Sargeant and others v Reece

Agricultural land – Agreement in writing – Common intention – Defendant seeking to rectify agreement – Whether land vesting in parties in equal shares – Claim dismissedThe claimants were the executors of the deceased’s estate. The deceased and his sister (the defendant) owned 45.535 acres of agricultural land that had long-term development potential. They had operated a farming partnership on the land, which in 1974, had been valued at £475 per acre for probate purposes.In 1990, the deceased and the defendant agreed to sell part of the land for a large-scale development for the fixed sum of £3,020m together with a further contingent consideration. That sale did not complete. However, other developers were subsequently interested in taking an option over various parts of the land, the potential value of which was calculated to be between £250,000 and £300,000 per acre.In 1995, the deceased and the defendant entered into an agreement to dissolve their partnership. By clause 6 of the agreement, it was provided that the defendant should join in and sign any document that might be required to vest all partnership assets in the deceased. Since the land was a partnership asset at the time of the 1995 agreement, prima facie, the deceased was entitled to acquire it under clause 6. The agreement did not provide for the land to be revalued and the deceased paid to the defendant one-half of the 1974 probate value, namely £10,687.In 1999, the deceased and the defendant entered into an option agreement with a developer. The deceased subsequently sought to enforce clause 6 of the agreement, whereby the land would be transferred into his sole name. The defendant applied to rectify the 1995 agreement on the basis that it did not reflect the common intention of the parties. She contended that contemporaneous documents had shown that it was their common intention that the land would remain vested in both parties as tenants in common in equal shares after the farming partnership had been dissolved. The claimants maintained that the defendant had failed to prove the requisite common intention and that the deceased had acquired the entire beneficial interest in the land.Held: The claim was dismissed.It was clear that, on the true construction of the 1995 agreement, it was the common intention of the parties, outwardly expressed and continuing up to its execution, that the land should belong beneficially to both of them equally following the dissolution of the partnership. Rectification was an equitable discretionary remedy that enabled the court to correct a mistake in the way in which a transaction had been expressed in writing. The fact that the parties had voluntarily signed a written instrument required cogent evidence to dispel the evidence of their intentions as reflected in that instrument. If, as in the present case, the instrument itself was poorly drafted, or conceptually unsound, the requirement for cogent evidence was reduced pro tanto: Racal Group Services Ltd v Ashmore [1995] STC 1151 and Whiteside v Whiteside [1950] Ch 65 considered. For the court to order rectification, there had to be a positive common intention (not necessarily amounting to a contractually enforceable agreement) that the written instrument did not, mistakely, properly express. That effectively required the parties to have addressed, on facts such as those in the present matter, the issue uoon which rectification was sought. The mere fact that the court formed the view that the written instrument had afforded a bad bargain to one or both parties was irrelevant: Swainland Builders Ltd vFreehold Properties Ltd [2002] EWCA Civ 560; [2002] 2 EGLR 71; [2002] 23 EG 123 applied.Although there had to be an outward expression of accord, it was not an absolute requirement for rectification but, rather, an evidential factor: Joscelyne v Nissen [1970] 2 QB 86 and Munt v Beasley [2006] EWCA Civ 370 considered.The court would grant an order for rectification on the terms that the land was held on trust for the defendant and the deceased, and subsequently the deceased’s estate, as beneficial tenants in common in equal shares. Penelope Reed (instructed by Arnold Thomson, of Towcester) appeared for the claimants; Christopher Tidmarsh QC and Karen Walden-Smith (instructed by Hewitsons, of Northampton) appeared for the defendant.Eileen O’Grady, barrister