Ralph v Ralph leaves open the door for trust rectifications

The recent case of Ralph v Ralph [2021] EWCA Civ 1106 raised the question of whether (and when) settlors seeking rectification of a voluntary settlement to which trustees are parties need to establish that the mistake was mutual.

The case itself did not involve a settlement, but instead concerned a father and son who purchased a property in joint names. The only reason the son became a joint owner was to enable his father to obtain a mortgage, and he did not contribute to the purchase price. The relevant Land Registry form showed that the buyers were to hold the property as tenants in common in equal shares. The father applied for the form to be rectified as he argued that his son was never intended to have a beneficial interest in the property.

The High Court concluded that the transfer form could be rectified. The Court of Appeal overturned this, holding that it was necessary to establish a continuing common intention of the parties in order to rectify the document. Rectification is a power to correct mistakes in recording what the parties have actually agreed and in this case there had been no discussion with the conveyancer on whether the property was to be held as joint tenants or tenants in common. An absence of agreement is different to an actual agreement.

However, the Court of Appeal held that different considerations apply to settlements and declarations of trust. There, depending on the nature of the clause that the parties seek to rectify, the settlor and trustees may not need to share a continuing common intention.

In support of this, Vos MR referred to the case of Re Butlin’s Settlement Trusts [1976] Ch 251 in which Brightman J rectified a voluntary settlement to include a clause that had been mistakenly omitted, despite the fact that at least two trustees were ignorant of the settlor’s intention to include the provision. The omitted clause provided an express power for a majority of the five trustees to exercise any of the powers given to them over the income and capital of the trust fund.

In that case, there was no need to establish the mistake was mutual. However, common intentions may still be relevant if there was an actual bargain between the settlor and the trustees, or between the settlor and another party such as a spouse in the case of a pre-nuptial settlement.

This leaves open the possibility that mistakes involving settlements may be easier to rectify as it may only be the intention of the settlor which is relevant.