The England and Wales High Court has agreed to set aside a clause in a trust deed that accidentally created a £650,000 capital gains tax liability (Kennedy v Kennedy, 2014 EWHC 4129 Ch). The intention was to make an appointment of trust assets in such a manner that would not result in a CGT liability. In particular certain holdings of shares were to be retained in the trust. The deed of appointment was subsequently executed in the mistaken belief that the deed met these intentions.
The Court decided that on balance it was ‘unconscionable in principle’ not to correct the appointment. It was concluded that the relevant clause in its entirety should be set aside. In reaching this conclusion the Court dismissed two other heads of relief: setting aside the transfer of shares (the relevant clause did not specifically mention them) and rectification (the relevant clause was intended to be included even if not its effect).