Keay and another v Morris Homes (West Midlands) Ltd

Sale of land – Contract in writing – Supplemental agreement – Parties making supplemental agreement in writing to vary purchase price and payment terms on sale of land – Respondents claiming collateral oral agreement in respect of building works – Whether appellant’s contention that agreement void having prospect of success at trial – Whether works obligation constituting express term of supplemental agreement – Whether completion of land transaction rendering other elements enforceable – Appeal allowed In April 2004, the respondents and their company, as sellers, and the appellant, as buyer, entered into a written agreement for the sale of six parcels of land. The appellant encountered difficulties in respect of planning permission for the development and, on 14 March 2005, the parties to the sale agreement entered into a written supplemental agreement reducing the total price payable by the appellant and altering the instalments payable under the sale agreement. The land was transferred in April 2006 and the agreed price paid in full. The respondents subsequently brought proceedings for damages for breach by the appellant of an alleged oral agreement to progress certain building works following completion of the sale. The appellant defended that claim contending, inter alia, that the alleged oral agreement would, together with the supplemental agreement, have constituted a composite transaction to vary the sale agreement which was ineffective by virtue of section 2(1) of the Law of Property Act 1989. The respondents applied for summary judgment on the ground that the defence had no prospect of success or, alternatively, the striking out of the relevant paragraph of the appellant’s defence. The judge held that the question whether the alleged works agreement was separate from the sale agreement so as to fall outside section 2 of the 1989 Act was unsuitable for summary judgment (“the Grossman point”): Grossman v Hooper [2001] 2 EGLR 82. However, even if section 2 did apply to the oral agreement, there was no bar to its enforcement once the land transaction had been completed and so the appellant’s contention that the agreement was void had no real prospect of success at trial (“the Tootal “): Tootal Clothing Ltd v Guinea Properties Management Ltd [1992] 2 EGLR 80. The appellant challenged the judge’s decision on the Tootal point. The respondents contended that the judge had correctly applied Tootal but also sought to affirm the judge’s order by contending that he was wrong not to decide the Grossman point in their favour. Held: The appeal was allowed. (1) The question under section 2(1) was whether the written document the parties had signed as recording the terms for the sale or other disposition of an interest in land included all the terms of such sale or disposition that they had expressly agreed. In any particular case, the answer might be that the disputed term was not a term of the relevant sale or other disposition but was, or was part of, a strictly unrelated transaction; in other cases, it might be clear that it was such a term. Grossman was a case of the former nature. The problem in the present case was that the works obligation sued upon was an oral one. Therefore, this was not a case in which the parties had structured their arrangements in separate documents, in one of which they had dealt with the sale of the land and in the other they had dealt with the works obligation. The parties to the sale agreement had reached an agreement as to its variation and that agreement had to be contained in a document that satisfied section 2 of the 1989 Act. In those respects, there was no doubt that the supplemental agreement purported to comply with section 2. The critical question was whether the supplement agreement needed also to incorporate the works obligation on the basis that that was an expressly agreed term of the variation of the sale agreement. If it should have done, it had not, with the consequence that it would wholly fail along with the works obligation. On the limited material before the court, it was not possible to decide the Grossman point one way or the other and the judge had been correct to decline to do so: Grossman v Hooper [2001] 2 EGLR 82 applied; McCausland v Duncan Lawrie Ltd [1997] 1 WLR 38 and North Eastern Properties Ltd v Coleman [2010] EWCA Civ 277, [2010] PLSCS 87, [2010] 12 EG 97 (CS) considered. (2) The premise for the Tootal point was that the respondents would fail at trial on the Grossman point and that, in consequence, the works obligation would be held to have been an express term of the partiesÕ agreement for the variation of the sale agreement. If it was not included, the supplemental agreement would be void and the works obligation would fail with it and have no independent life of its own. On the same premise, the respondents had argued that, even if the supplemental agreement had been void from the outset, once all of the land elements of the original sale agreement as purportedly varied by that void agreement had been performed, the outstanding obligations under the void agreement automatically assumed the status of valid and enforceable contractual obligations. However, the proposition that a void contract could, by acts in the nature of part performance, mature into a valid one was contrary to principle and was wrong. Although it was difficult to identify the ratio of the Tootal case, there was nothing in the decision to support the interpretation attributed to it by Lewison J in Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd [2005] 2 P & CR 8 as deciding that section 2 of the 1989 Act applied only to an executory contract for the sale or disposition of an interest in land, and that once all the land elements of an alleged contract had been performed, the remaining parts of the alleged contract could be examined without reference to section 2. In the present case, the status of the works obligation would be at most a proposed contractual term that was not, in the event, incorporated into any valid contract and was not capable of being independently enforced: Tootal Clothing Ltd v Guinea Properties Management Ltd [1992] 2 EGLR 80 considered; Kilcarne not followed. John Randall QC and Conrad Rumney (instructed by Gateley LLP) appeared for the appellant; Jeremy Cousins QC and Andrew Charman (instructed by Moran & Co, of Tamworth) appeared for the respondents. Eileen O’Grady, barrister