|[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]|
England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Littman & Anor v Aspen Oil (Broking) Ltd  EWCA Civ 1579 (19 December 2005)
Cite as:  EWCA Civ 1579
[New search] [View without highlighting] [Printable RTF version] [Help]
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
THE HON MR JUSTICE HART
HC 04 C02929
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LONGMORE
LORD JUSTICE JACOB
| Colette Celine Littman
Andrew Hylton Young
|- and -
Aspen Oil (Broking) Limited
Smith Bernal WordWave Limited
190 Fleet Street, London EC4A 2AG
Tel No: 020 7421 4040 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Timothy Fancourt QC and Andrew Bruce (instructed by Messrs Boodle Hatfield) for the Defendant/Appellant
Crown Copyright ©
Lord Justice Jacob (giving the first judgment at the invitation of Lord Justice May):
"1. This is the trial of a preliminary issue in relation to a landlord and tenant matter pursuant to an order of Master Moncaster dated 2nd December 2004. The claimants are the landlords of premises at Colette House, Piccadilly, London. By a lease dated 12th April 2001 the premises known as the Second Floor, Colette House were let to the defendant for a term of 5 years commencing on 24th June 2001 at an annual rent of £66,024 (excluding VAT).
2. The lease contained a clause ("clause 10") in the following terms:
"Either party shall be entitled by giving not less than six months' notice in writing to the other to terminate this lease at the end of the third year of the Term ("Termination Date") and provided that up to the Termination Date in the case of a notice given by the Landlord the Tenant shall have paid the rents hereby reserved and shall have duly observed and performed the covenants on the part of the Tenant and the conditions herein contained this lease shall absolutely cease and determine on the Termination Date but without prejudice to any right or remedy of either party in respect of any antecedent breach by the other of the provisions of this lease"
3. By a notice given by a letter dated 10th December 2003 the defendant purported to bring the lease to an end pursuant to that clause. In the action the claimants have disputed the effectiveness of that notice on the grounds that the defendant was in breach of its obligations under the lease as at the termination date. The defendant's primary case is that it is irrelevant whether or not it was in breach of the terms of the lease as at the termination date because its right to break was unconditional. Its alternative case is that any breach had been cured by the termination date as the result of a tender of a sum of money in respect of dilapidations. This preliminary issue is not concerned with that secondary question.
4. The question with which I am concerned is whether the defendant's right to terminate the lease was conditional on it having duly observed and performed its covenants at the termination date. It is common ground that such conditionality exists, if it exists at all, solely because of the express wording contained in clause 10. The difficulty for the claimants is that the express wording in clause 10 applies only "in the case of a notice given by the landlord". The claimants contend that on their true construction these words should be read as if they said "in the case of a notice given by the tenant" or, which amounts to the same thing, "in the case of a notice given to the landlord". Alternatively, the claimants contend that clause 10 should be rectified so to provide."
"11. It is quite plain that clause 10 as it stands is an absurdity. There can be no rhyme or reason in making the exercise by the landlord of its right to terminate conditional on the performance by the tenant of its obligations under the lease. No commercial purpose in such a provision can be imagined. Moreover the inclusion of such a provision would put it in the power of the tenant, by its own breach of covenant, to defeat the right conferred on the landlord. Although there is nothing grammatically or syntactically wrong with the formulation, it is in my judgment obvious that something has gone wrong with the clause. A landlord needs a condition of this kind in relation to its right to break in the same way that a fish needs a bicycle."
"15. An alternative way of putting the case, suggested by the court, was that it was not obvious what the error was since it might have been the case that Miss Gowman [who had acted for the landlord in the negotiations] had deliberately introduced some qualification in relation to a notice given by the landlord but had then accidentally included an entirely inapposite condition which was relevant only to a notice given by the tenant. The weakness of that approach however is that it is difficult (and I have found it impossible) to hypothesise any corresponding condition which either party could sensibly have wished to introduce in relation to a notice given by the landlord."
16. In my judgment, looking at the clause it is obvious not only that a mistake has been made in its formulation but also obvious what that mistake is. I would accordingly construe the words "in the case of a notice given by the landlord" as "in the case of a notice given by the tenant".
"It is clear on the authorities that a mistake in a written instrument can, in certain limited circumstances, be corrected as a matter of construction without obtaining a decree in an action for rectification. 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. If they are not satisfied then either the claimant must pursue an action for rectification or he must leave it to a court of construction to reach what answer it can on the basis that the uncorrected wording represents the manner in which the parties decided to express their intention. In Snell's Principles of Equity 27th ed p 611 the principle of rectification by construction is said to apply only to obvious clerical blunders or grammatical mistakes. I agree with that approach. Perhaps it might be summarised by saying that the principle applies where a reader with sufficient experience of the sort of document in issue would inevitably say to himself, "Of course X is a mistake for Y"."
