Rectification is an equitable remedy that the courts have used sparingly. However, recent cases suggest that it is becoming easier to persuade them to rectify a document to prevent one party from taking advantage of another. The decision in Sargeant and others v Reece [2007] PLSCS 191 reinforces this impression.
The case concerned land owned by a brother and sister in partnership, the assets of which included three areas of farmland. The sister decided to retire from the partnership. She agreed to sign any documents that were required to vest the partnership assets in her brother, in return for a payment for her share in the business. The value attributed to the land that became the subject of their dispute was extracted from a probate valuation obtained many years previously, even though the land was now ripe for development. The sister subsequently sought to rectify the agreement on the ground that the parties had intended to retain the development land in joint names.
The case looked unpromising. Eleven years had elapsed since the dissolution of the partnership. Neither of the principal parties was able to give evidence in court; the sister’s memory was failing and her brother had died. However, the judge considered as absurd the idea that the sister had gifted most of the value of the development land to her brother.
Clearly, something had gone wrong, but the courts do not generally rectify transactions. They will rectify mistakes in the drafting of a transaction, but they will rectify a document only if there is “convincing proof” that it is defective: Thomas Bates & Son Ltd v Wyndham’s (Lingerie) Ltd [1981] 1 EGLR 91; (1980) 257 EG 381.
In addition, a party claiming rectification on the ground of common mistake must prove that the parties had shared a common intention, manifested by an outward expression of accord, that was not accurately reflected in their document.
The judge addressed these requirements in turn. He took the view that the evidential requirements should be judged by the nature and quality of the document to be rectified. The burden of proving a mistake will be lower if a document is poorly drafted or conceptually unsound. Recent cases have established that the requirement for an “outward expression of accord” is also evidential, rather than legal, and, in the absence of evidence from the parties themselves, the judge relied on extracts from contemporaneous documents prepared by professional advisers for evidence of the parties’ intentions.
He was persuaded that the clause in the agreement requiring the sister to sign any documents necessary to vest the partnership assets in her brother was an extraordinarily weak vehicle to achieve the transfer of the development land at such a low price (and in a document with a title page naming a different farm). He therefore ruled that it would not be inequitable to rectify the dissolution agreement, despite the evidential difficulties caused by the delay in bringing the claim.
Allyson Colby is a property law consultant
