Lloyd's Maritime and Commercial Law Quarterly
COMMON MISTAKE RECTIFICATION: SUBJECTIVE INTENTIONS V OBJECTIVE MEANING
Hugh Beale* and Ned Beale†
FSHC v GLAS
Introduction
A contractual document has been executed by the parties, but party A claims that the document does not represent what it had agreed with party B. In what circumstances can A obtain rectification of the document? The question arises in two broad situations:
- (1) The parties had agreed on X, or that a provision of the contract should mean X, but the document instead states or means Y, when rectification may be granted on the basis of a common mistake; or
- (2) Party A intended X but, whether or not the parties had agreed beforehand, party B encouraged or allowed A to sign the document stating or meaning Y, although party B knew that party A intended X, when rectification may be granted on the basis of a unilateral mistake.
The judgment of the Court of Appeal in FSHC Group Holdings Ltd v GLAS Trust Corp Ltd
1 concerns common mistake rectification.
The essential elements of common mistake rectification are settled, having been summarised by Peter Gibson LJ in Swainland Builders Ltd v Freehold Properties Ltd
2 as: (i) a pre-contractual common continuing intention, whether or not amounting to an agreement; (ii) an outward expression of accord; (iii) the common intention continuing at the time the document sought to be rectified was executed; and (iv) by mistake, the document did not reflect that common intention.3 However, the test to be applied when determining whether there was a common continuing intention (and, to a lesser extent, what is meant by an outward expression of accord) has been controversial.
In Chartbrook Ltd v Persimmon Homes Ltd,4 Lord Hoffmann, with whom the other members of the appellate committee agreed, expressed the view (obiter, as the House
* Emeritus Professor, University of Warwick; Senior Research Fellow, Harris Manchester College and Visiting Professor, University of Oxford.
† Partner, Trowers & Hamlins LLP; Fellow, Chartered Institute of Arbitrators (who gratefully acknowledges the assistance of Dylan Milner-Stopps in connection with this note).
1. [2019] EWCA Civ 1361.
2. [2002] EWCA Civ 560; [2002] 2 EGLR 71, [33].
3. Cited with approval by, among others, Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 AC 1101, [48] and Leggatt LJ in FSHC [2019] EWCA Civ 1361, [100].
4. [2009] UKHL 38.
2