Kevern v Ayres & Anor

Rectification cannot be ordered merely to clarify wording. The court must determine that the written instrument failed to record the parties’ true agreement and that the proposed alteration is justified by a qualifying mistake. That ordinarily requires the court to construe the instrument and determine the effect of the relevant statutory provision. Construction and rectification are conceptually distinct, but in practice they are closely connected and may need to be determined together. A court should not give a unilateral indication of the outcome of a claim. Where the claim has been artificially separated from related tax issues, the court may adjourn to allow the parties and HMRC to agree a practical course for determining the issues.

The claim concerned a deed of variation executed following the intestate death of Raymond Ayres. The deed created a trust of part of Sheila Kevern’s share for twenty-four months, with income payable to Claire Ayres. The intended inheritance-tax treatment depended on the interaction between the deed and section 142 of the Inheritance Tax Act 1984.

The claimant initially advanced claims concerning the construction of section 142(4), the construction of the deed, and rectification. Following HMRC’s jurisdictional objection, the construction claims were discontinued and only rectification remained. The central issue was whether the High Court could determine the meaning and effect of the statutory provision and the deed when those issues might also arise before the tax tribunal.

1. Rectification and construction. A court cannot properly order rectification without determining that the written document failed to express the parties’ intentions and that the proposed change is required to correct the relevant mistake. That determination ordinarily requires consideration of the meaning and effect of the contractual words in context. The court cannot avoid that question by proceeding on an ambiguous assumption that the document requires alteration (paras [13]–[15]).
2. The distinction between construction and rectification is substantially artificial in practical terms. Although different evidence may be admissible to each inquiry, both claims will commonly need to be heard together. In the present procedural posture, the meaning of section 142(4) and clause 5 of the deed was material to whether any mistake had occurred and whether rectification was justified (paras [11]–[13]).
3. The judge considered that it might be appropriate for the High Court to determine issues arising incidentally in the rectification claim, even where they overlapped with matters within the tax tribunal’s jurisdiction. However, he did not finally decide that jurisdictional issue, particularly because HMRC had not actively participated and the claimant had not advanced full argument on it (paras [12]–[14], [18]).
4. The court should give a reasoned judgment on the claim and should not provide a unilateral indication that the claim would or might fail. The action was therefore adjourned to enable the claimant and HMRC to consider whether to seek further directions, restore the matter for argument, or proceed to final judgment (paras [16], [19]).