England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
HHJ PURLE QC
Claim No: 9BM30290

		Royal Courts of Justice Strand, London, WC2A 2LL
		09/05/2012

Lord Justice Mummery:

Introduction

1. This case is about the construction of a Deed of Gift dated 25 April 1995 (the Deed). The source of the dispute is a mismatch between (a) the area of unregistered land described in the parcels clause in the Deed and (b) the area of unregistered land delineated and edged red on a plan annexed to the Deed "for the purpose of identification only." It is agreed that extrinsic evidence is admissible for the purpose of construing the Deed. There is no claim to rectify it.
2. Following an application dated 8 February 2007 the claimant, Hudson Industrial Services Limited (Hudson), for first registration of title to some small areas of land at Slip Farm, Buildwas, near Ironbridge, Telford, Shropshire and objection to the application,the matter was originally referred to the Adjudicator to HM Land Registry. It was then adjourned to allow Hudson to bring these proceedings. Hudson proposed to relocate to Slip Farm its factory clearance, demolition and plant and crane hire business from other premises at the Granville Site, Granville, Telford.
3. The Deed was central to the dispute, Hudson having bought parts of Slip Farm from Mr David Wood (David), who was the donee under the Deed executed by his parents, Mr & Mrs Owen Wood. They are the first and second defendants and the first and second appellants. Objections to registration in the name of Hudson were made by Mr & Mrs John Morgan, who are the third and fourth defendants. And the third and fourth appellants own and occupy about 14 acres of adjoining land bought by them from Mr & Mrs Owen Wood, whom they have befriended, but they have no legal title or claim to the disputed areas of Slip Farm.
4. The main objection to Hudson's application for registration was that, according to the wording of the parcels clause in the Deed, only "one acre or thereabouts" of land at Slip Farm was conveyed to David, whereas, according to the annexed plan, the area was 3¼ acres, part of which Hudson claims to have subsequently acquired from him.
5. A further ground of objection that the identification plan had not been annexed to the Deed at the time of its execution, or that it had been substituted for the genuine plan, was dismissed by the judge in his findings of fact and was not pursued on the appeal.
6. This appeal is from an order made by HHJ Purle QC on 24 June 2011. The order contained a declaration that, as a matter of construction, the Deed operated to convey 3 ¼ acres to David. The objections of Mr & Mrs Morgan based on the area as described in the parcels clause were rejected. The judge gave effect to the area of red edging shown on the annexed plan rather than to the verbal description of area in the parcels clause. He did so on the basis that it was not possible to tell from the clause in the Deed where, within the area of the land delineated and edged red on the plan, the "one acre or thereabouts" of Slip Farm was located.
7. It was also ordered that the Registrar to HM Land Registry give effect to Hudson's application for first registration of title dated the 8^th February 2007 in so far as it related to the four parcels of land coloured blue on the plan annexed to the order.
8. Patten LJ granted permission to appeal on 19 October 2011 on the ground that the appellants' argument that the judge failed to give due weight to the area specified in the parcels clause had a real prospect of success.

