Day & Anor v Day

The appellants, James Harry Day and Michael Harry Day, and the respondent, Terence Anthony Day, are the executors of the will of their mother, Eileen Alice Day (“Mrs Day”). Mrs Day died on 21 December 2008.

This is an appeal from the order of Mr Recorder Chapman QC on 15 May 2102 in the Central London County Court, by which he dismissed the claim of the appellants for rectification of a conveyance dated 6 June 1985 of Mrs Day’s home, 25 Ashby Road, Sholing, Southampton (“the Property”), to herself and the respondent to be held by them as beneficial joint tenants (“the Conveyance”). The claim was to rectify the Conveyance so as to provide that the Property was held by Mrs Day and the respondent on trust for Mrs Day absolutely.

In 1954 the Property was conveyed into the joint names of Mrs Day and her husband. On his death in 1976 the Property vested in Mrs Day by survivorship. She continued to live there as her home.

On 13 May 1985 Mrs Day executed a general power of attorney, pursuant to the Powers of Attorney Act 1971, in favour of Alan Gordon Froud, a solicitor with Sotnicks of Southampton. On 6 June 1985 Mr Froud executed the Conveyance on Mrs Day’s behalf, as Mrs Day’s attorney. As I have said the Conveyance conveyed the Property from Mrs Day to herself and the respondent to be held by them as beneficial joint tenants. It was expressed to be “in consideration of natural love and affection”

On the same day, 6 June 1985, the respondent and Mrs Day, again acting by Mr Froud as her attorney, executed a mortgage in favour of Gateway Building Society (“the Gateway mortgage”) over the Property to secure an advance of £23,000. The money was paid to the respondent. On 21 October 1985 Mrs Day and the respondent were registered at the Land Registry as joint proprietors of the Property. The Gateway mortgage was subsequently discharged. On 1 November 1988 Mrs Day and the respondent executed a legal charge in favour of Midland Bank plc (“the Midland charge”) to secure all money owed by the respondent to that bank. The Midland charge was subsequently discharged, and at the date of the hearing before the Recorder the Property was free of any charge or mortgage.

By her last will, which was executed in November 2008, Mrs Day appointed the appellants and the respondent to be her executors and she directed, among other things, that the Property be sold and the sale proceeds be divided between her children equally.

Mrs Day died on 21 December 2008. She was survived by six children. Probate of her will was granted on 15 April 2009 to the appellants and the respondent.

In the absence of rectification as claimed by the appellants, on Mrs Day’s death in 2008 the respondent became by survivorship the sole legal and beneficial owner of the Property.

In the Particulars of Claim the appellants made the following allegations, among others. At the time the Conveyance was executed Mrs Day was staying with her daughter Diane in Canada. The Conveyance and the Gateway mortgage were executed in order to enable funds to be raised for the benefit of the respondent, with the Property being used as security, and it was no part of the agreement between Mrs Day and the respondent that he should acquire a beneficial interest in the Property. By error, the Conveyance declared that Mrs Day and the respondent were beneficial joint tenants. In those circumstances the Conveyance should be rectified so as to replace the provisions declaring and giving effect to a beneficial joint tenancy with a declaration that Mrs Day and the respondent held the beneficial interest in the Property on trust for Mrs Day absolutely.

In his Defence the respondent admitted that the reason for the Conveyance was to assist the respondent in raising funds, but he alleged that “there was no express or implied agreement that [he] should not acquire a beneficial interest in the Property”. He alleged that there was no formal consensus between himself and Mrs Day. He denied that there was any discussion or consensus between them regarding the legal title and the beneficial ownership of the Property, and he “denied that it was contemplated that the beneficial ownership should not pass to him”. He denied that there was any error in the Conveyance. He alleged that it was executed as intended by Mrs Day and himself. He denied that the appellants are entitled to an order for rectification.

The appellants, in accordance with the court's directions, served a number of witness statements, but the respondent failed to do so. At the opening of the trial, counsel for the respondent applied for permission to serve a witness statement made by the respondent. The appellants objected, and the Recorder refused to permit him to do so. In accordance with an earlier order of the court, the respondent, not having served any witness statement, was not permitted to give any oral evidence.

The Recorder heard a number of witnesses for the appellants, including the appellants themselves, Mrs Day’s daughter Diane, two other sons and the former wife of one of them.

