Bullard v Bullard & Anor

Section 31 of the Trustee Act 1925 may divest a minor’s vested trust interest unless the trust instrument expresses a contrary intention. A reference to the statutory power in a schedule does not convert it into a power contained in that schedule. A no-conflict clause therefore does not necessarily exclude section 31. A voluntary settlement may be rectified where clear and convincing evidence proves the settlor’s specific intention, and the document contains a flaw preventing that intention from taking effect. The flaw may concern the legal effect of words used, rather than a clerical error. Rectification is unavailable merely because a transaction failed to achieve a desired fiscal result, but it may be granted where the evidence establishes the intended beneficial interests with sufficient precision.

The claimant sought construction or, alternatively, rectification of the deed establishing the Bullard Family Trust. The deed described the trust as an interest-in-possession settlement, but its Second Schedule expressly applied an enhanced form of section 31 of the Trustee Act 1925. Several intended beneficiaries were minors when the trust was created. The claimant argued that the deed should be construed so that section 31 did not divest their interests, or that the deed should be rectified to give effect to the intended interests in possession. The defendants, who were trustees and beneficiaries, consented to the relief and did not attend. The central issues were the construction of the deed and whether the requirements for equitable rectification were satisfied.

1. The court held that section 31 of the Trustee Act 1925 applied to the minor beneficiaries. Section 69(2) permits the statutory powers to be modified or excluded by the trust instrument, but the statutory source of section 31 remained the Act. It was not a power contained in the Second Schedule.

2. The no-conflict clause could not exclude section 31. Construing it in that way would deprive paragraph 6 of the Second Schedule of any operation, since its only practical effect was to divest minors’ interests. The minor beneficiaries’ interests were therefore contingent rather than immediate interests in possession.

3. The deed was nevertheless rectified. Applying the principles summarised in Racal Group Services Ltd v Ashmore and Giles v Royal National Institute for the Blind, there was convincing evidence of the claimant’s specific intention to create interests in possession for all the Primary Beneficiaries. The evidence included her own evidence, the surrounding fiscal context, the evidence of her former solicitor and the deed’s description of the trust.

4. The claimant’s mistake concerned the legal effect of using section 31, not the identity of the document or the words she intended to sign. That was a rectifiable mistake in the document. The intended correction was sufficiently precise: section 31 was to be excluded so that the beneficiaries received immediate interests in possession.

5. There was a real issue concerning the difference between the contingent interests actually created and the absolute interests intended. Delay did not prevent relief because there was no evidence of undue delay and no material prejudice to third parties. Rectification of the trust deed was granted.