Unpacking FSHC Group Holdings v Glas Trust Corp

**Timothy Dodsworth** (0:00)
Hello, and welcome to Unpacking Contract Law, the UK-based contract law podcast delivering unsolicited opinions on new and old contract law cases. The purpose of these podcasts is to provide you with an insight into our thoughts, ideas and ideologies around all things contract law. It also provides us with an outlet for all our opinions, so you listen at your own peril.
Each podcast will feature a new contract law case with a discussion from three contract law enthusiasts. And it is thus my great pleasure to introduce you to Maggie Hemsworth, Severine Saintier and myself, Tim Dodsworth. Welcome to Unpacking Contract Law.

**Maggie Hemsworth** (0:43)
Welcome. Welcome, dear listeners. This is podcast number 14 of our series. Before we get going, just a short word of thanks to Newcastle Law School, who are our kind sponsors for this one, as well as several others in the past. So this one is Four Seasons Healthcare. It's shortened, tends to be shortened to FSHC, Group Holdings Limited and Glas GLAS Trust Corporation Limited.
Mostly shortened for those in the know to FSHC, or indeed just Glas Trust, but it's a bit of a mouthful. This is Court of Appeal 2019 So going back a little bit, but we've selected this one because it is Westlaw, marks it as significant in terms of guidance and therefore worth talking about. The topic is a sort of mystifying one that most students find mystifying, rectification, which is the court's power to correct documents. And of course we are talking about contract law. So it's correction of the language used in a contractual document because of what's called a common mistake. That is a shared mistake, shared in common. Both of the parties have concluded in error that their final document actually reflected the bargain that they had reached. So this is a bit of equity law. Those students sort of a bit perplexed by that. It's not the common law, it's equity, which gives the court power, policing control, you might say, over what we might archaically referred to as unconscionability or unconscionable conduct.
And it would be unconscionable to insist on an interpretation given to a contract which does not actually match with the concluded bargain.
And a little bit of background, I suppose, because I expect Tim will talk about these principles because he's keen on principles. This also touches and concerns, one might say as a lawyer, a couple of the common law principles. So we've got a principle of equity, but we've also got to juggle two other principles, at least two, I suppose, and they are coming to us from the common law. So the first one is freedom of contract. This idea that Lord Denning once famously said, courts don't correct bargains, they correct documents. In other words, the bargain is down to the parties. And you might say the parties are completely free to enter into an arrangement, a contract, that's not really in their best interests, but that's the idea of freedom of contract.
The second principle that comes to us from the common law is this idea of objectivity, which first year students looking at contract law in the first term, they stumble across that quite early on. In other words, we don't ask the parties what they really meant. We look at the language that they used and we use the hat, if you like, of the objective reasonable observer to try and work out what actually they have agreed.
So that's the objectivity principle and it comes right up against rectification and equity, where you have this sort of possible tension, I suppose, between the objectivity and subjectivity. Subjectivity meaning what you actually thought and meant. Objectivity meaning we don't care what you actually thought. We are looking back as an objective observer.
So that's the background. And in this case, it's quite a sort of high-value commercial dispute, really. The parties had entered into a deed, a binding contract whereby FSHC Group Holdings had provided security to Glas Trust Corporation. And that is actually what the intention was. But when one looked objectively at the language that they had drafted, it went beyond that. Not only had they provided security, but they had also agreed to accept the responsibility or liability for a whole range of debts that were owed by other companies in their group. So that was over and above what subjectively everyone was thinking was the bargain. But that's what the language appeared to mean on an objective basis. So the central question or issue you might say is, OK, can this document be rectified, corrected in those circumstances? And both the first instance judge and the Court of Appeal had no difficulty really in saying, this is not what objectively was intended by the parties, looking at the correspondence that had passed between their solicitors.