Wills v Gibbs
11th August 2007
[2007] All ER (D) 509 (Jul); 31 July 2007; Rimer J
A testator died, leaving property to the defendant, who wished to redirect some of that property to the claimant. The defendant’s intention was to take advantage of the provisions of section 142(1) of the Inheritance Tax Act 1984 and section 62(6) of the Taxation of Chargeable Gains Act 1992, so that the gift he made to claimant took effect for inheritance tax and certain capital gains tax purposes as if the testator had made it. The draftsman of the deed of variation accidentally omitted to include a statement that the above provisions were to apply, opening the possibility of detrimental tax consequences on the defendant’s death. The claimant applied for the deed to be rectified so that the necessary statement would be included. The application was successful.
It was held that rectification could be ordered in respect of a voluntary settlement so as to give effect to the settlor’s true intention when he executed it. There needed to be an issue, capable of being contested between the settlor and the intended beneficiary, even if all parties agreed on the outcome and beneficial fiscal consequences would result. If, however, the rights of the parties would not be affected and the only consequence of the order would be fiscal, no rectification would be ordered. Here there were more than merely fiscal consequences: because the gift by the defendant to the claimant was a potentially exempt transfer and might be chargeable to inheritance tax if he died within 7 years of it, the executors needed some security for the possibility of there being tax to pay (if they were liable to pay it). If the deed were rectified this would not be necessary and so the rights of the parties were being affected.
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