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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> West Sussex Properties Ltd v Chichester District Council [2000] EWCA Civ 205 (28 June 2000)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/205.html
Cite as: [2000] EWCA Civ 205
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Case No: 1999/0698
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 28th June 2000
LORD JUSTICE MORRITT
LORD JUSTICE SEDLEY
and
THE RT HON SIR CHRISTOPHER STAUGHTON
WEST SUSSEX PROPERTIES LTD |
Plaintiff/ | |
|
||
CHICHESTER DISTRICT COUNCIL |
Defendant/ | |
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
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Mr D.Oliver QC and Mr Darton (instructed by Mr M.J.Kelley for the Appellants)
Mr K.Reynolds QC and Mr Dutton (instructed by Thomas Eggar Church Adams for the respondent)
- - - - - - - - - - - - - - - - - - - - -
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE MORRITT:
1. By his order, made on 11th March 1999, Mr Nicholas Stewart QC, sitting as a deputy judge of the Chancery Division, ordered the rescission of an agreement, recorded in a Memorandum dated 3rd April 1991, made in implementation of a rent review clause contained in a lease ("the Lease") dated 18th July 1969 whereby the Mayor, Aldermen and Citizens of the City of Chichester demised to the claimant ("the Lessee"), then called Beanstalk Shelving Ltd, Plot 10, Terminus Road Industrial Estate, Chichester. In addition the judge ordered the Council to repay to the Lessee the rent overpaid as a result of the mistake and interest thereon from the date of overpayment. He did so on the grounds of a common mistake and notwithstanding the delay which had occurred before proceedings were commenced and rescission sought.
2. The Council, to which the freehold reversion has devolved, contend that the judge was wrong to have done so. In summary it contends that (1) the judge should not, on the second day of the trial, have allowed the requisite amendment to claim rescission, (2) there was no mistake adequate to justify the order he made, (3) any such relief to which the Lessee was otherwise entitled was barred by the Limitation Act 1980 or by laches or delay. If the Council is not successful on any of those issues it contends that (4) it should not be liable to repay to the Lessee rent overpaid in consequence of the mistake, or alternatively interest thereon, before the Lessee first advanced its claim in August 1997.
3. Terminus Road is an industrial estate in Chichester. In the 1960s the Council granted a number of leases as part of its policy of encouraging businesses to locate themselves there and to construct factory units. The Lease was one of them. By the Lease the Council demised to the Lessee Plot 10 together with "all buildings to be erected thereon" for a term of 83 years commencing on 24th June 1969 paying therefor the annual rent of £1,820 during the first 21 years of the term and thereafter at the rate payable in accordance with the rent review provisions set out in the First Schedule thereto. By paragraph 14 of the Second Schedule thereto the Lessee covenanted to erect on the demised premises within two years from the date of the Lease a factory and within three years from such date to extend the factory by the erection of workshop or storage accommodation. The period of three years might be extended if the cause of the delay was beyond the control of the Lessee.
4. The provisions for the rent review are contained in the First Schedule. They are applicable for ascertaining the yearly rent, defined as the "Annual Ground Rent", payable "from the commencement of the twenty-first, forty-second and sixty-third years of the term.." The material provisions are
"1. AT the expiration of the third year of the term or on completion of the buildings to be erected by the Lessees (whichever is the earlier in time) the amount of the Annual Rack Rent shall be agreed between the parties hereto or in default of Agreement shall be ascertained by valuation as hereinafter provided whereupon an appropriate memorandum in duplicate specifying such Annual Rack Rent and the ratio between it and the yearly rent then payable under the terms of this lease shall be sealed by the Corporation and the Lessees and one sealed copy of such memorandum shall be attached to each of the original and counterpart of this lease respectively
2. THE ratio between the Annual Ground Rent and the Annual Rack Rent of the premises shall at the commencement of the twenty-first forty-second and sixty-third years of the term hereby granted be the same as that ratio which exists at the time the said Annual Rack Rent is first determined as hereinbefore mentioned Provided that any buildings added to the premises or any increase in the cubical contents of the buildings at the premises after the initial determination of the Annual Rack Rent under paragraph 1 hereof shall be allowed for by reducing the Annual Rack Rent subsequently agreed or ascertained in accordance with paragraph 3 hereof to such sum as shall bear to the Annual Rack Rent as subsequently agreed or ascertained as aforesaid the same relationship as the cubical contents of the buildings at the premises on the initial determination of the Annual Rack Rent bears to the cubical contents of the buildings then at the premises.
