Francis v F Berndes Ltd & Ors

Factual and Procedural Background

The claimant initiated proceedings in the Chancery Division of the High Court on 21 December 2009, seeking damages for breach of an alleged written agreement dated 7 January 2004 ("the Agreement") for the sale of freehold premises comprising a club, a flat, and a workshop ("the Property") for £50,000. The claimant alleged that the first defendant, a company ("Company A"), breached the Agreement by refusing to complete the sale and instead conveying the Property to a third party. The claimant asserted the market value of the Property was significantly higher than the contract price, claiming damages of approximately £950,000 plus interest.

Company A was the first defendant, directed at all material times by a director ("Director A"). The other defendants were the children and next of kin of a deceased co-purchaser, who had died intestate. They were joined to be bound by any court order but did not participate in the proceedings. The claim involved complex factual disputes, including allegations that the Agreement was forged and entered into under duress. However, the key legal issue concerned whether the Agreement complied with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.

The document relied upon by the claimant, dated 7 January 2004 ("the 7 January letter"), was typed on Company A's headed notepaper, setting out terms including conditions for sale and signed by the parties. Company A applied for summary judgment, asserting the letter failed to comply with section 2 because it did not identify the purchaser, did not impose mutual obligations, and lacked certain obligations.

The Master heard the application on 3 November 2010, granted summary judgment in favor of Company A, and dismissed the claim. Permission to appeal was granted on 4 May 2011. The claimant appeals the decision.

Legal Issues Presented

1. Whether the 7 January letter complied with the formal requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, specifically whether it incorporated all expressly agreed terms in writing, including the identification of the purchaser and mutual obligations to buy and sell.
2. Whether extrinsic evidence can cure any defects in the 7 January letter under section 2.
3. Whether the claimant should be permitted to amend the claim to include alternative claims for rectification or restitution.

Arguments of the Parties

Appellant's Arguments

• The claimant's signature on the 7 January letter constituted unqualified assent to all material provisions, including price and conditions.
• It was clear that the purchasers were the claimant and the deceased co-purchaser, and the contract would be enforceable against them personally, even if acting as agents for a company.
• All expressly agreed terms were sufficiently recorded in the 7 January letter, satisfying section 2's formal requirements.
• Alternatively, if the contract is void for non-compliance, the claimant is entitled to claim rectification of the letter or restitution of benefits conferred due to failure of consideration.

Respondent's Arguments

• The 7 January letter failed to identify the purchaser and lacked mutual obligations to buy and sell, rendering it non-compliant with section 2.
• Defects in the document could not be cured by extrinsic evidence.
• The alternative claims for rectification and restitution were new, unsupported by draft amendments, and lacked clear prospects of success.
• The limitation period for any restitution claim had expired, and permission to amend should be refused.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Firstpost Homes Ltd v Johnson [1995] 1 WLR 1567	Section 2 of the 1989 Act requires contracts for sale of land to be in writing, signed by all parties, and contain mutual obligations; absence of purchaser's obligation invalidates contract.	The court relied on the principle that a contract must contain mutual obligations and that the 7 January letter failed to incorporate the purchaser's obligation, rendering it non-compliant.
Ruddick v Ormston [2005] EWHC 2547 (Ch)	Separate documents lacking mutual obligations to buy and sell do not comply with section 2, even if signed by both parties intending to form a contract.	The court found this case materially indistinguishable, supporting the conclusion that the 7 January letter was non-compliant.
Oun v Ahmad [2008] EWHC 545 (Ch)	Rectification remedy cannot be used to insert omitted express terms into a document to make it comply with section 2 if the omission was deliberate or not a drafting mistake.	The court agreed rectification was unavailable to cure the failure to comply with section 2 in this case.
Islington London Borough Council v Uckac [2006] EWCA Civ 340	Principles governing permission to amend pleadings, including considerations of fairness and interests of justice.	The court applied these principles in considering whether to allow the claimant to apply for permission to amend to raise restitution claims.
Cobbold v Greenwich LBC [1999] EWCA Civ 2074	General approach to allowing amendments to enable real disputes to be resolved, balanced against prejudice and public interest.	The court cited this as guiding the decision to permit the claimant to apply for permission to amend.

Court's Reasoning and Analysis

The court approached the summary judgment application on the assumption that the claimant's evidence regarding the signing and factual circumstances of the 7 January letter was correct. The critical legal question was whether the letter complied with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, which requires contracts for sale of land to be in writing, incorporating all expressly agreed terms in one document, signed by all parties, and containing mutual obligations to buy and sell.

The court noted the policy underlying section 2, emphasizing the need for certainty and avoidance of disputes by requiring all terms to be recorded in writing, thereby limiting reliance on extrinsic evidence. The 7 January letter was found to be a unilateral offer lacking explicit mutual obligations. Although signed by the claimant and the deceased co-purchaser, it failed to identify them as purchasers or to incorporate their obligation to purchase, a critical term that must be expressly agreed and recorded in writing.

The court distinguished between what the parties actually agreed and what was recorded in writing. The absence of the purchaser's obligation in the letter rendered it non-compliant with section 2. Precedents such as Firstpost Homes Ltd and Ruddick v Ormston supported this conclusion, emphasizing that contracts must contain mutual obligations and that signatures alone do not cure defects in incorporation of terms.

The court rejected the claimant's argument that extrinsic evidence could cure the defect, as section 2 aims to avoid reliance on such evidence. The claimant's alternative claims for rectification and restitution were considered new points not argued before the Master and unsupported by draft amendments. The court analyzed the nature of rectification, concluding it cannot be used to insert omitted express terms to satisfy section 2, as that would undermine the statute's legislative objective.

Regarding restitution, the court acknowledged the potential merit of a claim based on unjust enrichment due to failure of consideration but noted limitation issues and the need for proper formulation and pleadings. The court exercised discretion to allow the claimant to apply for permission to amend to raise the restitution claim, subject to conditions ensuring fairness and procedural propriety.

Holding and Implications

The court ALLOWED THE APPEAL IN PART to the limited extent of permitting the claimant to apply for permission to amend the claim to raise a restitution claim. In all other respects, the court upheld the decision of the Master, affirming that the 7 January letter did not comply with section 2 of the 1989 Act and that the claim based on it was properly dismissed by summary judgment.

The direct effect is that the claimant's original breach of contract claim remains dismissed for failure to satisfy statutory formalities. No new precedent was established beyond affirming existing principles on section 2 compliance and the limited scope of rectification. The claimant is allowed an opportunity to pursue a restitution claim by formal amendment, subject to satisfying procedural and substantive requirements. This maintains the integrity of statutory formalities while allowing potential equitable claims to be considered with appropriate safeguards.