Westvilla Properties Limited v Dow Properties Limited

 

The Message

The Court will strive to make a contract for the sale of land enforceable.

The Case

A purchaser sought to release itself from a contract on the basis that the documentation was incomplete and uncertain and was not binding upon it On 19 March 2008, Westvilla entered into a contract to sell to Dow the freehold of a property at 24 High Street, Andover for £850,000. The sale was subject to the grant back to Westvilla of a 999 year lease of the upper parts of the property. The ground floor was let to Cheltenham & Gloucester who paid a rent of £48,000 per annum and 36% of the service charge.

The property was sold to Dow immediately after it had failed to sell at auction. The auction pack contained the relevant plans of the property but these were not actually included with the relevant Leases attached to the contract. In addition, the Lease back to Westvilla had a gap where the service charge percentage was meant to be included.

It was only after entering the contract that Dow realised that the Lease back to Westvilla was on unusual terms as it provided for Westvilla to manage the building and for Dow to pay a service charge to Westvilla for the part Dow controlled. The amount of that service charge was unknown as the relevant percentage had never been inserted in the draft Lease.

There were various other errors in the documentation relating to the extent of the premises to be let to Westvilla and it was essential to have reference to the Lease plans, which were not attached to the contract, to determine what was intended.

The parties sought to renegotiate and agreed revised terms at a meeting but, although both parties sought to rely on these terms at various stages, they were not binding as any variation of a property contract has to be in writing signed by or on behalf of the parties.

The dispute came down to whether the original contract was too incomplete to be enforced due to the omission of the plans and the amount of the service charge Dow had to pay. The Court had to decide whether, in the light of the admissible background knowledge, it could make clear sense as to what was intended.

The Judge emphasised that the Court is reluctant to hold an agreement void for uncertainty and will only do so as a last resort. Accordingly, the Judge adopted a purposive approach to interpreting the contract to try to make sense of it. His job was not made any easier by the parties who each had adopted quite different and numerous interpretations as to what service charge was payable.

Insofar as the missing plans were concerned, the Judge relied on the fact they were included in the auction pack and, although Dow had not looked at this, he held that any reasonable person would have appreciated that these were the correct and intended plans and the Court could correct the omission by construing the contract as referring to these plans.

So far as the service percentage was concerned, the position was complicated by the fact that Westvilla’s Lease did not just exclude the Cheltenham & Gloucester ground floor premises as some rooms in the basement and ground floor were retained by Dow. The Judge had to decide what a reasonable person would have clearly understood the percentage to be? If the correction required to the contract was not clear, then it would be void for uncertainty.

The options ranged from the percentage simply being a fair and reasonable share to it being the 36% Dow collected from Cheltenham & Gloucester plus a further percentage for the extra rooms excluded from Westvilla’s Lease.

The Judge concluded that an actual percentage, rather than a fair or reasonable share, was clearly intended and that any person who had considered the auction pack and was aware of what all the documents provided would have thought that the extra rooms were part of the common parts which Westvilla would be responsible for. On that basis, Dow would only be responsible for the services relating to the Cheltenham & Gloucester premises and the figure of 36% they paid should have been included as payable by Dow under the Westvilla Lease.

Unfortunately for Dow, whilst the finding as to the percentage they had to pay was the lowest possible result, it meant the contract was enforceable and they were ordered to now complete the purchase.