Court Of Appeal Upholds Order For Rectification

Persimmon Homes Ltd v (1) Anthony John Hillier (2) Colin Michael Creed [2019] EWCA Civ 800

Background

Persimmon Homes Limited (the "Buyer") is a major housebuilder which holds significant amounts of land for future development. Mr Hillier and Mr Creed (the "Sellers") had for many years run a successful housebuilding business operating mainly in Kent and Sussex. In October 2012, the Buyer sought to acquire from the Sellers six parcels of land making up a development site.

By way of a share purchase agreement dated 5 October 2012 (the "SPA"), the Buyer purchased all of the shares in two of the Sellers' companies (the "Targets"). Through its purchase of the Targets, the Buyer acquired options to purchase four of the six parcels of land. The other two parcels (the "Felbridge freeholds"), which were necessary for access to the entire development site, fell under a different chain of ownership outside of the Targets and as such were not transferred to the Buyer.

The SPA contained a definition of 'properties' held by the Targets which described the location of the land but stopped short of identifying any specific parcels. The SPA contained warranties that the Targets had good title to the properties. An accompanying disclosure letter sent by the Sellers during the negotiations qualified the warranties, by stating that the Targets did not own the Felbridge freeholds.

High Court

The Buyer applied to the High Court seeking rectification of the SPA and disclosure letter so as to reflect what it claimed was the common intention of the negotiated deal between the parties: that the transaction would result in the Buyer acquiring the entire development site (i.e. all six parcels of land).

The judge found that the heads of terms agreed between the parties were contrary to the inclusion of the Felbridge freeholds in the transaction. That being said, the judge held that the Sellers' communications indicated that they controlled the entire development site and that a consequence of acquiring the Targets would be that the Buyers gained the interests in the entire site, including the Felbridge freeholds. The judge found this to have been the common intention between the parties, and ordered that the SPA and disclosure letter be rectified to reflect that intention.

This resulted in the description of 'properties' owned by the Targets in the SPA being rectified to so as to include the Felbridge freeholds along with the other four parcels. The disclosure letter...