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Texts Cited: NC Seddon, Seddon on Deeds (2nd edition, Federation Press, 2022)

Category: Principal judgment

Parties: Shortcorp Investments Pty Ltd (cross-claimant)
Martin James Short (first cross-defendant)
Paris Ballantyne (second cross-defendant)

Representation: Counsel:
S A Lawrance SC / M Jaireth (cross-claimant)
No other appearances
Solicitors:
Landerer & Company (cross-claimant)

File Number(s): 2024/235283

Publication restriction: N.A.

JUDGMENT

1. Mr Martin Short sued Quadrafox Pty Limited, Shortcrop Investments Pty Ltd (Shortcrop), Mrs Roslyn Short and others in this Court. Shortcorp brought a cross-claim against Mr Short. The proceedings settled. A deed of settlement and release was made on 23 April 2026. Orders were made on 29 April 2026. One matter remained for determination in the proceedings. Shortcorp applied for an order for rectification of a trust deed. The application was not contested. Nevertheless, I would not make an order for rectification unless satisfied that the order should be made. For the reasons set out below, I am so satisfied.

Factual background

2. The trust is known as the Mosman Bay Trust. It is a discretionary trust established on 11 July 2013. The sole substantial asset of the trust is a residential property on Upper Avenue Road, Mosman (the Mosman Property), which was acquired by the trust from a third party in 2013. Shortcorp is the current trustee.

3. The settlor was Mr Michael Callanan, a solicitor. The trustee at the time the trust was created was Mrs Short. The deed was executed by both Mr Callanan and Mrs Short.

4. The beneficiaries include Mr Short and Ms Paris Ballantyne, who are two of Mrs Short’s children. They are the only persons specifically named as beneficiaries. The deed also provides that various relatives of Mr Short and Ms Ballantyne are beneficiaries (for example, “the children and remoter issue” of Mr Short and Ms Ballantyne). The “mother” of Mr Short and Ms Ballantyne is also identified as a beneficiary.

5. The terms of the trust deed provide that the trustee has power to allow beneficiaries to reside upon trust property, as follows:

3. POWERS OF TRUSTEE

The Trustee in addition and without prejudice to all powers authorities and discretions vested in the Trustee hereby or by the laws of the State of New South Wales (except those as are expressly excluded in these presents) subject always to the provisions of clause 11 hereof shall have all the following additional powers and may in the absolute discretion of the Trustee exercise all or any of the same at any time or times and from time to time in such manner and to such extent as may seem to the Trustee to be desirable:…

To Allow Beneficiaries to Reside Upon Trust Property

(j) to permit any person who is for the time being a Beneficiary to occupy or reside in or upon any real or immovable property for the time being held upon the trusts hereof rent free or otherwise and generally upon such terms as the Trustee shall in absolute discretion of the Trustee think fit…

6. Clause 11 of the deed provides as follows:

11. OVERRIDING PROVISION

NOTWITHSTANDING anything in this Deed to the contrary expressed or implied no capital or income of the Settled Fund shall in any circumstances whatsoever be paid or transferred beneficially or applied for the benefit of an excluded person and no power or discretion hereby or by law vested in the Trustee or any other person shall be capable of being exercised in such manner as to benefit any excluded person.

7. The terms “excluded person” is defined as follows:

“Excluded person” means the Settlor, the Trustee and any persons who have previously been Trustees and each of them all of whom are absolutely prohibited from being or becoming a beneficiary under this Deed or otherwise directly or indirectly benefiting under this Deed and notwithstanding anything else herein contained this definition of “Excluded person” shall not be capable of amendment pursuant to Clause 6 of this Deed or otherwise.

8. Shortcorp replaced Mrs Short as trustee of the Mosman Bay Trust on about 20 October 2016.

9. Mrs Short is, and has at all times been, an “Excluded person”. That is because she was the Trustee when the trust was established and, from October 2016, has been a person who has previously been a Trustee. Accordingly, she cannot benefit from the trust, and has never been able to do so consistently with its terms.

10. Rectification is sought on the basis that it was never intended that Mrs Short would be excluded from benefiting from the trust. On the contrary, it was intended and expected that she would be the person most likely to benefit from the trust.

