Armstrong v Armstrong

Commercial principles of interpretation apply to trusts and wills. The court identifies meaning from the natural and ordinary language, purpose, document as a whole, known facts and common sense, while excluding subjective intentions.

A voluntary trust may be rectified where clear and convincing evidence establishes the settlor’s true intention and the written instrument fails to give effect to it. The intended correction must also be sufficiently certain. Trust property may be identified by construction from the circumstances without stating a policy or serial number.

The claimant sought declarations and, alternatively, rectification concerning two life-assurance trusts created in 2005 and 2007 by her parents. The documents left unresolved whether a power of appointment expired on the first or last death, and the 2007 trust omitted the policy description and default beneficiaries.

The claimant was also named as both claimant and first defendant because she acted in different capacities. The court first regularised that procedural irregularity and then determined the construction and rectification issues.

1. Constitution of proceedings. A person acting in more than one capacity should ordinarily be joined once only and on one side of the record. The claimant was therefore removed as first defendant.
2. Construction. The contractual approach to interpretation applies to trusts and wills. The court determines meaning from the natural and ordinary meaning of the words, the document’s overall purpose and provisions, facts known or assumed at execution, and common sense, excluding subjective evidence of intention.
3. Rectification. A voluntary settlement may be rectified where the settlor made a relevant mistake, the instrument fails to express the settlor’s true intention, and that intention is proved by clear and convincing evidence on the balance of probabilities. The court must also identify the correction with sufficient certainty. A contested issue must exist even where all relevant parties consent and rectification may produce a fiscal benefit.
4. Trust property. The policy subject to the 2007 trust could be identified by construing Mrs White’s application and the surrounding document. It was unnecessary to insert the policy number later added by the insurer’s head office.
5. Application. The evidence established that Mrs White intended her two daughters to be default beneficiaries in equal shares. The 2007 trust was rectified accordingly. The evidence also established that she intended the power of appointment to run for the longer period, so the word “first” was deleted from both trusts.
6. Orders. The court made a declaration identifying the policy subject to the 2007 trust and ordered the specified rectifications.

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