Chartbrook Ltd v Persimmon Homes Ltd and Others; HL 1 Jul 2009References:
 UKHL 38,  27 EG 91,  BLR 551, 125 Con LR 1,  3 WLR 267,  1 P & CR 9,  Bus LR 1200,  NPC 86,  CILL 2729,  4 All ER 677,  1 AC 1101,  WLR (D) 223 Links: Bailii
, HL Coram:
Lord Hope of Craighead, Lord Hoffmann, Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe and Baroness Hale of Richmond Ratio:
The parties had entered into a development contract in respect of a site in Wandsworth, under which balancing compensation was to be paid. They disagreed as to its calculation. Persimmon sought rectification to reflect the negotiations.
Held: The appeal succeeded. There were difficulties in construing the contract. The contract came to be read after a period of sharp falls in value which were not reflected comfortably in the words used, and the phrase 'additional residential payment' made no particular commercial sense. It was necessary for it to be clear first that the language had gone awry, and second what a reasonable bystander would have understood the parties to have meant. Those conditions being satisfied, the appeal was allowed.
Evidence of negotiations can be given to establish that 'a fact which may be relevant as background was known to the parties'. It was also argued that the course pre-contractual negotiations should be allowed and taken into account in construing the contract. There was however no clear case shown for departing from this exclusionary rule or changing what is now settled practice.
The court should consider 'what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean.'
Lord Hoffmann noted that prior negotiations might be relevant for purposes other than the drawing of inferences about what the contract means.
As to the cases of East and KPMG, he said: 'What is clear from these cases is that there is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant. In my opinion, both of these requirements are satisfied.' This case cites:
- At first instance - Chartbrook Ltd v Persimmon Homes Ltd and Another ChD (Bailii,  EWHC 409 (Ch),  2 P & CR 9,  1 All ER (Comm) 1083,  11 EG 160)
The claimants had entered into an agreement with the defendant house-builder for the development of a site which the claimants had recently acquired. The structure of the agreement was that the developer would obtain planning permission and, under . .
- Appeal from - Chartbrook Ltd v Persimmon Homes Ltd CA (Bailii,  EWCA Civ 183,  11 EG 92,  2 All ER (Comm) 387)
- Cited - A & J Inglis v Buttery & Co CA ((1877) 5 R 58)
Surrounding circumstances are not admissible for any purpose of finding out which words the parties intended to use rather than did use in their contract. Lord Justice Clerk Moncreiff said that in all mercantile contracts 'whether they be clear and . .
- Cited - River Wear Commissioners v Adamson HL ((1877) 2 App Cas 743)
It was not necessary for there to be an ambiguity in a statutory provision for a court to be allowed to look at the surrounding circumstances.
As to the Golden Rule of interpretation: 'It is to be borne in mind that the office of the judge is . .
- Cited - Prenn v Simmonds HL ( 1 WLR 1381,  3 All ER 237)
Commercial contracts are to be construed in the light of all the background information which could reasonably have been expected to have been available to the parties in order to ascertain what would objectively have been understood to be their . .
- Cited - Birmingham City Council v Walker HL (Bailii,  UKHL 22, Times 18-May-07,  1 P & CR 16,  2 P & CR DG10,  L & TR 24,  3 All ER 445,  HLR 38,  2 AC 262,  NPC 61,  2 WLR 1057,  2 EGLR 58,  21 EG 131)
The tenant was the son of the former tenant. The tenancy had originally been in the ownership of his father and his mother. The father died in 1969, when the tenancy not yet a secure tenancy. On the mother's death, the council argued that the first . .
- Cited - A & J Inglis v Buttery & Co HL ((1878) 3 AC 552)
The presumption is that a contract document expresses all the terms in the contract with the effect that the court will only look to the document 'in determining what the contract really was and what it really meant. Lord Blackburn preferred the . .
- Cited - KPMG Llp v Network Rail Infrastructure Ltd CA (Bailii,  EWCA Civ 363,  Bus LR 1336)
The parties disputed the interpretation of a break clause in their lease. Carnwath LJ said that courts should not readily accept that parties have made mistakes in formal documents: 'correction of mistakes by construction' is not a separate branch . .
- Cited - Alexiou and Another v Campbell PC (Bailii,  UKPC 11)
(the Bahamas) . .
