Lloyds TSB Bank Plc v Crowborough Properties Ltd & Ors [2013] EWCA Civ 107

A3/2012/2069 and A3/2012/2838[2013] EWCA Civ 107
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
HIS HONOUR JUDGE PURLE QC
Court 70
Venue The Royal Courts of JusticeDate 12 th February 2013
The Strand
London WC2A 2LL
Before
LORD JUSTICE MUMMERYLORD JUSTICE RIMERLORD JUSTICE LEWISON
Between
LLOYDS TSB BANK PLCClaimantCROWBOROUGH PROPERTIES LIMITEDDefendantSANJIV KAUSHALDefendantDEEPAK KAUSHALDefendantMARK STUPPLESDefendantROBERT BALDWINDefendant
MR A TRACE QC, MR G RICHARDSON and MR L SCHER (instructed by Eversheds LLP) appeared for Claimant.MS P REED QC (instructed by IBB Solicitors) appeared for First to the Third Defendants.
JUDGMENTTuesday, 12 February 2013(3.10 pm)

LORD JUSTICE MUMMERY:

Thank

[1]you very much for your arguments. We don't require any further argument at this stage from either side.[2]I will ask Lord Justice Lewison to give the first judgment.

APPROVED JUDGMENT

LORD JUSTICE LEWISON: The issue raised by this appeal is whether Lloyds TSB Bank Plc ("the Bank") is entitled to rectify the terms of a compromise embodied in the schedule to a Tomlin order. The order compromised proceedings in which the Bank sought to enforce charges over land in Slough. The land in question consisted of three areas. Two areas, Buckingham Court and Brisbane Court, had been developed, and the third, Buckingham Gateway, remains to be developed. The developer was Crowborough Properties Limited, ("Crowborough") a company owned by Mr and Mrs Kaushal.

[4]Crowborough had borrowed some £29 million from the Bank. Crowborough and Mr and Mrs Kaushal had assembled the overall site piecemeal. It consisted of 15 separate titles, some of which were held by Crowborough itself, and some of which were registered in the names of Mr and Mrs Kaushal. Mr and Mrs Kaushal had given guarantees of Crowborough's borrowings with a limit of £25 million. Crowborough's debt was secured by charges in favour of the Bank over the land that it owned, and Mr and Mrs Kaushal's guarantees were secured by charges in favour of the Bank over the land that they owned. Crucially, however, the charges over Mr and Mrs Kaushal's land secured only their own liability as sureties. They did not secure Crowborough's obligations as principal debtor.[5]Crowborough fell into financial difficulty and the Bank appointed receivers and sought to enforce all the charges. Mr and Mrs Kaushal challenged the validity of the appointment. It was that challenge that led to the original action. The trial of the action was due to begin before Mr Justice Roth on 17 May 2011. Both sides instructed counsel: Mr Richard Walford for the Bank and Mr Martin Hutchings, QC, for Crowborough and Mr and Mrs Kaushal. On the day before the trial was due to begin Mr Hutchings contacted Mr Walford to see whether there was a possibility of settlement. Over the next few days, while the trial was in progress, there were a number of proposals and counterproposals which culminated in the making of the Tomlin order on 25 May 2011. I will need to examine them further in due course.[6]One of the terms of the schedule to the Tomlin order was that in return for the payment of £500,000 Mr and Mrs Kaushal would be released from their guarantees. Shortly after the order was made the Bank realised that the release of the guarantees would entail the discharge of the charges over the land registered in the names of the Kaushals themselves because there would no longer be any debt due from them or other liability on their part in respect of Crowborough's borrowings. That is the alleged mistake that the Bank sought to correct by rectifying the Tomlin order.[7]The claim for rectification came before His Honour Judge Purle, QC, sitting as a judge of the Chancery Division. In summary he held that:[8](1) In drafting the Tomlin order the Bank and its advisers had assumed that the charge over the land held by the Kaushals themselves would remain in place.[9](2) That assumption was shared by Mr Hutchings.[10](3) The objectively ascertainable intention was that the parties intended the Bank to retain such rights as it already had.[11](4) There was a mistaken common assumption that the existing charges secured Crowborough's indebtedness, not merely Mr and Mrs Kaushal's liability as sureties.[12](5) That what was needed to give effect to that common assumption was the creation of a new charge over Mr and Mrs Kaushal's land to secure Crowborough's indebtedness.[13](6) Although there was a mistake in drafting, since nobody turned their minds to this particular problem, the Bank could not establish that there was a continuing common intention that it should acquire a new charge over Mr and Mrs's Kaushal's land.[14](7) Consequently the remedy of rectification was not available.