Oun v Ahmad

Under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, a written land contract must incorporate every term expressly agreed. If it omits such a term, there is prima facie no binding contract.

Rectification may cure an omission caused by a mistake in recording or expressing the parties’ agreement. It cannot insert a term which the parties expressly agreed should remain outside the written document, even if they mistakenly believed that the resulting document was legally binding.

The appellant appealed under section 111 of the Land Registration Act 2002 against a Deputy Adjudicator’s decision cancelling a unilateral notice concerning the proposed sale of leasehold premises and an associated business.

The parties had signed a written contract recording a price and other terms. They had also expressly agreed an apportionment of the price which was not included in that document. The central issues were whether the document complied with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, and whether rectification could insert the omitted term.

1. The appeal was dismissed. The appellant had no binding contract for the purchase of the property. He was ordered to pay the respondent’s appeal costs, summarily assessed at £4,103 including VAT, subject to deduction of VAT if recoverable.
2. Section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 requires identification of all terms expressly agreed, followed by examination of whether the written document incorporates them. If an expressly agreed term is omitted, the prima facie result is that there is no binding contract, either for the recorded terms alone or for the incomplete agreement.
3. Separate contractual arrangements may produce a different result where the written document contains all express terms of an independent land contract and the other terms belong to a separate contract. The question is whether the arrangements are independent, in the sense that performance of the second agreement is not a term of the land contract, as explained in Grossman v Hooper [2001] 2 EGLR 82 and Kilcarne Holdings v Targetfollow (Birmingham) Limited (2005) 2 P&CR 8.
4. Section 2(4) contemplates rectification. Conventional rectification principles apply. Rectification is available where the written document fails accurately to record or express the parties’ agreement, including through a mistake about the meaning or legal effect of words used, or the legal effect of the instrument as a whole. The approach in Robert Leonard Developments Limited v Wright and the principles discussed in Racal Group Services Limited v Ashmore [1995] STC 1151, Re Butlin’s Settlement Trusts [1976] Ch 251 and Swainland Builders Limited v Freehold Properties Limited [2002] 2 EGLR 71 supported that conclusion.
5. Rectification is unavailable where the parties deliberately agreed that an expressly agreed term should not be recorded. That is not a mistake in the expression of the transaction. It is an agreement to leave the term out, and the court cannot write it into the document merely because the parties misunderstood the resulting legal effect. This distinction was reinforced by the contrast with Wills v Gibbs [2007] All ER (D) 509.
6. On the facts, the parties expressly agreed the apportionment of the £75,000 price and expressly agreed that it would not appear in the written contract. The first document therefore failed section 2, and rectification could not cure the defect.

1. High Court (Chancery Division) — Appeal under section 111 of the Land Registration Act 2002 dismissed.
2. Deputy Adjudicator — Decision dated 24 May 2007 held that the arrangements did not comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 and cancelled the unilateral notice. Permission to appeal was refused by the Adjudicator and later granted by David Richards J.