Lawie v Lawie & ors [2012] EWHC 2940 (Ch)

Analysis

The claimant (SL) sought rectification of a deed of trust that he and his late wife (PL) had executed in 2006.

SL and PL determined, on the advice of Mr Tollins (a financial advisor at the Norwich & Peterborough Building Society (the building society)) that they wanted £100,000 (just under half of their net assets at the time) to be held in a Legal & General portfolio bond, which was to be held on a flexible trust for the benefit of their children and grandchildren. They expressed an intention to be able to alter the class of discretionary objects and the percentage entitlement of any beneficiary.

The trust was executed on a pro forma by which the names of current beneficiaries were to be added in part two, and part three was to contain the names of the potential future beneficiaries. Part two contained SL and PL’s grandchildren (the fourth and fifth defendants) but part three was left blank. Accordingly, as executed, the two grandchildren were the trust’s sole beneficiaries, entitled in equal shares, and the trustees had no power to make alterations.

In 2010 the defect was discovered and a complaint was lodged with the building society. The complaint was upheld by the building society’s complaints officer, who found that SL and PL’s intention, as expressed in Mr Tollins’ report, was to benefit their children and grandchildren on the basis that they would not need the funds during the remainder of their lifetimes. An offer to reimburse legal expenses was made by the building society and a claim for rectification (initially seeking the addition of SL and the children, but at the time of hearing merely the latter (ie the first and second defendants)) was issued in August 2011.

The first, second and third defendants (as the trustees, along with SL), and also the fourth defendant, did not appear at the hearing but had indicated by their witness statements or correspondence that they did not oppose the claim. The fifth defendant, by a letter from his solicitors in October 2012, highlighted SL’s change of position as regards his own inclusion in the class of discretionary objects and appeared to object to the first and second defendants’ inclusion also. He did not file evidence or appear at the hearing.

Held (ordering rectification):

1. (1) There was ‘convincing proof’ that the trust instrument did not represent the intentions of the relevant parties: the contemporaneous report produced by SL and PL’s financial advisor (Mr Tollins) provided solid evidence, particularly when coupled with the statements produced by SL and the second, third and fourth defendants (paras 23-27). Accordingly, the court had jurisdiction to make the rectification order sought.
3. (2) The circumstances dictated an exercise of the court’s discretion (paras 29-30), because:
5. (i) the trustees’ powers of appointment were emasculated by the trust instrument;
6. (ii) the trustees were unanimous in not opposing the claim;
7. (iii) it was clear that the deed contained a simple drafting error and thereby failed to implement the settlors’ expressed intentions; and
8. (iv) the fifth defendant had failed to elucidate his objections to the claim or to tender himself for cross-examination, Re Butlin’s Settlement [1976] Ch 251 considered.

JUDGMENT HHJ BIRSS QC: [1] This is an action by the surviving settlor seeking to rectify a deed of trust dated 4 March 2006. As executed the trust deed names the settlor’s two grandchildren as the sole beneficiaries and there is no scope for adding beneficiaries or varying the entitlement under the trust. The rectification …

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