Westvilla Properties Ltd v Dow Properties Ltd

Contract – Mistake – Rescission – Claimant selling freehold to defendant subject to grant of leaseback arrangement – Draft lease containing omissions – Defendant purporting to rescind contract – Whether claimant entitled to specific performance – Claim allowedIn 2008, the claimant agreed to sell its freehold interest in a property to the defendant for £850,000. The sale was subject to the grant by the defendant, on completion, of a 999-year lease of the upper parts of the property to the claimant at a peppercorn rent (the intended lease). The draft of the intended lease attached to the contract referred to two plans, but they had been omitted. In addition, the service charge percentage in the draft had been left blank. The property had been placed in an auction but was not sold under the hammer. Instead, after the sale, a contract was signed on behalf of the defendant and a deposit cheque for £85,000 was delivered to the auctioneers. Completion was due to take place on 14 May 2008. The defendant had not received an auction pack prior to the auction but a copy was available for inspection at the auctioneer’s offices. The pack included the plans that should have been attached to the intended lease. The defendant did not inspect it before the contract was executed. After the contract was signed, the defendant examined the lease and realised that it was on unusual terms, requiring, inter alia, the claimant, as the intended tenant of the upper floors, to be responsible for the building services for the property, with the service charge being payable by the defendant to the claimant. The defendant stopped the deposit cheque. On 12 June 2008, it purported to rescind the contract because completion had not taken place in accordance with its notice to complete issued on 28 May. The claimant brought proceedings for specific performance of the contract for sale. The issues for determination were whether: (i) the absence of the plans in the draft intended lease or the blank service charge percentage made the contract void for uncertainty; and (ii) the defendant had validly rescinded the contract. Held: The claim was allowed.(1) The contract was not void for uncertainty as a result either of the omission of the plans or a service charge percentage. Where parties entered into what they believed to be a binding agreement, the court would hold that their agreement was void for uncertainty only as a last resort. The test was what a reasonable person, having all the background knowledge available to the parties, would have understood the language used in the contract to mean. If there was an obvious mistake on the face of the instrument and it was clear what correction ought to be made to cure the mistake, the correction would be made as a matter of construction. Those were simply aspects of the task of interpreting the agreement in its context in order to get as close as possible to the meaning that the parties had intended. The background and context always had to be taken into consideration: Brown v Gould [1972] Ch 53; Investors Compensation Scheme Ltd v West Bromwich Building Society (No 1) [1998] 1 WLR 896; and East v Pantiles (Plant Hire) Ltd [1982] 2 EGLR 111; (1981) 263 EG 61; and Chartbrook v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 AC 1101 considered. There was specific authority on the need for certainty in the identification of property. Paragraph 2-040 of Emmet and Farrand on Title stated: “It had long been established that although the description of the property might be vague, if it contains sufficient internal information to enable the property to be ascertained, parol evidence should be admissible for that purpose.”: Trustees of Sir John Morden’s Charity v Mayrick [2006] EWHC 574 (Ch) considered.In the instant case, the verbal definition of the premises demised by the intended lease was not sufficiently clear; the wording suggested that the whole of the premises above the ground floor was demised. The plans showed that the area of the demise was less than the entire footprint of the building. In the instant case, it was appropriate, therefore, to construe the contract as though the intended lease attached to the contract had included the missing plans. The defendant’s representative was an experienced property purchaser and should have known that the plans would have been included in the available auction pack.The service charge percentage had been omitted in error. However, in the unusual circumstances, the only reasonable conclusion was that the parties had intended the defendant to pass on to the claimant the 36% landlord’s share of the service charges. (2) The defendant had not been ready, able or willing to complete the contract after the service of its notice to complete on 28 May 2008 and, accordingly, it was not entitled to rescind the contract on 12 June 2008: Quadrangle Development & Construction Co Ltd v Jenner [1974] 1 All ER 729 applied.Timothy Harry (instructed by Solomon Taylor & Shaw) appeared for the claimant; Evan Price (instructed by Rossides Caine Solicitors) appeared for the defendant.Eileen O’Grady, barrister