Clydesdale Bank Plc v Weston Property Company Ltd

The court held that a legal mortgage dated 6 February 2007, executed by Weston Property Company Ltd, was intended to secure the liabilities of Charlotte Partnership Homes Ltd and that box D of the mortgage form had been left blank by mistake. The judge applied principles of construction and rectification (East v Pantiles; Homburg Houtimport) and the test summarized in Swainland Builders to conclude that it was clear what words should be supplied.

The court made a declaratory order that the mortgage should be read as if box D contained the name and address of Charlotte Partnership Homes Ltd. The court declined to make a separate order for rectification of the mortgage instrument itself as unnecessary, but ordered rectification of the particulars registered at Companies House under section 873 of the Companies Act 2006.

The judge considered the effect of the Registrar's certificate and Re CL Nye, and concluded that rectification under s.873 was appropriate to correct the inadvertent mis-statement in the registered particulars.

This was a Part 8 application by Clydesdale Bank for (i) declarations as to the true construction of, or alternatively rectification of, a legal mortgage dated 6 February 2007 given by Weston Property Company Ltd (the defendant), and (ii) rectification or declarations in relation to the Form 395 particulars submitted to the Registrar of Companies and the Certificate issued on registration.

Background facts: the bank had provided a facility to a joint venture centred on Charlotte Partnership Homes Ltd (CPHL). The loan and facility agreement named CPHL as the customer. The bank required security by way of a legal mortgage over development land provided by Weston to secure the customer’s liabilities. A standard third-party owner charge form was prepared; box D (the identity of the customer) was left blank when the mortgage was executed by Weston on 6 February 2007. The bank filed the prescribed particulars at Companies House under section 395 of the Companies Act 1985, but those particulars and the registrar’s certificate recorded Weston as the company whose liabilities were secured.

Nature of the claim/application: the bank sought a declaration that the mortgage should be read as securing the liabilities of CPHL (by inserting CPHL in box D) or, alternatively, rectification of the mortgage; and rectification or declaratory relief in relation to the particulars registered and the Registrar’s certificate.

Issues framed: (i) whether the mortgage should be construed or rectified to identify CPHL as the customer whose liabilities were secured; (ii) whether the Registrar’s certificate was conclusive against correction, and whether relief to rectify registered particulars should be granted (consideration of Re CL Nye and Grove v Advantage Health Care); and (iii) whether the court should exercise its power under s.873 Companies Act 2006 to rectify the register of charges.

Evidence and reasoning: the judge relied on contemporaneous documents and witness evidence (including the defendant’s director Mr Winser and an employee of the bank) to find a common intention that the mortgage was to secure CPHL’s liabilities and that box D had been left blank by mistake. The judge considered two matters raised by the defendant — an earlier charge executed by Surrey Schools Ltd and the fact that Mr Winser’s evidence followed a payment of £50,000 — but found they did not undermine the clear documentary and witness evidence of common intention. Applying the legal tests from East v Pantiles, Homburg Houtimport and Swainland Builders, the court concluded it was clear what words were omitted and that the mortgage should be read as if CPHL were named in box D.

On the registered particulars, the judge considered Re CL Nye which held the registrar's certificate to be conclusive, but identified a simpler route by exercising the statutory power of rectification under s.873 Companies Act 2006 because the mis-statement was inadvertent and the bank was a person interested. The court ordered rectification of the registered particulars and directed that the order be sent to the Registrar of Companies.

The judge therefore made the requested declaration as to construction and an order for rectification of the registered particulars under s.873, but did not order formal rectification of the mortgage document itself as unnecessary.

At first instance the court made a declaration that the mortgage dated 6 February 2007 should be read as if box D contained the name and address of Charlotte Partnership Homes Ltd because that reflected the common intention of the parties and box D had been left blank by mistake. The court declined to make an order rectifying the mortgage instrument itself as unnecessary, but ordered rectification of the mis-stated particulars registered at Companies House under section 873 of the Companies Act 2006, because the omission was inadvertent and the bank was a person interested.