JIS (1974) Ltd. v MCP Investment Nominees I Ltd.

(As Approved by the Court)

LORD JUSTICE CARNWATH:

The Background

1. In July 1989, the Defendants' predecessor in title, Sun Alliance and London Assurance Company Limited ("Sun Alliance"), agreed in principle with the Claimant for the grant of a lease of a site at One Legg Street, Chelmsford. The claimant had obtained planning permission to build an office building of some 70,000 sq. ft. Sun Alliance were to develop the building and grant a lease to the claimant. The local planning authority required the building to incorporate a small set of shop units on part of the ground floor amounting only to 2,990 sq. ft. Sun Alliance hoped to obtain planning permission to turn the shop units into offices.

2. The parties entered into an agreement for the lease on 1 December 1989. It provided for Sun Alliance to carry out the Landlord's works as defined, and by clause 7 provided for the parties respectively to grant and accept a lease of the premises in the form of the draft annexed to the agreement. Simultaneously with entering into the agreement for the lease, the parties entered into a supplemental agreement for an underlease of the shop units. Clause 1 of that supplemental agreement required Sun Alliance to take all reasonable steps to procure planning permission for the shop units to be used as offices. Clause 3 provided that, if planning permission had not been obtained by the practical completion date, then immediately after the grant of the lease of the shops, the claimant would grant to Sun Alliance an underlease of the shop units in the form of the annexed draft (which provided for a term of 25 years, less the last day). (By clause 2, if permission for office use of the units were obtained, the agreement would cease to have effect). To cater for the two alternatives, the parts of the draft lease which required to be adapted for the possibility of shop use (for example, the user clause) included the relevant parts in square brackets.

3. The building was duly completed, and the lease granted, on 8 January 1993. Because planning permission for office use of the shop units had not been received before practical completion, the underlease of the shop units was also granted by the claimant to Sun Alliance on the same day. The term of the lease as granted was 25 years commencing on 24 June 1991. Clause 1 defined the demise in the following terms:

" ..... The Landlords hereby demise unto the tenant all that land and premises known as One Legg Street, Chelmsford, Essex for identification shown edged red on the site plan annexed hereto (hereinafter called 'the demised premises' which expression shall be deemed to include all Landlord's fixtures and fittings therein or thereon or improvements thereto whenever made and shall also include (save for the purposes of rent review as provided in the Schedule hereto) the part thereof (hereinafter called 'the Units') shown for identification edged blue on the lower ground floor map annexed hereto) ..... " (italics added)

In the rent review Schedule paragraph 2 was in the following terms:

"For the purposes of this Schedule only, the expression 'the demised premises' excludes the Units."

4. Clause 5 of the lease contained an option for the tenant to determine the lease. This is at the heart of the present dispute:

"Option to tenant to determine at sixteenth year

5 (a) The tenant may at any time within the twenty-eight day period (in respect of which time shall be of the essence) commencing on the date of determination of the yearly rent payable for the demised premises for the rent period commencing at the end of the fifteenth year of the term hereby created serve notice upon the Landlords in writing specifying a date not later than six months after the date of service of the notice upon which the Tenant will give vacant possession of the demised premises to the Landlords whereupon the succeeding provisions of this clause will take effect.

(b) Upon the date specified in such notice as aforesaid the Tenant shall pay to the Landlords an amount equal to one year's yearly rent (determined as aforesaid) and shall surrender the demised premises and yield the same up to the Landlords in accordance with the provisions of Clause 2 (6) of this Lease ..... "

I need read no more from that clause.

5. The underlease of the shop units was for the same period as the lease, less the last day. The rent was nominal (whimsically described as "the yearly rent of one white rose"). This was a departure from the draft underlease, which had contemplated a rack rental. Another difference from the draft underlease, was that the latter had provided that the underlease and the reversion to the lease could not be assigned separately by the Landlord. This provision was not reproduced in the underlease as granted. Thus the underlease became a valuable asset in its own right.

