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Can courts amend a bad bargain?

We reported in June 2015 on the Supreme Court case of Arnold v Britton and others [2015] UKSC 36. The Court held that even though the result of service charge provisions in a lease led to what appeared to be an unfair demand, “it is the result of the bargain made: and the court cannot properly under the guise of a process of interpretation, introduce new and other terms to mend a bad bargain”.

However, in the case of Monsolar IQ Ltd v Woden Park Ltd [2021] EWCA Civ 961, Mr Justice Fancourt found it was clear that a drafting mistake had been made in the setting out of the formula to be used in the rent review clause in the lease. He declared that the rent produced by use of the formula was ‘irrational and arbitrary, or illogical and arbitrary’ and held that “a reasonable and informed objective observer seeking to understand the meaning of the Lease would conclude that the Formula must be a drafting mistake because it made no sense.'” He therefore proposed to introduce a new formula into the lease. The landlord appealed.

The Court of Appeal agreed the lease contained a clear drafting error. Indeed, “it is about as plain a case of such a mistake as one could find”. Lord Justice Nugee said that “what one is looking for are not just results that are unduly favourable to one side, but arbitrary and irrational ones that are nonsensical and lead to the conclusion that they cannot have been intended”.

Having found there was a clear error which needed to be rectified, LJ Nugee turned to what wording should replace that struck out. Two proposals had been put before the judge at first instance. He had chosen ‘Correction B’ and as LJ Nugee found that it mattered not which correction was adopted, he saw no reason to disturb Fancourt J’s decision. Lord Justices Males and Baker agreed and the landlord’s appeal was dismissed.

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