Court Rescinds Agreement Resulting From Misrepresentation

Where an agreement is entered into as a result of a misrepresentation, the court can order the agreement to be set aside. This recently benefited a wife who entered into an agreement which meant that her sole beneficial interest in the family home was surrendered. The wife did so based on a misunderstanding following an innocent misrepresentation by her husband.

The circumstances were that the husband had lived and worked abroad and purchased the property for his wife to live in. In 1991, he created a deed which provided that the property was held in trust for his wife absolutely.

In 2004, legal proceedings against the husband led to a freezing injunction against his assets to protect the sum claimed. The husband incorrectly assumed that he had to demonstrate that he had free assets in excess of the amount of the limit of the freezing order, so he and his wife agreed that he should be released from his obligation to hold the house in trust for her. She then borrowed money secured on her share of the property to fund his defence.

The couple then discovered that they had misunderstood the situation and sought to restore the pre-2004 position. In the meantime, the claimant against the husband sought and obtained a legal charge over the property and sought an order for its sale.

In court, the judge ruled that the husband and wife were joint beneficial owners of the property and issued the order for sale. The wife appealed, arguing that the 2004 agreement was procured by the husband’s innocent misrepresentation, so she could not be bound by it and the property remained held by her husband in trust for her as previously.

The Court of Appeal upheld the appeal. The husband’s innocent misrepresentation of the effect of the freezing order had induced his wife to participate in the 2004 agreement. Had she understood the true position, she would not have entered into it. It would therefore be unfair for her to be bound by it.