Keay & Anor v Morris Homes (West Midlands) Ltd

Law of Property (Miscellaneous Provisions) Act 1989, section 2 requires a variation of a land contract to be recorded in a signed document containing all expressly agreed terms. Whether an alleged promise is a separate collateral contract or a term of the land transaction is a factual question. Its label, and the fact that it is to operate after completion, are not decisive.

Completion of the land element of an arrangement which was void for non-compliance with section 2 does not make an omitted non-land obligation enforceable. A separately valid supplemental agreement may survive completion, but that principle does not revive a term which was never incorporated into a valid contract.

The Keays sold land to Morris Homes under a 2004 written agreement. In 2005 the parties signed a supplemental agreement reducing the price by £700,000. The Keays alleged that, in return for the reduction, Morris Homes orally agreed to enter into a planning agreement and promptly progress works so that a medical centre shell could be completed. The supplemental agreement did not record that works obligation.

The Keays claimed damages for breach of the alleged oral obligation. The judge declined on a summary judgment application to determine whether it was a collateral agreement outside section 2, but declared that, if section 2 applied, completion of the land sale did not leave Morris Homes with a viable statutory-formality defence. Morris Homes appealed that declaration. The Keays cross-contended that the alleged obligation was outside section 2 altogether.

Appeal allowed. Rimer LJ gave the judgment, with which Patten and Laws LJJ agreed.

1. Section 2 concerns executory contracts for the creation, sale or other disposition of interests in land, rather than instruments which actually transfer those interests. A variation of an existing land-sale contract is in effect a new contract. It must therefore comply with Law of Property (Miscellaneous Provisions) Act 1989, section 2, including the requirement that the signed document contain or incorporate every expressly agreed term.

2. The inquiry identified in Grossman v Hooper, [2001] EWCA Civ 615, is factual: was the disputed promise a term on which the land interest was to be sold or disposed of, rather than a term of a genuinely separate transaction? The pleaded case and summary material did not establish whether the works obligation was a true collateral contract or an express term of the variation. The judge was therefore right to leave that issue for trial and the respondents’ cross-notice failed.

3. If the works obligation is found at trial to have been an express term of the variation, its omission from the supplemental agreement rendered that agreement a nullity. The obligation could not be enforced independently merely because it was to operate after completion of the sale.

4. Tootal Clothing Ltd v Guinea Properties Ltd, (1992) 64 P & CR 452, did not establish that performance of land elements of a void arrangement breathes life into omitted non-land terms. It concerned an enforceable, separately signed supplemental agreement after completion of a lease. The contrary reading adopted in Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd, [2004] EWHC 2547 (Ch), was wrong. The court set aside the fourth recital and the declaration in the judge’s order, and dismissed the Keays’ application notice.

• Court of Appeal (Civil Division) — in [2012] EWCA Civ 900, allowed Morris Homes’ appeal, set aside the declaration made below, and rejected the Keays’ cross-notice.

• High Court, Chancery Division, Birmingham District Registry — on 12 August 2011, His Honour Judge Simon Barker QC declined to decide summarily whether the alleged works obligation fell outside section 2, but declared that the section 2 defence had no real prospect of success if the obligation was within the section.