Form of rectification

11. Rectification is sought in respect of the definition of “Excluded person”. It is sought in either of the following alternative ways:

12. An order that the definition of “Excluded person” in clause 1 of the trust deed establishing the Mosman Bay Trust dated 11 July 2013 between Michael Callanan as settlor and Roslyn Mary Short as trustee, as amended on 20 October 2016 and 19 December 2019 (Mosman Bay Trust Deed), be rectified as follows:

“Excluded person” means the Settlor, the any Trustee which is a corporation and any persons corporations who which have previously been Trustees and each of them all of whom are absolutely prohibited from being or becoming a beneficiary under this Deed or otherwise directly or indirectly benefiting under this Deed and notwithstanding anything else herein contained this definition of “Excluded person” shall not be capable of amendment pursuant to clause 6 of this Deed or otherwise.

2. In the alternative, an order that the definition of “Excluded person” in clause 1 of the Mosman Bay Trust Deed be rectified as follows:

“Excluded person**”** means the Settlor, the Trustee and any persons who have previously been Trustees, other than Ms Roslyn Mary Short, and each of them all of whom are absolutely prohibited from being or becoming a beneficiary under this Deed or otherwise directly or indirectly benefiting under this Deed and notwithstanding anything else herein contained this definition of “Excluded person” shall not be capable of amendment pursuant to clause 6 of this Deed or otherwise.

Parties

12. Mr Short and Ms Ballantyne are parties to this application. Both of them support the application. The other potential objects of beneficiation are not parties. It would not be practicable to join them as defendants. Those persons are beneficiaries by reason of some relationship to Mr Short or Ms Ballantyne. They are entitled to have the trust properly administered, and may have an expectancy or hope of consideration by the trustee. But that is all each of them has. In those circumstances, it is not necessary to join them as defendants: Holloway (as trustees of Hollandia Family Trust v Commissioner of State Revenue (2024) 36 Tas R 150; [2024] TASSC 45 at [13]-[15] per Blow CJ; r 7.12 of the Uniform Civil Procedure Rules 2005 (NSW).

The evidence

13. Evidence was adduced from Mrs Short, Mr Callanan and Ms Ballantyne. There was also evidence from Mr Robert McGuinness, who was the accountant advising the Short family at the time the Mosman Bay Trust was established.

14. Mrs Short’s evidence is that, in about late June or early July 2013, she (with Mr Short and Ms Ballantyne) identified the Mosman Property for acquisition as her Sydney residence. She obtained some advice about the mechanism by which the property would be acquired. One consideration was to guard against a possible claim by Mrs Short’s other son, Mr Fraser Short. In 2011, following a dispute between Mr Martin Short and Mr Fraser Short about the operation of the family business, there was a financial settlement following which Mr Fraser Short ceased to have any involvement or interest in the business. Mrs Short was concerned to put into place a structure that minimised the potential for Mr Fraser Short to make a claim on her estate. She understood that a trust was being created for the purpose of the property acquisition. She was aware that it was originally proposed that a company would be the trustee but, for reasons she cannot recall, she was appointed as trustee. It was always her intention that she would reside in the Mosman Property rent-free and be able to deal with the property as she saw fit.

15. Mr Callanan’s evidence is that he received an email on 9 July 2013 from Mr Martin Short, attaching a draft contract for sale of the Mosman Property. He understood that Mr Short was helping Mrs Short to identify a new Sydney residence. On 10 July 2013, he received an email from Mr McGuinness in relation to the acquisition of the Mosman Property. Mr Callanan was aware of concerns about the risk of a claim against Mrs Short’s estate by Mr Fraser Short. Mr McGuiness suggested that the acquisition occur through a discretionary trust. Mr Callanan was aware, from discussions with Mrs Short and Mr Martin Short, that the primary purpose of the purchase was to benefit Mrs Short during her lifetime, with the asset enuring for the benefit of Mr Martin Short and Ms Ballantyne after her death.

16. Mr Callanan cannot specifically recall drafting the Mosman Bay Trust. It is apparent that the deed was prepared on short notice. Mr Callanan’s evidence is that, consistently with his usual practice, he would have used a precedent to commence drafting. His precedent contemplated that a company would be appointed as the trustee. He gave evidence that he has prepared numerous trust deeds during his career. His evidence included the following:

The purpose of the “Excluded person” provisions is so that the trust has the benefit of s 54(3) of the Duties Act 1997 (NSW) (as interpreted in the relevant ruling issued by Revenue NSW) which allows for nominal stamp duty to be paid where there is a change of trustee. It was never my intention that the terms of the Trust Deed would prevent Mrs Short from being a beneficiary of the Mosman Bay Trust, or from residing in the Mosman Property rent-free as provided by clause 3(j) of the Trust Deed. My understanding is that was not Mrs Short’s intention either.