3. NOT later than the expiration of the twentieth forty-first and sixty-second years of the term the Annual Rack Rent shall be agreed or ascertained by valuation as aforesaid and immediately thereafter there shall be ascertained either by agreement in writing for this purpose made between the Corporation and the Lessees or in default of such agreement by formal determination (i.e. by calculation strictly in accordance with paragraph 1 above) the Annual Ground Rent payable to the Corporation by the Lessees from the commencement of the twenty-first the forty-second and sixty-third years respectively of the term
4. IMMEDIATELY after such Annual Ground Rent has been ascertained as aforesaid the Corporation and the Lessees shall seal an appropriate memorandum in duplicate specifying such Annual Ground Rent and thereupon one sealed copy of such memorandum shall be attached to each of the original and counterpart of this lease respectively and such duly sealed memorandum when so attached shall thereafter be conclusive evidence of the Annual Ground Rent hereby reserved from the commencement of the twenty-first year to the termination of the forty-first year and from the commencement of the forty-second year to the termination of the sixty-second year and from the commencement of the sixty-third year to the termination of the term hereby granted."
5. The Factory, to which I shall refer as "Phase 1", was duly completed within the two years permitted by Paragraph 14 of the Second Schedule. The workshop and storage accommodation, to which I shall refer as "Phase 2", was not completed within the three years allowed. An Industrial Development Certificate for the extension was issued on 24th March 1972. The requisite planning permission was granted on 30th August 1972 and the Council's consent as the landlord was formally signified on 21st November 1972. The building contract for Phase 2, dated 27th September 1972 envisaged that the work would start on 2nd October 1972; the works were practically complete shortly before 10th October 1973.
6. In the meantime, on 29th December 1972, the parties to the Lease executed a Memorandum ("the 1972 Memorandum") as envisaged by paragraph 1 of the First Schedule. It recorded that it was made pursuant to paragraph 1 of the First Schedule to the Lease and continued
"2. The Corporation and the Lessees have agreed and hereby declare that for the purposes of Clause 1 of the First Schedule to the Lease the Annual Rack Rent referred to therein shall be determined as the sum of FIVE THOUSAND ONE HUNDRED POUNDS (£5,100) and that the ratio which such Annual Rack Rent bears to the Annual Ground Rent reserved by the lease is the ratio fourteen to five
3. The aforesaid ratio shall be used as the basis for calculating the Annual Ground Rent payable at the commencement of the twenty-first forty-second and sixty-third years of the term granted by the Lease as provided by Clause 3 of the First Schedule to the Lease"
7. On 26th October 1990 Mr Allen, the Senior Valuer of the Council, gave notice to the Lessee to review the rent payable from 24th June 1990. In fact the notice should have been given and the date for the commencement of the reviewed rent should have been a year earlier (See Schedule 1 para 3) but no point is taken in that respect. After the exchange of correspondence and a meeting held on 28th February 1991 Mr Allen and Ms Coslett of Herring Son & Daw, the agents appointed by the Lessee, agreed an annual ground rent payable from 24th June 1990 of £54,000. Applying the ratio of 5:14 this annual ground rent corresponded to an annual rack rent of £151,200. A memorandum as required by paragraph 4 of Schedule 1 was prepared and signed on 3rd April 1991 ("the 1991 Memorandum"). It recorded that
"the rent payable under the above-mentioned Lease has been reviewed in accordance with the provisions of the schedule thereof and fixed in accordance with those provisions in the sum of £54,000 per annum exclusive for the 21 year period commencing 24th June 1990 and payable from this date."