[15]The Bank appeals.[16]It is I think necessary to see precisely how the negotiations progressed. The solicitors acting for the Bank were Eversheds. Those acting for Crowborough and Mr and Mrs Kaushal were IBB. The first offer came from IBB in the afternoon of 16 May. What was proposed was an agreement by the Bank to sell the site, meaning the land over which the Bank has legal charges, to Mr Kaushal at open market value. Machinery for assessing that value was suggested and it was also proposed that pending completion the Bank's charges would remain in place but not be enforced. That was not acceptable to the Bank.[17]Paragraph 11 of the Particulars of Claim in the current action pleaded that as a result of this offer on the part of the Kaushals it was "a key element of the proposed settlement deal" that the Kaushals accepted the Bank's right to enforce its security over all the secured properties, including those owned by the Kaushals themselves. This was put to Mr Hutchings in his oral evidence and he confirmed that this was correct.[18]The trial began on the following day. In the afternoon of 20 May Mr Walford sent a different set of proposals to Mr Hutchings. There was to be a money judgment against all defendants for the full amount of the Bank's claim limited to the guaranteed amounts in the case of Mrs and Mrs Kaushal. Enforcement of the judgment would be stayed pending:[19]"Receiver to seek to sell together or separately on open market terms all three sites on basis of current planning consent or a revised or fresh planning consent, or with none, as they see fit".[20]Mr and Mrs Kaushal were to grant security over additional assets and were to have the right to redeem securities over two real property assets already disclosed in payment of a settlement sum which was defined in the proposal. The two real property assets in question were the Kaushals' matrimonial home and 122-124 High Street, Slough.[21]It was then proposed that if the settlement sum were paid, and they comply with the balance of their obligations under the agreement, Mr and Mrs Kaushal would "be released from their personal guarantees save to the value of other assets charged to the Bank".[22]It is plain that as a matter of interpretation of this proposal the Bank was to be entitled to look to the securities over all the charged properties, including those registered in the names of the Kaushals themselves, even after the settlement sum had been paid. It is therefore plain that the words in parenthesis, ("save to the value of other assets charged to the Bank"), included the properties which the Kaushals had themselves charged to secure their liabilities as sureties.[23]Thus under the form of words proposed the properties charged to the Bank and registered in the Kaushals' names would have remained available to the Bank as part of its recovery.[24]That offer produced what was described as a best and final offer from Mr and Mrs Kaushal, which Mr Hutchings' pupil sent to Mr Walford later that evening. Under the heading "D's worst case scenario", it envisaged that the Bank would be able to realise the value of the land over which it had charges; that is to say all the properties including those registered in the names of Mr and Mrs Kaushal. It pointed out that the Kaushals would have the opportunity to buy "the site" from the receivers when it was eventually put up for sale, and that too can only mean the whole of the land charged to the Bank.[25]The heads of terms proposed by way of settlement included first a declaration that the receivers had been validly appointed and, second, judgment against all defendants in favour of the claimant for full amounts up to the guarantee limits in the case of the Second and Third Defendants, that is to say Mr and Mrs Kaushal.[26]The proposals went on to outline the proposed terms for a Tomlin order. These included:[27]"4.2. Defendants to have the right to buy the site, being the land comprising Buckingham Court, Brisbane Court and Buckingham Gate over which the Bank has legal charges at its open market value ... If the defendants are unable to complete following the determination of the open market value the receivers will be entitled to sell the ransom strip in conjunction with the site ...[28]"4.3. Second and Third defendants to grant second or if possible first ranking security over all assets disclosed in affidavit of means ...[29]"4.5. If the settlement sum is paid and they comply with the balance of their obligations under this agreement the Second and Third Defendants will be released from their personal guarantees save to the value of other assets charged to the Bank."