In the Court of Appeal decision of Cherry Tree Investments Limited v Landmain Limited,5 the Court considered the interpretation of a legal charge registered under the Land Registration Act 2002.

A property owner had borrowed money from a lender involving the entering into of a standard form charge document, together with a facility agreement. The facility agreement varied the statutory power of sale under Section 101 of the Law of Property Act 1925, allowing the lender to exercise the power of sale at any time after execution of the facility agreement, even if the borrower was not in default. While this provision was set out in the facility agreement, this clause was not referred to in the standard form charge document which was registered at the Land Registry.

The borrower and lender disagreed as to whether or not a default existed and the lender sold the property to Cherry Tree Investments, who then sought to register their title to the property, at which point the borrower objected.

The question for the Court, on appeal, was whether or not the standard form charge document could be interpreted to include the extended power of sale referred to in the facility agreement.

Lord Justice Lewison in his judgment, highlighted the well-known statement of Lord Hoffmann in Investors Compensation Scheme v West Bromwich BS6 in which he had stated that one is allowed to take account of the background "matrix of fact" that would have been reasonably available to the parties and includes absolutely anything relevant which would have affected the way in which the language of the document would have been understood by a reasonable man. Lord Hoffmann had gone on to state that the "rule" that a word should be given its natural and ordinary meaning, reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. That said, Lord Hoffmann went on to state that if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. In Lewison LJ's words: "A contract cannot mean one thing when it is made and another thing following Court proceedings. Nor, in my judgment, can it mean one thing to some people (e.g. the parties to it) and another thing to others who might be affected by it".

Following the decision in KPMG LLP v Network Rail Infrastructure Limited7, Lewison LJ accepted that the Court need not shut its eyes to the terms of the facility letter and so it was deemed to be admissible evidence. Once the Judge had decided that the facility letter was admissible, the next question was what weight could be given to this evidence, once it had been admitted.

Putting the evidence in context, the Land Registration Act 2002 was passed with the intention that, under the system of electronic dealing with land, the register should be a complete and accurate reflection of the state of the title of the land at any given time. In particular, Section 120(2) of the Land Registration Act 2002 dealt with documents kept by the Registrar which were taken to be correct and to contain all the material parts of the original documents. To treat the registered charge as containing a modification of the statutory power of sale contained only in the facility letter fell foul of Section 120(2)(b) of the Act. Further, anyone contemplating dealing with the land may wish to inspect the registered charge and would take it to be correct and containing all material provisions, the intention thereby being that the document itself would be conclusive. While he acknowledged that there are rules which permit the withholding of sensitive commercial information, he found it unlikely that the Registrar would agree to the withholding of information about a power of sale on the ground that it is commercially sensitive, because to do so would prejudice the keeping of the register.

The Judge found that the reasonable reader's background knowledge would include the knowledge that the charge would be registered in a publicly accessible register upon which third parties might be expected to rely and that, while the parties had a choice about what they put into the public domain and what they kept private, the reasonable reader would conclude that matters which the parties chose to keep private should not influence the parts of the bargain that they chose to make public. What had gone wrong was that the parties had failed to include in the charge, a provision extending the statutory power that they agreed it should have contained. This meant, that nothing had, in fact, gone wrong with the language of the charge so far as concerned the power of sale.

The upshot, therefore, was that the Court could not interpret the charge so as to include the words within the facility agreement, whereby the power of sale was extended. Quoting from an earlier case, "If by oversight parties omit an agreed clause from their contract, interpretation would not provide a remedy."

Latin Quarter – Ejusdem Generis

Latin for “of the same kind”.

This is a rule of construction which assists the courts in the interpretation of statutes and – by analogy – other documents.

In essence, where a legal document lists classes of persons or things and then refers to them in general, the general statements only apply to the same kind of persons or things specifically listed.

For example where “cars, trucks, tractors, motor bikes, motor powered vehicles” are mentioned, the word “vehicle” should be interpreted in a limited sense; and should not – for example – be interpreted as including aeroplanes, since the list is of land based transportation.