Summary

It was not appropriate to rectify a Tomlin order to create a legal charge to secure a company's debts as there had not been a continuing common intention that the claimant bank was to have a separate charge in order to secure those debts.

Facts

The applicant bank (L) applied for rectification of a Tomlin order made in proceedings against the respondents.

L had advanced sums over £29 million to the first respondent company (C) for the development of three sites. The second and third respondents (X), who were members of C, held elements of the sites and provided personal guarantees up to £25 million. There was an underlying assumption that properties stood charged as security for C's debt but that was not the case. Two of the sites were developed but the third was not. L appointed Law of Property Act receivers to protect its interest and to collect rents, and issued proceedings. Following negotiations, a Tomlin order was entered into whereby judgment in the sum of £29 million was entered against C and the claims against X stayed. It was agreed that X would pay L a settlement sum totalling £500,000 and as security for those sums X were to execute legal charges against specified titles. Upon payment X would be released from their personal guarantees. The effect of that order left L with no security over the development land. L sought rectification whereby instead of having charges over X's properties it would have a new charge to secure C's debt.

L contended that there was a mistaken common assumption that the existing charge secured C's debt.

Held

In order for the Tomlin order to be rectified L had to show that there was a continuing common intention that L was to have a separate charge over the individual properties to secure C's debt. That was something that L did not have and did not ask for as the assumption was that it already had that. Therefore, there was no thought as to how that result would be achieved. That was not a mistake that could be characterised as giving rise to a common continuing intention. The intention at the time of the order was that L, on the basis of the erroneous assumption, had released X from their guarantees on the payment of £500,000. The inevitable result of releasing X was to release charges from L's control, Frederick E Rose (London) Ltd v William H Pim Junior & Co Ltd [1953] 2 Q.B. 450 appliedSwainland Builders Ltd v Freehold Properties Ltd [2002] EWCA Civ 560, [2002] 2 E.G.L.R. 71 considered. L had not recorded the intention incorrectly it had made a bad deal and it would not be appropriate to rectify the Tomlin order.

Application refused