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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Bashir v Ali & Anor [2011] EWCA Civ 707 (20 June 2011)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2011/707.html
Cite as: [2011] EWCA Civ 707, [2011] 2 P &CR 12

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Neutral Citation Number: [2011] EWCA Civ 707
Case No: A3/2010/2458

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
Miss Elizabeth Jones Q.C.
HC09C00503

Royal Courts of Justice
Strand, London, WC2A 2LL
20/06/2011

B e f o r e :

THE MASTER OF THE ROLLS
LORD JUSTICE ETHERTON
and
LORD JUSTICE GROSS

____________________

Between:
MOHAMED BASHIR
Appellant
- and -

(1) MOHAMMAD SAFRAZ ALI
(2) MOHAMED Arshad Khan

Defendants

____________________

(Transcript of the Handed Down Judgment of
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____________________

Miss Michelle Stevens-Hoare (instructed by Murdochs) for the Appellant
Mr Zachary Bredemear (instructed by G.H. Gelberg & Co) for the Defendants
Hearing dates : Wednesday 25th May 2011

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    LORD JUSTICE ETHERTON :

    Introduction

  1. This is an appeal from an order dated 30 September 2010 of Elizabeth Jones QC, sitting as a deputy High Court Judge, in proceedings in which the appellant, Mohamed Bashir, claims to be entitled to specific performance of a contract made at auction on 7 October 2008 for the purchase by Mr Bashir of 66 Leytonstone Road, Stratford, London E15, registered at HM Land Registry under Title No. EX93229 ("the Property"), from the respondents, subject to an existing lease of a shop on the ground floor and a lease of the first floor flat to be granted to the respondents. By her order the Deputy Judge declared, among other things, that, on its true construction, the contract was for the sale of the Property, subject to those leases and also a lease of a ground floor studio flat to be granted to the respondents for 125 years at a ground rent of 100. She ordered specific performance on that basis.
  2. The background facts

