Rowallan Group Ltd v Edgehill Portfolio No 1 Ltd

Rectification for unilateral mistake is a drastic remedy and requires strict proof. The claimant must show that the other contracting party had actual knowledge of the mistake, including knowledge arising from wilfully shutting its eyes or recklessly failing to make reasonable inquiries. Where the other party intended the mistake and deliberately diverted the claimant’s attention, suspicion may suffice. A party cannot establish the necessary knowledge from matters that were undisclosed and unknown to the other contracting party. Where the contractual wording plainly imposes the disputed obligation, and there is no evidence of sharp practice or knowledge of the mistake, the claim may properly be summarily dismissed.

The claimant vendor agreed to sell a lease of commercial premises to the defendant. The agreement required the claimant to provide evidence that it had paid an instalment of the premium due to the landlord on 24 April 2006. The claimant alleged that its solicitor had mistakenly understood the amendment to the agreement as preserving the defendant’s liability for that instalment and sought rectification for unilateral mistake.

The defendant applied under CPR 24 for summary judgment, contending that the claimant had no real prospect of proving the defendant’s knowledge of the alleged mistake. The central issue was whether the pleaded facts could satisfy the requirements for unilateral rectification.

1. Summary judgment. The defendant was entitled to summary judgment on the claimant’s claim for rectification. The claimant had no real prospect of establishing the necessary elements at trial.
2. Applicable requirements. Rectification for unilateral mistake is a drastic remedy because it imposes on a defendant a contract which the defendant did not make and did not intend to make. The conditions for relief must therefore be strictly satisfied. The claimant had to establish that the defendant knew of the claimant’s mistake that the agreement made the defendant liable for the instalment.
3. Meaning of actual knowledge. Actual knowledge may include wilfully shutting one’s eyes to the obvious or wilfully and recklessly failing to make inquiries which an honest or reasonable person would make. Where the defendant intended the claimant to be mistaken and deliberately diverted the claimant’s attention from discovering the mistake, it is sufficient that the defendant merely suspected the mistake. These principles were treated as established in the authorities culminating in George Wimpey v V I Construction Ltd [2005] EWCA 77.
4. Application. For the purpose of the application, the claimant’s evidence that its solicitor misunderstood the amendment was accepted. However, the matters said to have caused that misunderstanding, including the payment arrangement with the landlord, the state of the account and the solicitor’s instructions, were undisclosed and unknown to the defendant. The agreement’s wording plainly required the claimant to provide a receipt for payment of the instalment.
5. The defendant’s repeated requests for confirmation of payment gave the claimant opportunities to explain any unwillingness to pay. There was no evidence of sharp practice, deliberate diversion, or any reason why the defendant should have known or suspected the alleged mistake. The proposed rectification, substituting 23 April for 24 April 2006, was itself unsupported by any basis for attributing that mistake to the defendant.

First-instance decision. No prior appellate decision is stated in the judgment.