- Cited - Kirin-Amgen Inc and others v Hoechst Marion Roussel Limited and others etc HL (House of Lords,  UKHL 46, Bailii,  RPC 169, (2005) 28(7) IPD 28049,  1 All ER 667)
The claims arose in connection with the validity and alleged infringement of a European Patent on erythropoietin ('EPO').
Held: 'Construction is objective in the sense that it is concerned with what a reasonable person to whom the utterance . .
- Cited - Bank of Credit and Commerce International SA v Ali, Khan and others (No 1); BCCI v Ali HL (Times 06-Mar-01, Gazette 12-Apr-01, House of Lords, Bailii,  UKHL 8,  1 All ER 961,  2 WLR 735,  1 AC 251,  ICR 337,  IRLR 292,  Emp LR 359)
A compromise agreement which appeared to claim to settle all outstanding claims between the employee and employer, did not prevent the employee later claiming for stigma losses where, at the time of the agreement, the circumstances which might lead . .
- Cited - East v Pantiles Plant Hire Ltd CA ( 2 EGLR 111, (1981) 263 EG 61)
The court considered the circumstances under which rectification could properly be ordered in respect of a deed. Brightman LJ said: 'It is clear on the authorities that a mistake in a written instrument can, in certain limited circumstances, be . .
- Cited - Jumbo King Ltd v Faithful Properties Ltd ((1999) 2 HKCFAR 279, HKLII)
(Court of Final Appeal of Hong Kong) . .
- Cited - Investors Compensation Scheme Ltd v West Bromwich Building Society HL (Times 24-Jun-97, House of Lords, Bailii,  UKHL 28,  1 All ER 98,  1 WLR 896,  AC 896)
The respondent gave advice on home income plans. The individual claimants had assigned their initial claims to the scheme, but later sought also to have their mortgages in favour of the respondent set aside.
Held: Investors having once . .
- Cited - Mannai Investment Co Ltd v Eagle Star Assurance HL (Times 26-May-97, House of Lords, Bailii,  2 WLR 945,  UKHL 19,  AC 749,  3 All ER 352,  24 EG 122)
Leases contained clauses allowing the tenant to break the lease by serving not less than six months notice to expire on the third anniversary of the commencement date of the term of the lease. The tenant gave notice to determine the leases on 12th . .
- Cited - Countess of Rutland's Case ((1604) 5 Co Rep 25, Commonlii 01-Jan-04)
Popham CJ said: 'it would be inconvenient, that matters in writing made by advice and on consideration, and which finally import the certain truth of the agreement of the parties should be controlled by averment of the parties to be proved by the . .
- Cited - Homburg Houtimport BV v Agrosin Private Ltd (the 'Starsin') HL (House of Lords,  UKHL 12, Bailii, Times 17-Mar-03, Gazette 15-May-03,  2 WLR 711,  1 AC 715,  1 CLC 921, 2003 AMC 913,  1 Lloyd's Rep 571,  1 All ER (Comm) 625,  2 All ER 785,  1 LLR 571)
Cargo owners sought damages for their cargo which had been damaged aboard the ship. The contract had been endorsed with additional terms. That variation may have changed the contract from a charterer's to a shipowner's bill.
Held: The specific . .
- Cited - Bratton Seymour Service Co Ltd v Oxborough CA ( BCLC 693)
The company was set up to acquire and manage a property divided into flats which also included 'amenity areas' (tennis courts, swimming pool, gardens). It was argued that there should be implied into the articles of association an obligation on the . .
- Cited - National Bank of Sharjah v Dellborg and others CA (Bailii,  EWCA Civ 2070)
The court expressed doubts about having recourse to surrounding circumstances where the meaning of a contract is clear, but nevertheless admitted such evidence in this case. . .
- Cited - Pepper (Inspector of Taxes) v Hart HL (lip,  3 WLR 1032,  AC 593,  1 All ER 42, Bailii,  UKHL 3)
The inspector sought to tax the benefits in kind received by teachers at a private school in having their children educated at the school for free. Having agreed this was a taxable emolument, it was argued as to whether the taxable benefit was the . .
- Cited - Practice Statement (Judicial Precedent) HL ( 3 All ER 77,  1 WLR 1234)
The House gave guidance how it would treat an invitation to depart from a previous decision of the House. Such a course was possible, but the direction was not an 'open sesame' for a differently constituted committee to prefer their views to those . .
