Housebuilding giant George Wimpey UK Ltd has successfully applied to rectify an error in a contract for the £2.65m purchase of development land in Kent.
The High Court has held that vendor VI Components Ltd (now VI Construction Ltd) (VIC) had “wilfully and recklessly” failed to inform George Wimpey that an agreed term had been left out of the final contract.
Deputy Judge Jules Sher QC maintained that, although the “court should be slow to intervene and rewrite a contract” where only one party had made a mistake, in this case equity justified an order for rectification.
Wimpey had purchased the site at West Street, Erith, from VIC in July 1999, with the intention of constructing a 231-apartment complex fronting the River Thames.
The building company estimated that it would be able to sell the apartments for £20.6m, taking into account a basic price for square footage, and adding premiums or “enhancements” for river view, undercroft parking and floor level.
Under the agreement, VIC was to receive, in addition to the £2.65m purchase price, a deferred sum equal to 50% of the amount by which the estimated sale proceeds exceeded £20.6m, to allow for inflation over the period of construction and sale.
The parties also negotiated a formula by which any change in the development would be reflected in a change to the £20.6m figure, so that the price of an altered flat would increase or decrease depending on the new size. Enhancements were to be removed from the calculation of these changes and later reworked into the price.
However, in the final contract submitted by VIC, the formula did not provide for the enhancements to be factored in.
The High Court has held that VIC had “suspected” that Wimpey was not aware of the omission when it signed the contract, and that, in such circumstances, the court could intervene to rectify the agreement.
The deputy judge said: “I recognise the need to keep the court’s jurisdiction to rectify for unilateral mistake within strict bounds. Nothing would undermine confidence in commercial dealings more than a general willingness in the courts to intervene in this way.
“On the other hand, most would recognise that there are cases in which one party has taken advantage of the other’s mistake so as to justify rectification.”
He maintained that the “conscious and substantive change made by VIC at the 11th hour, to which Wimpey’s attention was not drawn”, was sufficient to attract the exercise of the court’s jurisdiction.
George Wimpey UK Ltd (formerly Wimpey Homes Holdings Ltd) v VI Components Ltd Chancery Division (Mr Jules Sher QC, sitting as a deputy judge of the division) 24 June 2004.
Gary Cowen and Caroline Shea (instructed by Birketts, of Ipswich) appeared for the claimant; Martin Rodger (instructed by Macfarlanes) appeared for the defendant.
References: EGi Legal News 25/06/04
