Hawksford Trustees Jersey Ltd v Stella Global UK Ltd & Anor

For rectification of a contract made by a company or other legal person, the relevant intention is that of the person who had authority to bind it, or who in substance took the decision on its behalf. A negotiator’s intention is ordinarily immaterial if a separate person made the contracting decision. The position differs where the company has left the substantive decision to the negotiator and retained only formal approval. In that event, the negotiator’s objectively expressed intention may be attributed to the company. Rectification remains available where the company entered the written instrument on the positive assumption that it reflected the terms agreed by the negotiator, even though its officers gave no specific thought to the erroneous provision.

Hawksford, trustee of the Bald Eagle Trust, agreed to sell shares in The Global Travel Group plc to Stella Global UK Limited. The amended share purchase agreement calculated the minimum earn-out by reference to 2007 EBITDA. It expressly excluded certain asset costs but, through a drafting omission, did not exclude consultancy payments made to George Begg.

The High Court found a common expressed intention that both categories of cost should be excluded and ordered rectification. The defendants appealed, arguing that Begg was only a negotiator and that the relevant decision-maker was Hawksford, whose authorised officers had not considered the disputed provision. The central issue was whether Begg’s intention could be attributed to Hawksford for rectification purposes.

1. Appeal dismissed. The order rectifying the definition of 2007 EBITDA was upheld.
2. In principle, the relevant decision-maker for a corporate contracting party is the person with authority to bind the company to the contract. A mere negotiator’s intention is immaterial unless the negotiator is also the decision-maker or shares the relevant intention with the person who is.
3. The question is fact-sensitive. A formal contracting structure does not necessarily determine who was the decision-maker where the company has left the substantive decision to the negotiator and retained only formal approval. The court must identify who in substance was, or was held out as being, the person who took the decision in relation to the contract.
4. On the findings, Hawksford authorised Mr Begg to negotiate and agree the detailed terms, with the clear understanding that it would follow his recommendations unless its interests were prejudiced. The authorised officers did not consider the disputed EBITDA provision or make any amendment of their own. Hawksford therefore entered the Amended SPA with the positive intention that it should give effect to the terms Begg had negotiated and agreed.
5. The objective expression of accord between Begg and the defendants continued until execution because it was the apparent basis on which Hawksford and the defendants contracted. Hawksford’s failure to give specific thought to the definition of 2007 EBITDA did not prevent rectification. The instrument failed by mistake to reflect the parties’ common intention.

The court distinguished Barnet LBC v Barnet Football Club Holdings Ltd [2004] EWCA Civ 1191 and George Wimpey UK Ltd v V I Construction Ltd [2005] EWCA Civ 77, where the negotiators were separate from the decision-makers. Lord Justice Etherton and Lord Justice Rix agreed with Lord Justice Patten.

• Court of Appeal (Civil Division): [2012] EWCA Civ 55 — dismissed the defendants’ appeal and upheld the High Court’s order for rectification.
• High Court of Justice, Chancery Division, Manchester District Registry: His Honour Judge Stephen Davies ordered rectification of the Amended SPA on 25 March 2011.