Susan Sullivan v Stephen Sullivan & Ors

A voluntary disposition may be rescinded for equitable mistake where the disposer made a distinct and causative mistake about the legal character or nature of the transaction. The mistake must be sufficiently grave, assessed by reference to its centrality and consequences, to make it unjust or unconscionable for the disposition to stand. The assessment requires an objective evaluation with close attention to the particular facts. Carelessness does not necessarily prevent relief, unless the disposer deliberately or effectively ran the risk of being wrong. Even where all parties consent, there must remain an issue capable of being contested between them.

The claimant, the widow and executrix of Patrick Sullivan, sought rescission of a 2009 declaration of trust concerning a property owned by Patrick. The defendants, members of Patrick’s family, acknowledged service and did not defend the claim. The evidence was undisputed.

Patrick intended to sign a non-binding declaration of his wishes concerning inheritance. He instead executed a trust which disposed of his beneficial interest in the property and carried legal, financial and tax consequences that he and the claimant did not understand. The central issues were whether Patrick had made a relevant equitable mistake, whether the mistake was sufficiently serious to justify rescission, and whether there remained a contestable issue despite the defendants’ consent.

1. Order made. The Trust was rescinded on the ground of mistake.
2. The court applied the equitable mistake principles identified in Pitt v Holt [2013] AC 108 and summarised in Kennedy v Kennedy [2015] WTLR 837. The relevant considerations were a distinct mistake, a causative mistake concerning the legal character or nature of the disposition, sufficient gravity, centrality to the transaction, and an objective assessment of the injustice and seriousness of leaving the disposition uncorrected.
3. Patrick’s mistake was distinct and causative. He believed that he was signing an informal and non-binding declaration of testamentary wishes. In fact, he executed a trust with unequivocal legal consequences. Neither Patrick nor the claimant had legal training or experience, and no advice had been given about the document’s nature or effect.
4. The mistake was sufficiently serious. The Trust disposed of Patrick’s most valuable asset, threatened his and the claimant’s financial security and business income, affected the claimant’s provision after Patrick’s death, and had significant tax consequences.
5. Although the defendants consented to the claim, there remained an issue capable of being contested. An agreement provided for payments to Stephen and David only if the Trust was rescinded. That satisfied the additional requirement relied upon by the claimant.
6. The circumstances therefore made it unjust to leave the Trust in place. The court did not need to address submissions concerning the merits of the claim beyond those findings.