Lawie v Lawie serves as a reminder to practitioners about the availability of the remedy of rectification, says Matthew Evans

Welcome to our new regular column. ?The focus of the articles will be on issues that affect practitioners advising elderly clients, be they issues that make headlines in the legal press, more generally in the national press, ?or otherwise.

In the spirit of best foot forward, we start on a slightly technical issue by looking at the case of Lawie v Lawie & Others (2012) EWHC 2940 (Ch), a case recently heard by HHJ Birss QC (sitting in the High Court) in relation to an application for rectification of a deed of trust.

The case is not notable for breaking any new legal ground, but it is relatively unusual for cases such as these (as opposed to cases brought on the basis of a mistake, such as Gibbon v Mitchell (1990) 1 WLR 1304), to be reported.

It therefore serves as a good reminder that the remedy of rectification is potentially available and of the factors that the court will take into account.

Family benefit

The case was an action by the surviving settlor, Mr Sydney Lawie, seeking to rectify a deed of trust dated 4 March 2006. The second settlor, Mr Lawie’s wife, had died since the deed of trust was executed.

The trustees of the settlement were Mr Lawie, his (now late) wife, his son Anthony, his daughter Lesley Ely, and her husband Roger Ely. The other (surviving) trustees were accordingly named as defendants, as were the settlors’ two grandchildren, Rebecca and Jamie, for reasons set out below. All of the parties were adults.

The court heard that in 2005 Mr and Mrs Lawie wished to make financial arrangements to benefit their family. Accordingly, they met with a financial planner from the Norwich & Peterborough Building Society.

After discussion, they decided that they wanted to place the sum of £100,000 (representing just under half their net assets at the time) into a Legal & General portfolio bond, which was to be held in a flexible trust for their children and grandchildren. Their primary intention was to benefit their grandchildren, but they also wanted flexibility to enable them to make changes in respect of the beneficiaries and their percentage of entitlement.

Mr Lawie also indicated to the court (via written evidence) that the intention was that he and his wife would also have the option of withdrawing some of the monies, should they need it.

The trust deed executed was entitled ‘non-statutory flexible trust’. It had a number of parts but, in essence, it created a discretionary trust for the benefit of individuals named within part 3 of the document. Part 2 of the document was designated to define which individuals would receive the shares in default of any appointment to the beneficiaries named in part 3.

Unfortunately, in this case, part 3 was left blank. Part 2 named the settlors’ grandchildren (Rebecca and Jamie) as beneficiaries in equal shares.

As such, the ‘flexible’ trust offered no flexibility whatsoever and, moreover, four of the beneficiaries whom Mr Lawie said that he had intended to include (namely himself, his now late wife, Anthony and Lesley), were not included at all.

Position undermined

Mr Lawie’s application was, in the first instance, ?for the deed of trust to be rectified to include the names of the missing beneficiaries (including himself) and the grandchildren within part 3 of the deed, so as to create a discretionary trust with them all as potential beneficiaries.

The court also had sight of the original report of the financial planner who gave advice regarding the trust deed and the findings of a complaints officer at Norwich & Peterborough, who upheld the complaint.

As a result of the consideration of those documents, by the time that the matter appeared before HHJ Birss QC, Mr Lawie had dropped the application to add himself to the list of beneficiaries. He did maintain that this was his intention, but accepted that, on the face of it, the documentary evidence undermined that position. The application to add the other beneficiaries remained, however.

It should be noted that Anthony, Roger, Lesley and Rebecca indicated (by way of witness statement or letter) that they would not seek to oppose the application. Jamie (being one of the default beneficiaries who would thereby potentially lose out on any rectification) objected, in principle at least, by way of a letter from his solicitor.

Upon hearing submissions from Mr Lawie’s solicitor, the learned judge made the order for rectification and provided written reasons.

When providing those reasons, the judge set out the relevant law as stated by Brightman J in In re Butlin’s Settlement (1976) Ch 251, a case involving an application to rectify a voluntary settlement by introducing a power for a majority of trustees to make decisions binding upon the minority.

The judge reminded himself that Brightman J held that the court has the power to rectify a settlement, notwithstanding that it is a voluntary settlement and not the result of a bargain.

He went on to explain that Brightman J held further that rectification was available not only in a case where particular words have been added, omitted or wrongly written, but also in a wider class of case when it was considered mistakenly that they bore a different meaning from the true meaning as a matter of construction (although in this particular instance the case was in the more simple class).

Convincing proof

The judge then set out that Brightman J had considered the question of whether it was enough to prove that the settlor alone had made a mistake, or whether the intention of the other parties to the settlement was relevant. He reminded himself that Brightman J had held that the solution to the problem was that the remedy of rectification was a discretionary remedy.

If the trustees were not a party to a bargain, it ?was not essential to prove that the settlement fails ?to express their true intention, but, in any event, ?the court may in its discretion decline to rectify ?a settlement against a protesting trustee who objects ?to rectification.

Finally, the judge recited the three factors that Brightman J considered in Butlin when deciding whether to exercise his discretion, namely the ?nature of the power sought to be introduced, the nature of the trust itself, and the overall impact ?of the rectification.

In considering the instant case, the judge had to consider whether there was before him ‘convincing proof’ of the relevant intention and concluded that, despite points raised by Jamie’s solicitors in evidence, he did.

He concluded that the important factors in the case were:

1. the fact that the trust was meant to be a discretionary trust and, as drafted, clearly was not;

2. the fact that the trustees were unanimous in not opposing the change;

3. the fact that it was clear that a simple drafting mistake had occurred; and,

4. the fact that the rectification made a fundamental change to the effect of the trust, most likely to the detriment of Rebecca and Jamie.

Notwithstanding that last point, the judge felt that, ?as a matter of discretion, he ought to make an order for rectification. He finished his judgment by making the point that if Jamie had wished to attempt to persuade him otherwise, then he ought to have placed evidence before the court, to be tested in ?cross examination.