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||Neutral Citation Number:  EWHC 1926 (Ch)
||Case No: D31BS664
IN THE HIGH COURT OF JUSTICE
BRISTOL DISTRICT REGISTRY
||Bristol Civil Justice Centre
2 Redcliff Street, Bristol, BS1 6GR
B e f o r e :
HHJ PAUL MATTHEWS
(sitting as a Judge of the High Court)
|| (1) Christina Mary Millar
(2) Sarah Bridget Pearson
||- and -
||(1) Robert John Millar
(2) Andrew Jon Millar
(3) Benjamin Jay Millar
(4) Samuel James Millar
(5) Her Majesty's Attorney General
Christopher Jones (instructed by Royds Withy King LLP) for the Claimants
The defendants were not represented
Claim dealt with on the papers, without a hearing
HTML VERSION OF JUDGMENT APPROVED
Crown Copyright ©
HHJ Paul Matthews :
- This is my judgment on a claim made by claim form under Part 8 of the CPR issued on 3 October 2017 by the claimants' solicitors, Royds Withy King LLP. It concerns a deed of settlement dated 7 December 2005 executed by the claimants. They seek an order for
"(a) the construction of the settlement so that clause 13 is either of no effect or there is no bar to the claimants or their spouses receiving a benefit from the fund or act of the trustees, or (b) the rectification of the instrument by the deletion clause 13".
The defendants are the first claimant's husband and three sons, and Her Majesty's Attorney-General (representing charity). All of the defendants (including the Attorney-General) have filed acknowledgements of service indicating that they do not intend to contest the claim. The covering letter dated 27 October 2017 from the government legal service also indicates that the Attorney-General would not intend to be represented at any hearing. In fact there has been no hearing, as, after consideration of the documents in the case, I decided to deal with the matter on the papers.
- The claim is supported by the witness statement of the first claimant dated 19 July 2017 and the witness statement of the second claimant dated 18 July 2017. These two witness statements have been prepared with the title as in this claim, and each containing a statement of truth, as required by the CPR, rule 22.1(1)(c), although they appear to have been signed some months before the claim was actually issued. There is no explanation as to why this is so. In addition there are several documents, one from each of the first four defendants, each called "Statement", but not titled in this claim and not containing a statement of truth (and therefore not complying with the relevant rules in the CPR). They too are dated long before the claim was issued. Each such statement is in identical form. It confirms that the writer has seen the claimants' witness statements, and the draft order, and gives consent to the claim. Finally, there is a brief witness statement dated 26 April 2018 from Heather Redman, the solicitor who drafted the settlement question
- The claimants are the two daughters of the late Christopher Pearson and his wife Janet Pearson. Mrs Pearson died on 1 July 2005 and Mr Pearson on 30 March 2015. The first claimant was born in August 1959 and the second claimant in December 1961. The first claimant is married to the first defendant and they have three sons, the second to fourth defendants. The second claimant is not married, and has no children.
- The late Mr and Mrs Pearson were co-owners of the property known as 15 Mill Lane, Iffley Village, Oxford ("the property"). They were joint tenants at law and beneficial tenants in common. When Mrs Pearson died in 2005 by her will made in 1993 she left her residuary estate to the claimants in equal shares absolutely. The effect of this was that Mr Pearson became the sole owner at law of the property, holding on trust for himself as to 50% and as to 25% for each of the claimants.
- The claimants consulted Heather Redman of Marshall & Galpin solicitors (a predecessor firm to Royds Withy King LLP) to act in the administration of the estate of their late mother. She advised the creation of a lifetime trust whereby their mother's one half share in equity in the property would be held on trust for their father during his lifetime, subject to that on trust for any spouse of the claimants for life, and subject to that on trust for the claimants themselves. As appears from a letter dated 1 November 2005 from Heather Redman to the second claimant, the motive for the creation of this trust was inheritance tax planning. I am not, of course, concerned with whether this was successful.
- The claimants are not only the settlors of the trust constituted by the settlement, but are also its trustees. The material terms of the settlement are as follows.
