FSHC Group Holdings Limited v GLAS Trust Corporation Ltd [2019] EWCA Civ 1361

KEY POINTS

• Rectification is a legal remedy that allows the court to correct the terms of a legal document when it does not accurately represent the intentions of the parties involved due to a mistake.

• This case overruled Chartbrook insofar as the test for rectification is concerned.

• To rectify a written contract based on a common mistake, it is necessary to show:

  1. That the document does not fulfill a prior agreed-upon contract; or

  2. That when the parties signed the document, they should have shared a common intention regarding a specific matter, which the document failed to accurately record due to a mistake.

• In the second situation, it's essential to demonstrate that each party had the same actual intention regarding the matter, and there was clear communication between them, indicating that both parties understood and shared that intention.

FACTS

• The case involves a dispute over two deeds executed in 2016 by "the Parent" and Barclays Bank plc to provide missing security for a corporate acquisition agreed upon in 2012.

• The missing security was the assignment of the benefit of a shareholder loan, which was identified during a review of the security documentation in 2016.

• The trial judge found that both parties intended the deeds to provide only the missing security for the shareholder loan and were unaware of the additional, onerous obligations they imposed.

  • The judge concluded that it was the common intention of the parties to execute a document that fulfilled the obligation to grant security for the shareholder loan without imposing additional obligations.

  • As a result, the judge granted rectification to exclude the additional obligations from the deeds.

• The appellant, GLAS Trust Corporation Limited, does not dispute the judge's factual findings but argues that the test for rectification is purely objective. They contend that the parties' objective intentions, based on their communications, would lead to the conclusion that they intended to accede to all the terms of the pre-existing security agreements, including the additional obligations.

JUDGEMENT

• Appeal dismissed.