Introduction
Correction is a legal fix that changes a written document to match the real goals of the parties. It applies when the document does not correctly show an earlier agreement due to a mistake. A main condition for correction is showing a lasting shared goal. This means proving both parties had the same goal, which the document did not include. Showing this shared goal, especially in claims of mutual error, involves significant factual difficulties. The case of FSHC Group Holdings Limited v GLAS Trust Corporation Limited [2019] EWCA Civ 1361 shows these difficulties clearly.
The Facts of FSHC Group Holdings
The case involved a detailed financial agreement about loan changes. FSHC Group Holdings Limited (FSHC) tried to fix a deed of release, arguing it wrongly removed protection over certain assets that should have stayed. FSHC claimed that both parties, including GLAS Trust Corporation Limited (GLAS), meant to keep this protection and that the deed’s mistake showed a mutual error.
The Requirement of Strong Evidence
The Court of Appeal highlighted the strict level of proof needed for correction based on mutual error. Evidence must be clear, factual, and certain. Unclear or partial claims about the parties' goals are not enough. The court said evidence must show, with high certainty, that the document does not match the real shared goal of the parties. This strict rule reflects the serious effect of changing a written agreement.
Objective versus Subjective Intention
The Court of Appeal stated that correction relies on the observable shared goal – what a fair observer would decide the parties agreed to, based on their actions and exchanges. While evidence of a party’s own view of the agreement may be considered, it is not final. The court looks for factual proof of agreement over private beliefs.
Difficulties in Showing a Mutual Error
FSHC showed the real issues in establishing mutual error. Parties often have conflicting memories, especially in detailed business agreements. Also, a lack of clear records showing the claimed shared goal weakens a correction claim. The Court of Appeal noted that later actions conflicting with the claimed goal add more problems. In FSHC, the court found the evidence not strong enough to show a mutual error, deciding that FSHC’s evidence focused on their own position, not a proven shared goal with GLAS.
The Role of Pre-Contractual Talks
The Court of Appeal explained how pre-contractual talks can support proof of shared goals. While such evidence is allowed, its worth depends on the situation. Direct pre-contractual records showing a specific agreement are strong. However, unclear or broken exchanges are less helpful. The court advised against depending too much on pre-contractual talks, especially when the final agreement differs from earlier versions. In FSHC, these talks did not properly support changing the final deed of release.
Conclusion
The FSHC ruling confirms the strict proof needed to establish mutual error for correction. Claimants must provide clear, factual, and certain evidence of a shared goal the document fails to show. Private views or partial pre-contractual talks are usually not enough. This case shows the need to carefully record agreements and ensure written terms match the parties’ real shared goals. The decision highlights the difficulties in seeking correction for mutual error and the need for strong evidence. The judgment shows the courts’ priority on keeping written agreements while allowing correction where proof is clear. The rules in FSHC give practical advice for business parties, stressing clear communication and exact drafting to avoid disputes over correction. Cases like FSHC help explain standards for contract interpretation and legal fixes. The decision strengthens the link between the formal written agreement and the parties’ proven goals, further detailing the legal conditions for correction.
