Wright and Another v National Westminster Bank Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Norris |
| Judgment Date | 12 June 2014 |
| Neutral Citation | [2014] EWHC 3158 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC13B03415 |
| Date | 12 June 2014 |
[2014] EWHC 3158 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building,
7 Rolls Building, Fetter Lane, London,
EC4A 1NL
Mr Justice Norris
Case No: HC13B03415
Mr Mark Studer appeared on behalf of the Claimants
Ms Teri Galati (instructed by TLT LLP) appeared on behalf of the Defendant
On 20 August 2012 Richard Frederick Wright ("Mr Wright") declared a discretionary trust of which the National Westminster Bank PLC was the trustee. The beneficiaries were described in the third schedule as "widow of the settlor, children and remoter issue of the settlor". There was a power to add beneficiaries to the settlement: but clause 3(c) said that the power should not be exercised so as to add to "the beneficiaries", the settlor or any person who should previously have added property to the trust fund or the spouse for the time being of the settlor.
The discretionary trusts were conventional in form. Clause 6(a) conferred a power to pay or apply income of the trust fund during the 125-year trust period but clause 5 made that subject to a power to appoint amongst the beneficiaries. Clause 15 of the settlement made plain that the power to pay or apply income and the power to appoint should not be exercised and no provision of the settlement should operate directly or indirectly so as to cause any part of the capital or income of the trust fund to become payable to or applicable for the benefit of the settlor, any person who had previously added property to the trust fund or the spouse for time being of the settlor. Clause 15 concluded with a declaration that the trust fund and the income should thenceforth be possessed and enjoyed to the entire exclusion of the settlor and of any person who should have added property to the trust fund.
Along with the settlement Mr Wright prepared a letter of wishes for the guidance of the National Westminster Bank as trustee. He declared his aim as being to provide for his family in a tax-efficient manner with the hope of saving inheritance tax on his death. He said that he hoped that the income would be reinvested for the foreseeable future but he said that his beneficiaries should be his wife, Elizabeth Wright ("Mrs Wright") after his death, and his four children, Francis, Veronica, Jerome and Felix. Paragraph 2(b) of his letter of wishes said:
"Following my death I would wish the trustees to apply the income and capital for the benefit of my wife to meet her general needs if required by her."
The original trust fund was the sum of £10, but the trust was effectively a bucket trust to which further property was intended to be added. The intention was that the trust fund should amount to £325,000, then the nil rate tax band for inheritance tax purposes. The £325,000 was to be provided by Mrs Wright making a gift to Mr Wright and then him independently and of his own free will choosing to add it to the trust fund which had been established. To that end on 13 August 2012 Mrs Wright completed the NatWest Bank's standard form, "Deed of gift, sole owner to sole owner" in which she said that she wished to transfer to her husband the assets specified in a schedule to the deed of gift. The schedule as headed "Schedule of securities" and was divided into two columns, one headed "Number of shares" and the other "Name of security": but this form of the schedule was ignored and the schedule was completed with the words "£324,990 cash/investments".
Mr and Mrs Wright now together apply to rescind the discretionary trust which was so constituted. The nub of the case is to be found in paragraph 24 of Mr Wright's witness statement in support of the claim. The effect of the discretionary trust was that Mrs Wright as spouse of the settlor would not be able to receive income from the trust fund at any time after its constitution whilst Mr Wright was still alive, and the way in which the trust fund had been constituted, to which I will come in a moment, meant that she could not receive income even after his death. Paragraph 24 says that Mr Wright would not have executed the settlement had he known that Mrs Wright would not be able to receive income from the trust fund at any time or that the execution of the settlement would prevent both Mrs Wright and himself from continuing to enjoy access to the same income and standard of living as they had previously.
On Mrs Wright's part it is said that she had no proper understanding of the documentation which she was asked to sign on 13 August, namely the deed of gift and certain mandates, and she never had any intention of transferring at any time property into the discretionary trust herself.
This relief is not opposed by the living adult beneficiaries, namely Mr and Mrs Wright's children. A representation order is being sought under which Felix will represent minor and unborn potential objects of the discretionary powers. He has been advised by Ms Judith Bryant of counsel and on the basis of that advice does not consider it in the interests of the persons whom he represents to oppose the relief being sought.
The National Westminster Bank has filed a defence. In that defence it says that it intends to act neutrally in relation to Mr and Mrs Wright's claim and will abide by any order which the court makes in relation to the claim, in particular the claim for recision of the settlement.
As is customary in such cases, HMRC has been notified of the claim to rescind the settlement. By a letter dated 2 October 2013 a trust officer at HMRC confirmed that HMRC did not wish to be joined as a party to the proceedings seeking to set aside the trust on the grounds of mistake but required the claimants to draw the court's attention to the decision in Pitt v Holt [2013] UKSC 26.
In the circumstances this application proceeds on what is effectively an unopposed basis. But even if the evidence is not challenged the court must still be satisfied that it proves the facts necessary to establish that the jurisdiction is available and that it is appropriate for the court to exercise the jurisdiction and make an order for rescission. The exercise of the jurisdiction involves the court making several discrete value judgments as to seriousness, causative effect and unconscionability. These are matters for the judgment of the court and not for the judgment of the parties. The mere fact that the application is not opposed does not mean that it can be safely assumed that an order for rescission will follow. The jurisdiction to set aside transactions, even of a voluntary nature, is not a collusive remedy. Accordingly Mr Studer of counsel who appears for the claimants has in written and oral argument presented the case effectively to persuade me to exercise the jurisdiction.
These are the principles that I must apply in deciding whether to grant rescission of the settlement. First, in the case of a unilateral transaction such as a voluntary settlement it is uncontroversial that a unilateral mistake is sufficient (without any element of misrepresentation or fraud) to make a gift voidable. The fact that it is a unilateral mistake may be a good reason for the court to apply a more stringent test as to the seriousness of the mistake before granting relief; see Pitt at paragraph 114. Second, it is clear, and was clear before Pitt v Holt, that it is perfectly possible for a unilateral mistake to found a proper claim for rescission of a...
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