Lawie v Lawie & Ors

The court may rectify a voluntary trust where there is convincing proof that the executed instrument fails to record the relevant intention. The remedy is discretionary. In deciding whether to grant relief, the court must consider the nature of the power sought, the nature and operation of the trust, the effect of rectification on the beneficiaries, and the positions of the trustees and affected parties. Where the trust was not created pursuant to a bargain, the settlors’ intention may be sufficient, although the trustees’ intentions and objections remain relevant to the exercise of discretion. Rectification may be ordered despite a substantial adverse effect on existing beneficiaries where a clear drafting mistake has deprived the trust of its intended discretionary operation and the circumstances justify relief.

The claimant, a surviving settlor, sought rectification of a trust deed executed on 4 March 2006. The deed named two grandchildren as beneficiaries but left blank the part intended to identify potential future beneficiaries. The claimant contended that his two children should also have been included, so that the trustees could exercise discretionary powers of appointment among the children and grandchildren.

The application was initially framed more broadly but the claimant abandoned the proposed inclusion of his own name after further evidence was filed. The defendants did not appear, although most did not oppose the application. One grandchild opposed it. The central issues were whether the intended beneficiaries had been proved and whether rectification should be granted as a matter of discretion.

1. Jurisdiction and proof. Following In re Butlin’s Settlement [1976] Ch 251, the court had jurisdiction to rectify a voluntary settlement. The claimant had to provide convincing proof that the concluded instrument failed to express the relevant intention. Whether relief should be granted remained a matter of discretion.
2. Relevant intention. The evidence established that the settlors intended the trust to benefit their children as well as their grandchildren. The personal financial report, read with the witness evidence, provided solid evidence of that intention. Because the trust was not created pursuant to a bargain, no intention apart from that of the settlors was legally essential on the facts. The intentions of the other trustees nevertheless supported the same conclusion, and none opposed rectification.
3. Exercise of discretion. The court considered the trust’s intended discretionary structure, the obvious drafting mistake, the unanimity of the trustees, and the likely reduction in the grandchildren’s entitlements. Those adverse consequences did not outweigh the evidence that the deed had accidentally omitted the children and had thereby deprived the trust of its intended flexibility. The position was sufficiently analogous to In re Butlin’s Settlement.
4. Disposition. Gibbon v Mitchell [1990] 1 WLR 1304 was not relevant because it concerned setting aside a deed for mistake rather than rectification. Joscelyne v Nissen [1970] 2 QB 86 confirmed the need for convincing proof. The order for rectification was made.