8. In about May 1997 Mr Christopher Tod, a chartered surveyor and commercial property consultant, was instructed by the Lessee in connection with a possible sale of the Lease. He considered that the ratio was not in line with his expectations and investigated the sequence of industrial development certificates, planning permission and landlord's consent for Phase 2. In the belief that the 1972 Memorandum might record the results of valuing the land with Phase 1 only he sought and obtained such rent comparables as he could from that period. In the light of his advice to the Lessee, on 7th August 1997 solicitors for the Lessee wrote to the Council. They claimed that Phase 2 was constructed after 1972 so that the proviso contained in para 2 Schedule 1 to the Lease should have been applied to the Annual Rack Rent, as ascertained in 1990, before applying the ratio set out in the 1972 Memorandum to arrive at the Annual Ground Rent for 1990. They claimed that the failure to apply the proviso was due to a mistake and had given rise to overpayments of rent since then. It was suggested that the proper Annual Ground Rent was £20,181, not £54,000.
9. These proceedings were commenced by a writ issued on 15th June 1998. The relief sought was a declaration that, in effect, the proviso should be applied because Phase 2 was constructed after 1972. The consequential relief sought was an order for the rectification of the 1991 Memorandum so as to record an annual ground rent of £18,387 or a declaration that it was void for common mistake and, in either case, repayment to the Lessee of the aggregate of the rent overpaid then put at £284,904 with interest thereon pursuant to S.35A Supreme Court Act 1981.
10. On the second day of the trial by Mr Stewart QC, after the evidence of both parties had been concluded, the Lessee applied for and was given leave to amend the writ and statement of claim so as to seek rescission of the agreement underlying the 1991 Memorandum on such terms as might be just. The application was opposed as being made too late and as seeking to raise a cause of action which must fail. The judge did not accept either submission and granted leave to amend. On the next day he heard further submissions from counsel for the Lessee. In the event those submissions were not accepted. By his order dated 11th March 1999 the judge made a declaration to the effect that the proviso was applicable in relation to Phase 2, he ordered the rescission of the agreement underlying the 1991 Memorandum and he gave judgment in favour of the Lessee for the aggregate of the rent overpaid with interest thereon at the rate of 4% for the period before the letter before action dated 7th August 1997 and 8% for the period thereafter.
11. Logically this ground of appeal comes first. In its original form the writ and statement of claim made the conventional claim for "such further or other relief as may be just". In my view this would cover the claim for rescission so that, as no further facts were relied on, it was not necessary to obtain leave to amend anyway. But as this was not a ground relied on by the Lessee I will deal with the other arguments as well.
12. It is submitted that the judge was wrong for the two reasons to which I have referred in paragraph 10. For my part I do not accept either of them. The suggestion that the remedy of rescission was not open to the Lessee is based on the proposition that notice of such a claim must be given before the action is brought and, in this case, had not been. Seemingly reliance for that proposition is placed on para 6-108 Chitty on Contracts 28th Ed and the decision of this court in Car & Universal Finance Co.Ltd v Caldwell [1965] 1 QB 525 there cited. But that proposition relates to questions of title to chattels stolen from the true owner. There is no principle that the equitable remedy of rescission is unavailable unless sought by notice given before action brought.
13. The question whether to grant leave to amend was one for the judge in the exercise of his discretion. It is true that the application was made very late. It is equally true that counsel for the Council did not have the time to research the law on the question which he might have liked. But he did not seek any longer adjournment for the purpose of putting in more evidence and the questions of law which arise are now ones for the decision of this court, not the judge. In the circumstances it must be for this court to determine the issues of law not to interfere with the judge's exercise of his discretion.
14. By the time these proceedings were instituted such direct evidence as there might originally have been as to the calculations underlying the 1972 Memorandum had been lost or destroyed. The evidence before the court and the judge's findings are clearly set out in the following passage from his judgment:
"Mr. Todd demonstrated that valuation evidence showed that comparable
properties would have attracted a rent in the region of 40 to 50 pence a square
foot in 1972. If in 1972 the rents had been determined on what he calls a
"phase one only" basis - so phase two is not included - the floor area would
have been in the region of 11,651 square feet, at a rental value of £5,100
per annum, which, as the annual rack-rent agreed at that time, equated to
around 43 pence per square foot, which would be in line with those comparables.