There was in evidence a letter dated 17 August 2009 from the respondent to the first appellant, James Day, in which he said that he drafted Mrs Day’s last will and the one that preceded it and that, at the time of her final will, he was unaware that his name “had been added to the title deeds some 24 years earlier”.

In his careful judgment the Recorder set out the oral and documentary evidence and then summarised the law. For the purpose of this appeal, it is sufficient to describe briefly the reasoning by which he arrived at his decision to dismiss the claim for rectification. He said that the Conveyance was not in the nature of a bilateral transaction, such as a contract, but was in the nature of a voluntary settlement since it was made without any consideration in money or money’s worth. He said that, in the case of a voluntary settlement, it is the mistake and intention of the settlor that matters, and he referred in that connection to Re Butlin’s Settlement Trusts [1976] Ch 251. Accordingly, he observed, in the ordinary way the critical question would be whether the Conveyance failed to embody Mrs Day’s intention. The Recorder’s conclusion on that issue was that, on the balance of probabilities, Mrs Day never intended or understood that the Conveyance vested a beneficial interest in the respondent. His reasoning was as follows:

“26.

… I rely on her remarks to her family that showed a continuing belief that the property was hers to dispose of on her death and I also rely on her last two wills, which were obviously executed in that belief. I consider the probability is that she thought that the 1985 transactions were only intended to give [the respondent] security for his borrowings, and once those borrowings had been repaid, the property would be entirely hers again. ”

The Recorder considered that the respondent, on the other hand, had never laboured under any mistake. He said:

“26.

… If anything turned on [the respondent’s] intentions in 1985, and for the reasons that I have given I do not think that they do, I am not satisfied, on the balance of probabilities, that he was labouring under any mistake. He denied that his name was on the deeds and suggested that he had forgotten all about his name being put on the deeds in the 1980s. That does not have the ring of truth to me. I think the probability is that he knew exactly what the effect of the 1985 Conveyance was, but kept quiet about it and let his mother believe that the house was still hers to dispose of, and indeed he encouraged that belief by drafting two of her wills, including the last one, in terms under which she disposed of the house by her will.”

The Recorder said that, therefore, if Mrs Day had personally executed the Conveyance, he would have made an order for rectification of the Conveyance so as to provide that she remained the sole beneficial owner. He considered, however, that the fact the Conveyance was executed by Mr Froud on her behalf, pursuant to the general power of attorney, precluded any right to rectification. His reasoning was, in short, that, in executing the Conveyance in the terms which it contained, Mr Froud was acting within the scope of his authority and most probably without any mistake as to those terms and their effect. The Recorder’s analysis, more fully, was as follows in paragraphs [27] and [28] of his judgement:

“27.

… There is no evidence that Mrs Day gave Mr Froud any particular instructions about the proposed transaction. Indeed, there is no evidence that she ever met or personally communicated with Mr Froud at all. It seems likely to me that everything was arranged by [the respondent] and that all that Mrs Day did was to execute a general power of attorney in the presence of Mr Bradshaw, the solicitor's clerk from Sotnicks, who witnessed her signature. There is no evidence that Mrs Day made any mistake in executing the general power of attorney. It seems that it was done as a matter of convenience, since she was going to visit her daughter, Diane, in Canada and it would enable [the respondent] to proceed with raising money by mortgage on the house while she was away in Canada. It is not suggested that the general power of attorney should be rectified in any way or that it should be set aside or that it was in any way invalid. Accordingly, so it seems to me, Mr Froud plainly had power validly to execute the 1985 Conveyance on Mrs Day's behalf. Since Mr Froud was a solicitor, it seems to me highly improbable that he was under any misapprehension as to the terms and effect of the 1985 Conveyance. There is no evidence that he was acting, in any way, against instructions received from his principal.

28.

In those circumstances I find it very hard to see any ground on which the 1985 Conveyance can be rectified. The fact that Mrs Day never appreciated that the house was no longer hers to dispose of by will does not seem to me to be a ground for rectification. She had given power to Mr Froud to place the house in the joint beneficial and legal ownership of herself and [the respondent] and that is what he did. In effect, she authorised Mr Froud to execute, on her behalf, a Conveyance of the house on such terms as he saw fit to facilitate the mortgage and he duly did so. In these circumstances, I feel bound to dismiss the claim for rectification.”

The Recorder was plainly troubled by the conclusion to which he felt the law and the evidence compelled him. He said in the final paragraph of his judgment that he felt “absolutely no satisfaction in reaching that conclusion”. In giving permission to appeal, he stated that he “felt unhappy at the conclusion to which [he] felt obliged to come” and that he considered that an appeal would have a reasonable prospect of success.

