Mackay v Wesley

The appointment of a new trustee is effected by the appointor’s act. The appointee may disclaim the office, with retrospective effect, but acceptance is not a necessary element of appointment. A claim based on mistake in equity generally concerns a voluntary disposition or transaction by the mistaken person; it does not vitiate an appointment made by trustees who were not mistaken. A document is not non est factum merely because the signer misunderstood its legal consequences. Capacity requires evidence directed to the statutory or common-law test, and expert evidence will ordinarily be necessary except in very clear cases. Partial rescission is unavailable where it would create a mismatch with the transaction document or where the relevant transaction is not severable.

The claimant sought rescission of, or a declaration invalidating, her appointment as a trustee of the Ellen Morris 1990 Settlement under a deed dated 19 March 2003. She relied on undue influence, mistake, lack of capacity and non est factum. The appointment occurred in the context of a tax-planning scheme and exposed her, if the scheme failed, to a substantial capital gains tax liability. The defendant did not acknowledge service or oppose the claim. Master Kaye had directed that the Part 7 claim be treated as a Part 8 claim and listed for disposal with the claimant’s summary judgment application. The central issues were whether the appointment or the claimant’s acceptance could be vitiated, and whether the relief sought could be granted in respect of her appointment alone.

1. Disposition. The claim and the application for summary judgment were dismissed.
2. Non est factum. The claimant knew that the document related to an offshore trust. Her misunderstanding concerned the legal consequences of becoming a trustee, not the document’s fundamental character. The doctrine therefore did not apply. The distinction between a document’s operative effect and its consequences remained applicable.
3. Capacity. The deed was a multiparty transaction involving appointment, consent, vesting and indemnity covenants. It was not a unilateral voluntary transaction by the claimant. Even if she had lacked capacity, the evidence did not establish that the other parties knew or ought to have known of that lack. In any event, the evidence did not satisfy the tests in sections 2 and 3 of the Mental Capacity Act 2005. Expert medical evidence was required in a case that was far from clear.
4. Mistake. The equitable jurisdiction identified in Pitt v Holt concerned a causative mistake in a voluntary disposition. The claimant did not make the appointment, did not dispose of property, and gave substantial consideration through indemnity covenants. Her general assumption that her father would not ask her to do anything dangerous was too vague to constitute the necessary distinct mistake.
5. Appointment and acceptance. The outgoing trustees’ appointment took effect before acceptance. The claimant could have disclaimed, but she had not sought that relief. The appointment was not tainted by mistake or undue influence. Further, rescinding only her appointment would create a mismatch with the deed, which appointed all the new trustees together.
6. Undue influence and fairness. The claimant had placed trust and confidence in her father and the transaction called for explanation. Nevertheless, the relief sought was not legally available in the form pleaded. Sixteen years had passed, subsequent trust acts had occurred, and the consequences of rescission for the trust, HMRC and the other trustee were insufficiently addressed. The court would not make an order which had not been shown to operate justly and fairly.
7. Permission. The proposed appeal grounds concerning mistake, severability and fairness had individual prospects, but the decisive issue was the legal effect of appointment and acceptance. That issue had no real prospect of success on the pleaded case. Permission to appeal and permission to amend were refused.

The judgment records no prior merits decision. Master Kaye’s order of 19 December 2019 directed that the Part 7 claim be treated as a claim under CPR Part 8 and listed for a disposal hearing with the claimant’s summary judgment application. The disposal hearing took place on 22 January 2020. The court dismissed the claim and application, and subsequently refused permission to appeal and permission to amend.