From: Robert Stevens <robert.stevens@law.ox.ac.uk>

Sent: Wednesday 13 November 2024 16:17

To: obligations@uwo.ca

Subject: RMT v Tyne and Wear Passenger Transport

Predictably, if unfortunately, the UKSC with a judgment given by Lord Leggatt and Lady Simler, with which the other members of the court agree, has affirmed the earlier understanding of Leggatt LJ (as he then was) of the doctrine of rectification, in National Union of Rail, Maritime and Transport Workers v Tyne and Wear Passenger Transport Executive.

https://www.supremecourt.uk/cases/uksc-2022-0180.html

A mistake arguably occurred in the recording of a collective bargaining agreement between employer and trade union. Under this agreement, the entitlement to a productivity bonus was altered by being incorporated into basic salary.  The terms of the collective agreement were then incorporated into contracts between employer and employee.

The problem that arose was whether the consolidation of the productivity bonus also increased the shift allowance payable, as a simple increase in basic salary would. A claim was successfully brought by employees against the employer that under the terms of their amended contracts they were entitled to the higher shift allowance.

The employer brought a claim against the union that the collective agreement as recorded did not reflect the common intentions of the employer and unions, that shift allowances would be unaltered by the increase in basic pay achieved by the consolidation, and sought rectification. This claim was dismissed by the UKSC on the basis that the correct party to any action for rectification should be the individual employees whose contracts the employer was seeking to thereby change, not the union.

Unfortunately, the court also embarked on a discussion of the principles applicable to rectification. We are told (quoting approvingly Snell's Equity)

The first and fundamental point is that the basic role of rectification is not to correct mistakes in transactions, but to correct mistakes in documents recording transactions. [26]

How this could be correct is, without more, completely mysterious. Documents are merely pieces of paper (or, today, pdfs or other electronic files). If the rights of the parties are X, but a piece of paper says they are not-X, why is a court or the law concerned with the inaccurate recording of the parties rights? The court should just cut to the chase and give effect to the parties rights, not the inaccurate statement of them in a document. Where then is the need for any doctrine of rectification if all that is being done is a change to a document? If the document itself has been lost or destroyed, presumably it would be thought that no need for rectification would then arise at all.

We are also told that

Although rectification alters documents and not the agreements or other transactions recorded in documents, its effect is to alter legal rights. It does so because the document must thereafter be interpreted in accordance with the reformed wording. [34]

But why are we giving effect to the document at all if it does not accord with the parties agreement? Why not just give effect to the agreement? The document is, again, just a piece of paper or an electronic file.

The step that is missing in the analysis is that we give effect to the terms as recorded in the document because that is what the parties have agreed. They have agreed that the terms in this document, and this document alone, contains their agreement and that any earlier agreement between them is replaced. (ie the doctrine of rectification can only be understood if you also understand the parol evidence rule).

Therefore, the doctrine of rectification does correct mistakes in transactions, but of one kind. It alters the transaction that this document, and this document alone, contains the terms of the parties rights and obligations. Where the parties have been mistaken in thinking that the document accurately reflected what had been agreed, that part of their agreement may be set aside because of their mistake.

The question then arises: what is given effect to when the agreement that the document embodies their contract is then set aside? Is it what the parties themselves subjectively intended? Or what the parties had objectively agreed, but failed to accurately record? The correct answer is the latter: which is what the House of Lords had said in Chartbrook v Persimmon. The Supreme Court now says it is the former, but glossed (why?) by a requirement that there must have been some outward expression of accord falling some way short of an actual agreement. ([34]).

The criticism of Chartbrook that is often made, and repeated here is that

it was never explained why the objective meaning of a formal written instrument intended to create legally binding obligations should be displaced in favour of the objective meaning of earlier less formal and less considered communications which were never intended to be binding if the objective meaning of those communications did not accord with the parties shared subjective intention. [31]

This is misconceived (it is actually a justifiable criticism of Hoffmann s dissenting decision in Britoil). Contracts are objectively made, they are not found in the minds of the parties. The doctrine of rectification is not a safety valve ([30]) whereby the court can sometimes give effect to the parties subjective intentions. If this were so, why not always just give effect to subjective intentions? I suppose one answer might be commercial certainty but just not too much of it.

There is no reason in principle why a document recording an unenforceable, but perfectly valid, agreement could not be rectified. The UKSC correctly hold that unenforceability of the collective bargaining agreement presented no bar to rectification if a legal issue arose from the agreement.

However, where an employee sues an employer for her unpaid shift allowance, could an employment tribunal rectify her contract of employment? No because under the statute that creates them, the orders an employment tribunal may grant are restricted and it lacks the jurisdiction to order rectification.

However, we are then told that this poses no barrier because an equitable magic spell dispenses with the need for any court order. Where the employee sues for the unpaid shift allowance the issue of rectification could be raised as a defence because equity can take as done that which ought to be done. Because an order ought to be made, the need to actually make one could therefore be dispensed with. Hey presto.

This is wholly unpersuasive, and is an illustration of the dangers of invoking equitable maxims. The reason that rectification has, hitherto, been required to be affected through an order of the court is the same reason why equitable rescission, specific performance, injunctions or any other equitable order needs to actually be made. The court is changing the legal position between the parties. In doing so it can take into account a range of countervailing reasons (have third party rights now intervened in a way to make the order unfair? has too too much time now elapsed?). Presumably where those countervailing reasons now apply, what ought to have been done at some moment in the past no longer does, and so no defence of ought to be rectified can be invoked. Effectively the employment tribunal can now order rectification without having the statutory power to do so.

The end result is to drive a coach and four through the basics of contract doctrine: that agreements are made by the words and actions of people in the world, words and actions that have objective meanings, and are not found in their subjective states of mind. Not only can the doctrine of rectification give effect to subjective intentions that have not been objectively agreed, the court should treat this as done even where rectification has not been ordered.

Rob