On what he calls a "both phases" basis - that is to say, if the 1972
memorandum, contrary to my finding, included the phase two works - the floor
area would have been in the region of 31,176 square feet, so a rental value of
£5,100 a year would have equated to around 16 pence a square foot and
would have been quite out of line with the rental level suggested by the
comparables. He draws the inference that the rental of £5,100 per annum
was for a building whose floor area was in the region of 11,651 square feet,
that is to say, including the phase one works, but not both phases one and
two.
There is some supporting evidence, to which he refers, as to the physical state
of the property. The planing consent was not granted until August 1972, as I
have already mentioned; also the contract for the works was not signed until
September 1972; the works did not start, apparently, until early October 1972;
the council's consent was not granted until November 1972. It appears that
between April and October 1973 works were carried out to the value of some
£13,000-odd, leaving only a reduced retention to be paid to the builders.
I was shown material which points towards those supporting points. I conclude,
based on the materials put before me in this case, that it is comfortably clear
on the balance of probabilities that the 1972 memorandum did exclude the phase
two works.
It was suggested that the low rent from which Mr. Todd draws inferences - not
forgetting that there are other supporting points - can be explained by council
policies at the time. I do not find that evidence compelling. It seems to me
to be rather speculative and that the far more probable conclusion is the one
that I have reached."
15. The Council submits that the judge was wrong in the conclusion to which
he came. It is submitted that the terms of the Lease required that Phase 2
should be completed within 3 years of the date of the lease. Though Phase 2
was not completed in time its intended capacity would be known by the time of
the 1972 Memorandum; and at that time the construction of Phase 2 had been
started. It was submitted that in those circumstances it is to be inferred
that the 1972 Memorandum treated as done that which ought to have been done and
took account of the Phase 2 works. The Council did not challenge the rent
comparables on which Mr Tod relied or on his calculations. It suggested that
the discrepancy to which Mr Tod referred could be accounted for by the policy
then followed by the Council of charging rents below the market value in order
to induce businesses to move to Chichester.
16. I do not accept this submission. In the light of its terms and in the
absence of any evidence to the contrary it must be inferred that the parties
intended that the 1972 Memorandum should properly reflect the terms of the
Lease. Those terms provided for a fixed ground rent of £1,820 for the
first 21 years of the term commencing on 24th June 1969 and the ascertainment
of the annual rack rent of the premises as at the expiration of the third year
of the term on 23rd June 1972. At that date the demised premises included
Phase 1 but could not have included Phase 2 as neither planning permission nor
the landlord's consent had been granted. Moreover there was no need to take
prospective account of Phase 2 because the proviso established a simple
mechanism for stripping out from the Annual Rack Rent ascertained for the
purposes of the three subsequent rent reviews such part as was referable to
Phase 2. The proviso applied in respect of "any buildings added to the
premises...after the initial determination of the annual rack rent under
paragraph 1 hereof..". Given that the initial determination required by
paragraph 1 was a valuation of the premises at 23rd June 1972 it would have
been contrary to the Lease to have ascertained the rack rent as if Phase 2 had
been completed.
17. Thus it is clear that to have included Phase 2 in the valuation made as
at 23rd June 1972 would have been contrary to the terms of the lease. In
addition the evidence of rent comparables provided by Mr Tod indicates that the
1972 valuations must have included Phase 1 but excluded Phase 2. Thus the
valuation evidence confirms that in 1972 as required by the Lease only Phase 1
was included in the ascertainment of the Annual Rack Rent at £5,100. It
must follow that the ratio 14:5 which is the proportion £5,100 bears to
£1,820 was arrived at without consideration of Phase 2 either. In my
view the judge arrived at the only possible conclusion, namely that the 1972
valuation did not include Phase 2.