I am not surprised by the Recorder’s expression of unease, at the end of his judgment and in granting permission to appeal, that he felt bound to dismiss the claim for rectification. The Recorder found as a fact that Mrs Day never intended to give, and never thought that she had given, a beneficial interest in the Property to the respondent. She always thought that, once the respondent’s borrowings had been repaid, the Property “would be entirely hers again”. The respondent’s Defence contains the admission that the reason for the transaction was to assist him to raise funds. It made no allegation of a positive intention of Mrs Day, other than is to be found in the terms of the Conveyance itself, of any intention to make a gift to him of her beneficial interest in the Property. The most the respondent asserted in his Defence, by way of a double negative, was that there was “no … agreement that he should not acquire a beneficial interest”. That was reflected in the double negative elsewhere in the Defence by way of a denial “that it was contemplated that the beneficial ownership should not pass to the [respondent]”.

Furthermore, it is clear that the Recorder had a poor view of the respondent’s conduct. The Recorder considered that it was probable that all the arrangements for the proposed transaction were made by the respondent; and that the respondent always understood perfectly well the meaning and effect of the Conveyance, but he deliberately kept quiet about it and indeed encouraged his mother to believe that the Property was still hers to dispose of by drafting her last two wills on that footing.

It might have been argued, on those findings, that the respondent incorrectly instructed Mr Froud on behalf of Mrs Day and that he was always aware both of Mrs Day’s mistake as to the contents and effect of the Conveyance and of Mr Froud’s mistake in believing that he was carrying out Mrs Day’s intentions and instructions. On the hearing of the appeal, however, Mr Michael Norman, the appellants’ counsel, expressly disclaimed any such arguments and indeed sought to distance his case from any views expressed by the Recorder, or to be inferred from the Recorder’s express findings, as to improper conduct or motive on the part of the respondent. Mr Norman pointed out that the appellants never made any allegation against the respondent of dishonesty or sharp practice in their statements of case. Their case up to, and including, the trial was one of mutual mistake on the part of both Mrs Day and the respondent as to the provisions and effect of the Conveyance.

Neither the appellants nor the respondent challenge the conclusions of the Recorder that the Conveyance was not part of any bargain between Mrs Day and the respondent but was in the nature of a voluntary settlement by her and that, therefore, for the purposes of the doctrine of rectification, the relevant intention was that of Mrs Day and the respondent’s intention is irrelevant. The Recorder rightly pointed to Re Butlin’s Settlement Trusts as setting out the relevant legal principles. In that case Brightman J said at pages 260F – 261A and 262F/G:

“There is, in my judgment, no doubt that the court has power to rectify a settlement notwithstanding that it is a voluntary settlement and not the result of a bargain, such as an ante-nuptial marriage settlement. Lackersteen v. Lackersteen (1860) 30 L.J.Ch. 5, a decision of Page-Wood V.-C., and Behrens v. Heilbut (1956). 222 L.T.Jo. 290, a decision of Harman J., are cases in which voluntary settlements were actually rectified. There are also obiter dicta to the like effect in cases where rectification was in fact refused; see Bonhote v. Henderson [1895] 1 Ch. 742; [1895] 2 Ch. 202.

Furthermore, rectification is available not only in a case where particular words have been added, omitted or wrongly written as the result of careless copying or the like. It is also available where the words of the document were purposely used but it was mistakenly considered that they bore a different meaning from their correct meaning as a matter of true construction. In such a case, which is the present case, the court will rectify the wording of the document so that it expresses the true intention: see Jervis v. Howle and Talke Colliery Co. Ltd. [1937] Ch. 67; Whiteside v. Whiteside [1950] Ch. 65, 74 and Joscelyne v. Nissen [1970] 2 Q.B. 86, 98.

…

[I]n the absence of an actual bargain between the settlor and the trustees, (i) a settlor may seek rectification by proving that the settlement does not express his true intention, or the true intention of himself and any party with whom he has bargained, such as a spouse in the case of an ante-nuptial settlement; (ii) it is not essential for him to prove that the settlement fails to express the true intention of the trustees if they have not bargained; but (iii) the court may in its discretion decline to rectify a settlement against a protesting trustee who objects to rectification.”

