In the case of Andrew Fender v National Westminster Bank PLC Judge Purle QC set aside a deed of release that had been executed in the mistaken belief that the company was no longer indebted to the bank.

Judge Purle QC accepted that turning the bank from a secured creditor to an unsecured creditor was an unintended effect and the mistaken belief was that the bank was not a creditor at all, interpreting the doctrine of mistake widely. He ordered the administrator to recognise the bank as a secured creditor, as if the deed of release had never been executed.

Comment

This case is important because it indicates that the Courts may yet be prepared to apply the remedy of mistake in a pensions context again as it once did in AMP v Barker (2000). In July this year it looked like the remedy was all but closed off as the High Court refused to apply the mistake doctrine in a pensions context (see Smithson v Hamilton EPB bulletin from 2 September 2008). In Smithson, Park J seriously questioned whether the mistake remedy should be available in a pensions context because (unlike private trusts) employers/trustees are not conferring a gift on employees as 'volunteers' and because “the mistake has to be as to the existence of some quality which makes the thing without the quality essentially different from the thing as it was believed to be” i.e. the mistake was not fundamental enough because “there was still a pension scheme, albeit one which, because of the mistake was going to be more expensive for the employer”.

The Smithson case was not cited in Fender so the judge did not have to deal with Park J's thinking. Nevertheless Fender gives hope that the mistake remedy (which is more flexible than rectification) may still be alive