- Cited - Partenreedesei Karen Oltmann v Scarsdale Shipping Co Ltd (The Karen Oltmann) ( 2 Lloyds Rep 708)
The parties disputed the application of the word 'after' in a break-clause in a charter party which provided that 'Charterers to have the option to redeliver the vessel after 12 months' trading subject giving 3 months' notice'. By their negotiations . .
- Cited - Shore v Wilson ((1842) 9 CI & Fin 355,  EngR 950, Commonlii, (1839,1842) 9 Cl & Fin 355, (1842) 8 ER 450)
Parke B said: 'In the first place, there is no doubt that not only where the language of the instrument is such as the Court does not understand, it is competent to receive evidence of the proper meaning of that language, as when it is written in a . .
- Cited - Regina v National Insurance Commissioner, Ex parte Hudson HL ( AC 944)
The House considered whether it would have power to make a ruling with prospective effect only. Lord Diplock said the matter deserved further consideration; Lord Simon said that the possibility of prospective overruling should be seriously . .
- Cited - Antaios Compania Naviera SA v Salen Rederierna AB ('the Antaios') HL ( AC 191,  3 WLR 592,  3 All ER 229,  2 Lloyds Rep 235)
A ship charterer discovered that the bills of lading were incorrect, but delayed withdrawal from the charter for 13 days. They now sought leave to appeal the arbitration award against them.
Held: Though he deprecated extending the use of the . .
(This list may be incomplete) This case is cited by:
- Cited - Sigma Finance Corporation, Re; (in administrative receivership) SC ( 1 All ER 571,  BCC 40, Bailii Summary, UKSC 2009/0143, SC Summary, SC, Bailii,  UKSC 2)
The court considered how the losses of the insolvent company were to be distributed as between secured creditors and preferential creditors, given the terms of the applicable trust deed.
Held: The court considered the interpretations of the . .
- Cited - Westvilla Properties Ltd v Dow Properties Ltd ChD (Bailii,  EWHC 30 (Ch),  2 P & CR 19,  2 P & CR DG4)
The owner sought specific performance of its contract to sell land to the defendant. The land was subject to a proposed lease which the defendant had concluded was uncertain and unattractive, and claimed to have rescinded the contract.
Held: . .
- Cited - Oceanbulk Shipping & Trading Sa v TMT Asia Ltd CA (Bailii,  EWCA Civ 79, Times,  CP Rep 24)
The parties had settled their disagreement, but now disputed the interpretation of the settlement. The defendant sought to be allowed to give in evidence correspondence leading up to the settlement which had been conducted on a without prejudice . .
- Cited - Horwood and Others v Land of Leather Ltd and Others ComC (Bailii,  EWHC 546 (Comm),  Lloyd's Rep IR 453,  1 CLC 423)
The claimants sought to claim for personal injuries against the defendant company, now in administration, and their insurers using the 1930 Act. The insurers said they were not liable to indemnify the company. The parties disputed the standing of an . .
- Cited - Pink Floyd Music Ltd and Another v EMI Records Ltd ChD ((2010) 107(12) LSG 25, Bailii,  EWHC 533 (Ch))
The claimant sought summary judgment for a claim under Licensing agreements under which the defendants had marketed and sold the claimant's products. The remaining disputes concerned differences as to royalties from digital downloads sold through . .
- Cited - Ashcroft v Barnsdale and Others ChD (Bailii,  EWHC 1948 (Ch))
The parties sought to recitify a deed of family arrangement varying a will. The variation deed had had several mistakes which in fact increased the sum of Inheritance Tax owed. HMRC refused to accept the rectification deed unless approved by the . .
- Cited - Wickens v Cheval Property Developments Ltd ChD (Bailii,  EWHC 2249 (Ch))
The buyer of land sought a reduction in the purchase price complaining of the removal of several items (worth possibly £300,000) by intruders after exchange. The seller said that the fixtures had been excluded under the contract.
Held: . .
- Cited - Oceanbulk Shipping & Trading Sa v TMT Asia Ltd and Others SC (Bailii,  UKSC 44,  1 All ER (Comm) 1,  3 WLR 1424,  4 All ER 1011,  1 Lloyd's Rep 96, Bailii Summary, UKSC 2010/0039, SC, SC Summary)
The court was asked whether facts which (a) are communicated between the parties in the course of without prejudice negotiations and (b) would, but for the without prejudice rule, be admissible as part of the factual matrix or surrounding . .
