George Wimpey UK Ltd v V I Construction Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Peter Gibson,Lord Justice Sedley,Mr Justice Blackburne |
| Judgment Date | 03 February 2005 |
| Neutral Citation | [2005] EWCA Civ 77 |
| Docket Number | Case No: A3/2004/1466 |
| Court | Court of Appeal (Civil Division) |
| Date | 03 February 2005 |
[2005] EWCA Civ 77
Lord Justice Peter Gibson
Lord Justice Sedley and
Mr Justice Blackburne
Case No: A3/2004/1466
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr. Jules Sher Q.C.
HC03C02228
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Guy Fetherstonhaugh Q.C. and Mr. Gary Cowen (instructed by Messrs Birketts) for the Respondent
Mr. John Wardell Q.C. and Mr. Martin Rodger (instructed by Messrs Macfarlanes of 10 Norwich Street, London) for the Appellant
This is an appeal by the Defendant, V. I. Components Ltd. ("VIC"), from the order made on 23 June 2004 by Mr. Jules Sher Q.C., sitting as a Deputy High Court judge. By his order he ordered rectification of a contract executed on 2 July 1999 by VIC and the Claimant, George Wimpey UK Ltd., then George Wimpey Holdings Ltd. ("Wimpey"). By that contract VIC agreed to sell and Wimpey agreed to purchase the land known as the VIC Industrial Estate in Erith, Kent ("the Site"). The consideration payable by Wimpey consisted of an initial payment, but with a deferred payment becoming due in a certain contingency. The rectification ordered related to the contractual formula for the deferred consideration. The type of rectification the conditions for which the judge found were satisfied was that based on unilateral mistake.
The facts
In 1989 VIC ceased manufacturing at the Site. It then explored the possibility of selling the site for residential development. VIC retained Mr. Jonathan Youens of Montague Youens, chartered surveyors, to act for it in negotiating a sale. He reported to Mr. Ron Daykin, a director and the majority shareholder of VIC, who also took part in the negotiations.
Wimpey is a substantial company in the field of residential development, operating throughout the country. Mr. Ketteridge, Wimpey's Regional Director in the South East, alone handled the negotiations for Wimpey. It had its own formal procedures for a decision to be made by the main board for Wimpey to enter into a contract to purchase land. Mr. Ketteridge did not have authority to take such a decision. Nor did the person to whom he reported, Mr. Steven Kendal, the Regional Director in the South East, as he was not on the main board. Before the board so decided, it required a written commercial report from Mr. Ketteridge and a written legal report from its solicitors.
In 1998 outline planning permission was obtained for 231 flats to be built on the Site. The plans, on the basis of which outline planning permission had been granted, showed an unusual amount of detail. This included the overall size of the flats, the number of bedrooms and the situation of the flats with particular reference to whether any particular flat commanded a river view. The amount of detail enabled a schedule to be prepared by Wimpey, identifying the area and projected selling price for each flat. The basic price of each flat was based on the flat's square footage. To that was added a further sum for what were called enhancements: a premium for a river view of 10% of that basic price, a premium of £2,000 for undercroft parking and an uplift of £1,000 for every floor the flat was above ground level. The aggregate of the selling prices totalled £20,610,090 of which about £2 million consisted of enhancements. That aggregate was the basic figure, and from the outset of the negotiations between VIC and Wimpey it was recognised that not only would Wimpey pay an initial purchase price but it would also pay what was called an overage payment if the aggregate of the sale prices achieved exceeded the base figure. The overage payment was to be 50% of the excess over the base figure.
It was always likely that, in the course of obtaining detailed planning permission, there would be changes in the number and size of the flats. In the event, each of the 231 flats changed in size and a further four flats were built.
On 10 March 1999 Wimpey made an offer to VIC to purchase the Site for £2,250,000 plus 50% of the overage. On 15 March Mr. Ketteridge proposed to VIC a formula to cope with overage in respect of any changes in the size or numbers of flats constructed on the Site. His proposal was to adjust the basic price to allow for the change in the size of the flats; once that had been done, the enhancements were to be added back to the adjusted basic price. If a new flat, additional to the 231 flats, was constructed, he proposed that its basic price was to be calculated by taking the price per square foot of the flat in the schedule having an area closest to that of the new flat and multiplying that price by the square footage of the new flat.