  3. In the following summary, I gratefully borrow heavily from the Deputy Judge's account of the facts in her judgment.
  4. The respondents are the executors of Mohamed Taj, who owned a number of properties on his death, including the Property. The respondents decided to sell the Property. The first respondent, Mohammad Safraz Ali, asked the managing agent of the Property, a Mr Khaliq of Move Direct, to arrange for the Property to be sold. Mr Khaliq contacted Mr John Barnett of Barnett Ross, auctioneers and chartered surveyors.
  5. Mr Barnett understood from information he was given and an inspection he undertook of the Property that it comprised a ground floor shop ("the shop"), which was let, and a vacant self contained flat on the first floor ("the first floor flat"), which was to be subject to a lease-back on a long lease at a ground rent. He inspected the Property, but was unaware that there was also a vacant studio flat on the ground floor ("the ground floor flat"). The respondents were also unaware of that fact. Mr Barnett prepared the auction particulars, which were sent to the respondents' solicitors, Gelbergs LLP, and to Mr Khaliq. Mr Barnett advised the respondents as to the reserve price. He did so by taking into account the then passing rent for the shop, and also the forthcoming rent review, which he thought would probably take the rent to 8,000. Applying a multiplier of 10, he suggested a reserve price of about 80,000.
  6. The relevant parts of the auction catalogue are as follows.
  7. On the inside cover is a page headed "Notice to all Bidders". Paragraph 1 on that page draws attention to the General Conditions of Sale included with the catalogue and the Special Conditions of Sale available on request. Paragraph 2 says that prospective purchasers are assumed to have inspected the properties in which they are interested and to have made all usual pre-contract searches and enquiries.
  8. The relevant lot was Lot 44, which appears on page 45 of the catalogue. The heading says "Lot 44", then "66 Leytonstone Road Stratford London E15 1SQ", and then "Reserve Below 80,000 by order of Executors". Underneath is a photograph of the Property. The "Situation" is described. There is a heading "PROPERTY", under which it says "A mid terrace property comprising a Ground Floor Shop with separate front access to a Self-Contained Flat at first floor level". Beneath that the catalogue states "FREEHOLD". There is then a box headed "Tenancies & Accommodation". The box has six columns, headed "Property", "Accommodation", "Lessee & Trade", "Term", "Ann. Excl. Rental" and "Remarks". There are two rows. Under the column headed "Property", one row says "Ground Floor Shop" and the other says "First Floor Flat". Under "Accommodation", the first row gives the dimensions of the shop, and the second says "3 Rooms, Kitchen, Bathroom/WC". Under "Term", the first row gives the remaining term for the shop lease, and the second row says "125 years from completion". The rent for the shop is shown as 6,000, and that of the First Floor Flat as 100.
  9. The Special Conditions of Sale were a two page document. There was a section headed "Brief description of the LOT", which said "66 LEYTONSTONE STRATFORD LONDON El5". There was a section headed "Title" which said "Freehold". There was a section headed "Registered or unregistered", which gave the Land Registry title number EX93229 and stated that the registration was with title absolute. The Special Conditions said that the sale was "subject to tenancies listed in Extra Special Conditions". Under the heading "Extra Special Conditions" it was stated that the property was sold subject to the tenancies and leases copies of which were attached. None were, in fact, attached. The Special Conditions stated that there were no exclusions from the sale and no reservations to the seller, and that the sale was subject to the General Conditions.
  10. On the day of the auction an addendum sheet was made available. In relation to Lot 44, the addendum sheet stated: "Shop - the rent is 7,000 per annum, therefore, total income is 7,100 per annum and there is no rent review in 2011".
  11. Mr Bashir attended the auction and collected the addendum sheet. He had not inspected the Property. When the Lot was announced, the auctioneer, Mr Barnett, described it as a freehold property comprising a ground floor shop and a self contained flat on the first floor. He also mentioned the alteration in rental which was set out on the addendum sheet. Mr Bashir made the successful bid at 103,500.
  12. Mr Bashir signed a memorandum of sale ("the Memorandum") after the auction. It was headed "LOT 44". It described the "Property" as 66 Leytonstone Road, Stratford London E15 1SQ, gave the names of the respondents as the vendors, and the name and address of Mr Bashir as the purchaser, the purchaser price, stated that "the Vendor agrees to sell and the Purchaser agrees to buy the Lot for the Price", and that the agreement was subject to the Conditions of Sale so far as they applied to the Lot. There were attached to the Memorandum all the auction documents I have described, as well as a page saying that "The Property is sold subject to the leases or tenancies set out on the attached list but otherwise with vacant possession on completion", the General Conditions of Sale ("the General Conditions), and the Standard Commercial Property Conditions (2nd edition) ("the Standard Conditions"), which were incorporated in the General Conditions by Condition 1.3 of the General Conditions. Other than in the box headed "Tenancies & Accommodation" on page 45 of the catalogue giving details of Lot 44, there was no separate list of leases and tenancies.
  13. Following the auction, Mr Bashir's solicitors, Murdochs, wrote to Gelbergs, asking for an information pack. On 16 October 2008 Gelbergs responded enclosing a draft lease, a copy of the probate and a copy of the freehold title. The letter stated: "This transaction is subject to a Lease back of the upper part".
  14. After some further correspondence, Gelbergs wrote to Murdochs on 29 October 2008, stating that they were enclosing copies of plans of the Property. Only one plan was enclosed. On 31 October 2008 Gelbergs wrote again saying that there were in fact two plans and that "part of the residential unit is located on the ground floor and unless agreement is reached regarding your clients acquisition will be retained by our clients" (sic). The plans showed the ground floor flat. The plan of the ground floor clearly showed two separate entrances to the ground floor and first floor residential accommodation.
  15. In correspondence between solicitors Mr Bashir maintained that the property to be sold comprised the freehold subject to a lease of only the shop and the first floor flat, and with vacant possession of the ground floor flat. The respondents' position was expressed in the following terms in a letter from Gelbergs dated 24 November 2008:
  16. "The only parts of the property that are being disposed of is the ground floor commercial element. The residential part of the building and your clients offer was obviously made on that basis and the price reflects the same."
  17. A notice to complete was served on behalf of Mr Bashir on 8 December 2008 for completion on 22 December 2008. Gelbergs responded on 12 December 2008 stating that there was a substantial error in the preparation of the auction particulars. They suggested that the matter proceed either by the contract being set aside and the deposit returned, or by the price being increased to reflect the value of vacant possession of the ground floor flat, or by a lease being granted to the respondents of the ground floor flat on the same terms as the lease of the first floor flat. Those terms were not accepted. The respondents refused to complete.
  18. The proceedings

