Rectification – Chartbrook not followed
Opportunity for an appellate court to clarify the correct test to apply in deciding whether the written terms of a contract may be rectified because of a common mistake.
Held: The appeal failed. The judge was right to conclude that an objective observer would have understood – just as Barclays in fact understood – that the accession deeds were not intended to do more than fill the gap in the security.
‘we are unable to accept that the objective test of rectification for common mistake articulated in Lord Hoffmann’s obiter remarks in the Chartbrook case correctly states the law. We consider that we are bound by authority, which also accords with sound legal principle and policy, to hold that, before a written contract may be rectified on the basis of a common mistake, it is necessary to show either (1) that the document fails to give effect to a prior concluded contract or (2) that, when they executed the document, the parties had a common intention in respect of a particular matter which, by mistake, the document did not accurately record. In the latter case it is necessary to show not only that each party to the contract had the same actual intention with regard to the relevant matter, but also that there was an ‘outward expression of accord’ – meaning that, as a result of communication between them, the parties understood each other to share that intention.’
Flaux, Leggatt, Rose LJJ
[2019] EWCA Civ 1361
Bailii
England and Wales
Citing:
Not Followed – Chartbrook Ltd v Persimmon Homes Ltd and Others HL 1-Jul-2009
Mutual Knowledge admissible to construe contract
The parties had entered into a development contract in respect of a site in Wandsworth, under which balancing compensation was to be paid. They disagreed as to its calculation. Persimmon sought rectification to reflect the negotiations.
Held: . .
Cited – Daventry District Council v Daventry and District Housing Ltd CA 13-Oct-2011
The appellant challenged refusal of rectification of its agreement with the defendant. They asserted either mutual or unilateral mistake. The parties had agreed for the transfer of housing stock and management staff to the respondents. The claimant . .
Cited – Henkle v Royal Exchange Assurance Company 14-Nov-1749
(Court of Chancery) Lord Hardwicke LC was in ‘no doubt, that this court has jurisdiction to relieve in respect of a plain mistake in contracts in writing as well as against frauds in contracts: so that if reduced into writing contrary to intent of . .
Cited – The Right Honourable Mary Countess Dowager of Shelburne, John Hamilton Fitzmaurice, An Infant, By The Said Countess, His Grandmother And Next Friend v Morough Earl of Inchiquin And Others 22-Mar-1781
On a claim to rectify a written agreement made in contemplation of marriage, Lord Thurlow LC considered it ‘impossible to refuse, as incompetent, parol evidence, which goes to prove, that the words taken down in writing were contrary to the current . .
Cited – The Marquis Townshend v Stangroom 21-Jul-1801
. .
Cited – Calverley v Williams, Williams v Calverley 2-Jul-1790
The question was whether a particular piece of land was correctly included in the description of the land to be conveyed under a contract of sale.
Lord Thurlow LC said that:
‘ . . if both [parties] understood the whole was to be conveyed, . .
Cited – Fowler v Fowler 12-May-1859
Lord Chelmsford LC said that a party seeking rectification must establish clearly ‘that the alleged intention to which he desires’ (the instrument) ‘to be made conformable continued concurrently in the minds of all parties down to the time of its . .
Cited – Mackenzie v Coulson 1869
James V-C said: ‘Courts of Equity do not rectify contracts; they may and do rectify instruments purporting to have been made in pursuance of the terms of contracts. But it is always necessary for a plaintiff to show that there was an actual . .
Cited – Lovell and Christmas Ltd v Wall CA 1911
The written contract contained a restrictive covenant limiting the defendant’s freedom to carry on the business of a ‘provision merchant’ other than on behalf of the plaintiff company. On the facts found, the parties in their discussions before the . .
Cited – Shipley Urban District Council v Bradford Corporation ChD 1936
The parties had reached a clear common understanding in their negotiations as to how they intended the price of water supplied to the plaintiff council by the defendant corporation to be calculated; but, as each party only had power to contract . .
Cited – Crane v Hegeman-Harris Co Inc CA 1939
Judgment approved . .
Cited – Crane v Hegeman-Harris Co Inc ChD 1939
A continuing common intention of the parties to a document alone will not suffice to justify rectification. For rectification to be appropriate, there must be convincing proof that the concluded instrument does not represent the common intention of . .