Background

9. For the purposes of this appeal I need to set out more of the relevant background and the evidence than is to be found in the judgment below [2011] EWHC 2152 (Ch).
10. Mr & Mrs Owen Wood originally owned nearly 22 acres of land with a house and buildings. The Deed referred to Slip Farm, but the house occupied by the Wood family was re-named Severn View. Slip Farm was conveyed to Mr & Mrs Owen Wood on 18 November 1970 by Mr & Mrs Ernie Jones. Mr Owen Wood ran a milk delivery round from a yard about 1.09 acres in extent to the east of the house. David later used the yard for his business as an agricultural machinery engineer and plant hire contractor. He was assisted by Mr Motteshaw and latterly operated through a company called Wheatland Contractors Limited.
11. Over the years Mr & Mrs Owen Wood disposed of parts of Slip Farm.
12. First, on 13 July 1990 they gave David about .34 acres consisting of Severn View together with some outbuildings and a right of way over a driveway. The parents continued to live in the house. David and his partner, Ms Katherine Hanley, also lived there.
13. The first deed was followed in April 1995 by a second gift of land to David. This was the gift effected by the Deed. As delineated on the annexed plan, the area occupied 3 ¼ acres, which would take in (a) the yard; (b) an area called Gaffer's Patch lying between Severn View to the west and the northern part of the yard to the east; (c) a driveway; and (d) a paddock about 2 acres in area to the west of Severn View.
14. As indicated above, the dispute has arisen from the discrepancy between the area of "one acre or thereabouts" described in the parcels clause and the total area of 3 ¼ acres delineated on the plan and edged red. The judge commented that it was not possible to tell from the parcels clause which one acre of the larger area of 3 ¼ acres shown on the plan was to be David's. The judge decided that the entire area shown on the plan was conveyed to David.
15. Thirdly, on 16 June 1995 David's parents gave him a further piece of land, an area of 0.19 acres occupied by a former stable block situated between Severn House and the yard. It was identified only by reference to a plan also stated to be "for the purpose of identification only." There were no words of description.
16. Pursuant to the deeds and necessitated by mortgages obtained by him David was registered at HM Land Registry as proprietor of Severn View, the commercial yard, the driveway and the stable block. Gaffer's Patch, the paddock and other small areas within the area shown edged red on the Deed plan remained unregistered.
17. In 1999 Mr & Mrs Owen Wood sold 14 acres of Slip Farm to Mr & Mrs Morgan. The bulk of the proceeds of sale were used as an interest free loan to David.
18. David himself made land disposals when his business ran into difficulties that ultimately led to possession proceedings against Mr & Mrs Owen Wood in respect of their home at Severn View.
19. First, on 24 November 2006, David transferred Severn View and part of the unregistered paddock adjoining Severn View to Mr Benjamin Jackson. Originally he was also a claimant in the proceedings, but his claim was compromised before trial and it has no bearing on the disputed construction of the Deed.
20. Secondly, on 11 December 2006, David executed two transfers in favour of Hudson, which claims to have acquired not only the commercial yard and the stable block, but also other pieces of land adjoining or adjacent to those properties, including Gaffer's Patch and part of the paddock. The key issue arising on Hudson's attempt to register title to all that land turned on what area of land at Slip Farm had been transferred to David under the Deed and on how to construe the Deed containing the mismatched areas described in the parcels clause and shown on the annexed plan.
21. At the trial concessions were made about two of the areas of land. The dispute focused on larger parcels of unregistered land consisting of Gaffer's Patch, which is topographically distinct from the yard, part of the paddock to the west and a small sliver of land to the south of the yard.

Judgment

22. The judge concluded that the Morgans' objections to registration by Hudson were ill founded, but declined to make an award of damages against them. Although their objections to registration were unreasonable, Hudson failed to prove that it had suffered any recoverable loss.
23. As for the construction of the Deed, the judge explained his approach and stated his conclusion as follows:

"20. …It is well established that a plan which is attached for identification purposes only must give way to any specific description identifying the land in the parcels clause. The matter was considered by Rimer LJ in Strachey v. Ramage [2008] 2 P2CR 8. As he explained: 'The plan is intended to identify the position and situation of the land but not its precise boundaries.' Strictly speaking, as the learned Lord Justice in that case explained, the formula should be used only where the verbal description in the parcels identifies the limits of the land with adequate precision. Here of course the verbal description in the [Deed] does not identify the land with precision, it merely refers to 'an area of one acre or thereabouts' without specifying the particular area in question. It is impossible, therefore to ignore the accompanying plan even though stated to be for the purpose of identification only……Although the plan is attached for identification purposes only, it is attached for that very purpose. The verbal description does not identify the land with any precision and, therefore, one is left with a plan that has as its very purpose, even if it is its only purpose, identification of the land in question. That land is the land edged red on the plan, consisting of approximately three and a quarter acres. The plan, being an identification only plan, must give way to physical features on the ground which contradict the boundary as drawn but the general area is that three and a quarter acres, and the verbal description of "one acre or thereabouts" must, in my judgment be rejected."

24. As for the evidence of surrounding circumstances the judge said this:-

"15. Moving to the context of the second deed of gift, there had been, over a period of two years or more, a number of discussions between David Wood, his parents and solicitors who acted for one or more of them. These related to the proposed transfer of, initially, the remainder of the farmland, that is to say more than 20 acres of it. There was a proposal for a sale and mortgage back at one stage which came to nothing. There was then a proposal for transfer of the remaining land in return for various assurances and promises (recorded in a formal document in May 1994) and there was discussion at times of the transfer of the yard though whether that would or would not include the Gaffer's Patch was not specified. Eventually there was discussion and even (around January 1995) a written undertaking signed by Mr David Wood in return for the transfer of a further piece of land said to be of one acre or thereabouts without specifying what that one acre was. Given the variety of those previous discussions, I did not find consideration of them particularly helpful in determining the question of what it was that was attached to the second deed of gift."

