(1) David Norma Keay (2) Linda Mary Keay v Morris Homes (West Midlands) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rimer,Lord Justice Patten,Lord Justice Laws |
| Judgment Date | 11 July 2012 |
| Neutral Citation | [2012] EWCA Civ 900 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2011/2309 |
| Date | 11 July 2012 |
[2012] EWCA Civ 900
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
His Honour Judge Barker QC
Case No: 0BM30608
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Laws
Lord Justice Rimer
and
Lord Justice Patten
Case No: A3/2011/2309
Mr John Randall QC and Mr Conrad Rumney (instructed by Gateley LLP) for the Appellant, Morris Homes (West Midlands) Limited
Mr Jeremy Cousins QC and Mr Andrew Charman (instructed by Moran & Co) for the Respondents, Mr and Mrs Keay
Hearing date: 19 April 2012
Introduction
This appeal concerns the impact, if any, of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 upon the validity of an alleged oral agreement. It is against an order made on 12 August 2011 by His Honour Judge Simon Barker QC in the Chancery Division, Birmingham District Registry. The application on which he made it was issued by the claimants, David and Linda Keay ('the Keays'), in proceedings they had brought against the defendant, Morris Homes (West Midlands) Limited ('MHL'), a developer. By their proceedings, the Keays claim damages of some £2.7m for MHL's alleged breach of an oral agreement promptly to progress certain building works.
MHL's pleaded response to the claim in its amended Defence was (a) to deny that any such agreement was made, and (b) to assert, in paragraph 20, that if such an agreement was made, it was a term of the variation of an agreement for the sale of land made in April 2004 between the Keays and MHL. MHL's further assertion was that because such term was not incorporated into an appropriate signed document, it was ineffective for its intended purpose for want of compliance with section 2 of the 1989 Act and so was void. The Keays' riposte was to issue an application for summary judgment against MHL on the paragraph 20 issue, alternatively for its striking out as disclosing no reasonable ground of defence. That was the application that came before Judge Barker.
The outcome of that application turned on two questions. First, whether the oral agreement upon which the Keays sued was one to which section 2 applied at all. That turned upon the resolution of the type of issue discussed by this court in Grossman v. Hooper [2001] EWCA Civ 615; [2001] 2 EGLR 82 ('the Grossman point'). Second, if, contrary to the Keays' case, the oral agreement was one to which section 2 applied, whether, in the events that had happened, it was in fact void for want of incorporation within a document complying with section 2. That turned upon a consideration of the decision of this court in Tootal Clothing Ltd v. Guinea Properties Ltd (1992) 64 P & CR 452 ('the Tootal point').
The judge held that the Grossman point could not be decided upon a summary judgment application but only at a trial. He therefore declined to decide whether or not the oral agreement was one to which section 2 applied. If, however, it should turn out at trial that it was one to which section 2 applied, he also held that, in the events that had happened, Tootal showed that MHL's contention that the agreement was void had no real prospect of succeeding at trial; and he made a declaration accordingly in favour of the Keays. The overall effect of his decision was, therefore, to decide the section 2 issue in favour of the Keays: and, subject to any different outcome on appeal, the Grossman point would not need to be decided at the trial.
MHL, the appellant, challenges the judge's decision on the Tootal point. The Keays, the respondents, resist the appeal and contend that the judge correctly applied Tootal. By a respondents' notice they also seek to affirm the judge's order by contending that he was wrong not to decide the Grossman point in their favour. He should, they say, have decided that the agreement was one to which section 2 did not apply at all.
John Randall QC and Conrad Rumney represented MHL and Jeremy Cousins QC and Andrew Charman represented the Keays. All counsel also appeared before the judge. We heard the argument on the Tootal point first and that on Grossman point second. I consider it logical, however, to deal with the points in the reverse order. That is because if Mr Cousins is correct that the agreement is not one to which section 2 applied at all, the Tootal point does not arise. I shall, however, first (i) set out the material provisions of section 2; (ii) summarise the facts; and (iii) explain the issues in the litigation more fully.
Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989
Section 2 of the 1989 Act provides, so far as material:
'2. Contracts for sale etc of land to be made by signed writing
(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed and in one document or, where contracts are exchanged, in each.
(2) The terms may be incorporated in a document either by being set out in it or by reference to some other document.
(3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract. ….'
As Lord Neuberger MR, in a judgment with which Smith and Elias LJJ agreed, said in Helden v. Strathmore Ltd [2011] EWCA Civ 452; [2011] 2 EGLR 39:
'27 … Section 2 is concerned with contracts for the creation or sale of legal estates or interests in land, not with documents that actually create or transfer such estates or interests. So a contract to transfer a freehold or a lease in the future, a contract to grant a lease in the future or a contract for a mortgage in the future are all within the reach of the section, provided of course that the ultimate subject matter is land. However, an actual transfer, conveyance or assignment, an actual lease, or an actual mortgage are not within the scope of section 2 at all.
2. … [Section 2] was directed to tightening up the formalities required for contracts for the creation or transfer of interests or estates in land and it was not concerned with documents that actually create or transfer legal estates or interests in land. ….'
Section 2(1) certainly did tighten up the formalities required for contracts for the sale or other disposition of interests in land. Its effect is merciless. An appropriately signed document purporting to amount to a contract for the sale or other disposition of an interest in land will not in fact create a valid contract unless it includes all the expressly agreed terms of the sale or other disposition. If it fails do so it will be void: see Firstpost Homes Ltd. v Johnson [1995] 1 WLR 1567, at 1571, per Peter Gibson LJ, with whose judgment in this respect Hutchison and Balcombe LJJ agreed. As Briggs J observed, however, when delivering the lead judgment of this court in North Eastern Properties Ltd v. Coleman Ltd and another [2010] EWCA Civ 277; [2010] 1 WLR 2715, one, perhaps unintended, result of section 2(1) is that:
'43. … It enables parties to land contracts who have changed their minds to look around for expressly agreed terms which have not found their way into the final form of land contract which they signed, for the precise purpose of avoiding their obligations, on the ground that the lack of discipline of their counterparty, or even their own lack of discipline, has rendered the contract void.'
Grossman was a case in which a party sought, unsuccessfully, to escape from a purported contract by adducing evidence of what he said was an expressly agreed term that had not been included in the written document. The present case is, however, not quite of that nature. It is not one in which MHL has advanced the case that there was an expressly agreed term that was not included in any written document. It is the Keays who are seeking to enforce an oral agreement, the making of which MHL disputes; but MHL has also advanced the alternative defence that such agreement, if made, is void for section 2 reasons.
The facts
On 2 April 2004 a written agreement for the sale of six parcels of registered freehold land in Hockley, Birmingham was entered into between (1) Imzax Limited (a company wholly owned and controlled by the Keays, but not a claimant), (2) the Keays (Imzax and the Keays being together the sellers) and (3) MHL, the buyer. The agreement incorporated the first edition of the Standard Commercial Property Conditions. Imzax was selling five of the parcels and the Keays the sixth. The price was £4.5m, of which £1.5m was apportioned to Imzax's land and £3m to the Keays' land. A deposit of £50,000 was paid on the signing of the agreement and MHL was to pay the balance by instalments of (i) £1.5m to Imzax on completion, (ii) £1.75m to the Keays 12 months later and (iii) a final payment of £1.2m to the Keays 24 months later. As only part of the balance was to be paid on completion, clause 2.4.4 provided that (a) on completion, MHL was to grant the Keays a charge over two identified parts of the land to secure the total unpaid balance of £2.95m and interest; (b) on payment of the £1.75m, the charge over one part was to be released; and (c) on payment of the £1.2m, the charge over the other part was also to be released. Upon completion, MHL and the Keays were also to enter into an agreement for lease substantially in the form of the draft agreement for lease...
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