Francis v F Berndes Ltd & Ors

For a contract for the sale of an interest in land to satisfy section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, every expressly agreed term must be recorded in writing in the document, subject to incorporation by reference. The court must distinguish between construing what the parties agreed and deciding whether the written document records all those express terms. Signatures and surrounding circumstances may identify the parties and illuminate the agreement, but cannot supply an omitted express obligation. Rectification cannot generally be used to insert an expressly agreed term omitted from the document merely because the parties misunderstood section 2. A new restitution claim may be pursued by amendment after limitation has expired if it arises from the same or substantially the same facts, although permission remains subject to proper pleading, prospects of success and fairness.

The claimant appealed from Master Teverson’s order of 3 November 2010 granting summary judgment to the first defendant and dismissing his claim. The claim alleged breach of an agreement for the sale of freehold premises. The claimant relied on a letter dated 7 January 2004, signed by the vendor and by the claimant and another proposed purchaser. The vendor argued that the letter failed to comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, including because it did not record the purchasers’ obligation to buy.

The appeal also raised proposed alternative claims for rectification and restitution, neither of which had been pleaded or argued before the Master. The central issues were whether the letter satisfied section 2 and whether the claimant should be allowed to apply to amend the claim to include restitution.

1. The appeal was allowed only to the limited extent that the claimant was permitted to apply for permission to amend the claim to raise a restitution claim. The Master’s conclusion on section 2 was upheld.
2. On the assumed factual basis favourable to the claimant, an express oral agreement had been made under which the claimant and Mr Hughes agreed to buy the property and FBL agreed to sell it. That express obligation to purchase was therefore one of the terms which section 2(1) required to be recorded in writing.
3. Under section 2(2), the term had to be set out in the 7 January letter because it was not incorporated by reference to another document. The letter nowhere stated that the claimant and Mr Hughes were the purchasers or recorded their obligation to purchase. Their signatures and the surrounding circumstances could assist in construing the agreement, but could not replace the missing written term.
4. The distinction between the parties’ actual agreement and the statutory question whether all expressly agreed terms were recorded was decisive. The policy of section 2 was to promote certainty and reduce disputes requiring extrinsic evidence. Firstpost Homes Ltd v Johnson [1995] 1 WLR 1567 and Ruddick v Ormston [2005] EWHC 2547 (Ch) supported that conclusion.
5. The proposed rectification claim was misconceived. Rectification corrects a mistake in recording or expressing an agreement; it cannot ordinarily be used to insert an expressly agreed term omitted from a document in order to cure non-compliance with section 2. The reasoning in Oun v Ahmad [2008] EWHC 545 (Ch) was adopted.
6. The restitution claim was not determined on its merits. The claimant was allowed an opportunity to apply to amend because refusing that opportunity could shut out a potentially meritorious claim before the limitation and same-facts issues had been tested. The application would still require properly pleaded amendments and proof of reasonable prospects, jurisdiction under section 35 of the Limitation Act 1980, and absence of unfairness to FBL.

• High Court (Chancery Division): On 3 November 2010 Master Teverson granted FBL summary judgment and dismissed the claim. On appeal, the High Court upheld the section 2 conclusion but allowed the claimant to apply for permission to amend to plead restitution.