Summary

It was proper to grant rectification of an agreement for an underlease where, because of a mutual mistake, the agreement had not given full effect to the mutual intention of the parties.

Facts

The applicant buyer (M) applied for the rectification of an agreement for an underlease between it and the respondent seller (J).

The parties had agreed that M would have the right to receive and retain a minimum rent and that any shortfall between the minimum rent and the rent payable would be guaranteed by J. However, the agreement for the underlease contained no reference to J's guarantee. The parties agreed that because of a mutual mistake the agreement had not given full effect to the mutual intention of the parties. While the agreement could be rectified by deed, because of changes in the law concerning stamp duty land tax under the Finance Act 2005, rectification other than by court order would create liability for stamp duty land tax, which had not been envisaged by the parties.

Held

It was no bar to rectification that the mistake could be put right in more ways than one. It was a bar to rectification if the parties had agreed on the words to be used but had not appreciated that they would not have the tax effect they had hoped. The instant mistake was one that had denied the parties the effect of the transaction as they had originally intended. It was appropriate to order rectification to enable the parties to obtain the relief that they would otherwise be entitled to.

Application granted