18. It is not now disputed that, as found by the judge, both Mr Allen and
Ms Coslett conducted the negotiations preceding the agreement underlying the
1991 Memorandum on the basis that both Phases 1 and 2 had been carried out at
the same time, that there was no occasion to apply the proviso and that the
ratio 14:5 was applicable to the annual rack rent of the premises as they stood
in 1991. In this they were mistaken. They were both labouring under the
same, common, mistake. But the nature of the mistake was not such as at law to
invalidate from its inception the agreement underlying the 1991
Memorandum.
19. In Solle v Butcher [1950] KB 671 Denning LJ formulated the relevant principles in regard to rescission for mistake. In the case of unilateral mistake he said (p.692)
"It is now clear that a contract will be set aside if the mistake of the one party has been induced by a material misrepresentation of the other, even though it was not fraudulent or fundamental; or if one party, knowing that the other is mistaken about the terms of an offer, or the identity of a person by whom it is made, lets him remain under his delusion and concludes a contract on the mistaken terms instead of pointing out the mistake."
In the case of a common mistake he said (p.693)
"A contract is also liable in equity to be set aside if the parties were
under a common misapprehension either as to the facts or as to their relative
rights, provided that the misapprehension was fundamental and that the party
seeking to set it aside was not himself at fault."
20. The judge applied the latter proposition. In doing so he rejected the
submissions that the Lessee or its agent was at fault in any relevant sense or
that there had been any delay sufficient to preclude a remedy by virtue of the
Limitation Act 1981, whether applied directly or by analogy, or otherwise. In
the written argument of junior counsel for the Council it was submitted that
the principle applicable to cases of common mistake was not as formulated by
Denning LJ in Solle v Butcher. Junior Counsel was not alone in that
view, see The Myth of Mistake in the English Law of Contract (1954) 70 LQR 385,
403-407; Spry on Equitable Remedies 5th Ed. p.156 and Chitty on Contract 27th
Ed para 5-091 to 5-094. However Leading Counsel for the Council in his oral
argument accepted the view of Mr C.J.Slade, as he then was, in The Myth of
Mistake in the English Law of Contract [ibid] p.407 that Solle v Butcher
is good law unless and until overruled by the House of Lords. Counsel reserved
the right to advance that contention in due course.
21. The argument before us was that the claim for rescission and repayment
of the amounts overpaid was in truth a claim for unjust enrichment so that the
question whether to rescind the agreement underlying the 1991 Memorandum must
be approached on that basis. Alternatively the principle as enunciated by
Denning LJ should be applied according to its terms. On either basis, so it
was submitted, the judge was wrong to have made the orders he did. In my view
the argument fails whichever limb is applied.
22. As Counsel pointed out a claim based on unjust enrichment is not fault
based. Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221, 227G-H. On this basis the question of whether the Lessee was at fault is
irrelevant. What matters is whether there was any "unjust enrichment".
Counsel contended that there was not because Phase 2 should have been completed
by 18th July 1972. So, he submitted, the annual rack rent should have been
calculated on the assumption that Phase 2 had been completed. Therefore, so he
submitted, the ratio 14:5, was correctly applied.
23. I do not accept any of those submissions. First, the provisions for
the construction of Phase 2 envisaged that the time might be extended if delays
occurred through no fault of the Lessee. We have no evidence to indicate why
Phase 2 was not completed before 18th July 1972. Thus it cannot be assumed
that Phase 2 should have been completed by 18th July 1972.
24. Second, even if it be assumed that Phase 2 should have been completed
by the valuation date, 23rd June 1972, the Lease did not require that Phase 2
should be included at that stage. The Lease envisaged that the premises should
be valued at the valuation date in their then condition, leaving it to the
proviso to effect the necessary modifications to the Annual Rack Rent as
ascertained in 1990 required by the addition of Phase 2 after 23rd June 1972.
