Sanwick Pty Limited v Kalyk

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").

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

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

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

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

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.

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

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.

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]).

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.

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

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]).

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.

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.

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:

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.

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

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.

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".