Sanwick Pty Ltd v Kalyk

[2016] NSWSC 100

Supreme Court

New South Wales

Medium Neutral Citation:	Sanwick Pty Limited v Kalyk [2016] NSWSC 100
Hearing dates:	15 February 2016
Decision date:	15 February 2016
Jurisdiction:	Equity - Expedition List
Before:	Stevenson J
Decision:	Order that the Deed made on 20 May 1981 made as between the Defendant and the Plaintiff be rectified by deleting the following words in cl 1(b) of that Deed: “(i) the thirty-first day of December in the year two thousand and twenty”
Catchwords:	TRUSTS – remedies – rectification of trust deed –– where deed executed by settlor and not the trustee – whether deed valid as a deed or deed poll – where settlor had no active and operative intention as to terms of the trust and acted merely on instructions of trustee and had no independent intention as to the terms of the trust – where trustee intended trust to have indefinite duration to fullest extent permitted by law - where terms of trust deed were that trust vested in 2020 – rectification ordered
Cases Cited:	Bush v National Australia Bank Ltd (1992) 35 NSWLR 390 Colquhoun v Dronpane Pty Ltd [2011] NSWSC 1500 Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 Hewlett-Packard Aust Pty Ltd v Exeed Pty Ltd (2004) 48 ACSR 670 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 Mirzikinian v Waterhouse Pty Ltd [2009] NSWCA 296 Muriti v Prendergast [2006] NSWSC 286 Public Trustee v Smith [2008] NSWSC 397
Category:	Principal judgment
Parties:	Sanwick Pty Limited (Plaintiff) Steven Kalyk (Defendant)
Representation:	Counsel: I M Jackman SC with D Barlin (Plaintiff)   Solicitors: Speed and Stracey Lawyers (Plaintiff) F C Bryant Thomas & Co Solicitors & Attorneys (Defendant)
File Number(s):	SC 2015/349358

EX TEMPORE Judgment (REVISED)

1. The plaintiff seeks an order rectifying a deed dated 20 May 1981 ("the Deed") which established a family trust known as the "Children's Trust Fund" ("the Trust").

2. The plaintiff is the trustee of the Trust and I shall refer to it as "the Trustee".

3. At all relevant times Mr Nikola Saric was the controlling director of, and held all voting shares in, the Trustee.

4. The Deed provided for a "distribution date" as follows:

“(b)   ‘the distribution date’ means the first to occur of the following dates, viz:-

(i)   the thirty-first day of December in the year Two thousand and twenty;

(ii)   the date being twenty (20) years from the death of the last survivor of the descendants now living of His Late Majesty King George VI;

(iii)   the date (if any) which the Trustee may in his absolute discretion appoint as the distribution date.” [Emphasis in original]

5. The Trustee seeks to have the Deed rectified to delete sub-par (i) of that definition.

6. If the Deed is not so rectified the distribution date of the trust will occur on 31 December 2020 and the trust will then vest.

7. The defendant, Mr Steven Kalyk, is the settlor of the Trust. He has entered a submitting appearance.

8. The only other interested parties are the beneficiaries named in the Deed. They are Mr Saric's wife, Mrs Maria Saric. Mrs Saric is suffering from dementia and is not able to play an active part in these proceedings. The other beneficiaries are the three adult children of Mr and Mrs Saric, Elena, Tony and Robert. Each of the children has signified in writing that they have no opposition to the order sought.

9. Mr Kalyk is an old family friend of Mr Saric. He agreed to act as settlor as a favour to his friend Mr Saric. Mr Saric received legal advice that the settlor of the Trust should be someone who was not a beneficiary. For that reason, Mr Saric approached Mr Kalyk. Mr Kalyk did not read the Deed and had no input into its contents. I would infer that Mr Kalyk intended the Deed to operate in whatever manner Mr Saric intended it to operate (as White J did in similar circumstances in Colquhoun v Dronpane Pty Ltd [2011] NSWSC 1500 at [15] and in Public Trustee v Smith [2008] NSWSC 397 at [73]).

10. Whilst the Deed records that Mr Kalyk settled the fund by paying $10 to the Trustee, it was Mr Saric who was instrumental in establishing the Trust with the intention of using it (as he has) for the benefit of his wife and children.

11. Only Mr Kalyk executed the Deed (although the Trustee has executed two "supplemental" deeds which vary the Trust in a manner not presently relevant).

12. I am satisfied that nonetheless the Deed is valid and effective so far as concerns the party that did execute it, irrespective of whether it is characterised as a deed poll or a deed inter partes (Lindgren J in Hewlett-Packard Aust Pty Ltd v Exeed Pty Ltd (2004) 48 ACSR 670 at [35] and Ipp JA in Mirzikinian v Waterhouse Pty Ltd [2009] NSWCA 296 at [50] – [53]).

13. The evidence establishes that Mr Saric intended that, to the fullest extent permitted by law, the Trust would have indefinite duration (hence the "Royal Lives" clause which appears at (ii) of the relevant definition). He did not notice sub-par (i) at the time the Deed was executed. His attention was only drawn to it relatively recently. As soon as he understood its effect, he understood that the Deed did not reflect his intentions.

14. I am satisfied that the presence of sub-par (ii) does have the effect that the Deed does not reflect what Mr Saric intended that it say nor reflect his intention as to how it was to operate.

15. The tests in relation to rectification are well known. In Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336, Mason J said at 350:

“What is of importance is that the purpose of the remedy is to make the instrument conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately. And there has been a firm insistence on the requirement that the mistake as to the writing must be common to the parties and not merely unilateral, except in cases of a special class…”.

16. An example of the "special class" to which Mason J referred is a voluntary settlement creating a trust where the settlor has no independent intention as to how the trust is to operate and who acts on the instruction of, or at the request of the proposed trustee; or, as here, the person who in substance stands behind the trustee.

17. In Public Trustee v Smith at [71] White J said:

“For the trust deed to be rectified there must be clear and convincing evidence that at the time the trust deed was executed the trustee and the settlor had an actual intention as to the effect which the deed was intended to create which was different from the effect which the instrument did have in a clearly identified way (Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 345). It must be demonstrated with clarity that the parties had a sufficiently precise intention that the court can determine both the substance and the detail of the precise variation to be made to the wording of the instrument (Bush v National Australia Bank Ltd (1992) 35 NSWLR 390 at 407; Muriti v Prendergast [[2006] NSWSC 286] at [137]).”

18. I am satisfied this test has been satisfied in this case. I am comfortably satisfied that the Deed does not reflect Mr Saric’s and thus the Trustee's actual intention as to how it should be expressed and that I should rectify it in the manner sought. I am satisfied that Mr Kalyk intended the Deed to have the effect Mr Saric intended.

19. The order I make is that the Deed made on 20 May 1981 between the defendant and the plaintiff be rectified by deleting the following words in cl 1(b) of that Deed: "(i) the thirty-first day of December in the year Two thousand and twenty".

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Decision last updated: 19 February 2016