Sale of land – Validity of contract – Written document containing no express obligation to purchase – Whether agreement void for failure to comply with formality requirements of section 2 of Law of Property (Miscellaneous Provisions) Act 1989 – Whether omission capable of being cured by rectification – Appeal allowed in part.
The claimant brought an action against the first defendant for breach of an alleged written agreement by which the first defendant was to sell freehold premises, comprising a club, flat and workshop, to the claimant and another purchaser, H, for £50,000. The first defendant had refused to complete the sale and had sold the property to a third party instead. The claimant sought damages based on the market value of the property, which was alleged to have been £300,000 at the time of the agreement and £1m at the date of the claim. The children of H, who had died intestate, were joined as defendants to the action.
The alleged agreement was contained in a letter on the first defendant’s headed notepaper, bearing the apparent signatures of the first defendant, the claimant and H, and stating that the first defendant was “prepared to sell” the property for £50,000 on certain conditions. The first defendant claimed that the document was a forgery, but, in addition, applied for summary judgment in its favour on the ground that the alleged agreement was in any event void for non-compliance with the formality requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.
Granting summary judgment, the master held that the letter failed to set out in writing all the express terms of the alleged agreement, contrary to section 2, since it failed to identify the purchaser and did not set out mutual obligations to buy and sell the property. He held that, since those matters were part of the alleged express terms, they could not be supplied by a process of implication.
The claimant appealed. On the appeal, he sought to raise further arguments, inter alia, that even if the agreement were void for failure to comply with section 2, rectification should be granted to cure that matter.
Held: The appeal was allowed in part.
(1) Assuming the facts to be as the claimant pleaded, there had to have been an express agreement for him and H to purchase the property from the first defendant. Given the existence of an express term that the claimant and H were to purchase the property, the question was whether that term had been successfully incorporated into the letter. It had not. No written record of that critical term was contained in the letter, which nowhere said that the claimant and H were to be the purchasers. The letter was, in form, no more than a counter-signed offer that did not set out in writing the obligation to purchase. It did not assist the claimant that, if the agreement were construed in the light of the surrounding circumstances, it might be apparent that the claimant and H had agreed to purchase. The question of what the parties had agreed, to be ascertained by a process of construction in the light of the surrounding circumstances and admissible extrinsic evidence, should not be confused with the question of whether the letter set out in writing all the express terms. Although that might appear a highly technical distinction, one of the main purposes of the 1989 Act was to produce certainty in relation to contracts for the sale of land and to reduce as far as possible the need for extrinsic evidence in order to establish the terms: Firstpost Homes Ltd v Johnson [1995] 1 WLR 1567 and Ruddick v Ormston [2005] EWHC 2547 (Ch); [2005] PLSCS 101 applied.
(2) The claimant needed the permission of the court to advance his argument in rectification since this was a new point that had not been raised before the master. Permission was refused. The function of rectification was to correct a common mistake in the way that a transaction had been reduced to writing, resulting in a discrepancy between what the parties had actually agreed and the terms of the written document. For the purposes of the summary judgment application, it had to be assumed that the parties had indeed concluded an agreement in the terms of the letter. Therefore, there was no scope for rectification, The problem was simply the failure of that letter to comply with the formal requirements of section 2 of the 1989 Act. Rectification could not be used to make a document compliant with section 2 by inserting into it a term that the parties had agreed to exclude. To allow rectification in such cases would make unjustifiable inroads into the policy of the 1989 Act: Oun v Ahmad [2008] EWHC 545 (Ch); [2008] 13 EG 149 (CS) applied.
(3) The appeal was allowed in the sole respect that permission was granted to the claimant to make an application to amend his particulars of claim to include a claim in restitution, although the court expressed no view on whether that application should succeed.
Richard Wilson QC appeared for the claimant; Tom Leech QC (instructed by Goodman Derrick LLP) appeared for the first defendant; the second to seventh defendants did not appear and were not represented.
Sally Dobson, barrister
