SwissIndependent Trustees SA v Robert Sofer & Ors

Trust instruments are construed by identifying the meaning of their words in context, having regard to the instrument’s purpose, structure, known background and common sense. For property-holding instruments intended to operate over the long term, textual analysis ordinarily receives greater weight than historic background circumstances.

The court may correct an obvious drafting error where the mistake and the required correction are clear from the document and admissible background facts. If the necessary correction is uncertain, the issue is one of rectification rather than construction. A parenthetical explanatory phrase should not ordinarily cut down a formal definition elsewhere in the trust instrument, particularly where doing so produces an irrational result.

The claimant trustee sought construction of three English-law discretionary trusts established for members of the Sofer family. Amendments made in 2015 referred both to a formal definition of the trust corpus and to a parenthetical description that appeared to reduce the tax-free corpus to one third of its intended amount.

The adult beneficiaries did not oppose the trustee’s construction. A solicitor represented minor and unborn beneficiaries and also did not oppose it. The first part of the Part 8 claim concerned construction only; rectification was postponed unless construction failed. The central issue was whether the inconsistent parenthetical words should be given effect.

1. The court declared that “Corpus of the Trust Fund” in sub-clause A3(1)(a) referred to the full corpus defined in clause S1(8a), notwithstanding the inconsistent parenthetical wording. The construction claim therefore succeeded, and the postponed rectification issue did not arise.

2. The ordinary principles of interpretation stated in Investors Compensation Scheme v West Bromwich Building Society and applied to wills in Marley v Rawlings also apply to trusts. The court identifies meaning from natural and ordinary language, the document’s purpose and provisions, known or assumed background facts and common sense, while excluding subjective intention.

3. Property instruments have distinctive characteristics. They bind persons beyond the original parties and commonly operate over long periods. Accordingly, as explained in Barnardo’s v Buckinghamshire, textual analysis may properly receive greater weight than the background factual matrix. This approach applies to non-pension trust documents as well as pension schemes.

4. The court may correct an obvious error in expression only where the mistake is clear on the face of the document and the required correction is also clear. If the correction cannot be identified with sufficient certainty, the remedy is rectification, as explained in Arnold v Britton.

5. Clause S1(8a) was a formal definition, whereas the disputed wording in A3(1)(a) was a parenthetical explanation introduced by “being”. The formal definition therefore had priority. Giving effect to the parenthesis would artificially reduce the tax-free corpus and make no commercial or fiscal sense, while ignoring the superfluous words produced consistency with the trust structure. The court preferred omission of the surplus wording, following the approach illustrated by Homburg Houtimport BV v Agrosin Ltd (The Starsin).

6. The Australian tax material was admitted as factual description of the taxation context in which the trusts operated, rather than as expert opinion evidence requiring permission under CPR Part 35. In any event, Part 35 is not a complete code for expert evidence, and the court could have directed that the usual report procedure was unnecessary.