Open to interpretation

Peta Dollar asks how the courts interpret documents that are noted on a public register and whether this is different to the rules of interpretation applied to other documents When considering whether the courts will interpret a document that is required to be placed on a public register differently from a document that is not required to be placed on a public register, there is a particular issue with property-related documents, in that most of these documents are required to be placed on at least one public register. In addition to the requirements for registration at the Land Registry (which affect virtually all freehold transfers, all leases granted for more than seven years, all easements and most mortgages), there are also property documents that are required to be registered at Companies House (such as mortgages) or in the Register of Local Land Charges (such as section 106 planning obligations). Indeed, it is hard to find a property document that is not required to be registered on at least one public register. Several recent decisions of the Supreme Court (culminating in Wood v Capita [2017] UKSC 24) have confirmed the rules for interpretation of documents. Interpretation means finding the meaning that a document would convey to a reasonable person having all the background knowledge, which would reasonably have been available to the parties in the situation they were in at the time of the contract (excluding previous negotiations of the parties and their declarations of subjective intent but including absolutely anything which could have affected the way in which the language of the document would have been understood by a reasonable person). The meaning of a document is not just based on the words, it is what the parties using those words against the relevant background would reasonably have been understood to mean. If it is obvious from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. There have been a number of decisions, as well as judicial statements, suggesting that the background referred to in the rules of interpretation should be restricted where a document is addressed to, or available to, third parties, generally on the grounds of unfairness to those third parties. Articles of association  So in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 3 EGLR 119, Lord Hoffman recognised that, in order to avoid unfairness, where a document was addressed to third parties, the admissible background may be restricted to that which would be available to those third party addressees. He gave the examples of a company’s articles of association and a bill of lading, but did not address whether documents of public record (which are not “addressed” to third parties as such but merely available to them) belong in this special category.  In Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10; [2009] 1 WLR 1988, Lord Hoffman said of articles of association: “Because the articles are required to be registered, addressed to anyone who wishes to inspect them, the admissible background for the purposes of construction must be limited to what any reader would reasonably be supposed to know. It cannot include extrinsic facts which were known only to some of the people involved in the formation of the company.” Planning permissions There are a number of decisions relating to planning permissions, which are now freely available to the public on the relevant planning authority website as well as being registered (in the case of a permission subject to conditions) in the Register of Local Land Charges. For example, in Slough Estates Ltd v Slough Borough Council [1971] AC 958, Lord Reid said, when interpreting a planning permission: “Members of the public, entitled to rely on a public document, surely ought not to be subject to the risk of its apparent meaning being altered by the introduction of [evidence of facts which are not common knowledge].” However, a planning permission runs with the land and can be relied on by any person entitled to develop that land – it is effectively public property, which is arguably somewhat different from a document (such as a lease) which is binding on the original parties together with any successors in title, who will normally have carried out full due diligence before undertaking responsibilities as successors in title. Registered leases and other property documents In KPMG LLP v Network Rail Infrastructure Ltd [2007] EWCA Civ 363; [2007] PLSCS 87, the Court of Appeal took the terms of a draft lease into account when determining the meaning of a provision in the final version. In that case, Carnwath LJ rejected the suggestion that, because a lease creates an interest in land which may last many years and be owned by different parties, the only background which could be taken into account was that which would reasonably be available to this disparate group of people, and not “a private arrangement between the original parties which successors have no right to know about, let alone see”. The case concerned a lease which was entered into before the Land Registration Act 2002 and no arguments on the significance of registration were considered. In Cherry Tree Investments Ltd v Landmain Ltd [2012] EWCA Civ 736; [2012] 2 EGLR 141, a property owner borrowed money from a lender for the refinancing of a property. Borrower and lender entered into a short Land Registry standard form charge document supplemented by a facility agreement which set out the commercial terms agreed between them at some length. In particular, the facility agreement contained a clause varying and extending the statutory power of sale, but neither this clause nor the facility agreement itself was referred to in the standard form charge document. The standard form charge document was registered at the Land Registry, but the facility agreement was not. The Court of Appeal, by a majority, held that the standard form charge document could not be interpreted so as to include the extended power of sale from the facility agreement (although they suggested that a claim for rectification of the standard form charge document might succeed). Lewison LJ (who was one of the majority) felt bound by KPMG to admit the facility agreement as evidence of