Platinum Investment Trust Plc v Knox D' Arcy Asset Management Ltd

Rectification requires clear evidence that the executed document failed to express the parties’ common intention and that the proposed correction expresses that intention. The court applies the balance of probabilities, but the evidence must be sufficiently cogent to displace the document’s terms. A general commercial objective is insufficient unless it can be translated into a sufficiently certain clause. The court cannot improve an agreement, proceed by successive approximation, or construct a formula that the parties did not make. Where the parties subsequently agree a replacement formula, that agreement may be binding even if formal amendments are never executed.

Platinum sought rectification of a deed governing the number of performance-related warrants payable to Knox D’Arcy Asset Management Ltd. It alleged that the formula failed to reflect the parties’ common intention described in the prospectus, particularly in relation to capital changes, historic out-performance, opening assets and disparities between market price and net asset value.

The parties agreed that the deed should be rectified in some respect. The issues were whether the original formula contained legally rectifiable mistakes, whether the parties had subsequently agreed a correction, and whether Platinum’s proposed formula or KAM’s alternative formula represented that agreement.

1. Rectification principles. The claimant had to establish that the deed did not accord with the parties’ common intention when executed and that the proposed wording did accord with that intention. The familiar requirement of convincing or irrefragable proof described the cogency of the evidence, not a standard higher than the balance of probabilities. The evidence had to overcome the terms of the written document itself: [2006] EWHC 1893 (Ch), paras 26–27.
2. Limits of the jurisdiction. A shared intention to achieve a stated commercial result was not enough. The intended result had to be capable of translation into a single correct clause, although there could be more than one permissible form of expression. The court could not select elements of different formulae or improve an imperfect bargain by successive approximation. The fact that another formula might produce fairer results did not establish common mistake where the parties had considered and approved the existing formula: paras 27, 34–36.
3. Original deed. The court found that the parties intended the formula’s quantity A to be Net Asset Value as defined in the deed and quantity C to be the specified market price per share. The evidence did not establish a common intention that the calculation should instead be based on Net Asset Value per Share. The alleged high-water-mark alteration was also not agreed at the date of the deed: paras 28–33.
4. Subsequent agreement. By late 1998 the parties had agreed KAM’s alternative formula, which reduced the warrant entitlement produced by the original deed. The agreement was complete and binding. The absence of a formally executed supplemental deed did not prevent the agreement from taking effect, since the later documentation was intended to record the agreed amendment for good order: paras 37–38.
5. Disposition. Platinum’s rectification claim failed. KAM succeeded on its counterclaim to the extent indicated, with the form of order to be settled or determined after submissions: para 39.