Cited – Frederick E Rose (London) Limited v William H Pim Junior and Co Limited 1953
The plaintiffs, who were London merchants, had been asked by Egyptian buyers to supply ‘feveroles’. Not knowing what this term meant, they asked the defendants’ representative, who responded that ‘feveroles’ meant horsebeans. Relying on this . .
Cited – London Weekend Television Ltd v Paris and Griffith ChD 1969
Megaw J said: ‘Where two persons agreed expressly with one another what was the meaning of a particular phrase but did not record their definition in the contract itself, if one of the parties sought to enforce the agreement on the basis of some . .
Cited – Joscelyne v Nissen CA 1970
A father entered into a written contract with his daughter by which he transferred to her his car hire business in return for her agreement to pay him a pension and discharge certain expenses. In their discussions it had been agreed between them . .
Cited – Lloyd v Stanbury 1971
A purchaser who had been let into possession before completion and had spent money on improvements to the property was not entitled to claim for such expenses because they would not usually have been within the contemplation of the parties. As to . .
Appeal From – FSHC Group Holdings Ltd v Barclays Bank Plc ChD 22-Jun-2018
Claim for rectification of two Deeds . .
Cited – Re Butlin’s Settlement Trusts 1976
Sir Billy Butlin had executed a voluntary settlement to allow a majority of trustees to exercise a power under the settlement. By a drafting error the settlement did not give effect to this intention.
Held: The court could rectify the . .
Cited – Britoil plc v Hunt Overseas Oil Inc CA 1994
After the failure of the attempt by the Texan oil tycoon, Nelson Bunker Hunt, in the 1970s to corner the world silver market, his fortune collapsed and his companies were forced to sell off assets. In 1979 two of those companies (the defendants in . .
Cited – Gallaher Limited v Gallaher Pensions Limited, C Foster, D Silver ChD 21-Jan-2005
Construction of amendments to pension scheme. . .
Cited – Munt v Beasley CA 4-Apr-2006
Mummery LJ expressed the view that an outward expression of accord, although established on the facts of that case, was not a strict legal requirement for rectification where the party resisting rectification had in fact admitted that his true state . .
Cited – Tartsinis v Navona Management Company ComC 19-Jan-2015
The parties disputed the price to be paid in a sale of shares under a contract for their sale. The company which owned a fleet of ships. The shares were sold by two Greek businessmen, Mr Mihail Tartsinis and Mr Antonis Nikolaou, to Navona Management . .
Cited – Ryledar Pty Ltd v Euphoric Pty Ltd 20-Apr-2007
Campbell JA asked rhetorically: ‘If two negotiating parties each had a particular intention about the agreement they would enter, and their intentions were identical, but that intention was disclosed by neither of them, and they later entered [into] . .
Cited – JIS (1974) Ltd v MCP Investment Nominees I Ltd ChD 2002
Hart J said: A particular intention may, as it seems to me, as a matter of the general nature of human discourse, be communicated by one party to another without express words necessarily being used. It may therefore sometimes be possible for the . .
Cited – JIS (1974) Ltd v MCP Investment Nominees I Ltd CA 9-Apr-2003
The parties agreed for a lease to be granted of a new building. Part had been intended to be excluded for shops, but permission was not obtained, the shops area was included and leased back. When the tenants sought to determine the lease, the . .
Cited – Re IBM Pension Plan ChD 2012
The court considered an application to rectify a pension scheme.
Held: Warren J said: ‘There needs to be cogent evidence of the intentions of both the trustee and the employer where the power of amendment requires the consent of both. . . In a . .
Cited – Caraman, Rowley and May v Aperghis 1923
Two contracts for the sale of sultanas on cif terms were drawn up by a broker acting for the sellers. By mistake, the broker used a form intended for spot contracts instead of the form for cif contracts with the result that the written contracts did . .
Cited – Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales 1982
(High Court of Australia) Mason J said: ‘The implication of a term is to be compared, and at the same time contrasted, with rectification of the contract. In each case the problem is caused by a deficiency in the expression of the consensual . .
Cited – Cooperative Insurance Society Ltd v Centremoor Ltd CA 1983
Rectification of a contract was sought.
Held: While it must be shown what was the common intention, the exact form of words in which the common intention is to be expressed is immaterial if, in substance and in detail, the common intention can . .