Agreement in principle was obtained, but there were further discussions and exchanges. Each of VIC and Wimpey had substantial and reputable firms of solicitors acting for it. For VIC Macfarlanes acted, Mr. Talbot-Ponsonby being the solicitor primarily concerned. For Wimpey Eversheds acted. Mr. Speer was the experienced solicitor primarily concerned. By 25 March Mr. Talbot-Ponsonby had produced the first draft of the overage provisions in the draft contract of sale and purchase of the Site. Cl. 16. 10. 2 contained the formula for a new flat and cl. 16. 10. 3 the formula for an altered flat. In each formula the enhancements were shown added back by the inclusion of the notation "+ E". The draft contract went through 12 editions.
By 15 April 1999 Eversheds had produced a legal report on the contract. By a commercial report of that date on Eversheds' report Mr. Ketteridge described the overage provisions in general terms. The board of Wimpey approved the proposed acquisition.
On 11 April 1999 another interested purchaser made an improved offer, as did yet another purchaser shortly afterwards, and Wimpey dropped out of the negotiations. Wimpey re-entered the negotiations on 24 June 1999 when by letter Mr. Ketteridge offered an increased initial price of £2,650,000. He added:
"This revised monetary upfront figure is the only adjustment to the original deal agreed to which the contract is in place. It is acknowledged that there will be no other adjustments to this contract, other than the revised upfront payment, i.e. the original uplift remains."
However, he requested a meeting with Mr. Youens in order to discuss the formulae in clauses 16. 10. 2 and 16. 10. 3, as, he said, they fell down in certain situations. A date of 2 July 1999 was said to be the target date for exchange of contracts.
On the same date, Mr. Daykin expressed VIC's acceptance of the offer subject to contract. On 25 June Mr. Youens met Mr. Ketteridge and discussed the difficulty identified by Mr. Ketteridge. This related to a new flat with an area precisely midway between the areas of two existing flats in the schedule, each having a different price. There was no mechanism for choosing between them.
Mr. Ketteridge produced a proposal which largely, but not entirely, eliminated the difficulty which he identified. He described his proposal as "more even-handed". Also on 25 June he sent Mr. Youens and Mr. Daykin his proposed new formulae by fax together with worked examples. The formulae included "+ E", although in the final line of two of the worked examples he omitted "+ E".
Mr. Youens then worked on the formulae and on 27 June sent a fax to Mr. Daykin in these terms, so far as material:
"Have been through Greg's formulae. It is fairer, but on working through I encountered problems on three bedroom units. In addition there is no clarification that the price used must be for a flat of same number of bedrooms. The formulae in the contract can, as Greg points out throw up some serious anomalies which would probably affect you more.
I have refined the formula as follows:
Formula for calculation of Gross Selling Price where a unit is either altered in size or added.
G = Us x (£ + F(B – Us))
Where:
G = Gross selling price for the unit
Us = Unit Size
For three Bedroom flats:
£ = 90
F = 0.08757
B = 1100
For Two Bedroom flats:
£ = 112.71
F = 0.08339
B = 712
For One Bedroom flats:
£ = 130.95
F = 0.085
B = 378
The above means that 16.10.2 & 16.10.3 can be merged."
Mr. Youens said that, if Mr. Daykin agreed, he would send the formula to Mr. Ketteridge and Macfarlanes.
Mr. Daykin sent back a copy of the last page of the fax sent to him by Mr. Youens on which Mr. Daykin wrote, "Agreed – this will also help re enhancements". Thereby he showed that he had noticed the absence of the addition of enhancements from the formula.
On 28 June Mr. Youens faxed Mr. Ketteridge in the following terms:
"Having been through your formulae which does indeed make things more equitable I have been refining it. The formula is essentially the same whether a unit is altered or added and therefore I would suggest that 16.10.2 and 16.10.3 be merged."
He then set out the formula which he had agreed with Mr. Daykin.
Mr. Ketteridge telephoned Mr. Youens and asked him to explain the formula and in particular the F factor. Having heard Mr. Youens' explanation, he was satisfied. He thought that there was no change and he did not notice the absence from the formula of "+ E".
Mr. Youens' formula was sent to Mr. Speer as an agreed formula to be inserted into the contract. Mr. Speer was told by Mr. Ketteridge's assistant, Ms. Kensington, that Mr. Ketteridge had "got clearance for this clause". Eversheds took no responsibility for advising on the formula. They said in their legal report, to which the contract was appended:
"The new clause 16. 10. 2 has been agreed by...
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