| From: | Robert Stevens <robert.stevens@law.ox.ac.uk> |
| To: | David McLauchlan <david.mclauchlan@vuw.ac.nz> |
| Lionel Smith, Prof. <lionel.smith@mcgill.ca> | |
| Harrington Matthew P. <matthew.p.harrington@umontreal.ca> | |
| CC: | obligations@uwo.ca |
| Date: | 05/03/2019 22:05:16 UTC |
| Subject: | [Spam?] Re: Parol evidence rule apply to shareholder resolutions? |
2. Campbell JA's question is the wrong one. The correct one is
Rob, in your white dog/black cat example, if the apparent contract for “white dog” were reduced to writing there would be an argument that “white dog” means “black cat” according to Lord Hoffmann’s version of the private dictionary principle in Chartbrook. So, one might ask, why should the position be different if the apparent contract remained oral? I surmise that your answer might be that the private dictionary principle only applies where the common understanding is reflected in communications “crossing the line”. As you know, I disagree that that should be a requirement. I appreciate that you would not necessarily enforce a contract for “white dog”, but there are many who would. I am reminded of the following statement by Campbell JA in the NSWCA case of Ryledar v Euphoric: “If two negotiating parties each had a particular intention about the agreement they would enter, and their intentions were identical, but that intention was disclosed by neither of them, and they later entered a document that did not accord with that intention, what would be the injustice or unconscientiousness in either of them enforcing the document according to its terms?”
David McLauchlan
Professor of Law, Victoria University of Wellington
Professorial Fellow, The University of Melbourne
Honorary Professor, The University of Queensland
From: Robert Stevens <robert.stevens@law.ox.ac.uk>
Sent: Wednesday, 6 March 2019 6:43 AM
To: Lionel Smith, Prof. <lionel.smith@mcgill.ca>; Harrington Matthew P. <matthew.p.harrington@umontreal.ca>
Cc: obligations@uwo.ca
Subject: Re: Parol evidence rule apply to shareholder resolutions?
I don't think so. So, say the objective offer and acceptance were an oral agreement that X sells and Y buys a black cat, but we have overwhelming evidence that what both parties subjectively intended was the sale of a white dog? So the personal diaries and correspondence of both show that that is what they subjectively intended, and each when cross examined says "yes that was what was in my head", is there a contract for the sale of a white dog? No, absent an offer and acceptance to that effect. We cannot 'rectify' the agreement they actually made to give effect to one they never did. The effect of their subjective common mistakes may be that we can invalidate the agreement they did make, but we cannot 'rectify' that to create a contract they never did.
2. "If rectification of a will is not possible at common law, how could we deal with the case of the will made at the point of a gun but which was formally correct?"
We can *invalidate* the objective action through appeals to its non-conformity with our subjective intentions (or because our subjective intentions are vitiated for duress, undue influence or misrepresentation). That is not a sufficient reason for giving effect to those subjective intentions. (see Re Morris)
So to quote from Guardhouse v Blackburn
"if the Court cannot now, as it could before the statute, give effect to any provision omitted by mistake from the will, does it still retain the power to strike out any portion of the contents of a duly executed paper on the ground that, although such portion formed part of the paper when executed by the testator, it was inserted or retained by mistake or inadvertence?"
Yes.
So it is possible to strike down a will obtained at the point of a gun, but that doesn't entail giving effect to the (subjective) intentions of the testator (whatever they may be). It means we fall back to the previous will (or to the intestate position). (see also the Re Reynette-James and Re Phelan distinction between striking down apparent dispositions made, and adding in dispositions never made).
The fact that the will has been lost or destroyed doesn't invalidate what has been done (Sugden). The will isn't the piece of paper, but there can only be a valid will if it is put into a piece of paper of the requisite form (even if subsequently lost).
So the same rule is applying to wills as it does for contracts in the sense that we can strike down an objectively manifested act because it doesn't conform to our subjective intentions (or because those intentions were vitiated by duress etc) but we cannot thereby give effect to the subjective intentions per se. The difference is that informal (objective) agreements are contracts and enforceable, whereas there is no such thing as an informal will.
3. This means that in cases of, say, cross wills (as in Marley v Rawlings) the mistake may invalidate the wills, but wouldn't enable us to give effect to the wills that were subjectively intended but never objectively made. Which is why legislation was required in the first place, and why the limited scope of that legislation cannot be just ignored.