17. At some point between 10 July 2013 and the time the deed was settled on 11 July 2013, the draft of the deed was altered so that Mrs Short would be the trustee, rather than a company. Mr Callanan gave the following evidence:

When the proposed trustee changed from a company to Mrs Short personally, I should have given advice that Mrs Short personally should not be the trustee, and that the trustee should be a company, because it was intended that Mrs Short would also be a beneficiary, which was not consistent with s 54(3) of the Duties Act. Given the urgency, I did not recognise the issue of Mrs Short becoming an “Excluded person” under the Trust Deed that would arise from her being the trustee of the Mosman Bay Trust rather than a company. If the trustee had been a company from the outset, no such issue would have arisen.

18. The evidence of Mr McGuiness and Ms Ballantyne is that they understood that Mrs Short would be a beneficiary of the trust and would be entitled to live in the Mosman Property rent-free.

19. There are (unremarkably) some differences in the evidence of Mrs Short and Mr Callanan. Mrs Short’s evidence focussed on her intention to be a beneficiary, being able to enjoy the benefit of rent-free living at the Mosman Property. It was entirely at odds with her understanding that, as an “Excluded person”, she would not be permitted to benefit from the trust assets. She gave no evidence about any steps taken to benefit from s 54(3) of the Duties Act 1997 (NSW). Mr Callanan’s evidence is that he failed to recognise that because Mrs Short was to be appointed as trustee, her status as an excluded person meant she could not benefit from the trust assets as a beneficiary. His evidence is that he knew that the intention of Mrs Short was that she would benefit. His instructions were to achieve that end. His evidence, however, is not that he would have given advice to amend the definition of excluded person to carve out Mrs Short. Rather, he would have advised that Mrs Short should not be the trustee.

20. It would not be possible to rectify the Mosman Bay Trust to make the initial trustee a company rather than Mrs Short. It is too late to make some other entity the initial trustee. Shortcorp did not seek that form of rectification.

Principles

21. Counsel for Shortcorp referred to well-known principles concerning the remedy of rectification, including:

(a) rectification may be granted where there was, at the time the document was executed, a common intention which, through a common mistake, was not reflected in the document: Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (2019) 99 NSWLR 317; [2019] NSWCA 11 at [12] (Leeming JA, Payne and White JJA agreeing); (b) the common intention of the parties must be sufficiently well-defined and clear to be capable of being stated in words that can be incorporated in the instrument: Franklins Pty Ltd v Metcash Trading Ltd*;* Metcash Trading Ltd v Franklins Pty Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [447] (Campbell JA); (c) rectification is granted upon clear and convincing proof: Australian Gypsum Limited and Australian Plaster Co**mpany Limited v Hume Steel Limited (1930) 45 CLR 54; [1930] HCA 38 at 63-64; and (d) a trust deed is an instrument capable of being rectified: Kent v Brown (1942) 43 SR (NSW) 124 at 128 (Roper J); Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 331A-E, 340E-F and 345C; NC Seddon, Seddon on Deeds (2nd edition, Federation Press, 2022) 237-238 [5.10], 277 [6.26].

Whose intention matters?

22. There is a question in this case as to whether the relevant intention is that of Mrs Short, or that of Mr Callanan, or whether it is the intention of both of them that matters.

23. Shortcorp submitted that the relevant mind was that of Mrs Short. At the hearing, Shortcorp relied on the following statement of principle by Sackar J in In the matter of the C.E. Brenchley Family Trust [2019] NSWSC 1602 at [34]:

First, whether rectification was appropriate. This involves a determination is to the relevant intention behind the party creating the deed and whether or not the deed in fact reflects that intention. Here where the settlor is acting on instructions and has no independent intention with relation to the trust, it is the intention of the person who provides the instructions that is relevant.

Shortcorp also supplied a note following the hearing drawing my attention to other relevant authorities, some of which I note below.

24. In Public Trustee v Smith [2008] NSWSC 397; (2008) 1 ASTLR 488, White J said at [73]:

There is no direct evidence of the settlor’s intentions. I accept Mr Strong’s evidence that at all times his father acted on his instructions and did not exercise any independent discretion. His father was the settlor of numerous trusts. It can be safely inferred that the settlor either had no intentions as to the terms of the trust deed, or intended that the trust deed should have the effects which the client or his son intended, whatever that might be.

