The High Court has granted FSHC Group Holdings Limited the rarely awarded remedy of rectification in relation to two accession deeds because the deeds did not reflect the parties' common intention.
Under English law, a court may be willing to rectify a contract if, due to mistake or oversight, it does not reflect the actual agreement the parties have reached. Rectification is, however, a discretionary remedy and, in his judgment, Mr Justice Henry Carr stressed the importance of the particular factual circumstances of the case.
The case arose from a private equity financing deal that took place in 2012. Some years later, in 2016, it was discovered that certain security required by the financing documents had not been provided or could not be located. FSHC duly sought to provide the required security by way of two accession deeds. However, those deeds resulted in FSHC assuming significantly more onerous obligations than were required to comply with terms of the original transaction.
FSHC brought a claim for rectification on the basis that neither party intended for the additional obligations to be provided and that there had been a common mistake. Barclays, in its role as security agent, defended the proceedings, submitting that FSHC sought to use the proceedings to amend what it now considered to be a bad bargain.
In reaching his decision, Mr Justice Henry Carr relied heavily upon the evidence of FSHC's witnesses at trial and also identified a number of factors, specific to this case, that militated in favour of a finding of common mistake. In particular, the absence of contemporaneous discussions between the parties around the point was "convincing proof of a common intention not to incur the Additional Obligations". Additionally, the fact that it would have been commercially absurd for FSHC to provide the additional security, particularly in circumstances where it was advised by experienced lawyers, was persuasive.
Despite this decision, in our view, bringing a claim for rectification for common mistake remains difficult and success will depend on the unique circumstances of the case.
The judgment in FSHC Group Holdings Limited v Barclays Bank Plc [2018] EWHC 1558 (Ch) is available here.
Further information on the legal principles of rectification is available in this Ashurst QuickGuide.
With thanks to Associate Alexander Beaton for his contribution.
