Zec Family Investments Pty Ltd v Zecchini [2024] QSC 173

• [1] The applicant applies to rectify a discretionary family trust deed to omit certain words that have the effect of prohibiting the first and second respondents, the persons behind the trust and, indeed, class A beneficiaries, from receiving trust distributions and income capital.
• [2] The unusual problem occurs against the following background. The first respondent, Mr Zecchini, was to become a half owner of Griffin & Associates. He and Carla Anderson, the second respondent, had decided that would happen through the vehicle of the company being incorporated. They also decided that the shares in that company ought be held under a discretionary family trust.
• [3] Their solicitor was instructed to establish the trust. Written instructions and oral instructions were given to the solicitor to do so. The documentary instructions included advice that Mr Zecchini and Ms Anderson were to be the trustees of the trust, as well as A class beneficiaries. The solicitor was the settlor of the trust.
• [4] Everything proceeded unremarkably, or so the parties thought. The deed had been executed in 2013. The trust and its affairs were conducted consistently with what everyone thought they had done. Time went on and Zec Accounting, the firm under which Mr Zecchini and Ms Anderson had assumed their 50 per cent ownership, acquired the other 50 per cent ownership of Griffin & Associates, in the middle of 2019.
• [5] In 2020, Mr Zecchini and Ms Anderson retired as trustees of the trust, replacing themselves with a company, Zec Family Investments Proprietary Limited. They discovered a problem in mid-2023. It was discovered that when the trust was created, notwithstanding Mr Zecchini and Ms Anderson being nominated as class A beneficiaries in the trust deed, their status as trustees and the past trustees of the trust was problematic. That was because clause 11.2 of the trust deed provided:

"Notwithstanding anything to the contrary contained in this deed, income or capital of the trust, other than remuneration permitted under subclause (2) of this clause shall not, in any circumstances, be paid or transferred beneficially to or applied for the benefit of the settlor or the trustee or any person who, at the time, has been a trustee."

• [6] Given one of the main aims of establishing the trust was to have the ability to distribute income to themselves as beneficiaries, this struck Mr Zecchini and Ms Anderson, who had not realised the significance of these words when the trust was executed, as plainly problematic and needing to be remedied.
• [7] The remedy sought is rectification. The proposed draft order before me would do that by deleting the words, "or the trustee or any person who, at any time, has been a trustee" from the clause I have mentioned. Evidence justifying an order for rectification ought be clear and convincing. It seems to be especially so here.
• [8] The deed is nonsensical. It clearly nominates Mr Zecchini and Ms Anderson as class A beneficiaries, yet the words of concern literally mean that they are excluded from receiving any distribution of trust income or capital. The concepts cannot stand, sensibly, together. There has plainly been an error that needs to be rectified.
• [9] Any doubt about there having been such an error is exposed by the evidence that has been provided before me, which shows that Mr Zecchini and Ms Anderson always intended the trustee would be able to distribute trust income and capital to them as beneficiaries. Mr Zecchini's instructions to the solicitor regarding formation of the trust accurately reflect those intentions.
• [10] There were no instructions provided to the solicitor to exclude current or past trustees of the trust as beneficiaries, and, when reviewing the draft, it is obvious they simply did not appreciate the impact of a clause that had been included inconsistently and without their instructions. The solicitor acknowledges he did not receive instructions of the kind which support the inclusion of the clause, which is unremarkable, given the purpose of the exercise.
• [11] The remedy involves the Court effectively reforming an instrument which the parties have mistakenly expressed their agreement to. It is generally necessary to show that the parties were in complete agreement on the terms, but, by error, wrote them down wrongly. Mason J in Maralinga Proprietary Limited v Major Enterprises Proprietary Limited [1973] HCA 23; [1973] 128 CLR 336 at 350 noted:

"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."

• [12] As to the party whose intention is relevant to an order for rectification of trust deeds, Sackar J in Re George Hardi Family Trust [2021] NSWSC 1584 observed at [19] to [21]:

"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. 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. In other cases, it may be the trustee whose intention is relevant to the terms of the trust."

• [13] The distinction as to whether it is the settlor's or trustee's intention which is relevant heralds the relevance of the special class spoken of by Justice Mason in Maralinga. Of this, Stevenson J observed in Sanwick Pty Limited v Kalyk [2016] NSWSC 100 at 16, that an example of such a class 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.
• [14] The solicitor was, obviously, such a person, although it is clear enough that he joined in the common mistake that occurred. It seems obvious that the offending words must have existed in some other document that the solicitors' firm used from time to time and had, erroneously, been left in the document, with which this application is concerned, when formatted, the error not being detected by anyone until recent times.
• [15] For all of these reasons, it is uncontroversial that I ought make the order sought.
• [16] I order as per the draft order signed by me and placed with the papers.
• [17] To remove doubt, for the benefit of the parties, I amended the draft by striking out the shaded option.