4. As it is for wills and contracts, so it is for trusts. Their creation must be a matter of the intention as objectively manifested, but their invalidation may be determined by the non-conformity of that objective state with some defect in the subjective intention of the person creating it. See the HCofA decision in Byrnes v Kendel
‘“As with contracts, subjective intention is only relevant in relation to trusts when the transaction is open to some challenge or some application for modification’”.
5. We might be able to invalidate the resolution on the basis that all those making it had been subject to duress or fraud or some such. But the original question went beyond that and asked whether we could then give effect to a resolution never made (but proven by extrinsic evidence to have been intended). No.
6. There are many arguments that the Brexit referendum was vitiated by various misrepresentations made to the gullible public ("£350 million a week for our NHS"). If we accepted them what we'd do is fall back to the status quo, which would be fine by me. Sadly we have perfectly valid UK legislation giving effect to it, and for good or ill you cannot invalidate legislation on the basis of the profound mistake being made by the MPs who voted for it. There is no doctrine of rectification applicable to legislation, despite claims to the contrary that are sometimes made.
7. In case it is thought I am an English nationalist, I am quite happy to argue that the common law tradition has got some things wrong and the civil law right. See, for a striking example, the modern law of "unjust enrichment" (sic) in England and Germany.
From: Lionel Smith, Prof. <lionel.smith@mcgill.ca>
Sent: 05 March 2019 14:43:12
To: Robert Stevens; Harrington Matthew P.
Cc: obligations@uwo.ca
Subject: Re: Parol evidence rule apply to shareholder resolutions?
Personally, I find the idea that one of the Europe’s legal traditions is ‘right’ and the other is ‘wrong’ to be a little far-fetched, certainly at this level of doctrinal detail. Particularly is this so when, despite differences in terminology, the outcomes seem so similar. The ‘headline’ approaches (eg subjective vs objective) often hide a great deal of detail that complicates the story.
Surely rectification is confined to documents because that is what we rectify. If we just disagreed as to what had been orally agreed, we would have a disagreement but there would be no separate analytical category. It would be like any case in which people disagreed about facts. (This I think is the sense in which there is no ‘doctrine of rectification’ in Quebec civil law: it is just an argument about the agreement: Jean Coutu Group (PJC) Inc. v. Canada (Attorney General), [2016] 2 SCR 670, 2016 SCC 55, http://canlii.ca/t/gvzzg , which refers to a contemporaneous decision restating the common law in Canada.)
In any event I think Robert’s discussion of objective vs subjective, while it may be perfectly relevant in the context of a contractual, is less relevant when we are not dealing with agreements. A will does not arise by an agreement, nor typically does a trust. This was precisely the holding in Re Butlin’s Settelement [1976] Ch 251 where only the settlor’s intention was relevant to rectification even though the trustees were parties to the deed. A fortiori in the case of a deed with only one party.
If rectification of a will is not possible at common law, how could we deal with the case of the will made at the point of a gun but which was formally correct? In common law Canada we allow rectification without a statute and..we got that law from England and Wales. See eg (all after the imposition of requirements of form and before the enactment of the statutory jurisdiction in the Administration of Justice Act 1982):
Guardhouse v Blackburn (1866) LR 1 P&D 109, 114-5 (a leading case rejecting, it seems to me, precisely the argument made by Robert)
Sugden v Lord St Leonards (1876) 1 PD 154, 224-31, 238-2 (CA, 5 judges, unanimous) (parol evidence admitted to grant probate to a lost will)
Re Morris [1971] P 62
Re Reynette-James [1976] 1 WLR 161 held that while a will could be rectified by striking words out (and this was done), it was not possible to rectify by adding words. It was this latter holding, correct or not (arguably inconsistent with Sugden?) that appears to have generated the impetus for statutory reform.
Re Phelan [1972] Fam 33
So if we come back to Matthew’s shareholder resolution: does it take effect by an agreement, which would need to be objectively construed and would surely look to the text of any document on which people voted? Or can we rectify if those who voted in favour were subjectively mistaken about the legal effect of what they were doing?
Hence the next topic: can the decision in the Brexit referendum be rectified?
From: Robert Stevens <robert.stevens@law.ox.ac.uk>
Date: Tuesday, March 5, 2019 at 08:02
To: Lionel Smith <lionel.smith@mcgill.ca>, "Harrington Matthew P." <matthew.p.harrington@umontreal.ca>
Cc: ODG <obligations@uwo.ca>
Subject: Re: Parol evidence rule apply to shareholder resolutions?
It depends what you think "rectification" allows you to do.
So, at common law q contract is found in an objectively manifested offer and acceptance between two parties. it is not found in the subjective intentions of two persons even where they coincide.
