Governor and Company of the Bank of Scotland v Brunswick Developments (1987) Limited and Another

The House of Lords held that a petition to rectify a letter of instruction under section 8(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1985 was inappropriate where the sought rectification would have the effect of creating retrospectively a representation or imputing to the putative grantor an intention it did not have when the document was executed. The bank relied upon a mandate and argued for attribution to the company of the signatories' intention or, alternatively, for rectification to make the letter appear to have been signed on behalf of the company. The court concluded that rectification cannot be used to rewrite history by creating a representation which was not actually made and that the bank had not established that Brunswick had the requisite intention at the time the letter was executed.

Background and parties:

• The Bank of Scotland (the bank) presented a petition under section 8 of the Law Reform (Miscellaneous Provisions) Act 1985 to rectify a written instruction dated 31 July 1989 which ordered transfer of £1,500,000 from Brunswick Developments (1987) Limited (Brunswick) to A. Goldberg & Sons PLC (Goldberg).
• The instruction was signed by two individuals who were authorised signatories in Brunswick's mandate but the document on its face indicated it was on behalf of Goldberg and mis-stated Brunswick's account number.

Procedural history:

• The bank sought deletion and substitution of the heading and concluding words to show the letter was for Brunswick, relying on section 8(1)(b). Initial procedural challenges were repelled (Lord Coulsfield, 28 October 1993); the First Division refused a reclaiming motion (26 January 1995) and allowed proof; Lord Hamilton at proof granted rectification by interlocutor dated 16 January 1996; a second reclaiming motion was refused by the First Division (25 April 1997); the bank appealed to the House of Lords.

Issues before the House:

1. Whether the document fell within section 8(1)(b) as a document intended to create or vary a right and whether the grantor for the purposes of that subsection was the company or the signatories.
2. Whether Brunswick's intention could be established or attributed so as to permit rectification to record that intention.
3. Whether rectification could be used to alter retrospectively the appearance of authority or to create an ostensible authority/representation that did not in fact exist when acted upon.

Court's reasoning and conclusion:

• The House accepted that the relevant provision was section 8(1)(b) and that the grantor for the purposes of that subsection is ordinarily the principal (here Brunswick) rather than the individual signatories.
• No actual authority from Brunswick for the transfer had been established. Rectification requires the court to give effect to the grantor's intention as it existed at the date of execution; there was no evidence that Brunswick had the relevant intention at that date.
• The bank could not use rectification to create retrospectively a representation or to rewrite the facts so as to attribute to Brunswick an intention it did not have when the letter was executed. The mandate and the bank's subsequent argument that ostensible authority should be treated as establishing Brunswick's intention were insufficient because the instrument on its face appeared to be signed on behalf of Goldberg.
• Accordingly the House allowed the appeal and dismissed the petition.

Appeal allowed; petition for rectification dismissed. The House held that rectification under section 8(1)(b) was inappropriate because the bank could not use rectification to create retrospectively a representation or to attribute to Brunswick an intention it did not have when the letter was executed; the bank had not proved Brunswick's intention to make the instruction and the instrument on its face suggested a representation in favour of Goldberg.

Petition to Court of Session under section 8 Law Reform (Miscellaneous Provisions) Act 1985. Plea to competency repelled (Lord Coulsfield, 28 October 1993). First Division refused reclaiming motion and allowed proof (26 January 1995). Proof heard by Lord Hamilton who made interlocutor rectifying the letter (16 January 1996). Second reclaiming motion refused by the First Division (25 April 1997). Appeal to House of Lords allowed ([1999] UKHL 16, 29 April 1999).