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Oatley & Ors v Oatley & Ors (2014)

Summary

A voluntary settlement was rectified where the claimants had erroneously been included as settlors which excluded them from the class of beneficiaries.

Facts

The claimants (C) sought the rectification of a 1995 settlement.

C were part of a family which operated a farming business through a family company. Shares in the company were originally held by C's parents. A number of shares had been put into a settlement in 1985. C also held shares. In 1994 a further settlement was proposed to hold the shares in the family company and prevent any shareholders calling for the break up of the family company. There was an agreement between the shareholders to transfer their shares to the new settlement. As drafted the new settlement included C as settlors in addition to their parents. They therefore could not be beneficiaries because the definition of beneficiaries excluded the settlors. When the 10-year tax charge on the settlement was being considered it was appreciated that C had been excluded from benefit. C's case was that they had been told that they would be beneficiaries under the settlement and had transferred their shares on that basis. They said that the settlement as drafted did not implement their parents' intention to benefit them. C had provided no bounty. They were supposed to have contributed £2 each to the settlement but said that they had not done so. The adult beneficiaries did not oppose the claim. The minor beneficiaries were joined as defendants and were represented.

Held

A voluntary settlement could be rectified in a case of mistake. The mistake was not in the transaction itself but in the documentation which did not reflect the true intention of the settlor, Racal Group Services Ltd v Ashmore [1995] S.T.C. 1151 and Allnutt v Wilding [2007] EWCA Civ 412, [2007] B.T.C. 8003 followed. Rectification was a discretionary remedy and should be exercised with caution and on strong evidence. There was no direct evidence from the parents. It was clear that the 1995 settlement was a voluntary settlement and not the result of a bargain, Butlin's Settlement Trusts (Rectification), Re [1976] Ch. 251 considered. It was difficult to prove intention in the absence of an outward expression of intention, but although the instant case was borderline there was just enough evidence to demonstrate that the settlement did not reflect the parents' true intention, Day v Day [2013] EWCA Civ 280, [2014] Ch. 114. It was clear that the intention of the settlement was to benefit all the members of the family, including C, as well as keeping the family company together. The settlement had been discussed with C and they had been told that they would be beneficiaries. It was not clear that there was any intention to miss a generation and the professional advisers had no instructions to exclude C as beneficiaries. C had not read the settlement documents and did not understand the significance of being included as settlors. It had not been shown that the £2 contributions had been made. There had been a delay in bringing the matter to court but it was not too lengthy to prevent the grant of relief and had been explained. There had been no prejudice as a result. It was right to rectify the settlement to remove C as settlors and include them as beneficiaries.

Judgment for claimants

Chancery Division
Asplin J
Judgment date
14 April 2014
References

LTL 15/4/2014