25. Third, though it is true that the ratio 14:5 was to be applied in 1991,
it was applied to the wrong figure for the Annual Rack Rent. The Annual Rack
Rent of £151,200 related to the premises as they stood in 1991. Phase 2
had been added since the initial determination in 1972. Therefore the figure
of £151,200 should have been reduced in accordance with the formula set
out in the proviso. The reduced figure, as calculated by Mr Tod, was
£56,507 giving an annual ground rent in 1991 by the application of the
ratio 14:5 of £20,181. Accordingly the submission that the rent paid was
in accordance with the intentions of either the Council or the Lessee so that
there was no unjust enrichment is unsustainable. It is plain that the ratio
14:5 was arrived at by comparing the original contractual rent of £1,820
with the Annual Rack Rent for the land and Phase 1 only. To apply the same
ratio to the Annual Rack Rent for both the land and both Phase 1 and 2 was not
comparing like with like and was unintended.
26. Assuming that there was, as I have concluded is correct, unjust
enrichment counsel for the Council submits that the claim is barred by the
Limitation Act 1980. It is contended that s.5, which prescribes a six year
period for actions founded on a simple contract, applies also to claims for
unjust enrichment. See Re Diplock [1948] Ch 465, 514 and
Westdeutsche Landesbank Girozentrale v Islington BC [1994] 4 AER 890,
942. It is accepted that the action is for relief from the consequences of a
mistake so that s.32(1)(c) applies so as to prevent the period of limitation
from beginning to run until the Lessee has discovered the mistake "or could
with reasonable diligence have discovered it".
27. The judge refused to find that Ms Coslett was negligent in failing to
appreciate that the proviso should be applied so as to reduce the annual rack
rent in 1991 in accordance with the formula. In addition he decided that the
original mistake could not itself constitute a failure to use reasonable
diligence. The first of these conclusions is challenged on the ground that the
Lessee was at fault in failing to use reasonable diligence because either Ms
Coslett was negligent or the Lessee had failed properly to instruct her. Why,
if Mr Tod was able to discover the error by considering the history of the
development of Plot 10 and various rent comparables from 1972, could not Ms
Coslett reasonably be expected to do likewise? But so to hold would be at
variance with the judge's findings of fact. He found that Mr Allen had no
reason to suspect that Phase 2 was not included in the 1972 Memorandum. What
is good for Mr Allen is good for Ms Coslett too. I am not prepared to
conclude that the Lessee failed to use reasonable diligence in instructing Ms
Coslett. There is simply no evidence on the point and no a priori reason why
such an inference should be drawn.
28. Counsel did not deal with the second reason given by the judge, namely
that the mistake could not itself constitute the failure to exercise due
diligence, and it is not necessary for me to do so. For my part I think that
it could be misleading to accept the judge's view without qualification. No
doubt the mistake precedes and is different from a failure to exercise
reasonable diligence after it has been made. But there may well be cases in
which there is a claim for relief from the consequences of a mistake which was
honestly but very stupidly made. I see no reason why the continuation of the
facts which gave rise to the mistake on the part of the claimant in the first
place should not also support a finding of failure to exercise reasonable
diligence immediately after the mistake occurred.
29. I turn then to the alternative formulation derived from the judgment of
Denning LJ in Solle v Butcher. For the reasons I have already given
there is no doubt that there was a common mistake; nor that the common mistake
had a serious effect on the rights and liabilities of the parties. The
question is whether the Lessee was "himself at fault". It has been pointed out
in a number of cases that the concept of fault has never, in this context, been
developed or explained. In Kent v Hartley [1966] EGD 725 Ungoed-Thomas
J doubted whether it played any part in cases of common mistake. In Grist v
Bailey [1967] Ch 532 Goff J considered that there must be some degree of
blameworthiness beyond the mere fault of having made a mistake and that each
case would depend on its own facts. In Laurence v Lexcourt Holdings Ltd
[1978] 1 WLR 1128 Mr Brian Dillon QC, as he then was, did not consider that the
defendants failure to make the search which would have disclosed the mistake
disentitled them from relying on their mistake.
