Bank of Scotland v Brunswick Developments (1987) Ltd and Another
| Jurisdiction | England & Wales |
| Judge | LORD BROWNE-WILKINSON,LORD STEYN,LORD HOFFMANN,LORD CLYDE,LORD HUTTON |
| Judgment Date | 29 April 1999 |
| Judgment citation (vLex) | [1999] UKHL J0429-2 |
| Court | House of Lords |
| Docket Number | No 4 |
| Date | 29 April 1999 |
[1999] UKHL J0429-2
HOUSE OF LORDS
Lord Browne-Wilkinson
Lord Steyn
Lord Hoffmann
Lord Clyde
Lord Hutton
and Another
(SCOTLAND)
My Lords,
I have had the opportunity of reading in draft the speeches of my nobleand learned friends, Lord Hoffmann and Lord Clyde. For the reasons whichthey give I would allow the appeal and dismiss the petition.
My Lords,
I have had the advantage of reading in draft the speeches of my nobleand learned friends Lord Hoffmann and Lord Clyde. For the reasons theygive I would allow the appeal and dismiss the petition.
My Lords,
This petition for rectification must in my opinion fail on the simpleground that the remedy of rectification was, in the circumstances of thecase, inappropriate and misconceived.
The instrument sought to be rectified is a letter instructing the Bankof Scotland ("the bank") to transfer £1.5 million from the account of Brunswick Developments Ltd. ("Brunswick") to the account of A. Goldberg& Sons PLC. It was signed by Mr. Steven and Mrs. Leon ("thesignatories") who were named as authorised signatories in a mandate whichBrunswick had given to the bank. The bank acted upon the letter, transferred the money and debited Brunswick's account.
Brunswick subsequently went into liquidation and the liquidatorchallenged the bank's right to debit the account on the grounds that theletter, although signed by authorised signatories, was not in a form whichcomplied with the terms of the mandate. In response, the bank presented apetition to rectify the letter by making the necessary amendments whichwould enable it to comply.
There is no dispute that the signatories intended to order the bank tomake the transfer and that the bank understood the letter in that senseand acted upon it. If, therefore, they had actual authority to order thetransfer, the terms of the letter are irrelevant and no question ofrectification can arise. On the other hand, if the signatories did nothave actual authority, the bank can rely upon the letter only if it fellwithin their ostensible authority.
Ostensible authority depends upon a representation by Brunswick to thebank that the signatories had authority to order the transfer. In thepresent case, the mandate potentially created such ostensible authority. It was an agreement with the bank which included a representation that if (but only if) the bank received an instrument which was signed by thesignatories and otherwise complied with the terms of the mandate, the bankwould be obliged and entitled to make the transfer and debit Brunswick'saccount.
If the letter complied with the terms of the mandate, the bank wasentitled to debit the account and no question of rectification arises. Ifit did not, the notion that it can be made to comply by rectificationseems to me quite misconceived. The purpose of rectification is to amendan instrument to conform to the intention of the author or parties andenable it to take effect as if originally so expressed. Such a remedy isappropriate to instruments to which the law gives effect because theyrecord the intention of the author or parties. But this is not the casewhen a document is relied upon as a representation or as forming part of arepresentation. Either the document constituted such a representation atthe time it was acted upon or it did not. Rectification cannot be used byeither representor or representee to rewrite history and create arepresentation which was not made or erase one which was. One might justas well rectify the order for the charge of the Light Brigade.
The absurdity of the bank's position can be illustrated by supposingthat the signatories had intended to order a transfer of only £150,000 andhad delivered an instrument which in all respects complied with themandate but by mistake said £1,500,000. On the bank's argument, Brunswickcould bring proceedings to rectify the instrument to reflect the trueintentions of the authors and so retrospectively invalidate the bank'sright to act upon it. This would completely defeat the purpose of themandate. But the same must in my opinion be true of an attempt by the bankretrospectively to deem itself to have acted upon a representation whichwas not made.
I would therefore allow the appeal and dismiss the petition.
My Lords,
The respondents in this appeal, the Bank of Scotland, presented apetition to the Court of Session under section 8 of the Law Reform (Miscellaneous Provisions) Act 1985, for rectification of a letter ofinstruction dated 31 July 1989. The letter was written on notepaper headed "A. Goldberg & Sons PLC." and was signed by two signatories "on behalfof A Goldberg & Sons PLC." The letter contained an instruction to thebank to transfer the sum of £1,500,000 "from Brunswick DevelopmentsLimited account number 17217727 to A. Goldberg & Sons PLC. accountnumber 30468801." It continued: "These monies will form a loan repayableon demand from Brunswick Development Limited to A. Goldberg & SonsPLC. which will attract interest at one over base rate." The full name ofthe former company was Brunswick Developments (1987) Limited (hereafterreferred to as "Brunswick"), but no point is taken in regard to thaterror. The signatories to the letter were a Mr. Steven and a Mrs. Leon. Mr. Steven was the Finance Director of A. Goldberg & Sons PLC.("Goldberg") and a Director of Brunswick. Mrs. Leon was the companysecretary of both Goldberg and Brunswick.
The £1,500,000 had been invested in Brunswick, as to £1,000,000 byGoldberg and as to £500,000 by the Scottish Development Agency, for thepurpose of a proposed development by Brunswick. Initially the sum at thecredit of Brunswick's account was set off by the bank against the deficitwhich existed in the account which Goldberg held with the bank, whichreduced the interest to be paid by the bank on Brunswick's account and theoverdraft interest to be claimed on Goldberg's account. As part of thisarrangement Goldberg agreed to pay interest at the rate of one per centover base rate to Brunswick. But the bank thereafter indicated that thisarrangement required to be discontinued as being contrary to certainbanking rules in respect that Brunswick was not a wholly owned subsidiaryof Goldberg. The transfer of the sum and the creation of the loan was thendevised as a means of satisfying the bank's requirements as well aspreserving the satisfactory financial arrangements which had been madebetween the two companies. It was in an attempt to achieve this alterationof the position that Mr. Steven and Mrs. Leon executed the letter of 31July 1989. Unfortunately, not only was the letter headed with the name of Goldberg rather than Brunswick and the number of Brunswick's accountmis-stated, but, more critically, the phrase which stated on whose behalfthe letter was signed referred to Goldberg and not to Brunswick. The bank, however, transferred the money, debiting Brunwick's account and creditingGoldberg's account.
Goldberg went into liquidation in June 1990 and Brunswick went intoliquidation in February 1991. In August 1992 Brunswick's liquidator raisedan action against the bank for payment of £1,500,000. It is in...
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