25. As for other material, the judge said (paragraph 9) that there was a great deal of evidence relating to the subjective intentions of the parties, which he considered to be irrelevant to the construction of the Deed. He described David, who could not readily read or write and was unlikely to have read the Deed, and his father, who was aged, frail and forgetful and said that he only transferred the yard, as unreliable witnesses.
26. The judge noted evidence from the solicitor, Mr Haycocks, who drew up the third deed of gift (June 1995) and dealt with the matter of mortgaging various bits of land to the bank. David already had the use of the yard for his business. The evidence showed that one of the purposes of the Deed was to enable David to charge land to raise money in connection with his business (paragraph 18). The judge noted that a transfer of the yard without a driveway affording access would be most unsatisfactory. It would have made it difficult to mortgage the yard, as there would have been no apparent means of access. It would be landlocked, though there might be implied rights.
27. The judge also noted the evidence of another solicitor, Mr Roderick Kirby, who was instrumental in drawing up the Deed. He summarised his evidence in connection with the attack on the genuineness of the annexed plan. Mr Kirby could not remember what plan was attached to the Deed, but was able to confirm that he would have checked the Deed when it was returned to him and would have noticed if the plan had been changed.

Appellants' submissions

28. The main ground of appeal is that the judge did not pay proper regard to the extrinsic evidence, including evidence of pre-Deed communications, in order to ascertain the property intended to be transferred to David by the Deed. That evidence points to the commercial yard as a readily identifiable area of "one acre or thereabouts" falling within the description in the parcels clause.
29. It is also submitted that the judge ought to have treated the plan as subsidiary to the parcels clause. It was not open to him to define the area conveyed by reference to the annexed plan in preference to the parcels clause.
30. Issue is taken with the contention in the respondent's notice that the evidence showed that the parties referred to the commercial yard as the "yard", thereby distinguishing it from other parts of Slip Farm, which they described simply as "land" and that, if the Deed was intended to include only the yard, it would have referred to "the yard" and not to "land."

Discussion

31. I agree with the judge that evidence of the subjective intentions of the parties to the Deed is not admissible. In any event, that evidence was given in this case by unreliable witnesses.
32. The judge rightly recognised that, in general, the parcels clause in a deed prevails over a plan attached "for the purposes of identification only." But, as stated in Megarry & Wade The Law of Real Property (8^th Edition 2012) at 8-045:-

"..if a verbal description is insufficient, as by failing to indicate a boundary, the court may have recourse to the plan, even though it is 'by way of identification only.' "

33. In this instance the location and boundaries of the area of "one acre or thereabouts" are not expressly described in the parcels clause, so that a restriction on the use of the plan to construe the deed would not apply. The real problem is that the annexed plan is of no help in identifying the "one acre or thereabouts": the area delineated and edged red on the plan simply shows a larger block of land.
34. In such a case, as is also explained in same paragraph of Megarry & Wade,:-

"…the court adopts an objective test. Taking into account the surrounding circumstances, including the topography, the language of the conveyance, and the representation of the plan, what would the reasonable lay person think that they were buying?"