6. In June 1999 Sun Alliance transferred their reversion, together with their interest in the underlease, to the Defendants. In subsequent discussions between the parties to the present proceedings, the Defendants took the position that, in order to exercise the option under Clause 5, the Claimants would need to give up vacant possession of the whole of the building, including the shop units, even though the latter are subject to the Underlease to the Defendants. This was said to be the consequence of the inclusion of the units in the definition of the "demised premises".

7. These proceedings were begun by the Claimants in May 2001 for a declaration that, either by construction or as an implied term, the requirement in Clause 5 for vacant possession should not extend to the shop units ("the construction issue"); alternatively, for rectification of the lease to achieve that effect ("the rectification issue").

8. Formally there are two appeals before us, although relating to the same subject matter. The first (with permission of the judge) relates to the order of Mr Justice Hart on 20 June 2002, dismissing the part of the claim relating to the construction issue. The second relates to the rectification issue. That claim was summarily dismissed by Deputy Master Cousins on 28 May 2002, but Mr Justice Hart, at a hearing immediately following the judgment on the construction issue, granted permission to appeal and allowed the appeal. On 16 August 2002 Lord Justice Robert Walker granted the Defendants permission to cross-appeal on the rectification issue, and directed that the Court of Appeal should have the opportunity to consider the two issues "together and in the round".

The construction issue

9. The judge summarised the issue between the parties:

"As we have already seen, the definition of the demised premises in the lease expressly includes the shop units, save for the purposes of the rent review provisions. Given the subsistence of the underlease, this presents an apparently insuperable problem for the tenant. The vacant possession condition in the option cannot be satisfied unless the tenant can first determine the underlease and obtain vacant possession of the shop units with a view to delivering those up to the landlord.

The contention of the claimant is that, although this is the literal meaning of the words used, this cannot have been intended by the parties. What the parties meant to say was that the vacant possession condition applied only to the office parts of the building, or that it applied to the demised premises with the exception of the shop units. Accordingly, for the purposes of clause 5, the expression 'the demised premises' should be read as excluding the shop units .....

The defendants' answer to that point, put shortly, was that, since the parties had clearly spelled out their meaning by the use of a defined term, there could be no doubt what they intended by it. 'The demised premises' clearly and unequivocally included the shop units, and that was an end of the matter on the question of construction."

10. The judge agreed with the Defendants on this point, and so do I. The starting point must be the wording of the contract. The judge referred to some extracts from recent authorities about the admissibility and relevance of evidence as to the background of the contract. (We have also been shown an illuminating paper by Mr Lewison himself, his 2002 Blundell lecture "Interpreting Property Documents - How Far Has The Law Come?"). I do not see any need to review those cases, because, whatever the limits of admissible background information, it is only of assistance insofar as it may throw light on the meaning of the language as used by the parties. In Melanesian Mission Trust Board v Australian Mutual Provident Society [1997] 2 EGLR 128 in the Privy Council Lord Hope said:

"The intention of the parties is to be discovered from the words used in the document. Where ordinary words have been used they must be taken to have been used according to the ordinary meaning of these words. If their meaning is clear and unambiguous effect must be given to them because that is what the parties are taken to have agreed by their contract."

I do not see any material difference between that and recent statements in, for example, BCCI v Ali [2002] 1 AC 251, [2001] UKHL/8 where Lord Bingham said (para 8):

"To ascertain the intention of the parties the court reads the terms of the contract as a whole giving the words used their natural and ordinary meaning in the context of the agreement, the parties' relationship and all the relevant facts surrounding the transaction so far as is known to the parties."

Lord Hoffmann, having referred to his own speech in ICS v West Bromwich BS [1998] 1 WLR 896, 913, said:

"But the primary source for understanding what the parties meant is their language interpreted in accordance with conventional usage ..... "

11. Here the language of the contract is all too clear. "Demised premises", for the purposes of the break clause, are defined as including the shop units. To put it beyond doubt, the schedule says that they are excluded only for the purpose of the rent review. That is what the language says, and no amount of background evidence will change that stark fact. For the same reason, there is no room for implying terms, since it is a basic rule that an implied term must not contradict any express term of the contract.

12. The only tenable argument for the claimants is based on the court's power to correct an obvious error. Mr Brock says that it is obvious that the parties made a mistake in relation to the break clause. It can be corrected simply in the definition of "demised premises", to which I have referred. There is already a parenthesis excluding the shop units in relation to the rent review provisions; this exclusion, he says, should also apply to the break clause.

13. No doubt the court has power in certain circumstances to correct obvious errors as part of the exercise of construction rather than rectification. That was recently affirmed by the House of Lords in Homburg Houtimport BV and Others v Agrosin Private Ltd and Another [2003] 2 WLR 711, [2003] UKHL 13, where Lord Bingham said at paragraph 23:

"I take it to be clear in principle that the court should not interpolate words into a written instrument, of whatever nature, unless it is clear both that words have been omitted and what those omitted words were ..... "

Lord Millett put it a little more broadly. He said at paragraph 192:

"The clause does not make grammatical sense as it stands, and it is obvious that words have been omitted. The court must, therefore, supply the omission by implying at least the minimum necessary for the clause to make grammatical sense. This is what all the judges below did. But the authorities show that in a proper case the court will go further. Where it can see, not only that words have been omitted, but what those words are, then it is its duty to supply them. It is not necessary that the court should be certain precisely what words have been omitted; it is sufficient that it knows their gist. The process is one of construction, not rectification ..... "

14. The high point of Mr Brock's argument on this point is by analogy with the decision of this court in Holding & Barnes Plc v Hill House Hammond Ltd (No 1) [2002] L & TR 7, 103. It is necessary to see what was said in that case in the context of the facts. It related to the sale of an insurance business under which there were to be granted seven leases, two of which related to complete buildings and five to parts of buildings. All seven leases contained landlord's repairing covenants. One of the leases of a complete building ("The Ilford lease") contained a covenant in the following form:

"to keep the structure and exterior of the property in good and tenantable repair and condition."

The other lease of a whole building had a different form of covenant:

"4.3 ..... to keep the structure and the exterior of the building (other than those parts comprised in the property) in good and tenantable condition."

The problem was that the lease defined "the property" as the whole building, with the result that, read literally, the clause meant there was an obligation to keep in repair the exterior of the property , other than the property . Not surprisingly, the court held that was an obvious nonsense and it was corrected. Lord Justice Peter Gibson said at paragraph 50:

"The problem which arises is a good illustration of the dangers of the use of the word processor to produce a draft which is then copied to provide other drafts to be adapted for the purpose of other cases."

He went on to say that looking at the leases together it could be seen that there was an obvious error and -

"What the parties plainly intended was a repairing covenant in the same form as that of the Ilford lease ..... "

Clearly what had happened was that the draftsman of the particular lease had taken by mistake a covenant from one of the leases of a part building. Sir Martin Nourse referred to this as "an obvious clerical error" which the court could correct.

15. Mr Brock relies on the statements in the leading judgment of Lord Justice Clarke with which Lord Justice Peter Gibson also agreed. Lord Justice Clarke referred to the recent cases on interpretation of contracts, including BCCI v Ali (above) and the statement of principles by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912-913. Those cases emphasise the importance of looking at contracts against the background as known to the parties. Lord Justice Clarke then referred to the cases on rectification, in particular, the judgment of Lord Justice Brightman in East v Pantiles Plant Hire Ltd [1982] 2 EGLR 111 at 112 where he said:

"It is clear on the authorities that a mistake in a written instrument can, in certain limited circumstances, be corrected as a matter of construction without obtaining a decree in an action for rectification. Two conditions must be satisfied: first, there must be a clear mistake on the face of the instrument; secondly, it must be clear what correction ought to be made in order to cure the mistake. If those conditions are satisfied, then the correction is made as a matter of construction. If they are not satisfied then either the claimant must pursue an action for rectification or he must leave it to a court of construction to reach what answer it can on the basis that the uncorrected wording represents the manner in which the parties decided to express their intention."

