FSHC Group Holdings Ltd v GLAS Trust Corporation Ltd [2019]

FSHC Group Holdings Ltd v GLAS Trust Corporation Ltd [2019]

In FSHC Group Holdings Limited v GLAS Trust Corporation Ltd [2019] EWCA Civ 1361, the Court of Appeal overturned the precedent set by Chartbrook v Persimmon [2009] and established a new test for the rectification of a common mistake. The court differentiated between cases where rectification is based on a prior contract and those based on a common continuing intention, asserting that the test is objective in the former and subjective in the latter.

The facts of the case involved FSHC providing security for a transaction to GLAS, the security agent of the creditors. Due to a mistake, FSHC failed to assign a security interest to GLAS. Subsequently, FSHC and GLAS entered into two security deeds, believing them to provide no greater security to the creditors than the original missing security. However, the deeds ended up imposing more onerous requirements on FSHCC, leading to FSHC seeking rectification.

The Court of Appeal, led by Legatt LJ, granted rectification, highlighting a common mistake in the deeds based on the continuing common intention of the parties, assessed subjectively. Legatt LJ outlined the doctrine of rectification for common mistake, stating that it could be granted when the document fails to give effect to a prior concluded contract or when the parties had a common intention that the document did not accurately record. In the former case, the meaning of the prior contract is objectively assessed, while in the latter case, the common intention must be actual, with an outward expression of accord demonstrated through communications between the parties.

The court disagreed with Lord Hoffmann’s observations in Chartbrook v Persimmon [2009], stating that the approach in Chartbrook v Persimmon should be abandoned based on principles, precedents, and policy reasons. Legatt LJ argued that different principles are at play, justifying an objective test for rectification based on a prior concluded contract and a subjective test for rectification based on a common continuing intention.

Legatt LJ justified the subjective test by emphasising the equitable principle of good faith when there is no prior contract. The court should not hold parties to the terms of an objective consensus reached during negotiations but never intended to be binding. The conscience of a party to enforce the formal agreement is contrary to what the parties intended to be the terms, justifying an exception to the objective test for interpretation.

The court's policy considerations included the importance of certainty in commercial transactions, asserting that rectification should be difficult to prove as a matter of policy. Legatt LJ argued that the potential unfairness of the objective approach in Chartbrook v Persimmon was demonstrated by the case's facts.

Legatt LJ also addressed rectification for unilateral mistake, stating the requirements for such a claim. One party must have made an actual mistake reflecting the parties' actual common intention, and the other party must have knowledge of this mistake.

In the broader legal context, the decision in FSHC can be seen as a correction to the judicial trend favouring certainty and the finality of formal contracts. The court's emphasis on actual common intention for rectification sets a higher evidential bar, aligning with a pushback against expansive approaches to interpretation seen in more recent cases.

In summary, the decision provides a clearer framework for assessing claims for rectification in cases of common mistake, and it emphasises the importance of good faith and mutual intentions in contractual agreements. Overall, the decision signifies a correction in favour of fidelity to the express words of contracts and a higher threshold for allowing corrections based on ambiguity or common sense.
Back to blog
UOL Case Bank

UOL Case Bank

Upon joining, you become a valuable UOL student and gain instant access to over 2,100 case summaries. UOL Case Bank is constantly expanding. Speed up your revision with us now.

Subscribe Now

Where are our students from?

Yale University
Council of Europe
Baker Mckenzie 
University of Chicago
Columbia University
New York University
University of Michigan 
INSEAD
University College London (UCL)
London School of Economics (LSE)
King’s College London (KCL)
University of London
University of Manchester
University of Zurich
University of York
Brandeis University
University of Exeter
University of Sheffield
Boston University
University of Washington
University of Leeds
University of Law
Royal Holloway, University of London 
Birkbeck, University of London
SOAS, University of London
University of Kent
University of Hull
Queen’s University Belfast
Toronto Metropolitan University
Hong Kong University of Science and Technology
University of Buckingham

  • Criminal Practice

    Diagrams and Charts

    Our carefully designed diagrams and charts will guide you through complex legal issues.

  • Criminal Law

    Clear and Succinct Definitions

    Key concepts are concisely defined to help you understand legal topics quickly.

  • Property Law

    Statutory Provisions

    Statutory provisions are provided side by side with legal concepts to help you swiftly locate the relevant legislation.

  • Public Law

    Case Summaries

    We have summarised important cases for you so that you don't need to read long and boring cases.

  • Evidence

    Rules and Exceptions

    Rules and exceptions are clearly listed so that you know when a rule applies and when it doesn't.

  • Company Law

    Terminology

    Legal terms and key concepts are explained at the beginning of each chapter to help you learn efficiently.

  • Case Law

    Case law is provided side by side with legal concepts so that you know how legal principles and precedents were established.

  • Law Exam Guide

    Law Essay Guide

    You will learn essential law exam skills and essay writing techniques that are not taught in class.

  • Law Exam Guide

    Problem Question Guide

    We will show you how to answer problem questions step by step to achieve first-class results.

  • Conflict of Laws

    Structured Explanations

    Complex legal concepts are broken down into concise and digestible bullet point explanations.

  • Legal System and Method

    Legal Research

    You will learn legal research techniques with our study guide and become a proficient legal researcher.

  • Jurisprudence and Legal Theory

    Exam-focused

    All essential concepts, principles, and case law are included so that you can answer exam questions quickly.