The recent Court of Appeal decision in Ahmad -v- Secret Garden (Cheshire) Limited is a useful reminder of the principles which will be applied by the Court when making an order for the rectification of a contract.
The recent Court of Appeal decision in Ahmad -v- Secret Garden (Cheshire) Limited is a useful reminder of the principles which will be applied by the Court when making an order for the rectification of a contract. The Facts In June 2010, Mr Ahmad, the owner of Oakcroft in Cheshire, entered into discussions with Mr Saleem, the owner of Secret Garden (Cheshire) Limited (“Secret Garden”), to negotiate the terms of a lease. Mr Saleem had plans to convert Oakcroft into a children’s nursery and to live there with his family. To enable Mr Saleem to carry out his plans for Oakcroft, any lease needed to allow him to use the property for any purpose, to carry out alterations and to deliver up possession at the end of the term without the need for re-instatement. He also needed to be able to sublet the property if his plans did not materialise. These terms were initially agreed on 17 March 2011 when the parties met and signed a standard form business lease (“Lease 1”). They agreed that Lease 1 would be amended to reflect the additional terms they had agreed and would be completed within four weeks. On 18 March 2011, Mr Ahmad signed and sent Mr Saleem another standard form lease with the names of the parties and particulars of the premises completed (“Lease 2”). Lease 2 provided that the property could be used for any purpose. Mr Saleem amended Lease 2 and returned it to Mr Ahmad. The parties met on 1 April 2011 to discuss the outstanding issue of rent review. This was agreed and the terms were noted on Lease 1 which was expressed to commence on 1 April 2011. On 4 April 2011 the parties signed Lease 2 dated 1 April 2011. Lease 2 did not contain the amendments shown in Lease 1. Mr Ahmad later issued possession proceedings against Secret Garden to recover the property. Secret Garden defended the claim and contended that Lease 2 should be rectified because it did not set out the full terms agreed by the parties. The County Court held that the parties had executed Lease 2 under a common mistake and made an Order for rectification. Mr Ahmad appealed. The Decision The Court of Appeal confirmed the decision of the lower Court. In her judgment, Lady Justice Arden confirmed that rectification can be granted where the parties have a clear common intention and the meaning in the executed document fails to reflect this intention. In this case, both parties had made a conscious decision to sign the two leases but had mistakenly believed that Lease 2 would take effect in conjunction with the terms of Lease 1 to set out the full terms of their agreement. There was no question in this case that there had been an objective and outward expression of accord between Mr Ahmad and Mr Saleem. The negotiations were not prolonged, they were dealing with standard forms rather than custom made documents and they had no legal advice to speak of. Furthermore, Mr Ahmad had assured Mr Saleem on 1 April 2011 that the amendments made to Lease 1 would apply to their agreement. The Court confirmed that rectification could be ordered even where this meant deleting or amending clauses on which the parties were agreed in order to achieve the original intention of the parties. For further advice on the principles which the Court will consider when faced with an application for rectification of an agreement, please contact Kate Harris on firstname.lastname@example.org or 01223 461155.