Kennedy & Ors v Kennedy & Ors
2014
CHANCERY DIVISION
United Kingdom
CORAM
- THE CHANCELLOR OF THE HIGH COURT
Areas of Law
- Equity and Trusts
2014
CHANCERY DIVISION
United Kingdom
CORAM
AI Generated Summary
The case involved trustees seeking to correct a mistaken appointment of shares to Mr. Kennedy in a settlement. The court, applying the principles of Pitt v Holt, found that the mistake was sufficiently grave to warrant rescission but not rectification of the appointment clause, thus setting it aside.
Judgment
The Chancellor (Sir Terence Etherton):
In these proceedings the trustees of a settlement dated 16 December 2003 made by the first claimant, Brian George Kennedy, (“the Settlement”) seek an order to correct a mistake made in the terms of an appointment dated 1 October 2008 (“the October 2008 Appointment”).
The mistake was to provide in the October 2008 Appointment for the appointment to Mr Kennedy of certain shares in four companies (“the relevant shares”). The relief specified in the amended Particulars of Claim is (1) a declaration that the relevant shares were not appointed on the trusts of the October 2008 Appointment, or (2) an order setting aside clause 2.1(c) of the October 2008 Appointment by which the relevant shares and a cash sum were appointed to Mr Kennedy absolutely, or (c) rectification of clause 2.1(c) by the addition of words excluding the relevant shares.
The background
I find the following facts on the basis of the evidence before the Court.
Under the terms of the Settlement, of which Mr Kennedy was originally the sole trustee, Mr Kennedy had a life interest in possession. The Settlement contained a power of appointment exercisable by the trustees in favour of Mr Kennedy himself, his children and remoter issue. In default of appointment, the capital was held on trust for his children.
Schedule 1 of the Settlement specified the settled assets. So far as relevant to the present proceedings they included shares in the following companies: Space Kitchens and Bedroom (Holdings) Limited (“SKBL”), Ever 1951 Limited (“Everest”), Celuform Limited (“Celuform”) and Patrick Properties Holdings Limited (“Patrick Properties”).
The Settlement subsequently acquired shares in Latium Building Products Limited (“Latium”).
In 2006 SKBL was refinanced. In consequence, all the Settlement’s SKBL shares were acquired by a new parent company, Space Kitchens Holdings Ltd (“Holdings”). In exchange, the Settlement acquired shares in Holdings, which were of little value, and loan notes worth about £6.82 million. The loan notes were qualifying corporate bonds for the purposes of the capital gains tax (“CGT”) legislation. The effect of the exchange was that a chargeable gain of about £700,000 was realised; the underlying CGT rate (which was only 10 per cent because of the availability of maximum business taper relief) was “banked”; and CGT at that rate on the gain would only become payable on the first of the following events: expiry of the loan note