Cited – A Roberts and Co Ltd v Leicestershire County Council ChD 1961
The court considered the circumstances required for rectification of a contract after a unilateral mistake. Pennycuick J said: ‘a party is entitled to rectification of a contract upon proof that he believed a particular term to be included in the . .
Cited – American Airlines Inc v Hope HL 1974
A claim was made for the rectification of an aviation insurance contract.
Lord Diplock said: ‘Rectification is a remedy which is available where parties to a contract, intending to reproduce in a more formal document the terms of an agreement . .
Cited – Thomas Bates and Sons Ltd v Wyndham’s Lingerie Ltd CA 21-Nov-1980
An application was made for rectification of a rent review clause in a lease. When executing the lease, the tenants’ officer, Mr Avon, noticed that the rent review clause in the lease drafted by the landlords was defective in not including a . .
Cited – Agip SpA v Navigazione Alta Italia SpA, ‘The Nai Genova’ CA 1984
Rectification was sought of an escalation clause in a charter-party which provided for a base figure in US dollars to be increased by reference to Italian inflation. The plaintiffs claimed that an accord had been reached that the base figure should . .
Cited – Britoil plc v Hunt Overseas Oil Inc CA 1994
After the failure of the attempt by the Texan oil tycoon, Nelson Bunker Hunt, in the 1970s to corner the world silver market, his fortune collapsed and his companies were forced to sell off assets. In 1979 two of those companies (the defendants in . .
Cited – Holaw (470) Ltd v Stockton Estates Ltd ChD 2000
In a sale and immediate sub-sale of land, the contracts used different standard terms and conditions. The result was that the sub-sale excluded a right of access to the property.
Neuberger J summarised the law in what were then uncontroversial . .
Cited – Swainland Builders Ltd v Freehold Properties Ltd CA 2002
Swainland Builders Ltd owned the freehold of a block of flats. It had granted 99-year leases at ground rents of all the flats except numbers 11 and 18. It had intended to sell the block subject to the retention of flats 11 and 18 which it initially . .
Cited – Re Hetherington 1990
The court looked to whether a decision of a superior court was binding when the point had not been argued: ‘In my judgment the authorities clearly establish that even where a decision of a point of law in a particular sense was essential to an . .
Cited – Kadhim v Housing Benefit Board, London Borough of Brent CA 20-Dec-2000
A lower court was not bound to follow a decision of a higher court, where the decision at issue had been based, on the relevant point, on an unargued assumption about the law, which had in turn been pivotal to the decision of that higher court: ‘The . .
Cited – Kiriacoulis Lines Sa v Compagnie D’Assurances Maritime Aeriennes Et Terrestres (Camat) and Another (‘The Demetra K’) CA 16-Jul-2002
The court set out the elements to be satisfied before ordering a rectification of a commercial contract, in particular, the need for an antecedent agreement with outward expression of a common intent, and convincing evidence sufficient to discharge . .
Cited – Crossco No 4 Unltd and Others v Jolan Ltd and Others ChD 31-Mar-2011
. .
Cited – Day and Another v Day CA 27-Mar-2013
Appeal against refusal of order to rectify a conveyance of 1985.
Held: The conveyance was in the nature of a voluntary settlement and in such a case what is relevant is the subjective intention of the settlor. . .
Cited – Mackenzie v Coulson 1869
James V-C said: ‘Courts of Equity do not rectify contracts; they may and do rectify instruments purporting to have been made in pursuance of the terms of contracts. But it is always necessary for a plaintiff to show that there was an actual . .
Cited – Lovell and Christmas Ltd v Wall CA 1911
The written contract contained a restrictive covenant limiting the defendant’s freedom to carry on the business of a ‘provision merchant’ other than on behalf of the plaintiff company. On the facts found, the parties in their discussions before the . .
Cited – Inland Revenue Commissioners v Raphael and Ezra HL 1935
Parties to a contract should be presumed to have intended what in fact they have said.
The function of the recitals in a lease is to narrate the history leading up to the making of the lease.
Lord Wright said: ‘ . . the principle of the . .
Cited – George Cohen Sons and Co Ltd v Docks and Inland Waterways Executive CA 1950
The landlord negotiating a new lease proposed to the tenant that ‘the terms and conditions contained in the present lease to be embodied in the new lease where applicable.’ The tenant accepted this offer, but the new lease as executed made the . .
