TRUST; RECTIFICATION OF INSTRUMENT OF APPOINTMENT
Representation of SG Kleinwort Hambros Trust Company (CI) Limited re The C Trust [2025] JRC 153
The Royal Court reiterated and applied the principles for equitable rectification of a trust document, noting that the Royal Court had re-affirmed the Sesemann test (In re The R.E. Sesemann Will Trust [2005] JLR 421) in Re the Maria Trust [2022] (2) JLR 37, noting that the standard of proof that a genuine mistake has been made is the civil standard, namely the balance of probabilities.
The Court considered an application by SG Kleinwort Hambros Trust Company (CI) Limited as trustee of a trust governed by Jersey law for the rectification of an instrument of appointment (“the Instrument”). The rectification was sought in circumstances where, when carrying out what was intended to be a preliminary step in the proposed winding-up of the trust, the trustee had inadvertently appointed the entire trust fund of the Trust to D rather than a cash amount of £67,000 as had been agreed by each of them.
The unintended effect of the Instrument was to vest in D the entirety of the trust assets and thereby to terminate the Trust.
There were two potential remedies available to the trustee. One was to request the Court to use its power under Article 47G of the Trusts (Jersey) Law 1984 to set aside the exercise of powers in relation to a trust or trust property due to mistake. The other potential remedy was to ask the Court to exercise its equitable jurisdiction to rectify the Instrument on the basis that it did not carry out the true intention of the parties. The application was made on these alternative bases.
Held:
(1) Most appropriate remedy was rectification. In the circumstances of the present application, the remedy of rectification was the more appropriate course to consider.
(2) Test for rectification.
(a) The test for rectification in Jersey was well established, the requirements being set out by Birt, Deputy Bailiff (as he then was) in In re The R.E. Sesemann Will Trust [2005] JLR 421 at paragraph 12: “(i) The Court must be satisfied by sufficient evidence that a genuine mistake has been made so that the document does not carry out the true intention of the party(ies). (ii) There must be full and frank disclosure. (iii) There should be no other practical remedy. The remedy of rectification remains a discretionary remedy.”
(b) At paragraph 13 of that judgment, the Court in Sesemann further noted an important limitation on the power to rectify, as follows: “The court can rectify a deed which does not reflect the transaction which the parties intended to achieve but the court cannot use rectification as a method of allowing the parties to achieve some other transaction which, in hindsight, would have been more desirable.”
(c) Although obiter dicta of Martin, JA, in B and C v Virtue Trustees (Switzerland) AG [2018] JLR (2) 372 (at paragraph 21) sought to incorporate additional stages in the test, the Royal Court subsequently re-affirmed the Sesemann test in Re the Maria Trust [2022] (2) JLR 37, noting also that the standard of proof that a genuine mistake had been made was the civil standard, namely the balance of probabilities.
Disposal. Applying the above test on the facts, the application for rectification was granted.
Bridgeford A. WDJL, 14 – 20 2025