"1.3. The "Beneficiaries" shall mean: (a) Christopher Gresley Pearson (b) the Settlors; (c) the spouses and children of the Settlors
[ … ]
3. Subject to the powers and provisions hereinafter contained the Trustees shall divide the Trust Fund into two separate sub-funds so that the property which derives from each Settlor can always be identified and shall stand possessed of the capital and income of the Trust Fund thus identified upon trust as follows
4.1. The income of the Trust Fund shall be paid to Christopher Gresley Pearson during his lifetime.
4.2. Subject thereto the income of each sub fund shall be paid to the Settlor during that Settlor's lifetime and subject thereto the income thereof shall be paid to the spouse of that Settlor and subject thereto the Trustees shall hold the capital and income of each sub-fund to its respective Settlor absolutely if living at the end of the Trust Period provided that if the Settlor dies before acquiring an absolute interest leaving issue living at the end of the Trust Period such issue shall take and if more than one in equal shares the share which his or her parent would have taken had such parent survived.
5.1. Notwithstanding the above, the Trustees shall have power to appoint the whole or any part of the Trust Fund for the benefit of such of the Beneficiaries, at such ages or times, in such shares, upon such trusts (which may include discretionary or protective powers or trusts) and in such manner generally as the trustees That shall in their discretion think fit. [ … ]
6. In the event of the failure or determination of the above trusts, the capital and income of the Trust Fund shall be held upon trust for such charity or charities as the Trustees shall in their absolute discretion appoint.
[ … ]
13.1. No discretion or power conferred on the Trustees or any other person by this Deed or by law shall be exercised, and no provision of this Deed shall operate directly or indirectly, so as to cause or permit any part of the capital or income of the Trust Fund to become in any way payable to or applicable for the benefit of the Settlor or any person who shall previously have added property to the Trust Fund or the spouse for the time being of the Settlor or any such person.
13.2. The provisions of subclause 13.1 shall not preclude the Settlor or any such person from exercising any statutory right to claim reimbursement from the Trustees for any income tax or capital gains tax paid by him in respect of income arising to the Trustees or capital gains realised or deemed or treated as realised by them.
13.3. Subject to subclause 13.2, the prohibition in this clause shall apply notwithstanding anything else contained or implied in this Deed."
- It will be seen that clause 13 of the settlement flatly contradicts the earlier provisions in clauses 4.2 and 5 of the settlement. Clause 4.2 gives vested interests in reversion to the settlors, and clause 5 creates a power of appointment exerciseable in favour of the settlors amongst others. This claim is accordingly about how (if at all) to resolve this contradiction.
- As I have already said, the parties to this claim are the two settlors (and trustees) as claimants, the present husband and children of the first claimant as defendants, and the Attorney-General, as representing charity under the ultimate default trust in clause 6, as fifth defendant. As a general proposition, in the absence of contrary statutory provision, it is for the claimants to decide who they wish to sue: Dollfus Mieg v Bank of England  Ch 33. The corollary is that, again subject to contrary statutory rule (eg CPR r 19.8A), only the persons joined are bound by the order made.
- However, there are two important points to bear in mind about the terms of the settlement in the present case. First, it makes a contingent gift to any spouse of either of the settlors. The spouse concerned can only be identified as at the time that the interest falls into possession and income falls to be paid to such spouse. In the case of the first claimant, who is already married, this is likely to be the first defendant. But it may not be. In the case of the second claimant, who is not married, it may be that this gift never takes effect. But on the other hand it may. These possibilities are not infinitesimal or illusory, but real, even if at present unlikely. Accordingly, on the face of it possible future spouses of both claimants need to be represented in these proceedings. Otherwise such possible future spouses will not be bound by any order made. However, I understand that the claimants have decided not to make application for a suitable representation order (no doubt because it is so unlikely that there would be any possible future spouses), and so the order I make will not bind any that there may be.
- The second point is that the settlement by clause 5, coupled with the definition in clause 1.3 (c), makes both the spouses and the children of the settlors objects of a power of appointment. So far as this relates to possible spouses other than the first defendant (who is of course already a party), the same point arises as in relation to the gifts of life interests already referred to. So far as this relates to existing children of the first claimant, they also are already parties to this claim. But so far as it relates to future children of both claimants, there is a question as to whether their interests need to be represented.
