Day & Anor v Day

Rectification of a voluntary disposition depends on the donor’s or settlor’s subjective intention. An outward expression or objective communication of that intention is an evidential consideration, not a legal requirement.

A general power of attorney does not make the attorney’s intention determinative. Authority to execute an instrument and the principal’s intention are distinct concepts. Equity may rectify an instrument where its legal effect fails to implement the principal’s actual intention, provided the mistake is sufficiently grave to make retention of the unintended benefit unjust.

A mother authorised a solicitor under a general power of attorney to facilitate borrowing for one of her sons against her home. The solicitor conveyed the property into their joint names as beneficial joint tenants. The mother did not intend to give her son a beneficial interest and continued to treat the property as entirely hers.

After her death, her executors sought rectification so that the property would be held for her estate absolutely. The Central London County Court found that the conveyance failed to reflect her intention but dismissed the claim because the solicitor had acted within the power of attorney and apparently understood the transaction’s effect.

The central issue was whether the attorney’s authority and understanding prevented rectification of a voluntary disposition which failed to implement the settlor’s subjective intention.

1. Appeal allowed. The conveyance was to be rectified so that the property was held for the mother absolutely. The existence and scope of the solicitor’s power of attorney did not prevent equitable relief.

2. The conveyance was a voluntary settlement rather than part of a bargain. In accordance with Re Butlin’s Settlement Trusts [1976] Ch 251, the relevant intention was therefore the settlor’s subjective intention. The son’s intention was immaterial. Unlike rectification of a bilateral contract, rectification of a voluntary disposition does not legally require an outward expression or objective communication of intention. Its absence may nevertheless make the alleged mistake harder to prove.

3. The Recorder had confused intention with authority. A general power of attorney may give an agent apparent authority sufficient to bind the principal as against a third party. It does not establish that the principal intended the agent to dispose of property on any terms the agent chose. The agent’s actual instructions may provide evidence of the principal’s intention, but apparent authority ordinarily sheds no light on whether the instrument should be rectified.

4. Once the Recorder found that the mother did not intend to transfer any beneficial interest, the evidential burden passed to the son to establish a different overriding intention permitting the solicitor complete freedom to structure the transaction. The evidence could not support such an intention. The proper inference was that the solicitor was authorised to do what was necessary, consistently with the mother’s interests, to enable the property to secure the son’s borrowing.

5. Lewison LJ held that rectification and rescission of voluntary dispositions form part of equity’s wider jurisdiction to relieve against mistake. The mother was mistaken about the conveyance’s legal effect, and the mistake was sufficiently grave to make it unjust for the son to retain the unintended gift. Subsequent conduct, including concealment which prevented correction during her lifetime, could be considered when assessing injustice.

6. Elias LJ agreed. The reason why the instrument failed to reflect the settlor’s intention was ultimately immaterial. Even inconsistent instructions may, in an appropriate case, leave room for rectification where the resulting instrument fails to implement the settlor’s true intention.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. The court held that the attorney’s authority did not bar rectification and granted the rectification sought: [2013] EWCA Civ 280.
2. Central London County Court: Mr Recorder Chapman QC dismissed the rectification claim on 15 May 2012. Although he found that the conveyance did not reflect the settlor’s intention, he considered the solicitor’s authority under the general power of attorney an insuperable barrier to relief.