Analysis
By his will, the late Robert Simcock created a trust over the sum of £200,000, under which his wife Catherine was to be the life tenant. Subject to that, the capital and income of that trust was to be held on the terms of a discretionary trust of residue also created by the will, the objects of which were Catherine, and Robert’s children and remoter issue.
Solicitors acting for the family determined that only a portion of Robert’s estate would benefit from Agricultural Property Relief (APR) and Business Property Relief (BPR), with the consequence that, absent an appointment from the will trust to Catherine engaging the spousal IHT exemption, there would be an immediate charge to IHT. With that in mind, a deed of appointment was drafted and circulated which provided that the income of the entire fund subject to the trust (defined in the will as ‘the Trust Fund’) should be paid to Catherine during her lifetime. The deed of appointment was executed by the two trustees of the will trust, these being Catherine herself and the claimant, who was a solicitor and partner in the firm which had prepared the deed.
The claim maintained that the deed should be rectified so as to appoint only those assets eligible for APR or BPR to Catherine. It was said that the appointment of the entirety of the Trust Fund to Catherine was a mistake, itself the product of a ‘clerical error’ by the solicitor who drafted it. The trustees’ intention is said to have been not to refer to the ‘Trust Fund’, but to ‘all that part of the Trust Fund which does not attract any relief from Inheritance Tax [by way of Agricultural or Business Property Relief]’. The application was unopposed by all of the parties. Since the appointment of the entirety of the Trust Fund to Catherine had the consequence that the fund in its entirety benefitted from the spousal exemption, rectification on the basis sought would have been tax neutral.
Held:
The claim was dismissed. For a claim for rectification to succeed, it is not sufficient to show that the parties to the relevant document (in this case, the trustees) did not intend what was recorded; it is also necessary to show what they did intend, with some degree of precision. It was clear on the evidence provided that neither of the trustees had the necessary intention to appoint only those assets eligible for APR or BPR.
The professional trustee had given evidence that she:
‘… would have been reliant upon [another solicitor in the firm] Mr Sharp to draft the document in such a way so as to appoint the correct portion of the estate, and to advise me as to the effect of the document, not least because I was not dealing with the administration of the estate on a daily basis so would not have had the information at my fingertips’.
The effect of her evidence was, therefore, that when executing the deed, she had no knowledge of what was intended to be achieved by it. Although she claimed she would have relied on the advice of Mr Sharp, she had not stated that any such advice had in fact been given, nor provided any particulars of such advice. Although Mr Sharp in his own witness statement claimed to recall having told the professional trustee that the intention was to appoint only the tax-bearing assets to Catherine, no details or particulars of any such conversation were given, and no file notes or other records of any such conversation were produced. The inference to be drawn from the evidence as a whole was that the professional trustee had delegated matters entirely to Mr Sharp and lacked any relevant intention when executing the deed.
As to Catherine, she had given evidence that:
‘My understanding… was that the purpose of and intention behind the Deed was to reduce the inheritance tax payable in my late husband’s estate… I am a lay Executor and Trustee rather than a legal professional or expert and was happy to sign and return the Deed as requested, and to rely upon SM’s [the firm’s] advice and guidance.’
This fell short of showing that Catherine had intended specifically only to appoint those assets eligible for APR and BPR. The general intention of mitigating the IHT burden on the estate was achieved by the deed as executed since by virtue of its provision, the entirety of the residuary estate was protected by the spousal exemption. It was clear that Catherine had not understood the letter supplied with the draft deed and intended to explain its purpose. Therefore, on the evidence available, it was not possible to attribute to Catherine the relevant intention in the execution of the deed.
JUDGMENT MASTER CLARK: Introduction [1] This is my judgment on a Part 8 claim dated 8 September 2020 seeking rectification of a deed of appointment dated 31 December 2019 (‘the Deed’) made by the claimant and the first defendant (together ‘the trustees’), as executors and trustees of a will trust (‘the Trust’) created by the …Continue reading "Laird v Simcock & ors [2022] WTLR 1351"