  19. Mr Bashir commenced proceedings on 18 February 2009 for specific performance by the transfer of the Property, damages and interest.
  20. The heart of the original Defence was that the property offered for sale at the auction was subject to a condition that there would be a lease-back of the ground floor flat and garden; that the respondents were at all times ready, willing and able to complete the sale on those terms; and that Mr Bashir was in breach of contract in failing to refuse to execute a lease of the ground floor flat; further or alternatively, the contract wrongly stated that the sale of the Property was only subject to the shop lease and the lease of the first floor flat, which the parties never agreed or intended; and the contract was therefore unenforceable. There was a counterclaim for rectification; alternatively, rescission; alternatively, damages.
  21. The Defence was subsequently amended, and the allegation that the auction sale was subject to a condition that there would be a lease-back of the ground floor flat and garden was deleted. The heart of the amended Defence was that, on a true construction of the contract, Lot 44 included only the shop and the first floor flat. In other words, the respondents' revised case was that the contract was for the sale of only part of the freehold comprised in the registered title, that is to say a "flying freehold", with the freehold of the ground floor flat and the rear garden being retained. They were ready, willing and able to complete the contract on that basis. It was alleged, further or in the alternative, that both Mr Bashir and the respondents entered into the contract under a common mistaken belief that the only land comprised in the Property was that described in the auction catalogue, and without the intention that the ground floor flat should form part of the Lot or be transferred to the appellant, and by reason of those matters the contract was void ab initio. In addition to the existing counterclaim for rectification, alternatively rescission, alternatively damages, there were added counterclaims for a declaration that the property comprised in the Lot consisted only of the first floor flat and the shop; alternatively a declaration that the contract was void ab initio; alternatively compensation for late completion under the Standard Conditions.
  22. The Judgment