- Mr Jones, counsel for the claimants, in his written argument, refers me to section 2 of the Perpetuities and Accumulations Act 1964, which is the relevant legislation concerning perpetuities and accumulations for an instrument such as this settlement made in 2005. This section provides as follows:
"(1) where in any proceedings there arises on the rule against perpetuities a question which turns on the ability of a person to have a child at some future time, then –
(a) subject to paragraph (b) below, it shall be presumed that a male can have a child at the age of fourteen years or over, not under that age, and that a female can have a child at the age of twelve years or over, but not under that age or over the age of fifty-five years; but
(b) in the case of a living person evidence may be given to show that he or she will or will not be able to have a child at the time in question."
- The evidence before me (which I accept) is that the first claimant is now aged 58 years, and will reach her 59th birthday on 7th August next, and that the second claimant is now aged 56 years, and will reach her 57th birthday on 23rd December next. Moreover, both have been through the menopause, and neither has any intention of adopting children in the future. On the face of it, therefore, the conditions of section 2 of the 1964 Act are satisfied. However, the problem with section 2 is that it is not a provision of general application. It is expressly restricted to proceedings in which a question arises "on the rule against perpetuities". No such question arises in this claim. Accordingly, that provision is inapplicable to these proceedings.
- But that is not the end of the matter. In Re Westminster Bank Ltd's Declaration of Trusts  1 WLR 820, it was held by Wilberforce J that, taking into account the applicant's age, matrimonial history, the birthdate of her children, the evidence of any possibility of the birth of further children and the medical evidence, the trustees of the trust would be authorised to deal with the trust funds on the basis that the applicant was past the age of childbearing. However, this order was made without prejudice to, and would not extinguish, any right at any future child might have. If in that case it was right for the court to give leave to trustees to administer the trust fund on the footing that there would be no further children born, then in a similar case with appropriate evidence it must be possible for the court to deal with the question of construction or rectification on the footing that there will be no further children born. In accordance with principle, it must follow from what Wilberforce J said that any order made by me will not bind future children, but, as I understand the matter, given what the claimants have said in evidence about their intentions, they are not concerned about that, and have not asked for a suitable representation order to be made.
- I must next refer to the position of HMRC. It is not a party to this claim. There is no claim made in these proceedings in relation to any tax liability. So far as it goes, the evidence is that the claimants are unaware of the tax consequences of this claim because HMRC have declined to confirm the applicable tax due until the question of clause 13 is resolved. The claimants' solicitors wrote to HMRC by letter dated 18 October 2015. I have not seen a copy of that letter, but I have seen a copy of the reply from HMRC dated 25 November 2015. That letter states that (1) it is for the court rather than HMRC to set aside clause 13 of the trust deed, and (2) HMRC requires approval of the court in a form of a court order before accepting the solicitors' interpretation of the deed. It also asks for
"a copy of the draft application to be made to the court and associated evidence so that [HMRC] may consider what progress has been made".
- As I have said, the claim form was issued nearly two years later, on 3 October 2017. Counsel's skeleton argument, sent to the court in early 2018, says merely that "the issued application, together with this skeleton argument, will be sent to the Revenue". I have not been told why the solicitors did not send the application in draft, as they were asked to, and, strictly speaking, there is no formal evidence that the application, now issued, has ever been sent. Nevertheless, as I have been told informally by the solicitors concerned that it was indeed sent, I will proceed on the basis that this has been done. It remains the case, however, that I have not seen any reply from HMRC, and do not therefore know what its attitude is. This is unsatisfactory. They may have wished, for example, for authorities to be drawn to the court's attention. At best, since it has not been joined to this claim, it will not be bound by any order made.
Construction of the trust deed
- As I have said, the claim was put on two alternative bases, the first being the construction of the trust deed and the second rectification of the trust deed. I deal first with the question of construction, because it is only after ascertaining the true construction of the trust deed that logically the court could consider whether or not there was anything to rectify. In considering the true construction of the trust deed, I ignore the evidence of intention of the claimants as settlors and also of the draughtsman of the deed.