25. In Kirkham as Trustee of The Kirkham Family Trust [2010] WASC 106, Martin CJ said:

[8] In this case the intention of Mr Kirkham, as the trustee, is relevant. The settlor of the trust was Mr Alistair MacKay, who was a junior solicitor in the law firm responsible for the preparation of the trust instrument.

[9] Given that the trust was executed in 1987, it is understandable that Mr MacKay has no present recollection of the events relating to its creation. It is clear from the evidence that, to the extent that he was involved in the matter, he acted in a professional capacity only and under the supervision of his principals who were, relevantly at that stage, Mr Norton and Mr Hager.

[10] In those circumstances, it is again established by authority that the relevant intent in relation to the settlor is that of the person providing instructions to the settlor: Public Trustee v Smith [73].

26. In Colquhoun v Dronpane Pty Limited [2011] NSWSC 1500, White J said at [15]:

Ms Ramsden was chosen as settlor because Peter Colquhoun advised the plaintiff to find a friend or a remote family member who was not intended to become a beneficiary of the proposed family trust to act as its settlor. The plaintiff's brother John arranged for his mother-in-law to act as the settlor. It can be inferred that she either had no intention as to what the trust deed should provide, or had no intention independent of that of the plaintiff and Peter Colquhoun. In other words, she intended that it should have whatever effect they intended it to have (Raftland Pty Ltd v Federal Commissioner of Taxation [2008] HCA 21; (2008) 238 CLR 516 at [44]; Public Trustee v Smith [2008] NSWSC 397; (2008) 1 ASTLR 488 at [73]).

27. In Sanwick Pty Limited v Kalyk [2016] NSWSC 100, Stevenson J said:

[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.

This passage has been cited in a number of cases, including some of the cases referred to below.

28. In Benaroon Pty Ltd v Larmar [2018] QSC 274, Martin J said at [5]-[7]:

[5] The prerequisites for granting the remedy were considered by Mason J (as he then was) in Maralinga Pty Ltd v Major Enterprises Pty Ltd where he said that there had 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.

[6] That statement was picked up by Stevenson J in Sanwick Pty Ltd v Kalyk where at [16] he said:

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.

[7] This trust deed falls within that description. It was not one in which the terms of the trust represent a bargain between the settlor and some other person or persons.

An appeal was dismissed: Benaroon Pty Ltd v Larmar [2020] QCA 62. Philippides JA, with whom Fraser and Morrison JJA agreed, referred to this passage without criticism (at [13]).

29. In In the matter of the George Hardi Family Trust [2021] NSWSC 1584, Sackar J observed:

[11] In Sanwick Pty Limited v Kalyk [2016] NSWSC 100 (“Sanwick”) Justice Stevenson rectified an inter vivos voluntary inter-party trust deed, where the evidence indicated that the intent of the “real” settlor (and not the nominal settlor) differed from the express terms of the trust deed.

[12] Mason J in Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350 observes of the test in relation to rectification:

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 first 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.

[13] Stevenson J at [16] in Sanwick observed of the “special class” referred to by Mason J as follows:

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.

30. In the same case, Sackar J said:

[18] As discussed above, rectification requires an assessment of the subjective (i.e. actual) intention of the party (or parties) to the document, and the person behind the arrangement (i.e. Hardi and possibly Stephen, who would have caused the instructions for the drafting of the Trust Deed to have been provided to any solicitor).

[19] In the case of a voluntary settlement, which has been established without any active bargain, the question as to whose intention is relevant as to rectification depends on the circumstances and the substance of the matter.

[20] Where the settlor has the active and operative intention as a matter of fact, as to the terms of the trust which is declared, then the question is one of the settlor’s intention (see Brightman J in Butlin’s Settlement at 262F – 263B and Roper J in Kent v Brown at 128).

[21] In other cases, it may be the trustee whose intention is relevant to the terms of the trust (Sheller JA in Carlenka at 344-5).

See also Williams v Duerinckx Enterprises Pty Ltd [2022] TASSC 32 at [14] (Pearce J); Lowther Park Pty Ltd as trustee for the Lowther Park Family Trust v Della Marta [2023] NSWSC 1555 at [55]-[56] (McGrath J) and Zec Family Investments Pty Ltd v Zecchini [2024] QSC 173 at [13] (Henry J).

31. Shortcorp submitted that there is a difference between drawing an inference as to the settlor's intention and finding the settlor's intention not to be a relevant intention. It submitted that in the present case, the terms of the trust do not represent a bargain between the settlor and some other person; rather, Mr Callanan was a nominal settlor who acted on the instructions of Mrs Short. Shortcorp submitted that the creation of the Mosman Bay Trust was, in substance, a unilateral transaction and Mrs Short's intention was the only relevant intention.

