From: GP McMeel <>
To: David McLauchlan <>
Jason Neyers <>
Robert Stevens <>
Date: 06/07/2009 14:20:01 UTC
Subject: RE: Lord Hoffmann's farewell tour (2009)

(1)        The HL is clearly right on the issue of construction on established

principle, although one has to admire the technical mastery of this

technique deployed in the judgments of Lords Hoffmann and Walker (and

indeed Lawrence Collins LJ in the CA).

(2)        The conclusion on prior negotiations is obviously disappointing and

despite Rob’s invocation of “inevitability” it is clear the rule remains

“on the turn”. Prior negs can still come in for the purposes of (a)

rectification when pleaded (as here where they were read by all nine

judges); (b) “to establish a fact which may be relevant as background

known to the parties” (Hoffmann para [42]); and (c) what remains of the

“private dictionary” exception after the re-interpretation of Karen

Oltmann. The younger judges (Lawrence Collins LJ and Baroness Hale)

clearly favoured change. All we are left in defence of the exclusionary

rule by Lord Hoffmann is the argument from “uncertainty” and (really part

and parcel of the same thing) alleged practitioner hostility. The first

sentence of para [36] appears to be the decisive factor. Picking up on a

point made by Lawrence Collins LJ (CA para [111]) there is also a

suggestion of the dangers of self-serving evidence (para [38]) (although I

would imagine the judges would be astute to spot such examples) and a

rather limited acknowledgement of the supposed danger of prejudicing third

parties (para [40]). I am most concerned about alleged practitioner

hostility. We currently have this “through the looking glass” world of

letting in the same evidence in for one question, but excluding it for

another, where both techniques are concerned with ascertaining the meaning

and effect of the deal. To shy away from the only principled rule because

certain vocal London practitioners, for all of whom I have the greatest

genuine possible respect, (but who typically and unavoidably act for banks

and other powerful institutions), insist on a highly contestable assertion

of the need for certainty based on the strict letter of their contracts

(which in their ideal world would involve turning the clock back to

literalism) is an abdication of responsibility for developing our

commercial law. The same people insisted that charges which were

manifestly floating securities were fixed for several decades until

Spectrum Plus. They also put the boot in to the Law Commission’s generally

sensible proposals for personal property security law reform. To echo an

ill-fated cry of Chief Justice Holt, I think we are in danger of taking

our laws from Lombard Street.

(3)        On rectification, I agree with both David and Rob that the obiter

dictum is novel and difficult. The typical division of common and

unilateral mistake barely raises its head. On the evidence this could only

be a case of unilateral mistake rectification. Briggs J accepted that the

developer had always intended the alternative formulation of the price,

and that its negotiator and lawyer had made an extraordinary mistake in

thinking the agreement coincided with their intention. However the owner’s

representatives gave evidence that they understood they would be entitled

to a “super-overage”, and whilst it was difficult to see where they had

got that idea from, the trial judge was not prepared to hold that they

were “skilled and sophisticated liars on oath. In short, thoroughgoing

rogues.” (CA para [152]). In the Court of Appeal, whilst accepting that

the developer’s had “a very powerful case for rectification”, and

considering that the judge had given insufficient weight to manuscript

evidence of jottings which favoured the developer’s case, the court

unanimously held that it could not intervene because the owner’s lawyer

had given oral evidence that he had explained the provision (in the sense

contended for by the owner’s) line by line to the developers, and the

judge had refused to find that the was either dishonest or mistaken. Lord

Hoffmann makes similar points at para [55]. Reading between the lines, the

owners were very lucky with Briggs J giving them the benefit of the doubt.

In the HL, what Lord Hoffmann appears to have done is to entrench the

approach in his dissenting judgment in Britoil plc v Hunt Overseas Oil Inc

[1994] CLC 561 that the prior agreement or consensus must be objectively

determined, and then to say that both parties were then mistaken because

the contract did not coincide with the commercial deal reflected in the

parties’ correspondence. Of course, as David says, this is a strange

version of “common” mistake. We are stuck with the finding that the owners

thought the contract said what it literally said (and that did not

coincide with the correspondence deal) and the developers though the deal,

which their lawyer drafted implemented the correspondence deal, but it did

not because of their botched drafting. It can hardly be said the two

parties were labouring under the same mistake (which as Rob says, is the

usually assumed juridical basis for intervening). So the law of

rectification, under strain from the unreality of the construction rule,

becomes more elaborate and less defensible, just when it should be

withering on the vine.

Gerard McMeel

University of Bristol

On Sat, July 4, 2009 10:52 am, David McLauchlan wrote:

> Rob


> Like you I have difficulty with the reasoning of Lord Hoffmann on the

> rectification issue, especially para 66 (although for me the most

> interesting and challenging parts of the case are the decisions on the

> construction and admissiblity issues).  However, my difficulty is quite

> different than yours.  I think Hoffmann is wrong when he says that

> Chartbrook made a mistake because, on the basis of the unchallenged

> findings of fact, their intention was exactly what (we must assume) the

> contract provided for.  Therefore, I still think that the only principled

> basis for allowing rectification is the one I suggested at 124 LQR 636.

> Chartbrook ought to have been aware from the offers that preceded the

> drafting of the written contract that Persimmon did not intend to offer

> the pricing formula Chartbrook intended, and, as a result of the various

> communications between the parties, including Chartbrook&#146;s

agreement in

> principle to the offers made by Persimmon, the latter were led reasonably

> to believe that the price they intended to offer was assented to.  In

> other words, the written contract failed to reflect the earlier objective

> consensus.  This is essentially the same conclusion as that reached by

> Lord Hoffmann but the reasoning is different.