- There are many authorities in recent times concerned with the principles of interpretation of pension trusts. But there are not many which deal with the interpretation of family trusts. However, there can be no doubt that the principles of interpretation for commercial documents set out in Investors Compensation Scheme v West Bromwich Building Society  1 WLR 896, 912-3, and developed in Rainy Sky SA v Kookmin Bank  1 WLR 2900, also apply to trusts and wills. So for example in the case of Staden v Jones  EWCA Civ 936, a case involving the construction of an agreement alleged to create a trust for the daughter of a divorcing couple, the Court of Appeal expressly referred to the principles of interpretation in the West Bromwich case. And in Marley v Rawlings  AC 129 the Supreme Court applied them to the case of the construction of a will.
- In the West Bromwich case Lord Hoffmann said this at 912-13:
"I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prenn v Simmonds  1 WLR 1381, 1384–1386 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen  1 WLR 989, is always sufficiently appreciated. The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of 'legal' interpretation has been discarded. The principles may be summarised as follows.
(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the 'matrix of fact,' but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd  AC 749.
(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera SA v. Salen Rederierna AB  AC 191, 201:
'if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.'
If one applies these principles, it seems to me that the judge must be right and, as we are dealing with one badly drafted clause which is happily no longer in use, there is little advantage in my repeating his reasons at greater length. The only remark of his which I would respectfully question is when he said that he was "doing violence" to the natural meaning of the words. This is an over-energetic way to describe the process of interpretation. Many people, including politicians, celebrities and Mrs. Malaprop, mangle meanings and syntax but nevertheless communicate tolerably clearly what they are using the words to mean. If anyone is doing violence to natural meanings, it is they rather than their listeners."
- In Staden v Jones  EWCA Civ 936, the question arose whether a daughter could enforce provisions in an agreement between her divorcing parents relating to a house. The mother, Mrs Davis, had transferred her one half beneficial interest in the property to the father, Mr Jones, apparently on terms that it should pass to the daughter Mrs Staden on her father's death. The property was later transferred by the father to himself and his second wife Mrs Jones as joint tenants. When the father died, Mrs Jones claimed the whole by survivorship. (The relevant facts occurred before the coming into force of the Contract (Rights of Third Party) Act 1999, so that Act did not apply.) A preliminary question was whether a letter from the father's solicitors to the mother, enclosing the draft agreement between them relating to the property was admissible in evidence.
- Arden LJ (with whom Wall and Lawrence Collins LJJ agreed) said
"17. … The road on which we have to travel to decide this appeal forks at the point where the question is asked: was there in this case, following the transfer of the property to Mr Jones, a trust or just a contract? … [V]ery different consequences flow if we take the contract route. Only Mrs Davis can enforce the contract; Mrs Staden cannot do so. Moreover, given that the property has now passed to Mrs Jones by survivorship, Mrs Davis's remedy would only be for nominal damages. … But the decision as to which road to take requires a principled decision as to the meaning of the writing. The writing has to be interpreted against the matrix of fact, excluding evidence prior negotiations. Was the solicitors' letter admissible, or does it fall within the rule which precludes the admission of prior negotiations as an aid to interpretation of an agreement?
18. In Investors Compensation Scheme Limited v West Bromwich Building Society  1 WLR 898 at 912-3, Lord Hoffmann, with whom the remainder of the House agreed, set out the principles for the interpretation of written documents. In the course of doing so, he specifically dealt with the admissibility for the purpose of interpreting an agreement of what the parties said in the course of negotiating that agreement. The relevant passage is as follows: [Arden LJ then set out the first three of the principles from Lord Hoffmann's speech already set out above].
19. In this particular case, the solicitors' letter was a document which purported to set out what the parties had agreed, and which stated that that was what it was setting out; and it was put forward as the covering document for the writing, which was delivered at the same time. In those circumstances it would, in my judgment, be artificial to exclude the letter from any consideration of the writing…"
- So the letter was admitted in evidence, and indeed the agreement was held to create a trust in favour of the daughter. Of course, that is not the case of construing an admitted trust deed by reference to Lord Hoffmann's principles, but instead a document which might have created (and was held to create) a trust. But I cannot think that that in itself makes any real difference. And it is also clear that these principles of construction apply now to wills as well, as shown by the decision of the Supreme Court in In Marley v Rawlings.
