The pitfalls of bad drafting – be warned!

In Perriam Limited v Wayne and Daly, the High Court had to decide whether Wayne and Daly were still liable pursuant to a Deed of Variation (“Deed”) they entered into.

Wayne and Daly were the guarantors under a commercial lease with Perriam. Perriam pursuant to the Deed was attempting to recover for dilapidations, unpaid rent and service charges amongst other things.

The decision with regards to the service charges etc is not relevant for the purposes of this article.

The Deed was executed on the 24th April 2007 and pursuant to clause 4.2 Wayne and Daly agreed that:

“the obligations of the tenant in the lease shall be varied so that there is no continuing obligation to repair, keep in repair or replace the external windows in the premises”.

Wayne and Daly argued before the High Court that the purpose of clause 4.2 was to release the commercial tenant, Ideas’ (now insolvent) and therefore them, from any continuing obligation in respect of the windows as at the 24th April 2007 and that meant that they were therefore not now liable.

Wayne and Daly further argued that the commercial purpose of the agreement was:

“So far as the external windows were concerned, the agreement was that there should be no continuing obligation in the sense of no ongoing liability to replace or repair whensoever the windows fell into disrepair and similarly no obligation to discharge any of the remaining repairing obligations. Mr Manning had the deed drawn up by his firm, Fox Hayes…We therefore signed the deed believing that we were thereby released from any ongoing personal liability to guarantee any of Ideas’ obligations under the lease and that Ideas were released from any liability to maintain external windows.”

The court was a little derogatory about the drafting of the Deed which included a catalogue of errors such as referring to Wayne and Daly as tenants and failing to draft a Deed which reflected the agreement reached by the parties.

The court therefore had to determine if Wayne and Daly were liable for the dilapidations. Upon listening to the arguments of both sides the court decided that in the absence of a date in clause 4.2 the intention of the parties was for liability to cease immediately upon the Deed being executed. That even on the reading of the wording of the clause this made common sense because there was no reference to a future event in the clause.

The court then went further and held that the wording of clause 4.2 meant that Wayne and Daly were no longer liable in respect of the windows. The basis for this decision was that the Deed failed to address the issue of the condition of the windows and where and when Wayne and Daly’s liability would end. That it strained common sense to pursue a claim for the windows when it was not mentioned in the Deed and in fact made it impossible to pursue due to the lack of a schedule of condition amongst other things.

Clause 4.2 did therefore operate in the courts interpretation as a release to Wayne and Daly, such that after the 24th April 2007, they had no liability for the condition of the windows. The clause therefore provided them with a complete defence to the claim for the costs of the dilapidations’.

When documents like this Deed are put before the courts the commercial reality and the obvious intention of the parties is usually the deciding factor. Therefore if you intended for something to happen then you are advised to ensure that a clause reflecting that intention is in the agreement. Badly drafted documents are common especially in our line of work but its unnecessary when templates can be purchased and advice sought. Cutting corners is simply to risky and potentially expensive.