The parties sought to rectify a deed of family arrangement varying a will. The variation deed had had several mistakes which in fact increased the sum of Inheritance Tax owed. HMRC refused to accept the rectification deed unless approved by the court.
Held: The request for rectification was granted. The claimant had demonstrated a specific common intention as to how the parties’ fiscal objectives were to be achieved; and that, owing to a mistake in the way in which that intention was expressed in the Deed of Variation, effect had not been given to that intention.
Hodge J QC said: ‘The court cannot rectify a document merely because it fails to achieve the fiscal objectives of the parties to it. A mere misapprehension as to the tax consequences of executing a particular document will not justify an order for its rectification. The specific intention of the parties as to how the fiscal objective was to be achieved must be shown if the court is to order rectification. The court will order the rectification of a document only if it is satisfied by cogent evidence (sufficient to counteract the effect of the parties’ subscription to the relevant document) that: (1) the document does not give effect to the true agreement or arrangement between the parties, and (2) there is an issue, capable of being contested, between the parties; it being irrelevant, first, that rectification of the document is sought or consented to by all of them; and, secondly, that rectification is desired because it has beneficial fiscal consequences. Conversely, the court will not order rectification of a document if the parties’ rights will be unaffected, and if the only effect of the order will be to secure a fiscal benefit for one or more of them.’
References:  EWHC 1948 (Ch)
Judges: Hodge J QC
Statutes: Inheritance Tax Act 1984 211
Jurisdiction: England and Wales
This case cites:
- Cited – Whiteside v Whiteside CA 1950 ( Ch 65)
The husband had executed a deed in favour of his former wife after dissolution of their marriage covenanting to pay a specified sum per annum free of income tax up to but not exceeding a stated amount. This provision was in substitution for one . .
- Cited – Gibbon v Mitchell ChD 1990 ( 1 WLR 1304,  3 All ER 338)
G executed a deed surrendering his life interest in a trust fund in order to vest the property in his two children: the deed did not have that effect because of two errors (one of which was ignoring the fact that his life interest was subject to . .
- Cited – Racal Group Services Limited v Ashmore CA 1995 ( STC 1151)
The company had covenanted to pay an annual sum to charity. Since the last payment under the covenant was to be made less than three years after the execution of the deed, an intended tax advantage was not secured.
Held: The company’s appeal . .
- Cited – Allnutt and Another v Wilding and others; Re Strain (deceased) CA 3-Apr-2007 (,  EWCA Civ 412,  WTLR 941, 9 ITELR 806)
The trustees of a discretionary settlement requested its rectification on the basis that the now deceased settlor’s solicitor had mistakenly not appreciated the need to confer interests in possession on the beneficiaries, with the consequence that . .
- Cited – Oun v Ahmad ChD 19-Mar-2008 (,  EWHC 545 (Ch))
The parties agreed in writing for the sale of leasehold property to the claimant. One document had been signed, but later one said that it had not included an aportionment. Another document then set out the apportionment. When the defendant refused . .
- Cited – Chartbrook Ltd v Persimmon Homes Ltd and Others HL 1-Jul-2009 (,  UKHL 38, Times 02-Jul-09,  27 EG 91,  BLR 551, 125 Con LR 1,  3 WLR 267,  1 P and CR 9,  Bus LR 1200,  NPC 86,  CILL 2729,  4 All ER 677,  1 AC 1101,  WLR (D) 223, , )
The parties had entered into a development contract in respect of a site in Wandsworth, under which balancing compensation was to be paid. They disagreed as to its calculation. Persimmon sought rectification to reflect the negotiations.
Held: . .
These lists may be incomplete.
Last Update: 01 November 2020; Ref: scu.421236