Cited – The Olympic Pride (Etablissements Georges et Paul Levy v Adderley Navigation Co Panama SA 1980
In the case of a bilateral transaction, there must be convincing proof that the concluded instrument does not represent the common intention of the parties to allow rectification. The policy reason for the need for convincing proof is that certainty . .
Cited – Westland Savings Bank v Hancock 1987
Tipping J set out the requirements for rectification for common mistake: ‘(1) That, whether there is an antecedent agreement or not, the parties formed and continued to hold a single corresponding intention on the point in question.
(2) That . .
Cited – Mannai Investment Co Ltd v Eagle Star Assurance HL 21-May-1997
Minor Irregularity in Break Notice Not Fatal
Leases contained clauses allowing the tenant to break the lease by serving not less than six months notice to expire on the third anniversary of the commencement date of the term of the lease. The tenant gave notice to determine the leases on 12th . .
Cited – Pimlico Properties Limited v Driftwood Developments Limited 10-Nov-2009
Court of Appeal of New Zealand – Rectification is an equitable remedy whereby a written contract which does not reflect the common intention of the parties can be modified or corrected so that it does. . .
Cited – Pimlico Properties Limited v Driftwood Developments Limited 10-Nov-2009
Court of Appeal of New Zealand – Rectification is an equitable remedy whereby a written contract which does not reflect the common intention of the parties can be modified or corrected so that it does. . .
Cited – Ahmad v Secret Garden (Cheshire) Ltd CA 6-Aug-2013
The tenant appealed against an order for the rectification of the lease agreement between the parties. The recorder at first instance had found that both parties had been mistaken in their belief about the effect of a lease and had granted . .
Cited – Marley v Rawlings and Another SC 22-Jan-2014
A husband and wife had each executed the will which had been prepared for the other, owing to an oversight on the part of their solicitor; the question which arose was whether the will of the husband, who died after his wife, was valid. The parties . .
Cited – Robb v James 28-Feb-2014
(New Zealand Court of Appeal) The Court contrasted ‘the state of some uncertainty as to the requisites for rectification in English law’ (referring to the Daventry case) with the ‘relatively settled’ position in New Zealand where ‘Tipping J’s 1987 . .
Cited – Rawlinson and Hunter Trustees SA and Others v Director of The Serious Fraud Office CA 31-Jul-2014
Documents had been disclosed in error in related proceedings, and the appellants now challenged refusal of an order that their use within the current proceedings should be restrained. . .
Cited – Simic v New South Wales Land and Housing Corporation 7-Dec-2016
(HIGH COURT OF AUSTRALIA) In holding that certain performance bonds should be rectified in order to correct a common mistake, applied the traditional test of asking what was the actual or true common intention of the parties
Kiefel J (with . .
Cited – Tartsinis v Navona Management Company ComC 19-Jan-2015
The parties disputed the price to be paid in a sale of shares under a contract for their sale. The company which owned a fleet of ships. The shares were sold by two Greek businessmen, Mr Mihail Tartsinis and Mr Antonis Nikolaou, to Navona Management . .
Cited – LSREF III Wight Ltd v Millvalley Ltd ComC 8-Mar-2016
. .
Cited – Van der Linde v Van der Linde ChD 1947
Evershed J said that the remedy of rectification is not appropriate if the grantor’s real intention: ‘be no more precise than this, namely, that he intended, by whatever formulation of words was appropriate or possible, to achieve the result that he . .
Cited – Racal Group Services Limited v Ashmore CA 1995
The company had covenanted to pay an annual sum to charity. Since the last payment under the covenant was to be made less than three years after the execution of the deed, an intended tax advantage was not secured.
Held: The company’s appeal . .
Cited – AMP (UK) Plc and Another v Barker and Others ChD 8-Dec-2000
The claimants were interested under a pension scheme. Alterations had been made, which the said had been in error, and they sought rectification to remove a link between early leaver benefits and incapacity benefits. The defendant trustees agreed . .
Cited – Futter and Another v Revenue and Customs; Pitt v Same SC 9-May-2013
Application of Hastings-Bass Rule
F had created two settlements. Distributions were made, but overlooking the effect of section 2(4) of the 2002 Act, creating a large tax liability. P had taken advice on the investment of the proceeds of a damages claim and created a discretionary . .
Lists of cited by and citing cases may be incomplete.
Contract, Equity
Updated: 01 November 2021; Ref: scu.640097
