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Beneficiaries must play active role in opposing rectification claims, High Court case shows

The High Court has re-emphasised in a recent decision that a beneficiary should put forward evidence and a positive case when seeking to oppose the rectification of a trust deed.

2 November 2012

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In Sydney Lawie v Anthony Lawie & Oths [2012] EWHC 2940 (Ch) the court exercised its discretion to rectify a trust deed where there was convincing proof that the intention of the settlors was not reflected therein.

The case concerned S and his deceased wife, who had created a discretionary trust to benefit their family. The trust deed as executed named two grandchildren as the sole beneficiaries, and provided no scope for adding beneficiaries or varying the entitlement under the trust.

S sought rectification to add his children as potential beneficiaries and to give the trustees power to vary the entitlement between all the beneficiaries, as rectified.

Joscelyne v Nissen [1970] 2 QB 86 was authority that a strong burden of proof lies on the shoulders of those seeking rectification and that the court’s jurisdiction is only to be exercised upon ‘convincing proof’ that the concluded instrument does not represent the intention of the relevant parties.

In Lawie, that burden was met. The only objection to rectification came from the grandson beneficiary. It was highly likely that he and the other grandchild would lose out.

However, the grandson advanced no case beyond his mere objection: he did not see fit to disclose his reasons for opposing the rectification and his position may have been no more than to put the settlor to proof. This presented similarities with In re Butlin’s Settlement [1976] Ch 251, where an important point in determining the exercise of the court’s discretion had been that Lady Butlin did not disclose her reasons for opposing rectification.

If the grandson in Lawie had wanted to persuade the court to reject rectification as a matter of discretion, he ought to have placed evidence before the court as to his reasons and made himself available for cross-examination. In the absence of any such evidence, HHJ Birss QC concluded that he was unable to find that there was in fact any reason to oppose rectification, once the mistake had been proved.

“Rectification is a discretionary remedy,” said Jonathan McDonagh, a barrister at Serle Court. “When deciding whether to exercise that discretion, the court will take into account the full range of circumstances put before it.

“But the lesson for beneficiaries or trustees who stand to lose out from a rectification claim is clear: if you do not provide the court with your reasons for opposing the correction, then the court is not going to make your case for you.

“Lawyers should take care to ensure that clients in this position play an active role in the litigation and do not remain mere bystanders, expecting the court to weigh their interests as a matter of course,” warned McDonagh.

For the full judgment, see

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Wills, Trusts & Probate