  23. The Judge first considered the proper meaning of the contract. The initial question she addressed was whether, on an objective approach to the meaning of the contract, the parties to it were to be assumed to know the actual accommodation which it comprised even though, in fact, they were not aware that there was a vacant ground floor flat. Ms Michelle Stevens-Hoare, counsel for Mr Bashir, contended that no such assumption should be made. Mr Zachary Bredemear, counsel for the respondents, thought that it should. The Deputy Judge invited supplemental written submissions on that point at the end of the oral hearing. She said ([28]) that she found it an extremely difficult issue. Having recounted the arguments of each side and referred to Investors' Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, Prenn v Simmonds [1971] 1 WLR 1381, Reardon Smith Line v Yngvar Hansen-Tangen [1976] 1 WLR 989, National Bank of Sharjah v Dellborg Court of Appeal (Civil Division), 9 November 1992, Scottish Power Plc v Britoil [1997] EWCA Civ 2752 and Youell v Bland Welch (1992) 2 LIoyd's Rep 127, she concluded ([28] and [33]) that the contract was to be interpreted, as submitted on behalf of the respondents, on the basis of the actual state of the Property, namely that it included the vacant ground floor flat.
  24. The Deputy Judge then turned to the interpretation of the contract in the light of that finding. On that issue she took the unusual course of rejecting the pleaded case and submissions of both sides. She rejected as wholly uncommercial Mr Bredemear's submission that the reasonable bidder, who had made a proper inspection and carried out pre-contract searches and enquiries, would have understood that what was being offered for sale was a flying freehold limited to the shop and the first floor flat, and that the flying freehold would not include the common parts or the garden. She said ([38]) that no reasonable observer could have thought that was what the parties intended.
  25. The Deputy Judge, however, also rejected, as equally wholly uncommercial, Ms Stevens-Hoare's submission that the objective observer would consider that the contract meant that the vendor had to transfer the freehold subject only to a lease back of the first floor flat. She said ([39]) that the objective observer would realise that something had gone wrong with the language of the contract, and would not expect the contract to give a gift of vacant possession of an additional flat to the purchaser. The Deputy Judge considered ([42]) that the objective observer would immediately realise that the description of the Property was incomplete; and that the contract had to be construed with reference to the price and the knowledge that it would not be adequate consideration for the sale of the freehold subject only to the existing lease of the shop and an obligation to grant a 125 year lease of the first floor flat.
  26. The Deputy Judge considered that there was a further alternative to the interpretations respectively advanced by the parties. She said ([43]) that the description of the property in the auction catalogue made it clear that the economic interest which the purchaser was obtaining was the reversion on a 125 year lease of the first floor flat at a nominal rent plus the reversion on the shop lease, and not vacant possession of the ground floor flat. She said that the reasonable observer would expect that result to be achieved by construing the contract to require the transfer of the whole of the freehold of the Property with the benefit of the existing lease of the shop and subject to a lease-back of both the first floor flat and the ground floor flat on the same terms, namely for a period of 125 years at a ground rent of 100. She said that was a sensible and workable construction of the contract, and indeed the only possible construction if the contract was not to be void for uncertainty. Although it involved a considerable addition of words to the contract, she considered that her interpretation fell fairly within paragraphs [22]-[25] of the judgment of Lord Hoffman in Chartbrook as follows:
  27. "22. In East Pantiles (Plant Hire) 1981 263 E.G. 61 Brightman L.J. stated the conditions for what he called "correction of mistakes by construction":
    "Two conditions must be satisfied; first there must be a clear mistake on the face of the instrument; secondly it must be clear what correction ought to be made in order to cure the mistake. If those conditions are satisfied then the correction is made as a matter of construction."
    23. Subject to two qualifications, both of which are explained by Carnwath J in his admirable judgment in KPMG LLP v Network Rail Infrastructure Ltd [2007] Bus LR 1336, I would accept this statement, which is in my opinion no more than an expression of the common sense view that we do not readily accept that people have made mistakes in formal documents. The first qualification is that "correction of mistakes by construction" is not a separate branch of the law, a summary version of an action for rectification. As Carnwath LJ said, at p 1351, para 50:
    "Both in the judgment, and in the arguments before us, there was a tendency to deal separately with correction of mistakes and construing the paragraph 'as it stands', as though they were distinct exercises. In my view, they are simply aspects of the single task of interpreting the agreement in its context, in order to get as close as possible to the meaning which the parties intended."
    24 The second qualification concerns the words "on the face of the instrument". I agree with Carnwath LJ, paras 44-50, that in deciding whether there is a clear mistake, the court is not confined to reading the document without regard to its background or context. As the exercise is part of the single task of interpretation, the background and context must always be taken into consideration.
    25 What is clear from these cases is that there is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant. In my opinion, both of these requirements are satisfied."
  28. The Deputy Judge noted ([45]) that the original Defence had, prior to amendment, pleaded that the contract was for the sale of the freehold subject to the existing lease of the shop and new leases of the ground floor flat and the first floor flat.
  29. In view of her decision on interpretation of the contract, the Judge said ([51]) that she did not have to consider whether the contract was void for uncertainty.
  30. She also said ([52] that in the circumstances the issue of rectification did not arise. She nevertheless expressed briefly her view, which was that the claim for rectification for mutual mistake was fatally flawed because there was no mistake in writing down the terms of the agreement.
  31. The Deputy Judge also considered the respondents' further alternative contention (which it was not necessary to decide in the circumstances) that the contract was void by reason of a fundamental common mistake. She considered ([65]) that the respondents were not entitled to rely on common mistake to argue that the contract was void because they had it within their power to find out the true facts and should have done so before selling.
  32. The Deputy Judge therefore ordered specific performance of the contract to sell the freehold in the Property subject to Mr Bashir executing a 125 year lease to the Respondents at a rent of 100 in respect of each of the first floor flat and the ground floor flat.
  33. The appeal

