RBC Trustees (CI) Ltd & Ors v Stubbs & Ors

Rectification may correct a deed which fails to record the maker’s specific intention. The claimant must provide convincing evidence of that intention, identify a flaw in the document itself, and show an issue capable of being contested. It is unnecessary to prove a positive intention not to produce every unintended consequence. A mistake in the scope of the changes made by a deed is distinct from a mistake merely as to fiscal consequences. Where the intended change could have been achieved by several methods, rectification is available if the intended result is sufficiently precise. A contestable issue may be non-fiscal, including whether rights arise under an earlier or later trust instrument.

The trustees of a family settlement sought rectification of deeds dated 11 November 2008 and 22 April 2014. The deeds were intended to remove successive life interests in favour of the former spouses of two principal beneficiaries. Through drafting errors, they revoked and reappointed the principal beneficiaries’ own interests, potentially changing their inheritance-tax treatment and other statutory consequences.

The settlor and beneficiaries supported the application, although full arguments were advanced against it. The alternative claim for rescission was not determinative because the court granted rectification. The central issues were whether the trustees’ specific intention was proved, whether the deeds contained a document-level flaw rather than merely an unsuccessful tax plan, and whether there was a contestable issue despite the parties’ agreement.

1. Rectification granted. The 2008 and 2014 deeds were rectified because they failed to record the trustees’ and settlor’s intention to remove only the former spouses’ successive life interests. The parties were invited to draw up the appropriate order.
2. The applicable criteria for rectification of a unilateral deed, drawn from Racal Group Services Ltd v Ashmore [1995] STC 1151 and summarised in Giles v RNIB [2014] EWHC 1373 (Ch), were: convincing evidence of the true intention; a flaw in the document rather than merely a mistake about consequences; proof of the specific intended result; and an issue capable of being contested even if all interested parties consented.
3. The evidence established that the trustees instructed their advisers to remove the spouses’ interests only. The deeds instead revoked and reappointed the principal beneficiaries’ interests. This was a mismatch between intention and the document’s scope. It was not merely a case in which a tax objective had failed. The reasoning in Allnutt v Wilding [2007] EWCA Civ 412, where the mistake concerned only the fiscal consequences of an intended settlement, was therefore distinguishable.
4. The specific intention was sufficiently clear. The trustees were not required to prove a positive intention never to revoke and reappoint the principal beneficiaries’ interests. Nor did the existence of several possible drafting methods prevent rectification.
5. There was a contestable non-fiscal issue. The rights might arise under the 2004 deed or under the later deeds, with possible consequences under the Trusts (Capital and Income Act) 2013 and other legislation. That change in the governing instrument was material and was not merely a fiscal consequence.