Lord Justice Clarke concluded:

"Those principles must, of course, now be read in the light of the principles of construction set out in cases like the ICS case. However, Mr Cherryman correctly accepts that where it is obvious to a reasonable man with the relevant knowledge that there has been a mistake, it is appropriate to correct that mistake by a process of construction."

16. Following that guidance, the judge in the present case said:

"Accordingly, I proceed on the basis that, if it can be shown on the language of the document, construed in the light of the relevant background, that there has been a clear mistake, and that it is clear what correction has to be made to cure the mistake, then it is permissible to construe the document as if it contained that correction."

17. As I said, it is important to see the judgments in Holding & Barnes in the factual context. The clause as it stood was an obvious nonsense on its face. Whether one describes that as a clerical error, whatever precisely that means, or, perhaps its more modern equivalent, a word processing error, it was clearly a nonsense and it was also clear what the alternative should be. Although Lord Justice Clarke referred to the need to take into account the background knowledge of the parties, the background knowledge to which he was referring was in fact very limited. It simply involved a comparison with the other leases, and the knowledge that they were all entered into at the same time as part of the same transaction. By comparison with the other lease, it was quite clear what was intended.

18. In my view that does not help Mr Brock in this case. The break clause is not obvious nonsense on its face. The complaint is that, when one analyses the lease and the underlease in more detail, one can see that the clause is practically inoperable. The tenant can only give vacant possession of the shop units to the landlord if either it can first buy the underlease back from the landlord/underlessee, or if it comes to an end for some other reason. Neither, it is said, would have been a possibility which was in the contemplation of the parties. The former would imply that the landlord could, in effect, prevent the exercise of the option by refusing to sell. The latter was very unlikely because of the intrinsic value of the underlease, and contrary to the intention of the parties who contemplated the underlease extending effectively for the same period as the lease.

19. This argument is powerful and certainly relevant to rectification. However, in my view the problem is quite different from the obvious nonsense which was corrected in Holding & Barnes . The task of interpretation does not allow the court to rewrite the contract.

20. That view is enough to dispose of the construction issue. I should mention a further difficulty raised by mr Lewison. He says that correcting the mistake is not as simple as Mr Brock suggests. It may not be enough simply to exclude the shop units from the demised premises for the purposes of the break clause. Any re-draft would have to take account of the possibility, not only of the grant of occupational sub-tenancy to the units, but also of the sale of the underlease itself as a separate asset (which the 1993 transaction, unlike the earlier draft, permits to be done). The operation of the break clause in the lease would (in the absence of provision to the contrary) have the effect of terminating not just the lease but also the underlease, and any inferior sub-tenancies. That is the effect of Pennell v Payne [1995] QB 192, approved by the House of Lords in Barrett v Morgan [2000] 2 AC 264. Thus those interests would lose any capital value they retain and might have claims for damages against their respective landlords for breach of the covenant for quiet enjoyment. There would therefore need to be some provision to preserve these interests.

21. Mr Brock's answer to that is that in 1993, before Pennell v Payne , the parties would have had a different view of the law, and should be taken as having contracted with that in mind. He gains some comfort from BCCI v Ali , where a reference in a 1990 contract to "claims which exist or may exist", was interpreted by reference to claims which might reasonably have been in contemplation at the time, not claims which were only made possible by a House of Lords' decision seven years later which "developed or, more bluntly, changed the law" (see Lord Nicholls, paragraph 33).