So, if we 'rectify' a written document that does not (usually because of a slip) reflect what the parties had actually agreed, what do we then give effect to?
My view is that rectification operates as a kind of partial rescission. We tear up the agreement that the document alone represents their entire agreement, and give effect to the agreement (the objective offer and acceptance) that there would be absent that. But we're still giving effect to an objectively manifested offer and acceptance, not to the parties' subjective intentions, as only the former is an agreement. If rectification were about giving effect to subjective intentions as some seem to think, why is it a doctine confined to documents? If we can give effect tot the parties' subjective intentions, why generally have objective offer and acceptance as a necessary condition?
Similarly, rectification of a trust deed is possible. We give effect to the trust that there would be absent the reduction to a single document.
Rectification of wills, at common law, is not however possible. There is no informal will to give effect to, and the testator's subjective intentions are not a will. Legislation can alter this because it can determine what a will "is." Reectification of court judgments should be similarly narrow.
The position in civil law may (indeed I suspect is) different because of a different conception of what it is we are giving effect to. If you think, following the will theory, that contracts bind because that is what the parties subjectively will, then there is no need for a doctrine of rectification. We just find out what the parties subjectively intend and give effect to that. So you don't need it.
I think one legal tradition is getting this right, the other wrong.
From: Lionel Smith, Prof. <lionel.smith@mcgill.ca>
Sent: 05 March 2019 12:43:22
To: Harrington Matthew P.
Cc: obligations@uwo.ca
Subject: Re: Parol evidence rule apply to shareholder resolutions?
Although the civil law does not know rectification by that name, it has a category of juridical act, which can be defined as a “manifestation of intention on the part of one or more persons with a view to producing legal effect.” Every contract is a juridical act, but so is a will, a contractual offer, or the acceptance of a contractual offer.
Although the common law does not (yet) have the category of juridical act, it actually allows, in my view, rectification of any juridical act, since it allows rectification of a trust deed, potentially of a will (though this is complicated by formalities issues and some statutory intervention), and of the judgment of a court.
So on this view, the answer is that a shareholder resolution should be subject to rectification. Note that on the traditional view this means that the text of a document recording the resolution is subject to rectification. The exercise does not change what was done; it changes the record to comply with what was actually done.
As to the parol evidence rule, I am no expert but I think that even where the rule is strictly applied, an application for rectification must necessarily stand as an exception or it could never get off the ground. So too with wills, to take ip Robert Stevens’ point: if the allegation is that my formally correct will was made while a gun was pointed at me, that evidence can be evaluated and the will impugned if the evidence is accepted. In that context this comes out as the traditional distinction between the court ‘sitting as a court of probate’, ie deciding whether a document is a will (where the gun-pointing claim could be assessed), and ‘sitting as a court of construction’ which is logically afterwards and involves construing the document that has been proved to be a will (at which stage parol evidence is not admissible). Even if it is only implicitly done, I think we need to draw the same distinction for contracts and other juridical acts recorded in writing: you can’t construe the writing until you know what it says, and a claim for rectification goes to that quesiton.
Lionel
On Mar 5, 2019, at 07:01, Harrington Matthew P. <matthew.p.harrington@umontreal.ca> wrote:
That's exactly what I wondered aloud in class. That is I suppose why we were unsure.
On Mar 5, 2019 02:04, "Tettenborn A.M." <a.m.tettenborn@swansea.ac.uk> wrote:
Is a shareholder resolution a contract?
Andrew
On 04/03/2019 23:58, Gerard Sadlier wrote:
Dear MatWithout wishing to be pedantic, do we think that the parole evidencerule could in reality be relied on to keep an oral agreement out ifthis was a traditional contract? I'm far from sure one could.Kind regardsGerOn 3/4/19, Harrington Matthew P. <matthew.p.harrington@umontreal.ca> wrote:Dear Colleagues:A student posed an interesting question today:Assume shareholders passed a resolution, (to reallocate shares or changeshare classes). Assume that the board then did something else on thegrounds that this other thing was discussed but not included in the actualresolution. I.e., this is what we really meant...Can the shareholders rely on the parol evidence rule to keep out evidence ofthese other discussions and enforce the resolution as written?In short, would the parol evidence rule apply to a shareholder resolution ordoes it apply only to traditional contracts?I want to say yes but don’t have any case for saying so.Am I right?Any thoughts greatly appreciated.ThanksMatt---------------------------------Matthew P HarringtonProfesseurFaculté de droitUniversité de Montréalwww.commonlaw.umontreal.ca----------------------------------
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Andrew Tettenborn
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