- In that case Lord Neuberger said:
"18. During the past 40 years, the House of Lords and Supreme Court have laid down the correct approach to the interpretation, or construction, of commercial contracts in a number of cases starting with Prenn v Simmonds  1 WLR 1381 and culminating in Rainy Sky SA v Kookmin Bank  1 WLR 2900.
19. When interpreting a contract, the court is concerned to find the intention of the party or parties, and it does this by identifying the meaning of the relevant words, (a) in the light of (i) the natural and ordinary meaning of those words, (ii) the overall purpose of the document, (iii) any other provisions of the document, (iv) the facts known or assumed by the parties at the time that the document was executed, and (v) common sense, but (b) ignoring subjective evidence of any party's intentions. In this connection, see Prenn, at pp 1384–1386 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as H E Hansen-Tangen)  1 WLR 989, per Lord Wilberforce, Bank of Credit and Commerce International SA v Ali  1 AC 251, para 8, per Lord Bingham of Cornhill, and the survey of more recent authorities in Rainy Sky , per Lord Clarke of Stone-cum-Ebony JSC, at paras 21–30.
20. When it comes to interpreting wills, it seems to me that the approach should be the same. Whether the document in question is a commercial contract or a will, the aim is to identify the intention of the party or parties to the document by interpreting the words used in their documentary, factual and commercial context. As Lord Hoffmann said in Kirin-Amgen Inc v Hoechst Marion Roussel Ltd  1 All ER 667, para 64, "No one has ever made an acontextual statement. There is always some context to any utterance, however meagre." To the same effect, Sir Thomas Bingham MR said in Arbuthnott v Fagan  CLC 1396, 1400 that "courts will never construe words in a vacuum".
21. Of course, a contract is agreed between a number of parties, whereas a will is made by a single party. However, that distinction is an unconvincing reason for adopting a different approach in principle to interpretation of wills: it is merely one of the contextual circumstances which has to be borne in mind when interpreting the document concerned. Thus, the court takes the same approach to interpretation of unilateral notices as it takes to interpretation of contracts: see Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd  AC 749, per Lord Steyn at pp 770C–771D, and Lord Hoffmann at pp 779H–780F.
22. Another example of a unilateral document which is interpreted in the same way as a contract is a patent—see the approach adopted by Lord Diplock in Catnic Components Ltd v Hill & Smith Ltd  RPC 183, 243, cited with approval, expanded, and applied in Kirin-Amgen at paras 27–32 by Lord Hoffmann. A notice and a patent are both documents intended by its originator to convey information, and so, too, is a will.
23. In my view, at least subject to any statutory provision to the contrary, the approach to the interpretation of contracts as set out in the cases discussed in para 19 above is therefore just as appropriate for wills as it is for other unilateral documents. This may well not be a particularly revolutionary conclusion in the light of the currently understood approach to the interpretation of wills (see eg Theobald on Wills , 17th ed (2010), chapter 15 and the recent supplement supports such an approach as indicated in Royal Society for the Prevention of Cruelty to Animals v Sharp  1 WLR 980, paras 22, 31). Indeed, the well known suggestion of James LJ in Boyes v Cook (1880) 14 Ch D 53, 56, that, when interpreting a will, the court should "place [itself] in [the testator's] arm-chair", is consistent with the approach of interpretation by reference to the factual context."
- There can be no reason to suppose that the construction of a family trust deed, often again a unilateral document, should be construed along different lines. Taking account of these principles, it is apparent that clause 4.2 and clause 13 simply cannot stand together. That would make no sense. The first gives (or rather, reserves) the interest in reversion to the settlors, and the latter takes it away again. In order to make sense of these provisions, one of them must give way to the other.