What is relevant in such a case is the subjective intention of the settlor. It is not a legal requirement for rectification of a voluntary settlement that there is any outward expression or objective communication of the settlor’s intention equivalent to the need to show an outward expression of accord for rectification of a contract for mutual mistake: see, for example, the line of pensions cases AMP v Barker [2000] EWHC (Ch) 42, [2001] Pens. LR 77 at [67]-[68], Gallaher Ltd v Gallaher Pensions Ltd [2005] EWHC 42 (Ch), [2005] Pens. LR 103 at [116]-[117], Drake Insurance v MacDonald [2005] EWHC 3287 (Ch), Pens. LR 401 at [34]–[35]. In Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101 the House of Lords agreed with Lord Hoffmann’s (obiter) explanation of an objective test for rectification for mutual mistake in the case of a contract so as to bring the final document into line with the parties’ prior consensus objectively ascertained. Nothing he said there touched upon the requirements for rectification for unilateral mistake in a non-contract case. Although, as I have said, there is no legal requirement of an outward expression or objective communication of the settlor’s intention in such a case, it will plainly be difficult as a matter of evidence to discharge the burden of proving that there was a mistake in the absence of an outward expression of intention.

The argument advanced on behalf of the appellants by Mr Norman is quite simply that, on the finding of the Recorder that Mrs Day never intended to give, and never thought she had given, a beneficial interest in the Property to the respondent, the appellants are entitled to rectification. The appellants’ argument is that both the existence of Mr Froud’s power of attorney and the scope of Mr Froud’s authority to execute the Conveyance are irrelevant. On the facts of the present case, as found by the Recorder, I accept that argument.

It is possible to identify the following stages in the reasoning of the Recorder in paragraphs [27] and [28] of his judgment: (1) it is not suggested that Mr Froud’s power of attorney should be rectified or set aside or was invalid; (2) therefore she authorised Mr Froud to execute, on her behalf, a conveyance of the Property on such terms as he saw fit to facilitate Gateway mortgage; (3) therefore Mr Froud had power validly to executed the Conveyance; (4) it is highly improbable that he was acting under any misapprehension as to the terms and effect of the Conveyance; (5) there is no evidence that he was acting in any way against the instructions received from Mrs Day.

It seems to me, with respect to the Recorder, that his analysis is flawed. In the first place, the doctrine of rectification is concerned with intention, or rather the mistaken implementation of intention, rather than the power and authority to effect a particular transaction. The intention of the principal and the scope of the agent’s authority may, and often will, overlap, but they are not synonymous concepts. In the case of a voluntary settlement, rectification hinges on whether the settlor executed the settlement in the mistaken belief that it implemented his or her intention. Whether or not the settlor’s solicitor was authorised to draw up the settlement on any particular terms or, as here, was acting within his actual or apparent authority in executing it on behalf of, and in the name of, the settlor is a different question. The Recorder appears to have been of the view that Mr Froud had authority to execute the Conveyance on behalf of Mrs Day because he acted pursuant to a general power of attorney and that was a complete answer to any claim Mrs Day might have made in her lifetime for rectification of the Conveyance. Mrs Day, however, was the settlor and it is her intention and the implementation of her intention, and not the scope of Mr Froud’s authority, which are in issue on the claim for rectification.

Secondly, on the issue of the scope of authority, the Recorder appears to have thought it axiomatic that the general power of attorney, by virtue of its very generality, authorised Mr Froud to execute, on Mrs Day’s behalf, a conveyance of the Property on such terms as he saw fit to facilitate the Gateway mortgage. If that was the view of the Recorder, it is plainly wrong. A solicitor’s actual authority is prescribed by any instructions expressly given by the client, whether or not those instructions are then implemented by the solicitor acting pursuant to a general power of attorney. So far as a third party is concerned, a general power of attorney may well clothe the solicitor with apparent authority to effect a transaction and so make the transaction binding on the principal even though the transaction was outside the solicitor’s actual authority. Insofar, however, as there is any overlap between the principal’s intention in carrying out a particular transaction and the scope of the agent’s authority to execute that transaction, it is the actual authority of the agent that is relevant and not the agent’s apparent or ostensible authority. The actual instructions to the agent may cast light on the actual intention of the principal, which is the relevant factor for rectification. Apparent or ostensible authority of the agent may make the transaction binding on the principal even where it does not coincide with the actual intention of the principal and the express instructions given to the agent, but (subject to the facts of any particular case) there is no obvious reason why such apparent authority should throw any light on the right to rectification.

