2002/244

royal court

(Samedi Division)

20^th December 2002

In the matter of an application by the Royal Bank of Canada Trust Company (Jersey) Limited

And in the matter of the Williams Jersey 1994 Trust

Application by the Royal Bank of Canada Trust Company (Jersey) Limited to rectify the instrument of Trust to include a provision excluding the Settlor irrevocably from benefiting thereunder as from the date of the Trust’s creation.

Advocate J. P. Speck for the Applicant.

Advocate C.G.P. Lakeman representing the minor, unborn and

unascertained beneficiaries of the Trust and the Canadian Red Cross

judgment

the deputy bailiff:

1.        The factual background would appear to be as follows.  The Trust was made by deed on the 19^th January, 1994, by a declaration of trust executed by the Trustee.  The funds were, however, provided by Dr Ivor Williams who is the Settlor.  The Settlor is, and was, at all material times a resident of Canada.

2.        In 1993 Dr Williams decided to establish a number of settlements for the benefit of various members of his family.  This settlement was to be a trust solely for the benefit of members of his family who were not resident in Canada.  The beneficiaries were therefore named as three of his children, all of whom were not resident in Canada, and their remoter issue.  A fax dated 29^th December, 1993 from the Canadian lawyer, Miss Johnson, who advised at the time of the setting up of the Trust, stated :

“It would not be desirable for either Dr. Williams or his daughter Alison DeNure who was resident in Toronto, Canada, to be beneficiaries”.

3.        On the 12^th January, 1994, the Settlor completed the Trustee’s application form in connection with the Trust.  The form contained a question which asked “Do you wish to be irrevocably excluded as a beneficiary?” and the Settlor filled in ”yes” against that question and returned it to the Trustee.  The form was not received by the Trustee until 19^th January, 1994, the date the deed was executed.

4.        The deed was executed in fairly standard discretionary form.  In accordance with the instructions from Miss Johnson, the Settlor was not named as a beneficiary nor was the daughter Alison.  The beneficiaries were confined to the non-resident children and their issue. 

5.        Clause A3.02 gave a fairly standard power to add beneficiaries to the class of beneficiaries.  It would, therefore, be possible for the Trustee to add the Settlor as a beneficiary under that power.  The Settlor had not therefore been “irrevocably excluded” from benefit, as he had instructed in the application form.  It would appear that when the form was received on the 19^th January, the inconsistency with the trust deed was not noticed and the form was just filed.  The position remains that the Settlor is not actually a beneficiary, and has never received any benefit; but he could be added as a beneficiary.

6.        This has just come to everyone’s attention and it appears that there may be adverse tax consequences as a result.  Under Canadian tax legislation the Settlor may be personally liable on all the capital gains and income arising in the Trust since creation if he is capable of being added as a beneficiary. 

7.        Application is therefore made to rectify the Trust so as to record the Settlor’s original intention by declaring that he is irrevocably excluded from any benefit under the Trust.

8.        The test for rectifying a settlement is well-established.  First, there must be clear and satisfactory evidence that the deed does not reflect the Settlor’s intention and that this has arisen through an error.  We accept that this is so in this case.  It is clear that the Settlor intended that he should be irrevocably excluded but that, by error, the deed as drawn up did not achieve that objective.

9.        Secondly, there must be full and frank disclosure on the part of the applicant.  We are satisfied that that has taken place in this case.  We have seen the various tax advice, and the affidavits and the exhibits.  Thirdly, there has to be no alternative remedy and we accept that that is the case on this occasion.  Advocate Lakeman has appeared as representative of the minor, unborn and unascertained beneficiaries and the named charity.  In addition we have letters from three adult children to say that they have no objection. 

10.      In our judgment the case for rectification is made out and we rectify it by adding, as clause A4a of the trust deed, a provision which reads “Notwithstanding anything herein expressed or implied the trust fund and the income thereof shall henceforth be possessed and enjoyed to the entire exclusion of the settlor and of any benefit thereto by contract or otherwise”.  We therefore rectify the Trust in that manner.

No Authorities