeds were accordingly rectified by inserting appropriate words excluding section 31(2)(ii).

First-instance decision. No appellate history was stated in the judgment.