Thirdly, since Mrs Day never formed any intention to confer a beneficial interest in the Property on the respondent, the Recorder could only reject the claim for rectification if Mrs Day’s overriding intention was that the proposed transaction should be carried out in any way that Mr Froud might choose. The Recorder, however, never directly addressed that question. He found, on the mere basis of the grant of the general power of attorney, that Mr Froud was authorised to execute the Conveyance on such terms as he saw fit to facilitate the Gateway mortgage. Not only was that analysis wrong for the reasons I have given, but it simply did not address the critical question of Mrs Day’s actual intention and, insofar as it had any relevance to that issue, the actual instructions given to Mr Froud.

In fact, apart from the generality of the power of attorney itself, there was no evidence that the intention of Mrs Day was that Mr Froud could carry out the proposed transaction in any way he chose. The mere statement of such a possible intent shows its inherent improbability. It would mean that it would have been Mrs Day’s intention, and within Mr Froud’s actual authority, to permit Mr Froud to arrange for the Property to be conveyed both legally and beneficially to the respondent alone. I cannot see how such a remarkable conclusion, so obviously against Mrs Day’s interests, could be supported by the mere existence of a general power of attorney or, indeed, anything short of the clearest evidence that those were her actual instructions.

Leaving aside the general power of attorney, the factual findings of the Recorder are all inconsistent with any intention, let alone actual instructions to Mr Froud, to carry out the transaction in any way he might choose. The purpose of the transaction, as admitted in the Defence, was to assist the respondent to raise funds. It was not to make a gift to the respondent of a beneficial interest in the Property. It was not Mrs Day’s actual intention that any beneficial interest should be transferred to the respondent, and no assertion is made in the Defence that Mrs Day ever indicated to the respondent that she intended to make any such gift to him. There was no evidence that she ever personally gave any instructions to Mr Froud, and the likelihood is that everything was arranged by the respondent. Bearing in mind all those matters, and the absence of any assertion in the Defence that Mrs Day authorised the respondent to instruct Mr Froud to give the respondent a beneficial interest in the Property, the only proper inference is that the respondent instructed Mr Froud, on behalf of Mrs Day, to do what was necessary, consistently with Mrs Day’s best interests, to allow the Property to be used as security to enable the respondent to raise funds. The transfer of a beneficial interest in the Property to the respondent went beyond those instructions and Mr Froud’s actual authority and was inconsistent with Mrs Day’s intention.

The Recorder’s finding that there was no evidence that Mr Froud was acting in any way against instructions received from his principal amounts to no more than a finding that Mr Froud was not expressly forbidden to structure the transaction so as to confer a beneficial interest on the respondent. It forms part of the Recorder’s reasoning, which I reject for the reasons I have given, that the general power of attorney, by virtue of its generality, is determinative of the claim to rectification because it was authority to Mr Froud to structure the transaction in whatever way he might choose.

In any event, I do not consider that the onus was on the appellants to disprove that Mrs Day’s intention and instructions to Mr Froud were that Mr Froud had a completely free hand to structure the transaction in whatever way he might choose to enable the respondent to raise funds on the Property. The Recorder having found that it was not Mrs Day’s actual intention to confer any beneficial interest in the Property on the respondent, I consider that the evidential burden then passed to the respondent to show that such intention was negated by some different overriding intention on her part. It is quite impossible on the facts for the respondent to do so.

Finally, neither side argued that this was a case where the correct remedy, if any, is that the Conveyance should be set aside rather than rectified. They were correct to take that line since a transfer of the legal title into joint names was consistent with Mrs Day’s intention. Only the provisions of the Conveyance declaring that the Property was held by Mrs Day and the respondent on trust for sale for themselves as beneficial joint tenants were inconsistent with her intention and any actual authority of Mr Froud.

For those reasons I would allow this appeal.

I am grateful to the Chancellor for setting out the relevant facts and the judge’s findings. I agree with him that the appeal must be allowed. However, in deference to the judge’s careful judgment I would like to add something of my own.

The judge found that Mrs Day had no intention to give a beneficial interest in her house to Terence. On the other hand he found that she did intend that the house would be put into their joint names for the purpose of enabling him to raise money on mortgage. The legal transaction that would have given effect to both limbs of her intention would have been a conveyance into the joint names of Mrs Day and Terence on trust for Mrs Day alone. In fact the transaction that Mr Froud executed under the general power of attorney was a conveyance to the two of them to hold as beneficial joint tenants in equity. The legal consequence of this transaction is that Mrs Day gave up sole ownership of the house and, potentially all beneficial interest in it if (as happened) she died without severing the joint tenancy in equity.