the meaning of the standard form charge document (despite the facility agreement not being available to third parties generally). However, the question then was: what influence did the terms of the facility agreement have on the interpretation of the charge? All the background evidence had to be considered in the “contextual scene”. In this case, the contextual scene was the grant of a legal charge intended to be registered at the Land Registry. The court should examine the policy behind the Land Registration Act 2002 and its detailed provisions when considering what meaning the charge would have to a reasonable person. That policy is that a legal charge is a public document on which third parties could be expected to rely in order to obtain a full and accurate picture of the state of the title to the land, and this theme is reflected in many sections of the Act. Lewison LJ found that, for the purposes of construction, a reasonable reader’s background knowledge would include the knowledge that the charge would be registered in a publicly accessible register on which third parties might be expected to rely, that registered documents were to be taken as containing all material terms and that the parties had a choice about what went into the public domain and what was kept private. Based on this, he concluded that matters which the parties chose to keep private (here the terms of the facility agreement) should not influence the parts of the bargain that they chose to make public. Lewison LJ argues in his book The Interpretation of Contracts (6th ed with first supplement, 2017) that restricting the role or scope of background in this way is a sound approach. He points out that the issue of construction frequently arises long after a document was entered into and between parties who are not the original parties to the document, and suggests that the move to a system of title by registration (rather than registration of title) as a result of the Land Registration Act 2002 “is likely to cause a shift in prevailing judicial attitudes to the admission of extrinsic evidence… to interpret conveyancing documents”. Cherry Tree has been followed in a number of subsequent cases, but the most recent of these is Bryant Homes Southern Ltd v Stein Management Ltd [2016] EWHC 2435 (Ch); [2016] PLSCS 273. This case dealt with the interpretation of a restrictive covenant contained in a 1993 conveyance that was registered at the Land Registry, the covenant stating: “The Buyers hereby further jointly and severally covenant with the [Vendor] and his successors in title the owners or occupiers for the time being of the [Retained Land] that they will not use the Property for any purpose other than agricultural.” The parties contemporaneously entered into a separate agreement in which the buyers promised to promote the property with a view to obtaining planning permission for the development of all or part of the land. The vendor promised to release the above covenant in the conveyance in relation to any of the property with qualifying planning approval once an overage payment was made. This agreement was not registered at the Land Registry. The vendor later sold off the retained land with the benefit of the restrictive covenant. However, the retained land was later sold without assigning the benefit of the restrictive covenant, and the buyer argued that it had the benefit of the restrictive covenant and could insist on the agricultural use of the property. The owners of the property submitted that the buyer was unable to enforce the covenant as it was designed to secure overage and not benefit the retained land; it therefore did not “touch and concern” that land. The High Court found in favour of the buyer as successor-in-title to the covenantee. It noted that the terms of the covenant indicated an intention that its benefit was to be enjoyed by the vendor’s successors in title. As the separate agreement was not registered, future owners would have no way of discovering the “release mechanism” contained in the agreement. The conveyance and agreement were not to be treated as a single document. Pre-eminence of information on the Land Register Another recent case that illustrates the importance of what is on the register is that of Oldham Metropolitan Borough Council v Tanna [2017] EWCA Civ 50; [2017] EGLR 17. This case concerned the service of a notice under section 215 of the Town and Country Planning Act 1990, which allows a local planning authority to serve a notice on the owner of a derelict property with a view to demolishing the property and recovering the cost of so doing from the owner. When giving judgment, Lewison LJ stated (at para 28): “I would hold that as a general rule, unless there is a statutory requirement to the contrary, in a case in which i) a person (in this case the local planning authority rather than the council taken as a whole) wishes to serve notice relating to a particular property on the owner of that property, and ii) title to that property is registered at HM Land Registry, that person’s obligation to make reasonable inquiries goes no further than to search the proprietorship register to ascertain the address of the registered proprietor. It is the responsibility of the registered proprietor to keep his address up to date. If the person serving the notice has actually been given a more recent address than that shown in the proprietorship register as the address or place of abode of the intended recipient of the notice, then notice should be served at that address also.” This case asserts the pre-eminence of information on the register in a different way from the interpretation cases, in that the address on the register is to be used even if the person serving the notice has actually been given a more recent address than that shown on the register (although notice should then be served at that address also). This would appear to be the first case in which the address of the registered proprietor noted in the proprietorship register of title is to be taken as conclusive in an area of property law that has nothing whatever to do with land registration. Pic credit: michael jaeger/imagebroker/rex/shutterstock Peta Dollar is a freelance lecturer, trainer and writer