The fact that the tax consequences of that winding up were not as intended by the trustees was not a sufficient ground on which to grant the application, Lord Turnbull ruled.

Commercial litigation expert Craig Connal QC of Pinsent Masons, the law firm behind Out-Law.com, said that the case was an important reminder of the limitations of the court’s power to rectify documents, despite being a decision of unit of the lower courts.

“Problems over the meaning – or apparent meaning – or operation of documents are piece of the daily diet of contentions lawyers,” he said. “Sometimes ‘constructive’ interpretation can save the day; but in others, ‘I am sure that is not what was intended’ is the cry and rectification has to be considered. Usually, there is a dispute in the background which makes things more challenging.”

“Here, the deed was intended to wind up a trust. That was achieved exactly as intended. What was not achieved was the wider revenue purpose, but that was not sufficient to bring in to romp the power to rectify. While some would regard this as an unnecessarily technical and narrow approach to the law, the case is a renewed warning that the route to rectification may not be as easy as some may expect,” he said.

Rectification is a process through which a court can amend a trust deed or other document retrospectively in a way which reflects the original intention of the parties. The reward case involved an application to rectify a deed of appointment, made below section 8 of the 1985 Law Reform (Miscellaneous Provisions) (Scotland) Act. The deed was intended to wind up the trust in such a way that the beneficiary, a Lord Nickson, would be capable to seize advantage of any unused portion of his delayed wife’s nil rate band for inheritance tax purposes.

The judge, Lord Turnbull, heard that when the trustees had executed the deed, they had been unaware of recent case law requiring the trust to be wound up on or subsequent a certain date in order for the nil rate band allowance to transfer to Lord Nickson on his death. Had they known this, they would possess delayed execution by three months. The deed of appointment ultimately wound up the trust as intended, but without the intended tax advantages.

On the evidence provided to the court, Lord Turnbull said that he was satisfied that the intention of the trustees had been to wind up the trust with the tax consequences stated. He also agreed that they would possess allowed the three month period to elapse had they been aware of the impact of the case. However, this was not sufficient grounds on which to grant the rectification application, he said.

Previous case law had established that the power to grant rectification was a “limited” unit, which could not be used to “recast an initial agreement in the terms which may possess been used had the parties been alert to some particular overlooked factual circumstance”, he said.

“In the reward case the trustees intended to create a correct by executing the deed of appointment,” he said. “They had no intention of delaying the creation of that correct as they were unaware of any benefit in doing so.”

“The legal result of the deed being executed was that the trust funds were made available to [the beneficiary], exactly as the trustees had intended … The fact that in bringing about their intended legal result the trustees … failed to attain the underlying purpose of the whole exercise, seems to me to be a varied matter and not within the scope of rectification,” he said.