[30]This version of paragraph 4.5 was put forward on behalf of the Kaushals themselves. It is in the same form as the proposals that Mr Walford had put forward earlier in the day. It shows to my mind that objectively the parties had a common intention that the properties registered in the Kaushals' name would remain available to the Bank as part of its recovery.[31]However this offer too was unacceptable to the Bank. On the following day, 21 May, Eversheds sent another set of proposals. What had been paragraph 4 of the previous proposals now became paragraph 3. Paragraph 3.1 envisaged the Kaushals being entitled to match the price offered by a purchaser "for all or for part or parts of Buckingham Court, Brisbane Court and Buckingham Gateway", in which event they would be entitled to buy.[32]What had been paragraph 4.3 now became paragraph 3.2. What had been paragraph 4.5 now became paragraph 3.4 to which one crucial change had been made. It now read:
"If the settlement sum is paid and they comply with the balance of their obligations under this agreement, the Second and Third Defendants will be released from their personal guarantees save to the value of other assets charged to the Bank under paragraph 3.2 above." (Emphasis added)
[33]The original drafting, as I have said, would have kept the Kaushals' liability alive as regards all the properties charged to the Bank. The effect of the additional words was that they would only be liable to the extent of the newly disclosed assets, which were relatively insubstantial. The judge was satisfied that the introduction of the additional words was a drafting error and that their effect was not intended by the Bank.[34]He also found that that was not the Bank's actual intention and that Mr Hutchings did not understand that to have been the Bank's actual intention. However, he also found that the error was unperceived at the time either by the Bank or by the Kaushals' legal team.[35]Mr Walford accepted in the course of his oral evidence that the genesis of the mistake was that the Bank's legal team had overlooked the fact that the charges over the properties registered in the names of the Kaushals' personally secured only their liability as sureties and did not secure Crowborough's primary liabilities. He had assumed that those charges did secure Crowborough's indebtedness and if that assumption had been correct he agreed that the drafting would have been correct.[36]This package too was unacceptable to the Kaushals. The problem was that they took the Bank's proposals to envisage them to hand over to the Bank a ransom strip and then to buy the charged property at its open market value enhanced by the value of the ransom strip.[37]Mr Olins of IBB emailed Eversheds on 22 May to make this point. He insisted that any settlement must be on the basis that his clients had "a proper opportunity of buying back the land over which the Bank has legal charges at its open market value".[38]Eversheds replied later that day confirming what they had understood the Kaushals' position to be. But on 23 May Mr Olins set out his clients' position in another email to Eversheds in which he said: "My clients' position has been misunderstood. While they are willing to give the Bank a charge over the ransom strip, this is only intended to be security for my clients' obligation to buy back the land over which the Bank presently has legal charges at current open value." (Original emphasis)[39]Thus Mr Olins did not differentiate between land registered in the name of Crowborough and land registered in the names of the Kaushals. Negotiations resumed after court on 23 May. They were now being conducted between counsel. The offer made by the Kaushals included:[40](1) Judgment for the Bank against Crowborough for the full sum claimed.[41](2) A payment by the Kaushals of GBP 350,000 in full and final settlement of all claims against them, including claims under the personal guarantee, and[42](3) An offer to buy Buckingham Gateway via a special purpose vehicle for GBP 1.25 million.[43]Buckingham Gateway included the land held by the Kaushals personally. Accordingly if the charges over the land registered in the names of the Kaushals were to be released the offer to buy Buckingham Gateway would have been unworkable.[44]Thus in his oral evidence Mr Hutchings accepted that it was integral to this offer that the receivers appointed by the Bank would have the right to sell all the properties over which they had been appointed, including those owned by the Kaushals personally, in satisfaction of Crowborough's judgment debt.[45]He also accepted that the offer to buy Buckingham Gate was necessarily predicated on the basis that acceptance of the principal offer, that is to pay £350,000 in settlement of the guarantee liability, would not remove the Bank's right to enforce the security over the property registered in the Kaushals' names.