- The usual purpose of a clause such as clause 13 is to prevent unwanted tax consequences by preventing any accidental resulting trust to the settlor. But in the present case clause 4.2, if it is to have any meaning at all, shows that the settlors wished deliberately to create a reservation of interest, or express resulting trust, to themselves. There is a question therefore as to what happens if clause 13 were given its full meaning and the settlors could not take under clause 4.2. In the absence of clause 6, there would be a resulting trust for the settlors, because the interests reserved to them under clause 4.2 could not take effect. Ignoring for the present the effect of clause 5 (the power of appointment), that would mean that whether clause 4.2 took effect and clause 13 did not, or whether clause 13 took effect and clause 4.2 did not, the substantive effect would be the same, ie that the settlors would take the property after the determination or failure of the prior interests. That would be a powerful indication that the only sensible meaning to be attached to the trust deed is to give effect to the interests reserved under clause 4.2 and to ignore clause 13.
- But there is the effect of clause 6 to consider. That clause provides for a gift over to charity "[i]n the event of the failure or determination of the above trusts". The question is whether the invalidation by clause 13 of the reservation of interests in clause 4.2 to the settlors constitutes the "failure or determination" of that trust. I am aware that there are cases which hold that on an interest under a trust being held void for remoteness a gift over expressed to take effect on the "failure or determination" of the prior trusts will also fail if the gift over is "dependant and expectant" on the prior interest: see eg Re Hubbard's WT,  Ch 273, 283-85. As Buckley J there says,
"This rule seems to be based on the intention of the settlor demonstrated by the nature of the trusts."
- In this connection, he refers to a dictum of Stirling J in Re Abbott  1 Ch 54:
"The reason appears to be that the persons entitled under the subsequent limitation are not intended to take unless and until the prior limitation is exhausted; and as the prior limitation which is void for remoteness can never come into operation, much less be exhausted, it is impossible to give effect to the intentions of the settlor in favour of the beneficiaries under the subsequent limitation."
- The present case is not one of failure of clause 4.2 for remoteness, but rather (on this hypothesis) because of the provision at clause 13. The first is a rule of public policy, which the relevant party or parties can do nothing about, whatever the deed says. The other is a question of the will of the relevant party or parties, expressed through the words of the deed. But the reasoning is nonetheless analogous. Because of clause 13, the provision at clause 4.2 "can never come into operation, much less be exhausted". In my judgment, clause 6 does seem to be dependant and expectant on the earlier provision. It makes a gift to charity which does not stand alone, but takes effect only if the earlier provisions do not. The primary intention manifested is to benefit members of the settlors' families whilst any remain alive. Only if that cannot be achieved does the gift over operate.
- In my judgment therefore, clause 6 does not take effect if clause 13 prevents clause 4.2 from taking effect. As a result, when I am looking to the effects of the deed if clause 13 has the full effect it purports to do, I must construe the trust deed on the footing that there is no gift over to charity of the settlors' interests. As I have said, there would instead be a resulting trust, for the settlors themselves. So whether clause 4.2 overrides clause 13, or vice versa, the substantive effect (leaving clause 5 on one side) is the same. In my judgment it would be perverse in those circumstances to allow clause 13 to negate the effect of clause 4.2 and leave the settlors to claim outside the deed on a resulting trust.
- I am acutely aware that I have not heard adversarial argument about this from anyone whose interest it may be to argue the other way (such as HMRC or the Attorney-General), but, looking the deed as a whole, I am in no doubt that it meant to reserve the interests to the settlors that it purports to do. That means that clause 13 must yield to clause 4.2 at least. Must it also yield to clause 5? It does not automatically follow that, because the settlors reserve their interests in reversion, their position as objects of the power in clause 5 should not be subject to clause 13. Clause 5 could still make sense if it were restricted to a power in favour of the other beneficiaries than the settlors. Yet, once it is accepted that clause 13 gives way to clause 4.2, the force of that logic applies almost as much to clause 5 as well. In my judgment, in those circumstances clause 13 should not bar the exercise of the power in clause 5 in favour of the settlors. Accordingly, by a process of construction, clause 13 of the settlement has no effect and should be disregarded completely.
- That conclusion means that, strictly speaking, I do not need to consider the question of rectification of the deed. But, in deference to the arguments addressed to me in writing by Mr Jones, I will briefly state my views, expressed on the hypothesis that I had not held that clause 13 should be disregarded as a matter of construction. As I have already said, I have not seen anything from HMRC asking that the court be referred to particular authorities on the question of rectification. But it is clear law that a voluntary trust deed can be rectified in appropriate circumstances: see Re Butlin's ST  Ch 251, 262. And I am aware that in other cases HMRC has referred to the decisions of the Court of Appeal in Racal Group Services Ltd v Ashmore  STC 1151 and Alnutt v Wilding  EWCA Civ 412. Mr Jones indeed refers to both of these in his skeleton argument.