22. I do not find that answer convincing. The question in Ali was what the parties had in mind in the words they actually used in the contract, rather than, as here, what they might have had in mind in relation to words they did not use. Further, although the law as settled by Pennell was a departure from previous authority, it cannot be said that the previous law was so clear the other way that it can be assumed that this point would have been ignored. In Lord Justice Simon Brown's judgment in Pennell at page 201 he summarised the effect of the various text books prior to the date of that decision. As he said, some - including Foa's General Landlord and Tenant Law 1957 Edn, and Woodfall in the current edition - took the view which the Court of Appeal subsequently adopted in Pennell . I also note that in her evidence in the present proceedings, Mary Ball, the Sun Alliance's in-house legal adviser at the time of the leases, when asked about what the parties would have done on this point, said:

" ..... I can only speculate ..... what we would have done, [in relation to the tenancy of the units] but I believe we would have found a way to ensure that the Units' tenants' leases were not affected by the operation of the break clause, as this would not have been difficult to do."

So she is saying, not necessarily that it would have been of no conern at all, but that it would have been dealt with.

23. However, I prefer not to decide the construction issue on this point. The problems which Mr Lewison raises are entirely hypothetical, and I am far from convinced that they would be problems in practice. I prefer therefore to rest my decision on the short point that the error is not an obvious nonsense, as in the cases to which I have referred.

Rectification issue

24. Having found against the claimants on the construction issue, the judge heard argument and gave a separate judgment on the rectification issue. Here we are not reviewing a final judgment after trial. The question is simply whether the judge was right to say that this was not so clear a case that summary judgment was appropriate.

25. The principles for rectification are not in dispute. They are conveniently summarised by Lord Justice Peter Gibson in Swainland Builders Ltd v Freehold Properties Ltd [2002] 2 EGLR 71, [2002] EWCA.Civ 560 at paragraphs 33 to 34. He said:

"The party seeking rectification must show that:

(1) the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified;

(2) there was an outward expression of accord;

(3) the intention continued at the time of the execution of the instrument sought to be rectified;

(4) by mistake, the instrument did not reflect that common intention.

I would add the following points derived from the authorities:

(1) the standard of proof required if the court is to order rectification is the ordinary standard of the balance of probabilities:

.....

(2) While it must be shown what was the common intention, the exact form of words in which the common intention is to be expressed is immaterial if, in substance and in detail, the common intention can be ascertained .....

(3) The fact that a party intends a particular form of words in the mistaken belief that it is achieving its intention does not prevent the court from giving effect to the true common intention ..... "

26. The suggested rectification was pleaded in the claim. There were three alternatives, all of which have the same effect. I shall take the proposed amendment to the definition of the demised premises in Clause 1 (italicised in para 3 above) -

"shall ..... include ..... (save for the purposes of rent review as provided in the Schedule hereto and for the purposes of clause 5 hereof ) the part thereof (hereinafter called 'the Units') shown for identification edged blue on the lower ground floor plan annexed hereto) ..... "

It is suggested that the clause should be rectified to give that result on the grounds of common mistake. A document called a "draft amended response to the request under CPR Part 18," sets out the case which Mr Brock wants to put forward. The starting point is referred to as "the consensus":

"By his letter of 19 July 1989 to Mr Pendower of Sun Alliance Mr Game of the claimant made it clear that the claimant was only interested in taking an occupational lease of the Units if Sun Alliance as prospective lessor could obtain planning permission for office use of the Units. At all times thereafter the parties operated under a consensus that, whatever mechanism the parties might eventually adopt in the documentation effecting the transaction, the claimant would have no practical control over or responsibility for the Units ('the consensus')."

The other key passage is in relation to what is said to have happened at a meeting on 19 October 1989 as part of the negotiations. This was referred to in a letter of 20 October:

"This followed a meeting between representatives of the parties on the 19 October 1989 at which the terms of the option were agreed in principle. One of the conditions for exercise of the option agreed at that meeting was that the claimant would be required to give up vacant possession of those premises for which it had responsibility and over which it exercised practical control in order to ensure that the office part of the building would be available for letting as a whole or in parts by the reversioner in the event of exercise of the option."