The judge found that there was no evidence that Mrs Day had given any instructions to Mr Froud; and he also found that Terence arranged everything. However, he did not make a finding about what instructions Terence had actually given Mr Froud.

The judge found that Mr Froud had authority under the power of attorney to enter into the transaction that he did. I agree. He went on to treat that as determinative of the case. Once he concluded that the transaction was within the scope of Mr Froud’s authority he held that there was an insuperable barrier to rectification. It is there that, in common with the Chancellor, I disagree with the judge. I do not consider that, on the facts found by the judge, it can fairly be said that Mr Froud was the decision maker. I do not believe that any honest solicitor, even one armed with a general power of attorney, would regard himself as free to decide whether or not to give away his client’s property. Nor could Terence have so regarded him.

The equitable jurisdiction to rectify instruments is part of equity’s wider power to relieve against the consequences of a mistake. I have found it helpful to approach the judge’s findings of fact from this perspective. There are many cases in which equity has exercised this power by setting aside a gift made by mistake. In such cases there is no question of lack of authority. The donor had full power to give away the asset in question, but the existence of his power to give away the asset was no bar to the intervention of equity. As the Chancellor has explained at [25] equity intervenes not on the ground of lack of authority but on the ground of a failure of intention.

The most recent comprehensive discussion of the circumstances in which equity will intervene is the decision of this court in Pitt v Holt [2011] EWCA Civ 197 [2012] Ch 132 (currently under appeal to the Supreme Court). There were two issues in that case. The first concerned mistakes made by trustees in the exercise of fiduciary powers. That need not concern us. But the second concerned the circumstances in which equity will intervene in cases of voluntary dispositions made under a mistake.

Lloyd LJ gave the leading judgment with which Mummery and Longmore LJJ agreed. Most of the cases were cases in which the whole transaction was set aside. But Lloyd LJ treated cases of rectification of voluntary dispositions as falling within the same principle. Having referred to cases in which a voluntary disposition had been set aside he continued:

“[174] Other cases at first instance include Meadows v Meadows (1853) 16 Beav 401 and Lister v Hodgson (1867) LR 4 Eq 30, 15 WR, in each of which the trusts of the settlement were different from those which had been intended and which the solicitor had been instructed to achieve. In some other cases of this kind the court was able to order that the settlement should take effect as intended, in effect rectifying it: see Walker v Armstrong (1858) 8 De G M & G 531 (Lords Justices) and Wollaston v Tribe (1869) LR 9 Eq 44, 18 WR 83, 21 LT 449.”

It is, in my judgment clear from this passage that rectification and rescission are to be treated in the same way, depending on the facts. This is also consistent with earlier authority. In Lady Hood of Avalon v MacKinnon [1909] 1 Ch 476, 481 (approved in Pitt v Holt) Eve J said:

“I accept Mr. Lawrence's argument that whether it is rescission or whether it is rectification is only a question of degree. If the Court comes to the conclusion that the plaintiff is entitled to relief, then whether the proper relief be reformation or rescission is really immaterial, because whatever is the proper and necessary relief the Court is bound to give it.”

In Pitt v Holt Lloyd LJ went on to consider the circumstances in which equity will intervene. He began by referring to what Lindley LJ had said in Ogilvie v Littleboy (1897) 13 TLR 399:

“Gifts cannot be revoked, nor can deeds of gift be set aside, simply because the donors wish they had not made them and would like to have back the property given. Where there is no fraud, no undue influence, no fiduciary relation between donor and donee, no mistake induced by those who derive any benefit by it, a gift, whether by mere delivery or by deed, is binding on the donor.

…

In the absence of all circumstances of suspicion a donor can only obtain back property which he has given away by showing that he was under some mistake of so serious a character as to render it unjust on the part of the donee to retain the property given to him.”