[46]Mr Walford and Mr Hutchings met, together with Mr Olins on the afternoon of 24 May. Most of the outstanding points were agreed at that meeting. Mr Hutchings agreed in his oral evidence that at no point in the meeting was the key element of the proposed settlement, that is that the Bank would have the right to sell all the charged properties, queried, challenged or discussed. Mr Walford's evidence was to similar effect. That is, at no point in the meeting "were the fundamentals of the agreement that the Bank would be in a position to realise the value in all of the charged properties changed or discussed".[47]In his oral evidence he said: "Of course, it was this discussion that gave rise to -- not gave rise, but at the end of that discussion, I think, Mr Hutchings' evidence was that he had a strong understanding of what the outcome was meant to be and that coincided with the understanding of the Bank's lawyers and representatives of what the outcome was meant to be and what we were all trying to achieve.[48]"Q: Although it was not discussed in detail at that meeting.[49]"A: No, because as we have, you and I have already discussed at some length here, the foundations of the agreement never changed."[50]Following the meeting Mr Walford drafted a consent order to embody the agreed settlement. The order began with a declaration that the appointment of the receivers over all the charged properties was valid and had at all times been effective. It then entered judgment against Crowborough for the sum of £29 million-odd with indemnity costs. The claims against the Kaushals were stayed on the terms of the schedule. Those terms included:[51](1) Payment by the Kaushals of £500,000, the settlement sum, in two instalments.[52](2) The provision by the Kaushals of security over their matrimonial home and another property, or at the Bank's election, the provision by one of their companies of alternative security.[53](3) The critical paragraph as follows:[54]"Upon payment of the settlement sum the Bank will release Mr and Mrs Kaushal from their personal guarantees ... of the indebtedness of Crowborough Properties Limited and will so long as Mr and Mrs Kaushal have to the reasonable satisfaction of the Bank fully and properly complied with their obligations under clauses 2 and 3 above, release their personal guarantee dated 7 February 2006, by no later than 25 May 2012."[55]The schedule also contained an acknowledgment that with certain specified exceptions neither party had entered into the agreement in reliance on any statement or representation, written or oral, made by the other.[56]In his oral evidence Mr Walford explained that the declaration that the appointment of the receivers was valid had two purposes:[57]"The first one was that Mr Kaushal's proceedings against the Bank sought to say that the appointments were not valid and therefore we did need that declaration ... in order to dispose of the proceedings. But it was also a necessary component of the Bank's proceedings against Mr Kaushal and obviously Mrs Kaushal and Crowborough that it should have good legal charges, if I can put it that way, over the properties and be able to sell them."[58]Both counsel attended before Mr Justice Roth on the following day and the order was made.[59]It was not until a routine security review by the Bank at the end of August that the Bank appreciated that the effect of releasing the Kaushals from their personal guarantees meant that the charges over the land registered in their names were no longer available as security for repayment of Crowborough's indebtedness.[60]Mr Walford contacted Mr Hutchings at the beginning of September and sent him some proposed amendments to the schedule to the order. These amendments made it clear that notwithstanding the release of the Kaushals' personal guarantees the properties registered in their names could be sold by the Bank and the proceeds of sale applied in reduction of Crowborough's indebtedness.[61]Mr Hutchings' evidence about this was as follows. Mr Walford had said there was a mistake in the schedule to the order. The effect of releasing the Kaushals was that they were released in entirety in relation to their personal properties as well as the security that they were giving under paragraph 2 of the schedule. Mr Hutchings was taken by surprise and asked for time to think about it.[62]He then retrieved the papers and discussed the matter with his pupil who had been with him throughout the negotiations and had typed some of the drafts. They both agreed that what Mr Walford had said was correct. Mr Hutchings called Mr Walford probably on 12 September. His evidence about this call was:
"In that conversation I told him that in my view there was a mistake in relation to the order ... I agreed that his version, his amendments, proposed amendments to the order, properly reflected what the parties had agreed at the settlement in May."