> Regards


> David





> ________________________________________

> From: []

> Sent: Friday, July 03, 2009 3:34 AM

> To: Jason Neyers

> Cc: Robert Stevens;

> Subject: Re: Lord Hoffmann's farewell tour (2009) - rectification


> In this case, issues (1), (2) and (3) did not arise. You might think (3)

> arose, but it did not. There was no doubt this document represented their

> entire agreement, nor was there any doubt as to what the terms were. The

> issue was the correct construction of one of those terms. RS


> On Jul 2 2009, Jason Neyers wrote:


>> For what it is worth, I think that their Lordships' conclusion on ii

>> (the non-admissibility of prior negotiations) is wrong. I agree with

>> Corbin and Cardozo (/Utica// City National Bank v. Gunn/) that this

>> evidence should be admissible where it is tendered to answer the

>> question

>> of whether: (1) The parties made a contract and on what terms? (2) The

>> contract is void or voidable because of illegality, fraud, mistake or

>> any

>> other reason? (3) The parties assented to this particular writing as the

>> complete and accurate "integration" of their whole bargain.


>>  Congrats go out to ODG list member David McLauchlan who had not one but

>> two of his articles cited by the court: ("Contract Interpretation: What

>> is it About?" (2009) 31 Sydney Law Review 5; "The 'Drastic' Remedy of

>> Rectification for Unilateral Mistake" (2008) 124 LQR 608).




>> Jason Neyers

>> Associate Professor of Law &

>> Cassels Brock LLP Faculty Fellow in Contract Law

>> Faculty of Law

>> University of Western Ontario

>> N6A 3K7

>> (519) 661-2111 x. 88435




>> Robert Stevens wrote:

>> > The issue concerns (i) construction, (ii) non-admissibility of prior

>> > negotiations and (iii) rectication.

>> >

>> > On (i) although the HL overturn the majority decision of the CA, they

>> > introduce no new principles but just reaffirn Investors Compensation

>> > Scheme.

>> >

>> > What is said on (ii) the non-admissibility of pre-contractual

>> > negotiations as an aid to construction will, no doubt, disappoint some

>> > but seems to me to be inevitable. The rule is well established and is

>> > not obviously wrong and that is that.

>> >

>> > I am, however, after reading it through a couple of times, rather more

>> > disturbed by Lord Hoffmann's approach to (iii) rectification which, at

>> > first blush, seems to abrogate the parol evidence rule.

>> >

>> > We are told ([59]) that for rectification the "terms of the contract

>> to

>> > which the subsequent instrument must conform must be objectively

>> > determined in the same way as any other contract."

>> >

>> > Completely unobjectionable and correct.

>> >

>> > What Lord Hoffmann then does [66] is ascertain that the prior

>> > consensus was based upon a letter in May (part of the prior

>> > negotiations). "It is agreed that the terms of the letter were

>> accepted

>> > ... and no one gave any evidence of any subsequent discussions which

>> > might have suggested an intention to depart from them. It follows that

>> > (on the assumption that the [construction the HL rejected was right])

>> > both parties were mistken in thinking that it reflected their prior

>> > consensus and [one party] was entitled to rectification."

>> >

>> > If correct, that is not how I have previously understood rectification

>> > to work.

>> >

>> > Once it has been shown that the parties have agreed to be bound to the

>> > terms of a contract wholly embodied in a written instrument, each is

>> > bound by its terms although one or other may not know what they are,

>> > and even though the content of prior negotiation may be inconsistent

>> > with the terms contained in the document. The refusal to admit such

>> > extrinsic evidence as relevant, arises from the fact that it is wholly

>> > pointless to admit it as it is irrelevant once the court has concluded

>> > that the document was intended by the parties to contain all the terms

>> > of the contract. The rule that such extrinsic evidence is irrelevant

>> > follows as a matter of logic from what the parties have agreed to be

>> > bound by. Such an agreement is determined by the ordinary rules of

>> > objective interpretation. If, as a matter of fact, the parties had at

>> > an earlier point in their negotiations reached an agreement on

>> > different terms from that embodied in the subsequent written contract,

>> > this earlier agreement is replaced, consideration provided by each

>> > side's promise to be bound solely by the terms in the written

>> > agreement. Giving effect to different terms from those contained in

>> the

>> > written agreement would be contrary to the agreement the parties have

>> > reached.

>> >

>> > Rectificatio allows one party to escape the fact that he has agreed

>> > that the document is to represent the parties' entire agreement by

>> > demonstrating, for example, that both parties made a common mistake as

>> > to the terms recorded (cf Bell v Lever Bros) or that he made a mistake

>> > about the terms recorded and the other party knew or ought to have

>> > known he was making such a mistake (cf Smith v Hughes). The former was

>> > unarguable as it had been found as fact that the counterparty believed

>> > the document to represent what had been agreed [55] and [56].)

>> >

>> > Lord Hoffmann doesn't do that, he just looks to see what had

>> > previously been agreed, and if the document which embodies their

>> > agreement doesn't accord with that, orders rectification. This seems

>> to

>> > me to be wrong. He isn't looking for a mistake sufficient to set aside

>> > the agreement that the document, and nothing else, is to represent the

>> > parties' entire bargain. The 'common mistake' seems to be assumed from

>> > the fact that the agreement embodied in the document is not the same

>> as

>> > that which had previously been agreed. But if you can do that there is

>> > no parol evidence rule as you can always get the document amended to

>> > represent what had previously been agreed.

>> >

>> > I would be very intersted to learn what others think. My first

>> > impression, however, is that this obiter dictum is wrong. RS

>> >

>> >

>> >

>> >> I'm sure that most list members will already have seen Chartbrook

>> >> Limited v. Persimmon Homes [2009] UKHL 38, but in case not:

>> >>

>> >>

>> >>

>> >>

>> >> t.pdf

>> >>

>> >>

>> >>

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