Commercial Law – Construction Contract – Inheritance of the Deceased – Real Estate Law

The recent case of Sargeant and others against Reece [2007], concerned the interpretation of the provisions of a contract on which the succession of a deceased person was intended to be based. The deceased and the defendant in this case were brother and sister. The first plaintiff in the case was the deceased’s wife and the second and third plaintiffs were, respectively, his daughter and his attorney.

The claimants were named as the executors of the decedent’s estate. The case concerned 45,535 acres of agricultural land. The land had substantial long-term development potential and was owned by decedent and 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 land for a fixed sum of £3,020,000. Unfortunately, the sale fell through. However, various parties showed considerable interest in taking options on various parts of the land. At the time, the potential value of the land was estimated to be between £250,000 and £300,000 per acre.

In 1995, Decedent and Respondent entered into a dissolution agreement (“the 1995 Agreement”). This meant that the agricultural society between them ceased to exist. Subsequently, the closing accounts were prepared. According to clause 6 of the 1995 agreement:

“… [The defendant] will join and sign any document that may be required to grant all the assets of the partnership in [the deceased]”.

In the final payment under the 1995 Settlement, the decedent paid the defendant half of the probate value of the land in 1974, ie £10,687.50. Then, in the year 2000, the decedent and the defendant entered into a deed, regulating the position between them in relation to an option contract granted to a third party.

Following the execution of the deed in relation to the land, the decedent commenced proceedings to enforce the terms of clause 6 of the 1995 Agreement and to have the land transferred to his sole name. The defendant requested the rectification of the 1995 Agreement.

Respondent argued that the essential common intent behind the 1995 Agreement, as recorded in the documentation, was that the land, after the dissolution of the agricultural partnership, would remain vested in her and the decedent as tenants in equal shares.

However, the plaintiffs argued that the defendant had failed to prove that the required joint intent had been formed and that the decedent had acquired the land under clause 6 of the 1995 Agreement.

The court held that in the true interpretation of the 1995 Agreement it was the common intention of the parties that the land should belong to both of them equally after the dissolution of the partnership. This was due to the fact that this intention was considered to have been externally expressed and continued until the execution of the 1995 Agreement.

The court found it difficult to see how the decedent could have believed that he was entitled to more than 45 acres of land with a valuation that was 20 years old. The court would grant an order of rectification on the terms that the land would be considered to be held in trust, as common usufructuaries in equity in equal parts, to the defendant and the decedent, and only subsequently their estate.

© RT COOPERS, 2007. This Information Note does not provide a comprehensive or complete statement of the law relating to the subjects discussed nor does it constitute legal advice. Its sole purpose is to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.

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