Prowting 1968 Trustee One Ltd & Ors v Amos-Yeo & Anor

Rectification for common mistake requires convincing evidence of a continuing common intention, an outward expression of accord, continuation of that intention when the instrument was executed, and a mistake causing the instrument to fail to reflect it. The claimant must identify the intended effect with sufficient precision. A mistake about how an agreed objective was to be implemented in the document may qualify, even where the transaction was motivated by a fiscal objective. It is distinct from a mistake about the fiscal consequences of a document that correctly records the parties’ intention. Delegating a calculation does not prevent the intention from being sufficiently specific where the intended result is clear.

The claimant trustees sought rectification of two share acquisition agreements dated 3 October 2012. Each agreement recorded the transfer of 25,000 shares to one of the defendants, but the parties claimed that 30,000 shares should have been transferred so that the defendants would satisfy the conditions for entrepreneurs’ relief. The defendants supported the claim. The central issues were whether the parties had a sufficiently specific common intention, whether the recorded number of shares resulted from a qualifying mistake, and whether there was an issue capable of being contested despite the parties’ consent.

1. The court applied the requirements summarised in Swainland Builders Ltd v Freehold Properties Ltd [2002] 2 EGLR 71 and approved in Chartbrook v Persimmon Homes Ltd [2009] UKHL 38: a continuing common intention, outward expression of accord, continuation at execution, and a mistake causing the instrument not to reflect that intention.
2. Rectification is discretionary and must be approached with caution. The true intention must be proved on the balance of probabilities with convincing evidence because the written instrument records a different intention. The mistake must concern the document’s effect or terms, rather than merely its fiscal consequences.
3. The parties intended the defendants to receive enough shares from the settlements to satisfy the entrepreneurs’ relief requirements. They left the calculation to Mr Cull, who mistakenly used an inappropriate share-number benchmark and overlooked the different nominal values of the shares. This was a qualifying mistake in implementing the intended transaction.
4. The court distinguished Racal Group Services Ltd v Ashmore [1995] STC 1151, where the specific intended means were not sufficiently proved. It treated Vaughan-Jones v Vaughan-Jones [2015] EWHC 1086 (Ch) as closely analogous. The intention here was sufficiently specific despite the delegated calculation.
5. There was an issue capable of being contested, namely the number of shares and consideration. The claim succeeded and the agreements were ordered to be rectified in the terms of the draft order.