27. Mr Brock explains that the reference to the area over which practical control was exercised, read as at the time of the letter, was looking forward to practical control at the time of the lease which, depending on whether permission was granted for office use, might or might not include the units. That, I think, accords with the way he put the point to the judge; the judge (at page 6) refers to his summary of his case:

"the agreement being alleged is an agreement that for the purposes of the break clause the tenant Jardines on exercising the option would give vacant possession of that which they had occupied at the outset, ie, if they had actually occupied at the outset the whole of the demised premises including the shop units and had extended the shop units but if not then it would extend only to the office space which is leased to them."

28. The evidence before the judge included statements not only by those who had represented the claimants in the lease negotiations which were before the deputy master, but also two witnesses for the defendants' predecessor, the Sun Alliance: Mr Mark Pendower, their chartered surveyor, and Mary Ball, their in-house lawyer to whom I have already referred.

29. Mr Pendower (at paragraph 8) commented on the suggestion made by the defendants that, because vacant possession cannot be given of the whole of the property, the break option cannot validly be exercised. He said this:

"This was never the intention of the parties, and contrary to what was agreed. I know that a fully operable break clause was intended and agreed. In the discussions with Jardines I attended, both sides expected Jardines to take the whole property including the Units, as we expected to receive the necessary planning permission. The acceptance of the possibility of an underlease back to Sun Alliance took the Units outside the considerations of the break clause, once it became a reality. Had the underlease back not occurred then Jardines would have had to provide vacant possession of the Units on operation of the break clause. Quite how this was to be documented was left to the parties' lawyers.

No one on either side considered that the grant of the underlease (which only came about in the unforeseen circumstance of planning permission being obtained too late in the day) would in any way impact on the exercise of the break clause. Had we appreciated that there might have been an issue on this, we would have dealt with it, logically by carving out the Units from the definition of the demised premises or by excluding the Units from the vacant possession provision."

30. Mary Ball, commenting on the same argument at paragraph 12, said:

" ..... I can confirm that it was, of course, never intended that Jardines give vacant possession of the Units in the event that planning permission was refused and the underlease came into existence. It was also never intended by Sun Alliance that the break clause be ineffective. It was always intended that at the end of 15 years, if Jardines wished to break the lease, and if they paid one year's rent, gave 6 months' notice and vacant possession of the offices that they occupied, that that break clause would be exercisable. We considered that we would extract a high price from Jardines in the event they wished to get out of the lease; we never intended to make it so they could never exercise it.

Had the possibility of confusion so far as the construction of the break option been spotted by Sun Alliance or our solicitors I am quite sure that we would simply have either clarified that vacant possession was required in relation to the premises except the Units, or perhaps redefined what was meant by 'demised premises' in the clause. I and my colleagues at Sun Alliance did not intend to work with Jardines to produce a clause which had no practical application.

In relation to the tenants of the Units, I can only speculate exactly what we would have done, but I believe we would have found a way to ensure that the Units' tenants' leases were not affected by the operation of the break clause, as this would not have been difficult to do."

31. The main point made by Mr Lewison is that that evidence does not go far enough. It shows what the parties would have done if they had thought about it. It does not show any shared intention to do anything about it at the time, still less any agreement or accord to that effect. He relied on the familiar passage in Frederick Rose Ltd v William Pim & Co Ltd [1953] 2 QB 450 where, at the top of page 462, Lord Justice Denning said:

" ..... I am clearly of opinion that a continuing common intention is not sufficient unless it has found expression in outward agreement."

"Outward agreement" today should be read, I think, as "outward accord", as Lord Justice Peter Gibson said in his summary.

32. Mr Lewison also relies on the decision of this court in Kemp v Neptune Concrete Ltd [1988] 2 EGLR 87 at 90G where Lord Justice Purchas explained the first criterion for rectification:

"First, there must be a mistake by the party seeking relief in executing the deed which does not translate that party's subjective intention at the time of the execution of the deed. I distinguish this from an intention which the party would have formed if either he or she had been properly advised, or had even applied their minds to the problem. In those circumstances it is clear that, from the passages I have already cited, the moment of time at which the subjective intention of the party seeking relief must be determined is at, or immediately before, executing the deed. Thus, no ex post facto intention can be admitted in such circumstances."