  34. In her skeleton argument Ms Stevens-Hoare made detailed submissions why the Deputy Judge was wrong to approach the interpretation of the contract in the present case on the assumption of knowledge of the existence of the vacant ground floor flat, even though the parties to the contract at the time had no such knowledge. It is not necessary to reproduce those submissions in this judgment because Mr Bashir's case is that, even if such knowledge is assumed, the meaning of the contract in the present case is still clear in providing for the transfer of the freehold subject only to the lease of the shop and the lease-back of the first floor flat and otherwise with vacant possession. With encouragement from the Court, Ms Stevens-Hoare (while not abandoning them) did not develop her submissions on the assumption of knowledge point, but proceeded to present her arguments on the hypothesis that the Deputy Judge was correct on the point.
  35. Ms Stevens-Hoare submitted that the documents available to Mr Bashir at the auction, and the Memorandum and associated documents, clearly identify the property being auctioned as the freehold of the whole of the Property. That is, she says, apparent from page 45 of the auction catalogue dealing with Lot 44, and the description in the Special Conditions of the lot being sold and its registered title. It is also apparent, she said, from the description of the Property and the reference to Lot 44 in the Memorandum. She also referred to Condition 1.1.2 of the General Conditions, which provides that "the property" means "the property offered for sale by the Auctioneers as specified in this auction catalogue and/or the Special Conditions".
  36. She submitted that, in the light of those matters and commercial reality, the Deputy Judge was plainly right to reject the respondents' case that the contract was for the sale of only part of the freehold. No reasonable bidder attending the auction, she said, would have thought they were bidding for a flying freehold, in itself a highly unusual arrangement and one carrying obvious complications in terms, for example, of the difficulty of mortgaging it.
  37. Furthermore, she submitted that the documents simply could not bear the interpretation which the Deputy Judge placed on them. The only tenancies mentioned were those specified on page 45 of the catalogue, namely the existing lease of the shop and the lease-back of the first floor flat. She criticised the approach of the Deputy Judge. She said that, instead of starting with the words of the contract and seeking to interpret them objectively, the Deputy Judge sought to impose on the parties an agreement she considered they ought to have agreed in the light of the amount of the reserve. The Deputy Judge, she submitted, was effectively interpreting the contract in the light of her own view about what would have been a fair bargain. Ms Stevens-Hoare referred to Lord Hoffmann's observation in Chartbrook at [20] that: "It is of course true that the fact that a contract may appear to be unduly favourable to one of the parties is not a sufficient reason for supposing that it does not mean what it says." She emphasised that, unlike Chartbrook's interpretation of the contract in that case, giving the words of the catalogue and the Memorandum in the present case their ordinary meaning does not produce a result which is arbitrary or irrational.
  38. The respondents' notice

  39. The respondents have filed a respondents' notice which asks for a declaration, in place of that in the Judge's order, that the contract provides for the sale only of part of the registered freehold title, namely the ground floor shop and the first floor flat.
  40. Discussion

