Paul S. Davies

Interpretation and Rectification in Australia

Both interpretation and rectification continue to pose problems. Difficulties are compounded by blurring the boundary between the two. In Simic v New South Wales Land and Housing Corporation [2016] HCA 47, the High Court of Australia overturned the decisions of the lower courts which had held that performance bonds could be interpreted in a “loose” manner in order to correct a mistake. However, the documents could be rectified in order to reflect the actual intentions of the parties. This decision should be welcomed: the mistake was more appropriately corrected through the equitable jurisdiction than at common law. Significantly, the concurring judgments of French C.J. and Kiefel J. highlight that the law of rectification now seems to be different in Australia from the law in England. It is to be hoped that the English approach will soon be revisited (see further P. Davies, “Rectification versus Interpretation” [2016] C.L.J. 62).

RECTIFICATION VERSUS INTERPRETATION: THE NATURE AND SCOPE OF THE EQUITABLE JURISDICTION

This article argues that mistakes in written contracts should be corrected under the equitable doctrine of rectification rather than the common law of interpretation. But rectification on the basis of a common mistake should only be granted where both parties are actually mistaken. Any other approach is inconsistent with the nature of the equitable jurisdiction, and blurs the boundary between common mistake and unilateral mistake rectification.

RESCISSION FOR MISREPRESENTATION

IN Salt v Stratstone Specialist Ltd. (t/a Stratstone Cadillac Newcastle) [2015] EWCA Civ 745; [2015] C.T.L.C. 206, the Court of Appeal usefully emphasised that rescission is the primary remedy for misrepresentation (whether that misrepresentation be fraudulent, negligent, or innocent). The Court decided that the discretion to award damages in lieu of rescission under s. 2(2) of the Misrepresentation Act 1967 can only be exercised where the right to rescind still exists, which helpfully resolves an issue of some controversy. The Court of Appeal also held that rescission for misrepresentation is not barred just because the asset sold has dropped in value or been registered, and cast doubt on the notion that lapse of time can by itself bar rescission. The short but important decision in Salt v Stratstone Specialist Ltd. is welcome and full of interest.