Mr Lewison says that, here as there, all one has is evidence of what the parties would have done if they had applied their minds to the problem.

33. The judge considered the very similar arguments as put to him. He noted that, as Mr Brock conceded, shared intention was not enough, at least as the authorities stand, unless there was some "outward expression" of that intention. He continues as follows:

"As it seems to me, I must apply, for the purposes of this application for permission to appeal, the accepted English doctrine. As indicated, the contrary has not been argued. However, the requirement is essentially directed to a question of evidence about the communication by one party to the other of his intention. A particular intention may be, as it seems to me, as a matter of the general nature of human discourse, be communicated by one party to another without express words necessarily being used. It may therefore sometimes be possible for the court to conclude there has been sufficient outward evidence of the accord of the parties' intentions in relation to a particular term of their bargain without either party having actually spelled out to the other that term in so many words. It may be like an implied term in a contract, something which, in the context of the particular discourse, is so obvious that it need not be stated."

He referred to Mr Lewison's submission that implied accord was not enough:

" ..... I do not think that can be right. There are many occasions in ordinary human exchange in which something can be implied and, without being expressly stated, perfectly understood by the other party, and the communication of which can be supported by objective but indirect inferential evidence."

Then he continued:

"In any event, even if I am wrong about that, it seems to me that it would be wrong, in a case of this kind, where all the persons who were concerned on either side in relation to the transaction can be shown to have had precisely the same intention and a precisely shared view of the object which they were seeking to achieve, to shut the claimant out, at this stage of the proceedings, from seeking to prove that that coincidence of intention was not either the result of, or reflected in some contemporary communication sufficient for the purpose of the doctrine."

34. Thus he had two grounds of decision: the first that an outward expression of the common intention may not be necessary, if it is so obvious that it need not be stated; and the second that, on the facts of this case and on the state of the evidence, it would be wrong to shut it out without going to trial. It has to be borne in mind, as Mr Brock urges upon us, that we are at a very early stage where there has not been disclosure of the documents which may be in the defendants' possession. Of the two points, I can see room for argument about the first ground. For my part, I would not exclude the possibility of their being some development of the strict Rose v Pim principles to cover the case where there is an obvious common assumption, as the judge suggested. However, it is unnecessary to decide whether the case for rectification would succeed. It is enough to find, as I do, that the judge's second ground of decision represents an entirely proper exercise of his discretion.

35. As he said, it was a striking feature of this case that there was wholly credible evidence from both parties to the contract, speaking with one voice as to their shared intentions. It was quite clear that a mistake was made, and that if it had been drawn to the parties' attention they would have made sure it was corrected. It was intended that the break clause should work, and not be subject to a stranglehold by the landlord.

36. The only question is how precisely they would have corrected it, in particular having regard to the effect on inferior interests. However, as Miss Ball says, it would not have been regarded as a significant problem, particularly bearing in mind that it concerned only 3,000 sq ft, of no commercial interest to either party, in a building of more than 70,000 sq ft. As Swainland makes clear, on rectification, the court's powers are much more flexible than when simply correcting an "obvious error": see Lord Justice Peter Gibson at paragraph 44.

37. This view of the present case is not inconsistent with the passage I read from Kemp v Neptune . In that case the parties had agreed in negotiations that the six years should be extended to 12 years, but had failed altogher to address the issue of a second rent review. The court would not manufacture an agreement on that point. In this case detailed consideration had been given to the break clause; the only oversight was in relation to a detail which was of no practical significance in the negotiations to either party.

38. On this issue also I would uphold the judge's decision.

39. LORD JUSTICE BUXTON: I agree .

40. LORD JUSTICE KENNEDY: I agree.

Appeal and cross-appeal dismissed with no order as costs.