- There is a helpful summary of the necessary conditions for the remedy of rectification to be available to be found in the decision of Barling J in Giles v Royal National Institute for the Blind  EWHC 1373, also referred to by Mr Jones, as follows:
"(1) While equity has power to rectify a written instrument so that it accords with the true intention of its maker, as a discretionary remedy rectification is to be treated with caution. One aspect of that caution is that the claimant's case should be established by clear evidence of the true intention to which effect has not been given in the instrument. Such proof is on the civil standard of balance of probability. But as the alleged true intention of necessity contradicts the written instrument, there must be convincing proof to counteract the evidence of a different intention represented by the document itself;
(2) There must be a flaw in the written document such that it does not give effect to the parties'/donor's agreement/intention, as opposed to the parties/donor merely being mistaken as to the consequences of what they have agreed/intended; for example it is not sufficient merely that the document fails to achieve the desired fiscal objective;
(3) The specific intention of the parties/donor must be shown; it is not sufficient to show that the parties did not intend what was recorded; they also have to show what they did intend, with some degree of precision;
(4) There must be an issue capable of being contested between the parties notwithstanding that all relevant parties consent. This criterion has been much criticised: the purpose of it, and its actual content and scope, are by no means clear. In Racal Peter Gibson LJ expressly approved the following summary of the principle by Vinelott J in the same case. Vinelott J stated that the court must be satisfied:
'that there is an issue capable of being contested, between the parties or between a covenantor or a grantor and the person he intended to benefit, it being irrelevant first that rectification of the document is sought or consented to by them all, and second that rectification is desired because it has beneficial fiscal consequences. On the other hand, the court will not order rectification of a document as between the parties or as between a grantor or covenantor and an intended beneficiary, if their rights will be unaffected and if the only effect of the order will be to secure a fiscal benefit'."
- In my judgment, on the hypothesis to which I have referred, there is clear evidence in this case of the true intention of the settlors that they should benefit under clauses 4.2 and 5. This is to be found in the witness statement of both claimants, and in documents exhibited to the first claimant's statement, including the attendance note of Mrs Redman dated 6 October 2005, the letter from her to the first claimant of 1 November 2005, and the letter to HMRC of 10 March 2006, and also the witness statement of Mrs Redman herself.
- As to this last statement, dated 26 April 2018, Heather Redman states that, although she was previously in employed as a solicitor by Marshall & Galpin, she is no longer a practising solicitor. She confirms that she has seen the witness statement of the first claimant, but, having read through that and the exhibit, she does not remember any details of the matter. However she does agree
"that there is an error in the drafting of the settlement dated 7 December 2005, specifically in respect of the inclusion of clause 13, which should not have been added to the settlement".
I am satisfied on the evidence that the claimants settled their one half beneficial interest in the property on a trust which was always intended to involve a reversion to the settlors. They never intended permanently to deprive themselves of this property.
- The flaw in the trust deed is that clause 13 is inconsistent with that intention, and on its face bars the operation of clauses 4.2 and 5, designed to give effect to that intention. The words that were intended in this case are in fact already contained in the deed, in those clauses; the problem is the unintended inclusion of clause 13. This is particularly clear from the witness statement of Mrs Redman., cited above. Lastly, there is an issue capable of being litigated between the parties. The claimants are deprived of substantial property rights which they intended to retain, with the result that others including charity, benefit instead.
- So the conditions are satisfied, and it is thus a question of discretion as to whether the court exercises its power to rectify the trust deed. In my judgment there are no considerations here which should bar rectification as sought, and therefore if I had not held that as a matter of construction clause 13 is to be disregarded, I would have so ordered.
- Assuming that there are no further applications made before the order is drawn up, that order will contain a declaration that on its true construction clause 13 of the trust deed is of no effect, and that clauses 4.2 and 5 have full effect in favour of the claimants.
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