  41. Notwithstanding the Deputy Judge's careful analysis and Mr Bredemear's able submissions, I consider that it is clear that Mr Bashir is correct in his interpretation of the contract made at the auction. That is so, whether or not, on an objective interpretation, it is to be assumed that the parties were aware at the time that the Property included a vacant ground floor flat.
  42. I agree with the Deputy Judge that the wording of the auction catalogue, its associated documentation and the Memorandum, as well as commercial reality, make it impossible to interpret the contract as one for the sale of only part of the freehold of the Property. Quite simply, all those documents point to a sale of the entire registered title and not just part of it. I do not accept Mr Bredemear's submission that the description of the "Property" in the auction catalogue as "A mid terrace property comprising Ground Floor Shop with separate front access to a Self-Contained flat at first floor level" and the details of "Tenancies & Accommodation" at the bottom of the same page are contrary indications. The same page of the catalogue describes Lot 44 as being 66 Leytonstone Road, Stratford, London E15 1 SQ; the picture on that page has arrows pointing to the entire building; and the same page has the single word "FREEHOLD" beneath the words on which Mr Bredmear relies. The Special Conditions in the auction catalogue again describe the Lot by reference to the address of the Property, describe the title as freehold, and specify the title number at the Land Registry for the whole Property.
  43. The sale of a flying freehold is very unusual. It involves conveyancing complications in relation to easements and other rights and obligations between the separate freeholds. I accept Mr Bredemear's submission that Condition 18.2 of the General Conditions and Condition 3.3 of the Standard Conditions provide a contractual mechanism for addressing those issues. There would also, however, be issues about the precise areas included within each freehold parcel, such as the ownership of the walls and floors dividing them and of common parts, such as staircases.
  44. Further, as Ms Stevens-Hoare pointed out, the commercial reality is that there would be obvious complications in mortgaging a flying freehold. The market for such properties is plainly more limited than for a more conventional property sale. Mr Bredemear referred to Mustafa v Baptist Union Corporation Ltd [1973] 1 EGLR 177, in which Warner J rejected the defendant's argument that a property which it sold to the plaintiff at auction excluded a blocked-off room let to a third party. That case, it seems to me, is more consistent with Mr Bashir's case than the respondents'. In reaching his conclusion, Warner J said that, whatever the situation may have been in centuries gone by, flying freeholds are uncommon today, except in such places as New Square, Lincoln's Inn, where the difficulties to which they give rise are overcome by Acts of Parliament. He said that an ordinary reasonable person, looking at the printed particulars of the lot in that case, would not be on his guard for the possible existence of a flying freehold within it. That is precisely the position in the present case. For all those reasons, it is simply inconceivable that, if there was an intention to sell only part of the freehold, that would not have been highlighted in the clearest possible terms in the catalogue.
  45. That then leaves as the only possibilities Mr Bashir's interpretation of the contract or the Judge's. The obvious first point is that Mr Bashir's interpretation does not involve any interference with the language used in the documentation. The sale is quite simply of the registered freehold title to the Property subject to the only two tenancies identified in the documentation, namely the existing shop lease and the lease-back of the first floor flat. The Judge's interpretation involves subjecting the sale to an incumbrance which is nowhere mentioned a new lease to be granted on completion to the respondents for 125 years at a ground rent of 100 per annum.
  46. The Judge's interpretation is founded upon the following considerations. First, the parties, knowing of the existence of the vacant ground floor flat, would appreciate that the description of the "Property" and the details of the accommodation as comprising only the shop and the first floor flat were incomplete. Secondly, the reserve and actual price reflected the value of the reversion on the shop lease and a lease for 125 of the first floor flat at a fairly nominal rent. Thirdly, the objective observer would realise that something had gone wrong with the language of the contract, and would not expect the contract to give a gift of vacant possession of an additional flat to the purchaser. Fourthly the Judge's construction, to give effect to that expectation, was sensible and workable and the only possible construction if the contract was not to be void for uncertainty.
  47. I respectfully disagree with the Judge's approach in several respects. In the first place, this is not a case, like Chartbrook, in which the wording used by the parties, on one construction, leads to arbitrary and irrational results. The wording of the documentation in the present case is clear and, if it is given its ordinary meaning, the results are perfectly workable. It may have resulted in a good bargain for one of the parties, but, as Lord Hoffmann pointed out in Chartbrook at [20], that is not itself a sufficient reason for supposing that the contract does not mean what it says.
