Lease and agreement for lease — Discrepancy in name of tenant in agreement for lease — Whether binding agreement — Whether plaintiffs’ solicitor negligent — Whether guarantee of tenant’s obligations extended to agreement — Rectification ordered
The second plaintiff, Johnsey Estates Ltd, was a family-run company in building and property development. It owned a retail business site of 55 acres in Newport which it had developed and let in stages. That property was transferred to a new subsidiary company, the first plaintiff. It intended to develop a vacant area on the edge of the estate as an outdoor market site and reached agreement in principle whereby Johnsey would let the market site to the second defendant (“Westport”) for a 25-year term at £150,000 pa without a break. The plaintiffs would undertake extensive building works at their own costs although Westport also undertook substantial expenditure on the site. The parties instructed their respective solicitors to act for them in the conveyancing transaction and it was suggested that a subsidiary of Westport, known as KMA Markets Ltd and now the first defendant, Newport Marketworld Ltd, might be a possible vehicle for taking the lease of the site. KMA was then a shell company without assets, but with a history of trading relating to markets. Westport was a public liability company quoted on the stock exchange. Because of time pressure it was agreed that Johnsey’s solicitor, D, would draft the agreement for the lease while Westport’s solicitor would draft the lease. The draft agreement for the lease specified Westport as the lessee. However, the draft lease specified KMA as lessee with Westport guaranteeing subject to contract. Neither solicitor was aware of the discrepancy. Once D did become aware of it viz that KMA was to be lessee under the lease, he took instructions that KMA would be acceptable as tenant provided Westport guaranteed its obligations. He still thought that the lessee under the agreement for the lease would be Westport. Thereafter, Westport’s solicitor engrossed the agreement for the lease but altered in ink the name of the lessee to KMA; he also made no mention of Westport as surety. The lease was executed by Westport’s company officers. In contrast Johnsey’s part remained unaltered and still showed Westport as the contracting party. The solicitors purported to exchange, neither of them being aware of the discrepancy. When D became aware of it, correspondence followed to extend the guarantee by Westport to the obligations in the agreement for the lease.
Held Rectification of the agreement for the lease was ordered.
1. The part contract sent by D to the solicitors for Westport should be rectified so as to alter the name Westport to KMA.
2. Subject to such rectification there was an enforceable agreement for a lease between Johnsey Estates and KMA which complied with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 section 2.
3. That enforceable agreement for a lease contained an implied term whereby KMA would procure Westport to enter into a guarantee in the lease.
4. There was an enforceable contract between Johnsey Estates and Westport whereby Westport agreed to guarantee the agreement for the lease. Section 2 of the 1989 Act did not apply to that agreement.
5. KMA and Westport were both estopped from denying that contracts were entered into in the case of KMA to take the lease and, in the case of Westport, to guarantee both the lease and the agreement for the lease.
6. The plaintiffs’ solicitor was in breach of his duty of care to his clients in the conveyancing transaction.
Jules Sher QC and Caroline Furze (instructed by Edwards Geldard, of Cardiff) appeared for the plaintiffs; Nigel Davis QC and Lindsay Steward (instructed by Wansbrough Willey Hargreave, of Bristol) appeared for the defendant solicitor; Martin Collins QC (instructed by Mischon de Reya) appeared for the first and second defendants.
