Title to land – Beneficial interest – Common mistake – Rectification – Respondent purchasing property as family home – Appellant son becoming joint legal owner to secure mortgage advance – Land Registry transfer form showing parties as joint tenants in common in equal shares under express declaration of trust – Appellant claiming entitlement to half beneficial interest in property – Whether court entitled to infer common intention of parties to that effect – Whether grounds to set aside declaration of trust – Appeal allowed
The appellant and his father (the respondent) were the registered owners of a property at 6 Homedale House, 3 Brunswick Road, Sutton. The respondent had been unable to obtain a mortgage advance, on his income, and asked the appellant to help out, as he was working and earning. The property was conveyed into joint names in equal shares but the respondent made the mortgage payments and paid the difference between the loan and the purchase price.
The parties both used the services of a firm of solicitors to act for them in connection with the purchase and the mortgage. In box 11 of the Land Registry transfer form TR1, recording the conveyance, an “X” was inserted next to the text “the transferees are to hold the property on trust for themselves as tenants in common in equal shares”. However, neither party signed the form as transferees.
The appellant later brought a claim for a declaration as to the beneficial ownership of the property and for an order for sale under the Trusts of Land and Appointment of Trustees Act 1986.
The judge found in favour of the respondent, concluding that the declaration of trust in the TR1 form was completed by mistake and that the property was held beneficially for the respondent alone. A first appeal was dismissed by the High Court which held that the form could be rectified by deleting the X so that there was no express declaration of trust at all: [2020] EWHC 3348 (QB).
On a second appeal, the appellant argued that rectification was inadmissible because there was no positive subjective common agreement at the time of the declaration of trust, and no sufficient outward expression of accord.
Held: The appeal was allowed.
(1) A common intention continuing at the time when a contract was made was sufficient for rectification, subject only to the qualification that some outward expression of accord was required. The requirement for an outward expression of accord was sound in principle: the power of the court to rectify a contractual document was a power to correct mistakes in recording what the parties had actually agreed: Joscelyne v Nissen [1970] 2 QB 86 applied.
The communication necessary to establish an outwardly expressed accord or common intention which each party understood the other to share need not involve declaring that agreement or intention in express terms. An accord could include understandings that were so obvious as to go without saying, or that were reached without being spelled out in so many words. There could be cases where, depending on the circumstances and the context, the fact that an intention or understanding was shared might be apparent from the fact that nothing was said.
(2) The basis for rectification was entirely concerned with the parties’ subjective states of mind, because the justification for rectifying a contractual document to conform to a continuing common intention was found in the equitable doctrine that a party would not be allowed to enforce the terms of a written contract, objectively ascertained, when to do so was against conscience because it was inconsistent with what both parties in fact intended (and mutually understood each other to intend) those terms to be when the document was executed.
Common mistake rectification based on a common intention when the parties executed the document in respect of a particular matter, which by mistake the document did not accurately record, required 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: FSHC Group Holdings Ltd v GLAS Trust Corporation Ltd [2020] Ch 365 applied.
(3) In the present case, it was not necessary to consider whether there was a need for an outward expression of accord, or whether such an expression had occurred tacitly. On the facts found by the trial judge, he did not find any continuing common intention shared by the parties at the time of completion of the purchase as to the beneficial interest that each was to hold.
The most that could be said was that the judge found that the parties had not agreed that the property should be held in equal shares. As was established in Joscelyne, rectification could be ordered where a continuing common intention of the parties could be established. Rectification was a power to correct mistakes in recording what the parties had actually agreed and required 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.
The judge’s findings did not admit of the conclusion that the parties actually agreed anything, nor that they had the same intention. The respondent’s intentions were unclear and no findings were made as to the appellant’s actual intentions at the time, save that he had become involved to enable the respondent to get a mortgage. If there was no continuing common intention, the question of whether an outward expression of accord was required did not need to be decided.
The trial judge made no finding that the parties agreed joint legal title only, even if that might, by deduction, be the correct legal analysis of what occurred. In those circumstances, it was impossible to find any continuing common intention that there should be no declaration of trust in the TR1. The law did not make contracts for people unless they had agreed to them or shown a continuing common intention as to the terms in issue. On the evidence, the parties simply gave no thought to the matter at all. The appeal would be allowed and rectification of the TR1 refused.
Clifford Darton QC and George Woodhead (instructed by Verisona Law, of Portsmouth) appeared for the appellant; Robin Green and Riccardo Calzavara (instructed by Porter & Co Law Ltd on a pro bono basis) appeared for the respondent.
Eileen O’Grady, barrister