"Either party shall be entitled by giving not less than six months' notice in writing to the other to terminate the lease at the end of the third year of the Term ("Termination Date") and provided that up to the Termination date in the case of a notice given by the landlord
the Tenant shall have paid the rents hereby reserved and shall have duly observed and performed the covenants on the part of the Tenant and the conditions herein containedthe Landlord intends to demolish or reconstruct the demised premises or to occupy them in connection with its own business this lease shall absolutely cease and determine on the Termination Date but without prejudice to any right or remedy of either party in respect of any antecedent breach by the other of the provisions of this lease."
"The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) that the parties must, for whatever reason, have used the wrong words or syntax."
This is just such a case. I recognise that it means holding the tenant accepted an onerous condition (for his right to break depends on full compliance with all the covenants) but that is not the same thing as reading the clause to mean something daft.
i) The parties already had an existing lease, the 1996 lease from which to work. They were in dispute about a notice purportedly given by the tenant to terminate that lease. The new lease was to be the result of negotiations settling that dispute;
ii) The parties initially agreed in principle a 5 year term "with mutual break after 3 years." No condition on either the tenant or landlords' right to break was agreed or discussed;
iii) Miss Gowman, the solicitor acting for the landlords, nonetheless set about drafting a clause which imposed a condition (of due performance) on the tenant's right to break. She knew that such a clause was unlikely to be signed by a well-advised tenant. This is because it is not easy to perform all covenants perfectly (a cracked window might be a small breach, but nonetheless a breach, of a repairing covenant, for example);
iv) She made further amendments to the clause after consultation with her client, and then sent the draft new lease consisting of the language of the 1996 lease with all the amendments indicated in red. Clause 10 in its final form was one of the amendments, she having erroneously written "landlord" for tenant. She did not separately draw attention to the fact she was seeking to impose a condition on the tenant's right to break;
v) Her opposite number for the tenant was Mr Levan. He studied the draft and saw the clause in question. He thought she was trying something on. He also realised that read literally what had in fact been drafted was a nonsense and if read literally the clause could do his clients no harm. He realised that Miss Gowman had erroneously used the word "Landlord" when she meant "Tenant";
vi) So he decided not to point her error out, nor to challenge the whole question of conditionality of the break clause. He decided to accept the clause as it stood, not only knowing that Miss Gowman had made a mistake but also what she had really meant.
"I think it must be shown: first, that one party A erroneously believed that the document sought to be rectified contained a particular term or provision, or possibly did not contain a particular term or provision which, mistakenly, it did contain; secondly, that the other party B was aware of the omission or the inclusion and that it was due to a mistake on the part of A; thirdly, that B has omitted to draw the mistake to the notice of A. And I think there must be a fourth element involved, namely, that the mistake must be one calculated to benefit B. If these requirements are satisfied, the court may regard it as inequitable to allow B to resist rectification to give effect to A's intention on the ground that the mistake was not, at the time of execution of the document, a mutual mistake."
"58. There is, as it seems to me, a paradox in the notion of what an honourable and reasonable person would do in the context of an arm's-length commercial negotiation. This is a context in which honour (or honesty) and rationality (or reasonableness) are frequently not on speaking terms. I doubt whether Mr Fetherstonhaugh 's submission that the two epithets qualify each other does more than compound the paradox.
59. Take the present case. An honourable person negotiating for VIC would probably have asked Wimpey if they realised that E had been left out, but I very much doubt whether a reasonable negotiator would have done so. His first duty would have been to his own principal, whose interests undoubtedly lay in leaving E out and not alerting Wimpey to the omission.
60. The phrase 'honest and reasonable' is not a term of art. It is a judicial attempt to sketch a line beyond which conduct may be regarded as unconscionable or inequitable. Its duality, however, is a recognition that honesty alone is too pure a standard for business dealings because it omits legitimate self-interest; while reasonableness alone is capable of legitimising Machiavellian tactics.
61. Mistake is a concept which sits awkwardly in this space. Absent a prior accord which has simply not been carried into effect, absent also a dishonest inducement to contract, one is looking for a mistake on the claimant's own part which the defendant was honour-bound, despite his own legitimate business interests, to point out to him. I am unable to accept that this was such a case on any tenable view of the evidence.
62. There are at least two kinds of mistake. One is a literal misunderstanding of some fact material to the proposed contract. The other is an error of judgment in entering into the contract. I find it difficult to think that the second kind has any relevance to the law of unilateral mistake. Nobody is bound, even in honour, to help his opposite number to negotiate to the best advantage."
Mr Fancourt submitted that Mr Levan was doing no more than acting in his client's legitimate business interests – no more taking advantage of a mistake by the other side than a buyer who knows he is buying a valuable antique from a seller who thinks the thing is near worthless.
Lord Justice Longmore:
Lord Justice May: