JIS (1974) Ltd. v MCP Investment Nominees I Ltd.

Clear contractual language governs even where its practical effect appears commercially unlikely. Background material assists in identifying the meaning of the words used, but cannot rewrite an unambiguous agreement. An implied term cannot contradict an express term.

A court may correct a drafting error through construction only where the instrument discloses a clear mistake and the required correction is clear. Practical inoperability alone does not satisfy that standard.

Rectification requires a continuing common intention, outward accord, persistence of that intention until execution, and a mistake by which the instrument failed to reflect it. A rectification claim should proceed to trial where credible evidence from both contracting parties supports a shared intention and further disclosure may establish the necessary communication.

The claimant tenant occupied an office building under a lease containing a break clause that required vacant possession of the demised premises. The demised premises expressly included shop units which the tenant had simultaneously underlet to the landlord's predecessor for almost the full lease term.

The tenant sought a declaration that the vacant-possession requirement excluded the units, either through construction or an implied term. Alternatively, it sought rectification. Hart J dismissed the construction claim but reversed the summary dismissal of the rectification claim.

The tenant appealed on construction. The landlord cross-appealed on rectification. The issues were whether the clear definition could be corrected through construction and whether the evidence disclosed a sufficiently arguable case for rectification to proceed to trial.

1. The appeal and cross-appeal were dismissed. Carnwath LJ delivered the judgment, with which Buxton and Kennedy LJJ agreed. The lease's express definition included the shop units within the demised premises for the break clause. Their exclusion solely for rent review put the meaning beyond doubt.

2. Background evidence could illuminate the language used, but could not change clear contractual wording. Nor could a term excluding the units be implied, because an implied term cannot contradict an express term.

3. A court may correct an obvious drafting error as an exercise of construction where it is clear that a mistake has occurred and clear what correction is required. The break clause was not nonsensical on its face. Its practical difficulty emerged only after detailed analysis of the lease and underlease. Correcting it would require the court to rewrite the bargain and potentially address the preservation of derivative interests. The construction claim therefore failed.

4. The established requirements for rectification were a continuing common intention concerning the matter, an outward expression of accord, continuation of that intention until execution, and a mistake by which the instrument failed to reflect it. The precise corrective wording need not have been agreed if the common intention can be ascertained in substance and detail.

5. It was unnecessary to decide whether an obvious common assumption could satisfy or develop the strict requirement of outward accord. The case was at an early stage and disclosure had not occurred. Credible witnesses from both original contracting parties spoke consistently about their shared intention that the break clause should remain operable and should require vacant possession only of the premises controlled by the tenant. It was therefore proper to permit the rectification claim to proceed to trial.

6. The claimant's appeal against dismissal of the construction claim and the defendant's cross-appeal against continuation of the rectification claim were dismissed, with no order as to costs.

• Court of Appeal (Civil Division): The tenant's appeal on construction and the landlord's cross-appeal on rectification were dismissed by [2003] EWCA Civ 721.
• High Court: Hart J dismissed the construction claim on 20 June 2002. He subsequently allowed the tenant's appeal from the summary dismissal of its rectification claim and permitted that claim to proceed.
• Deputy Master: Deputy Master Cousins summarily dismissed the rectification claim on 28 May 2002.