32. I accept that there is a conceptual difference between drawing an inference as to the settlor's intention and finding the settlor's intention not to be a relevant intention. The conceptual difference may not always be clean in application. The circumstances which suggest that a settlor’s intention must have been merely to give effect to the intention of another person may naturally lead to the conclusion that the settlor’s intention is irrelevant.

33. The Mosman Bay Trust was not the product of an active bargain. It was the product of instructions. But Mr Callanan appears, on the evidence, to have taken steps to achieve an advantageous taxation position for his client. There is no evidence of specific instructions to do so. Given that Mr Callanan applied his mind to the terms of the deed to achieve a particular outcome, I am not prepared to conclude that his intention is irrelevant. I conclude, however, that his paramount intention was to settle a deed that would enable Mrs Short to benefit as trustee, and that he made a mistake when drafting the deed by retaining a definition of “Excluded person” that would operate to deny Mrs Short, as the named trustee, from any benefit from the trust property. Mrs Short likewise made the same mistake when she executed the deed as trustee. There was a mistake made by everyone involved insofar as the deed denied Mrs Short the opportunity to benefit from the trust property. The most basal intention of Mrs Short and Mr Callanan was to put into place a trust deed that would enable Mrs Short to reside at the Mosman Property. This was not achieved, because the definition of “Excluded person” extended to Mrs Short. The outcome, being to deny Mrs Short of the benefit of the trust, was a plain mistake.

34. I do not consider that the remedy of rectification should be denied on the basis that Mr Callanan’s evidence is that had he adverted to the mistake, he would have advised that a company, rather than Mrs Short, be appointed as trustee. That is not to deny that the key mistake was to exclude Mrs Short as a person who could benefit. There may have been various alternatives open to Mr Callanan and Mrs Short had they adverted to the mistake. Nevertheless, when one looks at the deed as made and appreciates that Mrs Short cannot benefit because of the definition of “Excluded person”, it is proper to conclude that the real mistake in the terms of the deed lies in the definition of “Excluded person”, and lies in the failure to exclude Mrs Short from that definition.

Conclusion

35. At the time the Mosman Bay Trust deed was executed, Mrs Short and Mr Callanan had a common intention to establish a trust that would permit Mrs Short to benefit as a beneficiary. By reason of a common mistake, that intention was not reflected in the document. This is a proper case where the instrument should be rectified.

Form of rectification

36. As I have already noted, Shortcorp advanced two alternative forms of words to rectify the Mosman Bay Trust. In the note provided after the hearing, Shortcorp submitted that a more precise rectification may be to insert the words, ", other than Mrs Roslyn Mary Short (unless, having ceased to be the initial Trustee, she should again become Trustee)," into the definition of Excluded person.

37. I prefer the alternative form or words set out at [11(2)] above. That seems to me to most clearly give rise to the fundamental intention of Mrs Short and Mr Callanan and correct the common mistake.

Undertaking

38. Given that the mistake in this case came about because Mr Callanan was seeking to include terms in the deed that would confer the benefit of s 54(3) of the Duties Act, it is conceivable that rectification (which operates from the time the deed was made) could have taxation implications. Shortcorp submitted that there would be no such implications.

39. Nevertheless, Mrs Short proffered an undertaking to the Court to provide a copy of the Court’s orders and reasons together with a copy of the Mosman Bay Trust (with amending deeds) to the Commissioner of State Revenue, so that the Commissioner can consider any impact on stamp duty liability as a result of the orders. I consider that to be an appropriate undertaking.

Orders

40. The orders of the Court are as follows:

41. The Mosman Bay Trust is rectified as follows:

“Excluded person**”** means the Settlor, the Trustee and any persons who have previously been Trustees, other than Ms Roslyn Mary Short, and each of them all of whom are absolutely prohibited from being or becoming a beneficiary under this Deed or otherwise directly or indirectly benefiting under this Deed and notwithstanding anything else herein contained this definition of “Excluded person” shall not be capable of amendment pursuant to clause 6 of this Deed or otherwise.

2. The Court notes and accepts the undertaking given to the Court by Mrs Short to provide a copy of the Court’s orders and reasons, together with a copy of the Mosman Bay Trust (with amending deeds) to the Commissioner of State Revenue, so that the Commissioner can consider any impact on stamp duty liability as a result of the orders. That should be done within 7 days and Shortcorp is to notify my Associate once it has been done.

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