Lee v Lee [2018] EWHC 149 (Ch)

WTLR Issue: Spring 2018 #171

1. ROSEMARY LEE 
2. ROBERT JAMES

V

1. BENJAMIN WILLIAM GORWYN LEE
 2. HER MAJESTY’S REVENUE & CUSTOMS

Analysis

Facts

In October 2002 the testator (T) and the first claimant (C1) bought Little Hendra Farm, Looe, Cornwall (the farm). They purchased as joint tenants. The farm consisted of a bungalow and some fields, within three registered titles. Title X included Village Field and Title Y included the Bungalow and Borehole and Church Fields. In fact, Title Z was the subject of a conveyancing mix-up, which was discovered later and resolved in 2008 by a transfer of the title, using form TR1, to T and C1 expressly as ‘joint tenants’.

In 2007, T and C1 made wills in substantially similar terms, by which it was intended that, on the death of the first to die, the survivor would take the deceased’s interests in the bungalow and Village, Church and Borehole Fields and retain his or her half share in the remainder of the farm, with the deceased’s half share of the remainder going to their son, B. This required the jointly held ownership of Titles X and Y (and Z, had there been no mix-up) to be severed. On the death of the survivor, the bungalow, the three named fields and the other half of the remainder would go to B. A notice of severance was prepared by solicitors and signed by T and C1 in January 2007, but it referred only to Title X and not to Titles Y or Z.

In 2011, T and C1 revised their wills but the gifts relating to the farm remained in substance the same as before (and the judge found that this had been the intention of both of them): on the first death B would be entitled to T’s half share in the farm, except the bungalow and Village, Church and Borehole Fields, which would go to the survivor; then, on the death of the survivor, B would inherit the remainder of the farm including those items previously excepted. There was no further severance of the joint tenancies.

T died on 24 October 2014. As only Title X was affected by the 2007 notice of severance, Title Y passed by survivorship to C1, as did Title Z, to the extent that the TR1 resulted in a joint tenancy. B therefore received only T’s severed half share of Title X, apart from Village Field, which was specifically given to C1.

Within two years of T’s death, C1 and B executed a deed varying the disposition of T’s estate by his will, intending to reduce the land that would have been received by C1 to the bungalow and increasing the gift to B of the whole of the remainder of the farm. This document did not achieve its objective, because of the failure of the notice of severance. Subsequently, after two years from T’s death had elapsed, the error in the notice of severance was discovered.

The judge found as a fact that T and C1 relied entirely on solicitors to advise them on severance and executed the notice prepared for them; the solicitor made two mistakes: in relation to Title Y and to the mix-up and resolution relating to Title Z. T and C1 did not notice these errors in the notice, and signed it believing it to be effective in achieving their intentions. They also executed their wills in 2007 and 2011 believing that they would be effective in passing all the land forming part of the farm in accordance with their intention. They were wrong because on T’s death, Title Y and, depending on the effect of the TR1, Title Z passed to C1 by survivorship and outside T’s will.

An application was made for rectification of the deed of variation, but it was later changed to an application for the rectification of the notice of severance to include Title Y, and, if necessary, to rectify the TR1 in relation to Title Z.

Held:

The necessary conditions for rectification are:

  1. (1) Equity has a discretionary power, to be treated with caution, to rectify a written instrument to accord with the true intention of its maker. The claimant’s case should be established by clear evidence of the true intention, to be proved on the civil standard of balance of probability but sufficiently convincing to counteract the evidence of a different intention, as represented by the document itself.
  2. (2)A flaw in the written document must be the cause of it failing to give effect to the intention of the parties rather than their merely being mistaken as to the consequences of that intention or agreement.
  3. (3) It is not enough to show that the parties did not intend what was recorded; it must also be shown what was actually intended, with some degree of precision.
  4. (4) There must be an issue capable of being contested between the parties to the application, even if they all consent.

Racal Group Services Ltd v Ashmore [1995] STC 1151; 68 TC 86 followed; dictum of Barling J in Giles v Royal National Institute for the Blind [2014] EWHC 1373; [2014] STC 1631, at para 25, applied; Alnutt v Wilding [2007] EWCA Civ 412; 9 ITELR 806 distinguished.

In this case, although mistakes were made by the lawyers acting for T and C1 in preparing the notice of severance, what mattered were the mistakes of T and C1 themselves. Their intention was that severance would be achieved over the whole of the farm and they believed that the words used by their lawyers in the notice would achieve that. Accordingly, the requirements for rectification were satisfied. In respect of the TR1 being expressed as a transfer of Title Z to T and C1 as joint tenants, the judge construed that as a transfer to them as tenants-in-common, alternatively he would have rectified it to alter the reference to ‘joint tenants’ as a reference to ‘tenants-in-common’.

JUDGMENT HHJ PAUL MATTHEWS: Introductory [1] This is my judgment on a claim for rectification of a notice of severance of joint tenancy of certain land dated 31 January 2007. However, that is not how the claim started. The claim form is dated 24 March 2017, when it was issued under Part 7 of the …
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Counsel Details

Adam Corbin, and Edward Porter (solicitor) on 5 February 2018 (Michelmores LLP, Broad Quay House, Broad Quay, Bristol BS1 4DJ, tel 0117 906 930, e-mail enquiries@michelmores.com), instructed by Michelmores LLP.

The first defendant appeared in person.

The second defendant did not appear and was not represented.

Legislation Referenced

  • Crown Proceedings Act 1947
  • Inheritance Tax Act 1984
  • Law of Property Act 1925
  • Taxation of Chargeable Gains Act 1992