Swainland Builders Ltd owned the freehold of a block of flats. It had granted 99-year leases at ground rents of all the flats except numbers 11 and 18. It had intended to sell the block subject to the retention of flats 11 and 18 which it initially proposed to let on shorthold tenancies but with a view to granting long leases at premiums in the future.
In October 1998 Freehold Properties Ltd agreed to buy the block for 60,000 pounds. It correctly understood the aggregate ground rents of 4,875 pounds on the assumption that all 39 flats were let on the same long leasehold terms. By September 1999 the vendor’s solicitor had confirmed by letter to the purchaser’s solicitor that the vendor was not intending to sell flats 11 and 18 and in the interim the vendor was to be treated as any other tenant of the block.
Long leases of the two flats were never granted and the transfer of the freehold by the vendor failed to reserve any rights to the two flats for the benefit of the vendor. On becoming aware of that omission the vendor issued proceedings claiming that there had been a mistake which was common to the parties and contrary to their common intention.
At trial Neuberger J concluded that the intention of the parties seemed quite clear from the evidence. He ordered rectification of the transfer so as to provide for the grant to the vendor of leases in respect of the two flats.
Held: The court summarised the requirements for rectification for mutual mistake, namely: ‘The party seeking rectification must show that: (1) the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified; (2) there was an outward expression of accord; (3) the intention continued at the time of the execution of the instrument sought to be rectified; (4) by mistake, the instrument did not reflect that common intention. The following points derive from the authorities: (1) the standard of proof required if the court is to order rectification is the ordinary standard of the balance of probabilities . . (2) While it must be shown what was the common intention, the exact form of words in which the common intention is to be expressed is immaterial if, in substance and in detail, the common intention can be ascertained . . (3) The fact that a party intends a particular form of words in the mistaken belief that it is achieving its intention does not prevent the court from giving effect to the true common intention . . ‘
Lord Justice Peter Gibson
[2002] EWCA Civ 560, [2002] 2 EGLR 71, [2002] 23 EG 123, [2002] 17 EG 154
Bailii
England and Wales
Cited by:
Cited – JIS (1974) Ltd v MCP Investment Nominees I Ltd CA 9-Apr-2003
The parties agreed for a lease to be granted of a new building. Part had been intended to be excluded for shops, but permission was not obtained, the shops area was included and leased back. When the tenants sought to determine the lease, the . .
Cited – Oun v Ahmad ChD 19-Mar-2008
The parties agreed in writing for the sale of leasehold property to the claimant. One document had been signed, but later one said that it had not included an aportionment. Another document then set out the apportionment. When the defendant refused . .
Cited – Connolly Ltd v Bellway Homes Ltd ChD 23-Apr-2007
connolly_bellwayChD2007
The claimant sought rectification of a contract for the sale of land, or damages in deceit. They said that it had been agreed that the price would be adjusted to reflect any change in values. The formula inserted made no great sense mathematically, . .
Cited – Daventry District Council v Daventry and District Housing Ltd CA 13-Oct-2011
The appellant challenged refusal of rectification of its agreement with the defendant. They asserted either mutual or unilateral mistake. The parties had agreed for the transfer of housing stock and management staff to the respondents. The claimant . .
Cited – Lloyds TSB Bank Plc v Crowborough Properties Ltd and Others CA 12-Feb-2013
The court was asked whether Lloyds TSB Bank Plc was entitled to rectify the terms of a compromise embodied in the schedule to a Tomlin order. . .
Cited – Radford and Another v Frade and Others QBD 8-Jul-2016
The court was asked as to the terms on which solicitors and Counsel were retained to act for the defendants. The appeals did not raise any issues concerning costs practice, and were by way of review of the Costs Judge’s rulings, and not by way of . .
Cited – FSHC Group Holdings Ltd v Glas Trust Corporation Ltd CA 31-Jul-2019
Rectification – Chartbrook not followed
Opportunity for an appellate court to clarify the correct test to apply in deciding whether the written terms of a contract may be rectified because of a common mistake.
Held: The appeal failed. The judge was right to conclude that an . .
Lists of cited by and citing cases may be incomplete.
Equity, Contract, Registered Land
Leading Case
Updated: 02 November 2021; Ref: scu.184539