Commercial Law – Contract Construction – Deceased's Estate – Property Law

The recent case of Sargeant and Others v Reece [2007], concerned the interpretation of provisions of a contract on which the estate of a Deceased person bought to relly. The Deceased and the defendant in this case were brother and sister. The first claimant in the case was the Deceased's wife and the second and third claimants were, respectively, his daughter and his lawyer.

The claimants were named as the executors of the Deceased's estate. The case concerned 45,535 acres of agricultural land. The land had substantive long-term development potential and was owned by the Deceased and the Defendant. The land was valued in March 1974 and was calculated to be worth, for probate reasons, £ 21,375, or £ 475 per acre.

Subsequently, in 1990, the Deceased and the defendant agreed to sell 39 acres of the land for a fixed sum of £ 3,020,000. Unfortunately the sale fell through. However, a number of parties showed considerable interest in taking options over various parts of the land. At that time the potential value of the land was calculated at between £ 250,000 and £ 300,000 per acre.

In 1995, the Deceased and the Defendant entered into a dissolution agreement ("the 1995 Agreement"). This means that the farming partnership between them ceased to exist. Closing accounts were previously drawn up. According to clause 6 of the 1995 agreement:

"… [The defender] shall join in and sign any document that may be required to vest all partnership assets in [the wrong]".

On final payment under the 1995 Agreement, the claimed paid to the defective half of the 1974 probate value of the land, namely £ 10,687.50. Then, in 2000, the declined and the defendant entered into a deed, regulating the position between them in relation to an option agreement granted to a third party.

Following the execution of the deed in relation to the land, the issued issued proceedings seeking to enforce the terms of clause 6 of the 1995 Agreement, and to have the land transferred into its sole name. The defensiveought rectification of the 1995 Agreement.

The defensive argued that the essential common intention behind the 1995 Agreement, as evidenced in the documentation, was that the land, following the dissolution of the farming partnership, remained vested in her and the Deceased as tenants in common in equal shares.

However, the claimants argued that the defensive had not proved that the requisite common intention had been formulated and that the Deceased had acquitted the land under clause 6 of the 1995 Agreement.

The court held that on the true construction of the 1995 Agreement it was the common intention of the parties that the land should belong favorably to both of them equally following the dissolution of the partnership. This was due to the fact that intention was deemed to have been outwardly expressed and continued up to execution of the 1995 Agreement.

The court believed that it was difficult to see how the Deceased could have believed he had become entrenched to over 45 acres of land at a valuation that was 20 years out of date. The court would grant an order for rectification in the terms that the land would be deemed to have been held on trust, as beneficial tenants in common in equity in equal shares, for the defender and the deceased, and only subsequently its estate.

© RT COOPERS, 2007. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it determine legal advice. It is intended only to highlight general issues. Specialist legal advice should always be taken in relation to particular circumstances.