[63]I emphasise the words "had agreed". Mr Walford recorded Mr Hutchings' agreement in a note of his conversation with Mr Hutchings and an email that he sent to Eversheds on that day. In his note Mr Walford recorded:
"Martin said they both agreed there had been a mistake. It was their strong understanding that the charged properties were intended to form part of the Bank's recovery in settlement of the action. Martin said that the wording we had proposed as a revision of the settlement agreement answers the point."
[64]Mr Hutchings added that he had not yet spoken to Mr Olins but he would do so. Mr Walford sent Mr Hutchings a copy of his note and asked him to confirm it was accurate. Mr Hutchings telephoned Mr Walford on 28 September. He said he had spoken to Mr Olins and the note could now be used in open correspondence but he said that he was not in a position to concede that the Bank had the right to succeed in a rectification claim.[65]In his oral evidence Mr Hutchings said the reference in the note to "a strong understanding" accurately recorded that he fully agreed with Mr Walford. He reiterated that what he had done was to explain to Mr Walford:
"My understanding of the agreement that we had reached"
. Again, I emphasise the words “had reached”. I have summarised the evidence and the judge's findings. He did not rehearse the evidence in detail but made broad findings. The key passages in his judgment were these. "[6] The Bank was of course concerned to ensure so far as it could that its security was effective and that the receivers could proceed to the collection of rents and ultimate sale of the properties secured to them." "[11] However, the underlying theme of the negotiations was that the charges were valid and that the Bank could through the receivers effect a sale in fulfilment of the various proposed terms."[66]Having considered the wording put forward by way of rectification he then said:
"[52] What this amounts to, however worded, is that the Bank instead of having a charge over the individuals' properties to secure their indebtedness, which indirectly was the company's indebtedness, were to have a new charge over the same properties to secure the company's indebtedness notwithstanding the discharge of the personal guarantees." "[53] The Bank did not already have a charge over those properties to secure the company's indebtedness. It did however assume in the drafting of the Tomlin order that there already was such a charge which would remain in place."
[67]"[54] This assumption was shared by, in my judgment, Mr Hutchings, who was also a party to the drafting, whatever the actual intentions of Mr Kaushal or of Mrs Kaushal, who played no part in the negotiations at all were. The objectively ascertainable intention must be that the parties intended the Bank to retain such rights as it had."[68]"[55] But retaining such rights as it had would not be enough because the rights that it had were over the properties to secure the indebtedness of the individuals. As I have said what they needed was a charge, in truth a new charge, to secure separately the indebtedness of the company over the individuals' properties."[69]"[56] As in fact the flaw in the drafting was not perceived that is not an issue to which anyone ever turned their mind."[70]It is clear to my mind that when the judge refers to "the issue" in paragraph 56 what he is referring to is what he perceived as the need for a new charge.[71]The question that he posed for himself in paragraph 59 was this:
"What I have to consider is whether or not there ever was a sufficiently clear intention to grant that further charge which would be necessary for the receiverships to continue."
[72]He returned to this point, that what he was looking for was evidence of an intention to grant a new charge, time and again throughout his judgment. In addition to the paragraphs I have read, the judge makes the same point in paragraphs 69, 75, 81 and 83.

