Rectification and trusts: a Cayman Islands perspective
Rectification is about ‘putting the record straight’. It is an equitable remedy by which the court can order that the wording of a document is rectified so that it reflects the true intentions of the parties. That does not mean, however, that the court can re-write history should one of the parties subsequently have a change of heart. Rather, it is a means by which the words of the document can be changed to reflect what was actually agreed between the parties.
In the trusts context, imagine that Mr A decides to settle his farm in Devon and his town house in London on trust for his five children and executes a trust deed governed by English law which he believes carries those wishes into effect. Fifteen years later he discovers that, owing to a drafting error, only the town house in London is in fact settled on trust. In those circumstances Mr A could ask the English court to exercise its discretion to rectify the trust deed so that it reflects Mr A’s intentions on the date he executed the document. As the English court held in Allnutt v Wilding: ‘…In the case of a voluntary settlement, rectification involves bringing the trust document into line with the true intentions of the Settlor as held by him at the date when he executed the document.’
Given the likely repercussions for Mr A, his five children and the trustees of his settlement having acted for the last 15 years on the basis that both properties were settled on trust, it is easy to see why rectification can be such a welcome remedy…
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