After a full review of the cases Lloyd LJ began his discussion thus:

“[203] It seems to me that, as a matter of authority and of principle, the correct test is in part as set out by Lindley LJ in Ogilvie v Littleboy, endorsed by the House of Lords, which I have quoted at para 167 above. That identifies the critical relevance of the court's view of the effect of the mistake, once identified, upon the conscience of the recipient. Thereby it points to a need to protect the recipient in his possession and enjoyment of the property given. In that respect it sets a very high test as to the gravity of the mistake. However, I do not consider that it can be taken as definitive as to the type of mistake that may be relevant, so as to leave that entirely at large. I would accept that, in general, equity does not define dogmatically the categories of case in which it may intervene. Nevertheless, it seems to me that, with the benefit of the review of the relevant cases over the past 150 years or so, it is possible and right to say in what kinds of case the jurisdiction is available, and in which it is not. I do not aim to set out a hard and fast rule as if in legislation, which permits of no exceptions for unforeseen cases, but in my judgment the authorities do justify setting down certain general rules, as to both inclusion and exclusion.”

He expressed his ultimate conclusion as follows:

“[210] I would therefore hold that, for the equitable jurisdiction to set aside a voluntary disposition for mistake to be invoked, there must be a mistake on the part of the donor either as to the legal effect of the disposition or as to an existing fact which is basic to the transaction. (I leave aside cases where there is an additional vitiating factor such as some misrepresentation or concealment in relation to the transaction, among which I include Dutton v Armstrong.) Moreover the mistake must be of sufficient gravity as to satisfy the Ogilvie v Littleboy test, which provides protection to the recipient against too ready an ability of the donor to seek to recall his gift. The fact that the transaction gives rise to unforeseen fiscal liabilities is a consequence, not an effect, for this purpose, and is not sufficient to bring the jurisdiction into play.”

In our case there was a mistake by Mrs Day as to the legal effect of the transaction. She did not intend to give away a beneficial interest in her house; but that was the effect of the conveyance. The mistake was of sufficient gravity to satisfy the Ogilvie v Littleboy test; namely that it is unjust for Terence to retain the benefit of the gift. In determining whether it is unjust for him to retain the benefit of the gift we are entitled, in my judgment, to consider events subsequent to the conveyance and in particular his action in concealing the effect of the conveyance from his mother. That had the effect that Mrs Day did not do anything to correct the mistake during her lifetime (even if only to sever the joint tenancy in equity).

I was concerned by the fact that on the judge’s findings of fact Mrs Day never communicated her intention to anyone at the time of the transaction. However, I have come to the conclusion that an outward expression of intention is unnecessary in cases of voluntary dispositions. There has been some discussion in cases at first instance whether this is a legal requirement or merely an evidential factor. In Lansing Linde Ltd v Alber [2000] Pens LR 15 Rimer J held that it was a legal requirement. But the tide of authority began to flow in the opposite direction in AMP (UK) Ltd v Barker [2000] EWHC 42 (Ch), [2001] PLR 77, which was approved in Pitt v Holt (although it has to be said not on this precise point). The cases in which AMP (UK) Ltd v Barker has been followed on this point now include Gallaher Ltd v Gallaher Pensions Ltd [2005] EWHC 42 (Ch) [2005] Pens LR 103; Drake Insurance Plc v MacDonald [2005] EWHC 3287 (Ch) [2005] Pens LR 401; Colorcon Ltd v Huckell [2009] EWHC 979 (Ch); [2009] Pens LR 201 and Industrial Acoustics Ltd v Crowhurst [2012] EWHC 1614 (Ch); [2012] Pens LR 371. In Munt v Beasley [2006] EWCA Civ 370 Mummery LJ said at [36]

“I agree with the trend in recent cases to treat the expression "outward expression of accord" more as an evidential factor rather than a strict legal requirement in all cases of rectification.”

That was a case of a bilateral transaction (a lease). Whether Mummery LJ’s view survives in relation to bilateral transactions in the light of the restatement of the test for rectification of bilateral transactions in the obiter part of the decision of the House of Lords in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 A.C. 1101 need not detain us here. In Daventry District Council v Daventry and District Housing Ltd [2011] EWCA Civ 1153; [2012] 1 WLR 1333 Etherton LJ (with whom Lord Neuberger of Abbotsbury MR agreed) said at [80]:

“In other words, the requirements of ‘an outward expression of accord’ and ‘common continuing intention’ are not separate conditions, but two sides of the same coin, since an uncommunicated inward intention is irrelevant.”

That case, too, was concerned with a bilateral transaction. Since the Chancellor has said clearly at [22] that an uncommunicated subjective intention is sufficient in the case of a voluntary disposition his statement about bilateral transactions in Daventry in his previous incarnation cannot be taken as authority to the contrary. Indeed in an incarnation before that he held that to be the case in Gallaher Ltd v Gallaher Pensions Ltd.