The judge concluded thus:

"[74] In this case Mr Trace, QC, says that as it was always intended that the Bank should have the ability to sell and to secure the continuation of the receiverships over the properties, the rest he says is mechanics and I should rectify the agreement in the way he says." "[75] This point has caused me great anxiety. As I have said, as I see this case what must be shown is a common intention that the Bank was to have a separate charge over the individuals' properties to secure the company's debt."
[74]He then said that this was a question of estoppel rather than rectification and, in the event, therefore, he refused to rectify the schedule to the Tomlin order.[75]The law is conveniently set out in the decision of this court in Swainland Builders Limited v Freehold Properties Limited [2002] 2 EGLR 71. Swainland Builders Ltd was the freehold owner of a block of 39 flats. It had granted 99-year leases at ground rents of all the flats except numbers 11 and 18. It had intended to sell the block subject to the retention of flats 11 and 18 which it initially proposed to let on shorthold tenancies but with a view to granting long leases at premiums in the future.[76]In October 1998 Freehold Properties Ltd agreed to buy the block for £60,000. It correctly understood the aggregate ground rents of £4,875 on the assumption that all 39 flats were let on the same long leasehold terms. By September 1999 the vendor's solicitor had confirmed by letter to the purchaser's solicitor that the vendor was not intending to sell flats 11 and 18 and in the interim the vendor was to be treated as any other tenant of the block.[77]Long leases of the two flats were never granted and the transfer of the freehold by the vendor failed to reserve any rights to the two flats for the benefit of the vendor. On becoming aware of that omission the vendor issued proceedings claiming that there had been a mistake which was common to the parties and contrary to their common intention.[78]At trial Neuberger J concluded that the intention of the parties seemed quite clear from the evidence. He ordered rectification of the transfer so as to provide for the grant to the vendor of leases in respect of the two flats.[79]Peter Gibson LJ set out what needed to be proved in order to found a claim to rectify an instrument. In paragraph 33 he said:
"The party seeking rectification most show that: (1) the parties had a common continuing intention whether or not amounting to an agreement in respect of a particular matter in the agreement to be rectified; (2) there was an outward expression of accord; (3) the intention continued at the time of the execution of the instrument sought to be rectified; (4) by mistake the instrument did not reflect that common intention."
[80]This is now a succinct and authoritative statement of the essentials of the law approved by the House of Lords in Chartbrook Ltd v Persimmon Homes Ltd, [2009] UKHL 38; [2009] AC 1101.[81]Peter Gibson LJ continued by making certain additional points which he derived from the authorities, of which points two and three are relevant to our case. They are as follows (omitting references to authority):
"(2) While it must be shown what was the common intention, the exact form of words in which the common intention is to be expressed is immaterial if in substance and in detail the common intention can be ascertained. "(3) The fact that a party intends a particular form of words in the mistaken belief that it is achieving its intention does not prevent the court from giving effect to the true common intention."
[83]He amplified the second and third points by reference to the facts in the case in a way that I find helpful. The first related to a pleading point taken by the buyer. The argument was that the seller had put forward two inconsistent ways of giving effect to the alleged mistake. Peter Gibson LJ disposed of that argument saying:
"I am unable to accept this submission. In the present case the claimant does not plead inconsistent common intentions. It has pleaded inconsistent ways in which the pleaded common intention can be given effect and that I think was true even of the original unamended pleading."
[84]The buyer then argued that it had not been agreed that the buyer would grant two leases back to the seller. Peter Gibson LJ dealt with that argument thus:
"Mr West further takes the point that there was no common intention as to the means by which the intention found by the judge to be the common intention should be given effect. He points in particular to the fact that it was never considered or agreed that the defendant should grant a lease of flats 11 and 18 back to the defendant. Mr Wayne Clarke for the claimant concedes, as he must, that there was never any common intention that the transfer should contain the specific provision ordered by the judge to be included in the transfer. But Mr Clarke submits that that does not prevent rectification in a manner appropriate to give effect to the common intention. I agree."