  48. There may be a case in which the commercial advantage would be so great that it moves the case into the sphere of irrationality and arbitrariness. That, however, is not the present case. The evidence was that the auctioneer, Mr Barnett, had suggested the reserve of 80,000 on the basis of an estimated rental value of 8,000 (once the rent review was completed) and a yield of 10 per cent. In the event, by the time of the auction the reviewed rent was 7,000 and the total rent was 7,100, as stated in the addendum available on the day. The reserve of 80,000, mentioned in the catalogue, therefore represented more than a 10 per cent yield. Furthermore, in the event, the purchase price of 103,500 was much more than the reserve. Moreover, no evidence was given of how much greater than 80,000 and 103,500 an objective observer would have expected the reserve and the actual price respectively to have been if the ground floor flat was to be given with vacant possession.
  49. That leaves then the fact that, on the assumed knowledge of the parties about the existence of the ground floor flat, it would have been apparent that there had been a mistaken omission of that flat from the description of the Property and the accommodation which it comprised, and that it would have been apparent that the reserve of 80,000 was low. I cannot see how those factors could possibly be sufficient to permit an interference with the clear wording of the contract. I do not agree with the Deputy Judge that Chartbrook leads to that conclusion. Lord Hoffmann referred (at [22]) with approval to the statement of Brightman LJ in East v Pantiles (Plant Hire) Ltd (quoted above) that the two conditions for the correction of mistakes by construction are that there must be a clear mistake on the face of the instrument, and it must be clear what correction ought to be made in order to cure the mistake. That statement of principle must, however, be set in its factual context.
  50. The present case is not one, like Chartbrook, in which what is being interpreted is an agreement between two negotiating parties. This case concerns a contract resulting from a bid at an auction. In that situation the terms are not negotiated. It is entirely up to the vendor to decide what to offer and on what terms. The bidder decides how much to bid in the light of what is offered and the terms dictated by the vendor. If, as in the present case, there has been a misdescription of the property and a low reserve leading the bidder to conclude that the vendor has or may have made a mistake in failing to take account of part of the accommodation, that does not mean that the contract must be construed so as to rectify the vendor's mistake. That is to confuse construction with the need for an action for rectification for (say) unilateral mistake. The vendor's mistake will only be corrected by construction if, objectively, it is clear what property and terms the vendor intended to offer and that the bidder understood them and intended to bid on that basis.
  51. I cannot see how those requirements are satisfied in the present case. Objectively, it far from clear that, with his assumed knowledge of the ground floor flat, Mr Bashir would have known that the respondents intended the sale to be subject to a lease-back of that flat for a term of 125 years at a ground rent. As I have said, there was no evidence of how far below market value was the reserve of 80,000. In any event, someone in Mr Bashir's position might have thought that the reserve was low because the respondents, who were described in the auction catalogue as selling as executors, wished to have a quick sale or were generally not concerned to obtain the highest price or because, in setting a low reserve, they wished to encourage as much interest as possible so as to encourage competitive bidding.
  52. Even if, objectively, someone in Mr Bashir's position and with his assumed knowledge would clearly have appreciated that the respondents had overlooked the ground floor flat in fixing the price or in failing to provide for a lease-back on the same terms as the first floor flat, it does not follow that it would be clear that he made his bid on the basis of such a lease-back. He might simply have thought and intended that, in view of the clear terms of the catalogue and its associated documents, he was going to get a commercial bargain as a result of the respondents' oversight. The Judge was plainly motivated by the conviction that he would not expect, and should not enjoy, such a bargain, but I cannot see the factual basis for the former or the jurisprudential basis for the latter.
  53. Finally, I do not agree that the Judge was right to take account, if as apparently she did ([43)], of the desirability of avoiding the contract being void for uncertainty. I do not see how there could be any question of that outcome. Mr Bashir's interpretation, which reflected the actual wording of the contractual documentation, was not uncertain: it was clear and workable.
  54. The respondents' notice does not seek to rely on the alternative claims, advanced at first instance, of rectification and voidness for mutual mistake. Nor did Mr Bredemear wish to argue that specific performance should be refused as a matter of discretion in view of the respondents' mistake
  55. Conclusion

  56. For those reasons I would allow the appeal and vary the order of the Judge in the manner sought by Mr Bashir.
  57. LORD JUSTICE GROSS

  58. I agree
  59. MASTER OF THE ROLLS

  60. I also agree.


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