35. On this aspect of the case I part company with the judge's conclusion that no assistance could be derived from the available evidence of the surrounding circumstances known to the parties when the Deed was executed.
36. I would agree that the evidence does not all point in the same direction and that not all of it is admissible on construction of the Deed.
37. The evidence of David's intention to raise money for the development of his business in the yard by mortgaging property given by his parents is more consistent with an intention to give him a larger area on which he could raise money for the development of the business based in the yard. There was also some evidence relied on by Hudson that David and his father referred to the commercial yard as "the yard", as distinct from the remainder of the land at Slip Farm. That appeared in the early proposals for the transfer to David of the "yard and land." Another proposal was for the transfer of "the land adjoining Severn House." It would be difficult to confine that description to the yard, as it did not adjoin Severn House, but was separated from it by Gaffer's Patch. Understandably Hudson emphasised that the Deed did not refer to the "yard" as such.
38. On the other hand, there are indicators in the surrounding circumstances and in the oral and documentary evidence of the pre-Deed communications that the parties had in mind the yard, on which David conducted his business, as being the "one acre or thereabouts."
39. The court was taken to the transcripts of the witness evidence. Some of the evidence relates to communications preceding the Deed. I will first summarise the evidence on which the appellants rely and leave for later discussion the question as to how far such evidence is admissible in aid of construction.
40. I would put on one side the unreliable evidence of Mr Owen Wood and David. Mr Roderick Kirby, the solicitor who acted for the parents in connection with the Deed, gave evidence that on 20 April 1995, shortly before the Deed was executed, he attended on Mr Owen Wood at Slip Farm. Mr Kirby said that Mr Owen Wood identified the area of land to be included in the Deed by pointing. Although he could not be precise about where he pointed, Mr Kirby's evidence was clear that they were talking about the "service yard." He also gave evidence about a site visit to Slip Farm on 23 September 1994 which is evidenced by a contemporaneous attendance note discussed in paragraph 45 below.
41. Mr Kirby accepted in his evidence that his failure to provide for an express right of way for the property transferred by the Deed was a "grave omission" on his part. It was serious, particularly if the property was going to be mortgaged. Although he accepted that he should have directed his attention to the right of way, he did not agree that the access way was included in the land gifted, which, he said, was the small area of the commercial yard only. (In fact no difficulty about access to the yard arose.)
42. Ms Katherine Hanley, who was living with David at Severn View at the time of the Deed, also gave evidence. She said that the yard was the place where David made his living, that David needed bigger premises to work from and that he had made an application for planning permission to put a big building on the yard.
43. Next, the court was taken to some of the documents which the appellants contend are more helpful than the judge said in fathoming the meaning of a document that says different things in the wording and on the plan about the extent of the area conveyed by it.
44. A typed document dated 1 January 1994 (which year is, it is agreed, a mistake and should be 1 January 1995) was prepared by Mr Motteshaw, addressed to Mr & Mrs Owen Wood and signed by David. It makes clear that what was in contemplation was a gift of "approximately one acre", not a gift of 3 ¼ acres, as found by the judge. The document provided as follows:-

"IN CONSIDERATION of the Gift you have already made to me and in further consideration of the Gift of a further piece of land comprising approximately one acre and forming part of Slip Farm I THE UNDERSIGNED DAVID OWEN WOOD of Severn View Buildwas Telford aforesaid UNDERTAKE:-"

45. David's undertakings to his parents included payment of £250 a month back dated to 1 January 1994; supplies of heating fuel and motor fuel and motor vehicle licence, MOT, insurance and maintenance; the right to occupy Severn View for the rest of their joint lives; provision of alternative suitable accommodation at his expense should he sell Severn View with their prior written consent; the supply of one pair of Hogg's Boots and one Turkey at Christmas each year; and their prior written consent before carrying out any major alterations to land or buildings at Severn View.
46. That document did not come out of the blue. There was also in evidence a manuscript attendance note made at a meeting on 23 September 1994. It was made by Mr Kirby, who gave evidence that the meeting was in the yard, that David was there and so was Mr Motteshaw, though standing some feet away. Mr Kirby's evidence was that what was being proposed at that time was a gift of the yard. He made his attendance note at the site of the meeting. It recorded the instructions given by Mr Owen Wood about a "Deed of Trust" referring to "Right to live in house for rest of life. To give land adjoining Severn House approx 1 acre to David. Covenant about alterations to land & buildings."
47. An even earlier document dated 12 May 1994 was signed by David, his parents and Mr Motteshaw. It did not identify any land or buildings by name or in extent. It was addressed to the parents and referred to "discussing the yard and land for some time, in particular your own fears of gifting these to me, leaving both of you with no assetts [sic] what so ever." The document went on to record matters very similar to the terms of the undertakings given by David to his parents in the later document on 1 January 1995.
48. The judge did not deal in detail with any of those documents nor with the oral evidence about the pre-Deed discussions. We were shown the written closing submissions made to the judge at the end of the trial and were told that they were supplemented by oral submissions. Both sides made submissions on the matter of extrinsic evidence. The following written submission was made for the appellants:-

" 51. The extrinsic evidence to ascertain what was conveyed is virtually all in one direction. The court simply needs to review the documentary evidence, the evidence of Owen Wood, Roderick Kirby and contrast that with the evidence of David Wood."