[85]Ms Reed, QC, for the Kaushals has referred us to the decision of Walton J in Harlow Development Corporation v Kingsgate (Clothing Productions) Ltd (1973) 226 EG 1960.[86]That was a case in which the parties to a lease were in discussion for the terms upon which the landlord would carry out substantial improvement works on the demised property in turn for an increase in rent. The parties had forgotten than the tenant had an option to acquire a long lease at a fixed price, the effect of which would be to remove the landlord's entitlement to future rent.[87]The landlord sought to rectify but the claim failed because according to the judge the parties had no intention as regards the option. He also pointed out that there would have been several possibilities if the question had been drawn to the parties' attention at the time of the contract. I do not consider that that case bears on ours because in our case the judge found that there was an objectively ascertainable intention. The objectively ascertainable intention of the parties was that the Bank would retain such rights as it had.[88]So it is necessary to ask: how does one characterise those rights? The judge characterised them in formal legalistic terms and in a particular way on the basis that there was only one legal means of achieving the solution that both parties thought was necessary. He held that the Bank's right was a right to have a charge over the Kaushals' land to secure only their liabilities as sureties. Thus what they needed was fresh charges over the Kaushals' land in order to secure Crowborough's debts directly.[89]But in my judgment it is equally valid to characterise the Bank's existing right in commercial if to some extent legally inaccurate terms. The Bank's right was to sell all the charged properties and apply the proceeds of sale towards discharge of Crowborough's indebtedness. That on the evidence, and indeed on the judge's findings, was plainly the right that both parties intended the Bank to retain.[90]The grant of fresh charges by the Kaushals would have been one way of achieving that objective but the wording proposed by Mr Walford was another. That is why Mr Hutchings felt able to agree that Mr Walford's proposed wording "properly reflected what the parties had agreed at the settlement in May".[91]He did not say that that is what they would have agreed if they had thought about it.[92]But another way of achieving the same result would have been to retain the wording put forward on behalf of the Kaushals themselves on 20 May, namely that they would be "released from their personal guarantees save to the value of other assets charged to the Bank."[93]Yet another way would have been a covenant by the Bank not to sue the Kaushals for any sum in excess of the settlement sum or to enforce liability under the personal guarantees except by sale of the charged properties. But all these different ways are simply mechanics. They are all directed to the same end; to ensure as both parties agreed that all the charged properties could be sold by the Bank and their proceeds of sale applied towards discharge of Crowborough's indebtedness. As is sometimes said, equity looks to the intent rather than to the form.[94]In fact the mechanism that the parties had agreed was the limited release of the Kaushals from their personal guarantees. What went wrong was that the limitation on that release was for all practical purposes removed by the drafting error that the judge found to have occurred. It may be that the cause of the error was a mistake in assumption that the change in wording would not affect the Bank's ability to look to the charged properties as part of its recovery. But in my judgment the fact that the cause of the drafting error is an erroneous assumption does not remove the drafting error from the reach of rectification. Erroneous assumptions and drafting errors are not in watertight compartments. Many drafting errors are no doubt made because the drafter has assumed that the affect of altering the wording in one respect will not affect other parts of the draft.[95]In the present case I consider that the judge took too narrow a view. He posed himself the question: whether the parties had manifested an objective intention that fresh charges should be granted. As I have said, he repeated that as the object of his search many times during the course of his judgment. That was the only relevant factual question that he asked and answered. If the question the judge posed himself had been the right question the judge's answer could not be faulted. But I do not consider that it was the right question. As I have said, the grant of a fresh charge was not the only way in which the agreed objective could have been achieved. By concentrating on only one mechanism for achieving that objective the judge did not adequately analyse the evidence of what had been agreed.[96]I would allow the Bank's cross-appeal. That means it is not necessary to deal with the Kaushals' appeal.

LORD JUSTICE RIMER: I agree.

LORD JUSTICE MUMMERY: There is nothing to add. I agree.

Cited in 1 later judgment