Persimmon Homes Ltd v Hillier & Anor

Rectification may be granted where the parties’ communications, viewed objectively and as a whole, establish a continuing common intention which the executed documents fail to record. Knowledge that an asset belongs to a different group company does not defeat rectification where the sellers control that company and the agreed transaction requires them to arrange the asset’s inclusion.

A disclosure letter which qualifies contractual warranties may also be rectified when it is an agreed and integral part of the documents implementing the transaction. Its unilateral form presents no bar. Rectification gives effect to the parties’ true intention rather than rewriting history.

Persimmon Homes Ltd purchased the appellants’ housebuilding companies under two share purchase agreements. The parties had negotiated on the basis that the strategic land included the whole Felbridge development site. Two essential freeholds, however, remained vested in another company controlled by the appellants and were not included within the contractual warranties.

A Deputy High Court Judge rectified the agreement and its related disclosure letter, declared that the appellants had breached the warranties as rectified, and held them liable in damages. The appellants challenged the evidential basis for rectification. They also argued that a disclosure letter was, as a matter of law, incapable of rectification because it was a unilateral notification of existing facts.

1. The appeal was dismissed. The evidence overwhelmingly supported the judge’s conclusion that the parties had agreed, and continued until execution to intend, that the entire Felbridge site would be included in the sale of the development company. The executed agreement and disclosure letter failed accurately to record that intention: per David Richards LJ, with whom Newey and McCombe LJJ agreed.
2. The judge had made a sufficient finding about the telephone conversation on which the appellants relied. A contemporaneous email accurately summarised the conversation and showed that it concerned price. Its reference to the inability to extract material sites from the transaction confirmed that the previously agreed inclusion of the entire Felbridge site had not changed. In the absence of evidence of later discussions altering the sites included, the judge was entitled to consider the parties’ dealings as a whole.
3. The heads of terms did not displace the common intention established by the negotiations. They contained no detailed statement of the properties to be held by the development company on completion. In any event, a document affected by the same mistake as the final agreement could not conclusively establish a different intention.
4. The parties’ knowledge that the freeholds were vested in another group company did not defeat rectification. The appellants controlled both the development company and the relevant ownership structure. They could therefore arrange for the freeholds to be held by the development company at completion. The mechanism by which they performed the agreed transaction was a matter for them.
5. The disclosure letter was capable of rectification. Drafts had passed between the solicitors, its terms had been agreed, it was defined in the sale agreement, and it qualified the contractual warranties. It was therefore an integral part of the suite of documents intended to implement the transaction. Its formally unilateral character presented no bar, since unilateral documents may be rectified where they fail to express the maker’s intention. Rectification did not rewrite history; it gave effect to the parties’ continuing common intention that the development company should be warranted as owning the freeholds.

1. Court of Appeal (Civil Division): The appeal was dismissed. The orders rectifying the share sale agreement and disclosure letter, declaring breach of the warranties as rectified, and establishing liability in damages were upheld.
2. High Court, Business and Property Courts, Business List (ChD): John Martin QC, sitting as a Deputy High Court Judge, ordered rectification of the share sale agreement and related disclosure letter. He declared that the sellers were in breach of the warranties as rectified and liable in damages.