- Cited - Farstad Supply As v Enviroco Ltd SC (Bailii Summary, Bailii,  UKSC 16, UKSC 2010/0008, SC Summary, SC)
The court was asked by the parties to a charterparty whether one of them is an 'Affiliate' of the charterer for the purposes of provisions in a charterparty by which both the owner and the charterer agreed to indemnify and hold each other harmless . .
- Cited - Autoclenz Ltd v Belcher and Others SC (Bailii,  UKSC 41, Bailii Summary, SC Summary, UKSC 2009/0198, SC,  4 All ER 745,  IRLR 820,  ICR 1157)
The company contracted with the claimants to work cleaning cars. The company appealed against a finding that contrary to the explicit provisions of the contracts, they were workers within the Regulations and entitled to holiday pay and associated . .
- Cited - Rainy Sky Sa and Others v Kookmin Bank SC (Bailii,  UKSC 50,  1 WLR 2900, Bailii Summary, SC Summary, SC, UKSC 2010/0127,  CILL 3105, 138 Con LR 1,  1 All ER (Comm) 1,  ICR 1)
The Court was asked as to the role of commercial good sense in the construction of a term in a contract which was open to alternative interpretations.
Held: The appeal succeeded. In such a case the court should adopt the more, rather than the . .
- Cited - Campbell v Daejan Properties Ltd CA (Bailii,  EWCA Civ 1503)
The tenant appealed against an order requiring the amendment of what was found to be an obvious error in the lease as to the responsibility of the lessor to make repairs to certain walls and rooves, and the apportionment of liability for payment of . .
- Cited - AJ Building and Plastering Ltd v Turner and Others QBD (Bailii,  EWHC 484 (QB))
An insurance company had engaged a main contractor to handle repairs to houses insured under its policies. The contractor had engaged the claimant subcontractor to carry out the works at the defendants' homes, but then went into insolvent . .
- Cited - Pink Floyd Music Ltd and Another v EMI Records Ltd CA (Bailii,  EWCA Civ 1429,  1 WLR 770)
The defendant appealed against an order made on the claimant's assertion that there were due to it substantial underpayments of royalties over many years. The issues were as to the construction of licensing agreements particulary in the context of . .
- Cited - Daventry District Council v Daventry & District Housing Ltd CA (Bailii,  EWCA Civ 1153,  2 All ER (Comm) 142,  Pens LR 57,  1 P & CR 5,  42 EG 120,  1 WLR 1333,  Bus LR 485)
The appellant challenged refusal of rectification of its agreement with the defendant. They asserted either mutual or unilateral mistake. The parties had agreed for the transfer of housing stock and management staff to the respondents.
Held: . .
- Cited - Marley v Rawlings and Another SC (Bailii,  UKSC 2,  2 WLR 213,  WTLR 299, 16 ITELR 642,  1 All ER 807,  WLR(D) 18,  Fam Law 466, Bailii Summary, WLRD, UKSC 2012/0057, SC Summary, SC)
A husband and wife had each executed the will which had been prepared for the other, owing to an oversight on the part of their solicitor; the question which arose was whether the will of the husband, who died after his wife, was valid. The parties . .
- Cited - Sugarman and Others v CJS Investments Llp and Others CA (Bailii,  EWCA Civ 1239)
The parties were apartment owners in a development, each owning shares in the management company. They disputed the interpreation of the Articles as to whether the owner of more than one apartment was still restricted to one vote at member meetings, . .
- Cited - Lloyds TSB Bank Plc v Crowborough Properties Ltd and Others CA (Bailii,  EWCA Civ 107)
The court was asked whether Lloyds TSB Bank Plc ('the Bank') was entitled to rectify the terms of a compromise embodied in the schedule to a Tomlin order. . .
- Cited - Arnold v Britton and Others SC (Bailii,  UKSC 36,  HLR 31,  1 All ER 1,  WLR(D) 247,  2 WLR 1593,  AC 1619, Bailii Summary, WLRD, UKSC 2013/0193, SC, SC Summary, SC Video)
A standard lease of plots on a caravan park, contained a probision which appeared to increase the rent by 10% in each year. The tenants argued that such a substantial increase could not have been intended.
Held: The tenants' appeal failed . .
- Cited - Radford and Another v Frade and Others QBD (Bailii,  EWHC 1600 (QB))
The court was asked as to the terms on which solicitors and Counsel were retained to act for the defendants. The appeals did not raise any issues concerning costs practice, and were by way of review of the Costs Judge's rulings, and not by way of . .
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