49. I recognise, as the judge probably did, that a long line of cases, of which Prenn v. Simmonds [1971] 1 WLR 1381 is probably the most frequently cited, lays down a general rule that evidence of previous communications between the parties is excluded from the process of construing the document, which formally records their final agreement. However, it is submitted on behalf of the appellants that this is one of those exceptional cases in which the court is justified in looking beyond the wording of the Deed and the annexed plan to the pre-Deed communications for extrinsic evidence that may be relevant to, and assist in, construing the unclear terms of the Deed.
50. Mr Zaman QC cited a passage from Chartbrook Limited v. Persimmon Homes Limited [2009] UKHL 38; [2009] 1 AC 1101 in which Lord Hoffmann said, in a farewell speech admired by his colleagues on the Appellate Committee, that, in principle, previous communications may be potentially relevant background to the document:-.

"33. I do however accept that it would not be inconsistent with the English objective theory of contractual interpretation to admit evidence of previous communications between the parties as part of the background which may throw light upon what they meant by the language they used. The general rule, as I said in Bank of Credit and Commerce International SA v. Ali [2002] 1 AC 251,269, is that there are no conceptual limits to what can properly be regarded as background. Prima facie, therefore, the negotiations are potentially relevant background. They may be inadmissible simply because they are irrelevant to the question which the court has to decide, namely, what the parties would reasonably be taken to have meant by the language which they finally adopted to express their agreement. For the reasons given by Lord Wilberforce, that will usually be the case. But not always. In exceptional cases, as Lord Nicholls has forcibly argued, a rule that prior negotiations are always inadmissible will prevent the court from giving effect to what a reasonable man in the position of the parties would have taken them to have meant. Of course, judges may disagree over whether in a particular case such evidence is helpful or not…"

51. Here that evidence of communications preceding the Deed, in particular the solicitor's attendance note of 23 September 1994 and the document of 1 January 1995, indicates that (a) the parties to the Deed and others concerned with it were referring to a transfer of only one acre of Slip Farm, not to 3 ¼ acres; and (b) the yard was the property transferred, being about one acre in extent and the place where David was conducting and proposing to develop his business.
52. Despite the illumination thrown on the confused terms of the Deed by those communications, I am not satisfied that the court is entitled to admit them as extrinsic evidence to construe the Deed. In his speech Lord Hoffmann went on, after his statement of the general principles of relevance and background, to hold that there was no clearly established case for departing from the rule excluding evidence of what was said or done during the course of negotiating an agreement for the purpose of drawing inferences about what it meant, as distinct, for example, from establishing that a fact, which may be relevant as background, was known to the parties : see [41] and [42]. See also the speeches of the other members of the Appellate Committee, who made it clear that the decision in that case was not a departure from the exclusionary rule applying to pre-contract communications, though I note that in her speech Baroness Hale of Richmond confessed that she-

" 99. …would not have found it quite so easy to reach this conclusion had we not been made aware of the agreement which the parties had reached on this aspect of their bargain during the negotiations which led up to the formal contract. On any objective view, that made the matter crystal clear. This to me increased the attractions of accepting counsel's eloquent invitation to reconsider the rule in Prenn v. Simmonds …."

53. Baroness Hale did not, in the end, succumb to the attractions of overturning an established canon of construction.
54. The application of the exclusionary rule does not, however, leave this court as bereft of extrinsic evidence as the judge thought. I agree with the judge that the problem posed by the Deed is the identification of the intended parcel of "approximately one acre or thereabouts" within the area of the land edged red on the annexed plan. On the balance of probabilities the admissible surrounding circumstances known to the parties point to the yard as being that area. Those circumstances are (a) the physical separation of the yard from Gaffer's Patch and other land to the west; (b) the yard area being 1.09 acres; (c) the absence of any other plausible candidate of similar area, apart from the yard plus the access way (which is not contended for); (d) the fact that the yard was used for David's business; and (e) David's recent application for planning permission to erect a bigger building on it.
55. In my judgment, the judge failed to have regard to that available and admissible extrinsic evidence. It was relevant and it indicated that the parties probably intended to deal only with the yard in the Deed. As a result of leaving those surrounding circumstances out of account, the judge settled on the wrong construction and his decision should be overturned.

Result.

56. I would allow the appeal, set aside the order of the judge and dismiss the action.

Mr Justice Henderson:

57. I agree.

Dame Janet Smith:

58. I also agree.