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For many years, online property giants Rightmove and Zoopla have informed their members that online lettings agents cannot place adverts for properties to be let by other lettings agencies. This was put to the test legally in the case of Butcher and another v Pike and others [2020] EWHC 3362 (QB).

The High Court judge had decided that Rightmove’s and Zoopla’s terms did not have the contractual effect they have consistently put forward and did not prevent online lettings agents from placing adverts for other lettings agents. The Court of Appeal has now upheld this decision in Butcher & Anor v Pike & Ors [2021] EWCA Civ 1407.

Although Rightmove and Zoopla were not themselves party to this case, with the issues occurring in the context of a dispute over unpaid deferred consideration and warranty claims between the buyers and sellers of an online lettings agency company following a corporate transaction, Rightmove did set out its interpretation in a letter to the Court. That interpretation was also argued by the Defendants.

Much of the emphasis of the Defendants’ argument was premised on taking specific words from specific clauses to reach an outcome they argued was “business common sense”, a long-established concept from case law that if “analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must yield to business common sense.

The judge held that the Defendants’ approach was “not a proposition that I find at all likely or attractive. It would also involve the court choosing to ignore the plain meaning of the words the parties decided to use to set out their bargain and to place upon the agreement a construction simply because it is said to be the more commercially sensible for Rightmove.

The judge went on to say that “it is not for the court to re-write contracts or impose on parties to them what the court may think would have been a reasonable contract” and “certainly not because I arrive at the view that it would be more reasonable a construction and not when such a state of affairs is self-evidently not provided for in circumstances where it easily could have been.

The Defendants obtained permission to appeal from the Court of Appeal. The three appeal judges upheld the original judge’s decision, with the leading judgment of Lord Justice Arnold observing that “this is not a case where a straightforward interpretation of the words used leads to a commercially absurd result, nor a case in which commercial common sense must be resorted to in order to resolve an ambiguity in the wording.”

Nick Wells commented on the judgment as follows:

“The Claimants were again thrilled by this excellent result, achieved in the face of strong opposition from those whose contracts were being interpreted and by the Defendants themselves. Four judges have not been swayed either by what Rightmove or Zoopla said was the correct interpretation of their own terms, nor by efforts to salvage their preferred outcome by reliance on isolated words and “business common sense”.

The best lesson from this case comes from a passage from a leading text, Chitty on Contracts, quoted expressly by the original judge: “It is no part of the court’s function to rewrite the contract for the parties so that, where the draftsman has not thought through the consequences of his own drafting, he will not be permitted to say that “something has gone wrong with the language” in order to save himself from the consequences of his own poor or inadequate drafting.”

Parties to commercial contracts and transactional and in-house lawyers should take note. “Business common sense” has a limit to its application; it will not provide a back-door for subjective views of the parties, it will not fill in major gaps, nor will it re-write badly drafted terms.”

The full judgments can be read here: Butcher and another v Pike and others [2020] EWHC 3362 (QB) and Butcher & Anor v Pike & Ors [20210 EWCA Civ 1407.

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