George Wimpey UK Ltd. v VI Construction Ltd.

Rectification for unilateral mistake is an exceptional remedy. The claimant must prove that it mistakenly believed the instrument contained or omitted a particular term; the other party knew of that mistake; the other party failed to disclose it; and the mistake was calculated to benefit that party. The civil standard applies, but convincing evidence is required to overcome the signed instrument.

Where a company contracts through authorised decision-makers, an unauthorised negotiator’s mistake is insufficient unless the decision-makers shared his intention. Dishonesty must be distinctly pleaded, particularised and put to the persons accused. A court cannot infer it from unpleaded facts or pleaded facts consistent with honesty.

VIC appealed against an order rectifying the deferred-consideration formula in its contract for the sale of a development site to Wimpey. The formula originally contemplated the addition of specified enhancements. During negotiations VIC’s agent proposed a revised formula which omitted “+ E”. Wimpey’s negotiator overlooked the omission, and the executed contract contained the revised formula.

The deputy judge granted rectification for unilateral mistake. He found that VIC’s representatives suspected Wimpey’s mistake, deliberately failed to disclose it and had knowledge in the extended sense of shutting their eyes to the obvious or wilfully and recklessly failing to make appropriate inquiries.

The appeal raised whether those findings were permissible when dishonesty and misrepresentation had neither been properly pleaded nor put, whether VIC had the knowledge required for unilateral-mistake rectification, and whether Wimpey had proved that its corporate decision-makers shared its negotiator’s mistake.

1. Appeal allowed. The order for rectification was set aside and the action dismissed. Peter Gibson LJ gave the leading judgment. Sedley LJ and Blackburne J agreed with the disposition.

2. Dishonesty must be pleaded with full particulars and put to the person accused. A court cannot infer dishonesty from facts which were not pleaded or from pleaded facts consistent with honesty. Wimpey had not pleaded dishonesty, sharp practice or misrepresentation and had deliberately avoided advancing such a case in cross-examination. The judge therefore had no proper basis for finding that VIC’s representatives deliberately misled Wimpey.

3. The authoritative requirements for rectification based on unilateral mistake were those stated in Thomas Bates Ltd v Wyndham’s (Lingerie) Ltd [1981] 1 WLR 505. The claimant must show that it erroneously believed the instrument contained or omitted a particular provision; the defendant knew both of the discrepancy and that it resulted from the claimant’s mistake; the defendant did not disclose the mistake; and the mistake was calculated to benefit the defendant. The circumstances must make it inequitable to permit the defendant to resist rectification.

4. Knowledge may include wilfully shutting one’s eyes to the obvious or wilfully and recklessly failing to make inquiries which an honest and reasonable person would make. Under Commission for the New Towns v Cooper (Great Britain) Ltd [1995] Ch 259, however, those categories were closely connected with dishonest conduct. The trial judge’s finding of extended knowledge could not be separated from his impermissible finding of dishonesty.

5. Wimpey had not supplied convincing proof that VIC possessed the requisite knowledge. These were arm’s-length negotiations involving an experienced developer, professional advisers and a formula whose omission was apparent on its face. VIC could reasonably assume that Wimpey had read and approved the formula. It was not inequitable to allow VIC to resist rectification.

6. The normal civil standard of proof applies, but convincing evidence is needed to overcome the cogent indication of intention supplied by a signed instrument. Wimpey’s negotiator was not its corporate decision-maker. There was no evidence from the board, no relevant board minutes and no instructions to the signatory proving that the board intended a formula containing “+ E”. An unauthorised negotiator’s error was irrelevant without evidence that the corporate decision-makers shared his intention.

7. Sedley LJ added that unilateral mistake does not oblige one commercial party to identify where its opponent’s best interests lie. Wimpey’s failure to renegotiate an evident omission was an error of judgment arising from its own corporate neglect, not a mistake for which VIC bore legal responsibility.

• Court of Appeal (Civil Division): By [2005] EWCA Civ 77, allowed VIC’s appeal, set aside the rectification order and dismissed Wimpey’s action.
• High Court, Chancery Division: Mr Jules Sher QC, sitting as a deputy High Court judge, ordered rectification of the contract on 23 June 2004. No citation is stated in the judgment.