Industrial Acoustics Company Limited v Crowhurst [2012] EWHC 1614 (Ch); [2012] Pens LR 371 was another voluntary disposition case. Vos J, having considered both Chartbrook and Daventry, said at [45]

“…it seems to me that there will be cases, particularly in a pensions context, where it will be permissible to allow rectification when one can say by implication perfectly clearly that the parties did not intend by the Deed they entered into, to effect a particular change, even though they had not stated outwardly to each other (or indeed at all) that they did not intend to effect that change, simply because the change was not in any form discussed.”

I am content to endorse that view, at least in a case of a voluntary disposition. Vos J also (correctly in my judgment) looked at events subsequent to the transaction in order to deduce what, objectively, was the real intention at the time of the disposition. I therefore agree with the Chancellor that in the case of a voluntary disposition it is the subjective intention of the donor or settlor that counts.

In my judgment therefore the necessary conditions for equitable relief against the consequences of a mistake are satisfied. The manner in which equity should relieve against the consequences of the mistake on the facts of our case is by way of rectification.

I, too, would allow the appeal.

I have read the judgments of the Chancellor and Lewison LJ and I respectfully agree with them. Although I did not initially find the case easy, I am now convinced, essentially for the reasons they give, that the appeal should be allowed. I briefly explain my reasons in my own words. I gratefully adopt the facts as set out by the Chancellor.

The case was argued below on the basis that it was necessary to establish a mutual mistake. A critical conclusion of the judge was that this was erroneous, that the case was in the nature of a voluntary settlement, and therefore that in accordance with such authorities as Re Butlin’s Settlement Trusts [1976] Ch 251 it is only the intention of the settlor, Mrs Day, that is relevant. It is now common ground that this is the correct approach.

The issue which then arises is whether the relevant intention is that of the mother or the solicitor, Mr Froud, to whom she gave a general power of attorney. The judge seems to have thought that since the solicitor was acting under a general power, she must be bound by his intentions. Since he was acting in accordance with his instructions and intended to enter into the transaction with a full appreciation of its legal effects, the mother could not now assert a contrary intention.

I agree with the Chancellor that this confuses intention and authority. That is not to say that they are wholly unrelated concepts. It seems to me that absent evidence to the contrary of a settlor’s actual intentions, where a settlor gives instructions to her agent, the only proper inference will be that the instructions reflect the settlor’s intentions. Any transaction consistent with the instructions will properly reflect those intentions. But for the reasons given by the Chancellor, it is impossible to infer in the circumstances of this case that Mrs Day intended to make a gift to her son. Indeed, the one clear finding of the judge, which is entirely consistent with the evidence, is that she did not.

I confess that I have some difficulty in understanding quite how it came about that the conveyance was drafted so as to give a beneficial interest to the son. It seems almost inconceivable that a competent solicitor could negligently have drafted the conveyance in this way; the appellants do not seek to suggest that the son was acting dishonestly or that he deliberately misrepresented his mother’s intentions to the solicitor (although the judge seems to have thought that this may have been the case), and in any event there is no evidence that the son was ever authorised to act on the mother’s behalf; and there is no evidence that the mother gave instructions to anyone. But ultimately it matters not why the conveyance failed to reflect the intentions of the settlor; it is enough that it did not in fact do so. Mrs Day never intended to make a gift to her son, but that is the effect of the conveyance. Moreover, even if the mistake results from the settlor giving instructions which are inconsistent with her true intentions – and I would not entirely rule out the possibility that this is in fact what occurred here - still in an appropriate case rectification may be ordered to give effect to those intentions. In Hanley v Pearson (1879) 13 Ch.D. 545 Bacon VC ordered rectification of a post-nuptial settlement where the deed failed to reflect the intentions of the wife, who was the settlor. The only evidence supporting the contention that the deed misrepresented her intentions was given by the wife herself. It was not suggested that the lawyers drafting the deed had failed to give effect to their instructions. The court accepted her affidavit evidence that the transaction did not accord with her intentions and that was sufficient to warrant an order for rectification, even though the effect was to alter the deed in her favour.

For whatever reason there was a fundamental mistake in the drafting of the conveyance and it gave the son a benefit which it would be unconscionable for him to keep. Accordingly, I agree that the order for rectification sought should be granted.