MV Promotions Ltd & Anor v Telegraph Media Group Ltd & Anor

A contract may be corrected by construction only where the language contains a clear mistake and it is clear what correction a reasonable person would understand the parties to have intended. Rectification for common mistake requires a continuing common intention, an outward expression of accord, continuation of that intention when the document was executed, and a mistake causing the document to misstate it.

Rectification remains discretionary. Where the parties have already executed a deed correcting the document between themselves, and the only remaining purpose of court intervention is to secure a tax advantage against HMRC, relief may be refused. A specific tax advantage must have formed part of the parties’ bargain where it is the only reason for granting rectification.

The claimants sought declarations concerning the identity of the parties to a 2011 contract under which Michael Vaughan provided services to Telegraph Media Group Ltd. They argued that the contract was, on its true construction, between MV Promotions Ltd and TMG, or alternatively that it should be rectified to produce that result.

TMG consented to the relief. HMRC opposed the construction claim and maintained that a 2018 deed of rectification could not bind it retrospectively. The central issues were the proper construction of the 2011 contract, whether the requirements for rectification for common mistake were satisfied, and whether the court should exercise its discretion to grant relief after the parties had executed the 2018 deed.

1. On construction, the reasonable reader, equipped with the admissible background, would regard Mr Vaughan as the contracting party. The contract was addressed to MVP, but its language, personal form, description of the services, and execution indicated a contract for personal services. There was no clear mistake in the document, so correction by construction was unavailable.

2. The court applied the principles governing correction by construction stated in East v Pantiles (Plant Hire) Ltd and explained in Chartbrook Ltd v Persimmon Homes Ltd. The exercise remained one of interpretation in context, and the subjective intentions of the parties were inadmissible for that purpose.

3. The requirements for rectification for common mistake were satisfied. The parties had a continuing common intention that MVP, rather than Mr Vaughan, should contract with TMG; that intention had been outwardly expressed through the tacit shared understanding involved in extending the existing arrangement; it continued at execution; and the written contract misstated it. The precise origin of the mistake did not need to be proved once the court was convinced that a mistake had occurred.

4. Nevertheless, rectification was refused in the exercise of the court’s equitable discretion. The 2018 deed had resolved the rights of TMG, MVP and Mr Vaughan between themselves. There was no evidence that the 2011 contract had been entered into with any specific tax advantage in mind. The remaining purpose of rectification was therefore to obtain a tax-efficient result against HMRC.

5. Where the parties have already corrected a document by deed, a specific tax advantage must have formed part of their bargain if it is the only conceivable reason for court-ordered rectification. Equity does not act in vain, and a dispute solely concerning the parties’ position against HMRC did not justify relief.

6. The claim was dismissed. The contract was construed as having been made between TMG and Mr Vaughan, and no order was made rectifying it so as to substitute MVP.