Watson & Anor v Eyre

Rectification requires convincing proof, assessed on the balance of probabilities, that the parties shared a continuing intention which was outwardly expressed, continued when the instrument was executed, and was not reflected in it. The burden is particularly demanding where the document is detailed and was executed after independent legal advice. A party’s unilateral understanding is insufficient.

A misrepresentation claim concerning a statement of future intention succeeds only if the maker did not genuinely intend to perform it when the statement was made. A later failure to perform, including because circumstances intervene, does not itself establish misrepresentation.

The claimants charged their home to the defendant under an all-monies legal charge. They sought rectification on the basis that the charge was intended to secure only their guarantees of liabilities owed by Worldsunny Ltd. Alternatively, they sought rescission for alleged misrepresentation that the defendant would advance £415,000 to Worldsunny.

The court determined these preliminary issues before a later determination of the parties’ ultimate indebtedness. The central questions were whether the statutory requirements for rectification were established and whether the defendant lacked a genuine intention to make the proposed advance when the charge was executed.

1. Rectification. The requirements stated in Scottish Widows Fund and Life Assurance Society v BGC International (2012) EWCA Civ 607, drawing on Swainland Builders Ltd v Freehold Properties Ltd (2002) 2 EGLR 71 and Chartbrook Ltd v Persimmon Homes Ltd (2009) 1 AC 1101, applied. The claimants had to prove a common continuing intention, an outward expression of accord, continuation of that intention at execution, and a mistake causing the instrument not to reflect it.
2. The ordinary civil standard applied, but convincing proof was required because the alleged common intention contradicted the signed document. The burden was especially formidable because the charge was detailed and the claimants had received independent legal advice. The court accepted that the charge clearly operated as an all-monies charge and found it more likely than not that the solicitor had explained its effect.
3. The claimants failed to establish either a common continuing intention to limit the charge to Worldsunny’s liabilities or an outward expression of accord. The defendant’s evidence that he believed personal liabilities remained outstanding, together with the surrounding documents and circumstances, was inconsistent with the alleged common intention. Rectification was therefore refused.
4. Misrepresentation. Under Edgington v Fitzmaurice (1881–85) All ER Rep 856, the claimants had to show that the defendant’s statement that he would advance £415,000 was made without a genuine intention or ability to perform it. The evidence that he placed funds with solicitors, made or pursued offers, and remained prepared to complete a transaction supported his genuine intention. The subsequent failure to advance the money resulted from circumstances outside his control and did not prove misrepresentation.
5. The applications for rectification and rescission were both dismissed.