30. Whatever the ambit of fault may be in this context I do not consider
that the Lessee was at fault. In essence the point is little different to the
question whether the Lessee failed to exercise reasonable diligence to discover
the mistake. The judge considered that there was no reason why Mr Allen should
have suspected that phase 2 was not included in the 1972 Memorandum. For the
same reasons as I have already given in the context of s.32 Limitation Act I
see no reason why fault should be attributed to the Lessee or its
agent.
31. It was suggested that though the provisions of the Limitation Act 1980
would not apply directly to the claim for equitable relief in the form of
rescission and consequential orders for repayment they should be applied by
analogy. As I have concluded that they would not apply to bar the claim based
on unjust enrichment I see no ground for applying them by analogy to the same
claim as reformulated to bring it within the principle as stated by Denning LJ
in Solle v Butcher.
32. Quite apart from questions of applying the Limitation Act 1980 by
analogy it was submitted that the claim for equitable relief might be barred by
delay, particularly when allied to prejudice. But there was no delay after the
mistake was discovered. The discovery was made in about May 1997, the letter
before action was dated 11th August 1997 and the writ was issued on 15th June
1998. The prejudice relied on was that the negotiating stance taken by the
Council was disclosed by discovery in the action. But that is only prejudicial
if the information thereby derived is used in a renegotiation of the rent
review. But the Lessee has offered undertakings sufficient to ensure that such
information is not possessed by the persons carrying out the negotiations on
behalf of the Lessee. In addition I am not satisfied that the information now
possessed by the Lessee as to the position of the Council will be of any
significant use in any renegotiation of the 1991 Rent Review for the figures
will be quite different.
33. For all these reasons I would uphold the judge's decision to set aside
the agreement underlying the 1991 Memorandum. There remain the questions
referred to in paragraph 2(4) above, namely, whether there should be some
limitation on what is recovered or the interest thereon.
34. In the course of argument Counsel for the Council suggested that the
court should, in rescinding the agreement, impose terms so as to exclude the
recovery by the Lessee of the overpayments of rent made in the past. It is not
suggested that the defence to the restitutionary claim of change of position by
the Council has been established so as to defeat the claim to that extent.
Nor is it denied that on rescission of the agreement the amounts overpaid are
to be regarded as the property of the Lessee in the hands of the Council. As
such they would be recoverable as a matter of right. Foskett v McKeown
[2000] 2 WLR 1299, 1304H.
35. In these circumstances, whilst accepting that the Court has
jurisdiction to impose terms on the grant of equitable relief, I can see no
reason to impose any terms precluding the Lessee from recovering its own
property in the hands of the Council. The fact that the Council is a public
authority and therefore subject to certain financial and other restrictions is
not in my view a good reason for depriving the Lessee of any part of its
property.
36. The question of interest may be different. The award of interest under s.35A Supreme Court 1980 is discretionary. The judge awarded interest from the time the overpayment arose on the increasing balance of overpayment. He did so because the Lessee had been out of its money for the period commencing on that date. He rejected the suggestion that interest should run only from the time the claim of the Lessee was brought to the attention of the Council. But he acknowledged the justice of the suggestion in awarding 4% for the period before the letter before action and 8% for the period thereafter.
37. The trouble with the approach of the judge is that he gave no reason why this case was not one of the exceptions to the general rule that interest runs from the accrual of the cause of action summarised by Goff J in BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, 847-8. The first exception, as approved by this court in Allied London Investments Ltd v Hambro Life Assurance plc [1985] 1 EGLR 45, is where the defendant did not know and could not reasonably be expected to have known that the plaintiff was likely to make a claim and so was in no position to tender payment or make provision for payment if the claim should be substantiated. In my view a restitutionary claim based on a common mistake is well within the exception.
38. Further the rate of interest awarded appears to me to be high. The rate payable after the letter before action was written in August 1997 is 8%. But that is in excess of the monthly average of the clearing banks base rate for short term loans as assessed by the London Maritime Arbitrators Association ("Base Lending Rate") for each subsequent month, in the months since February 1999 by at least 2%. The interest payable for the period before August 1997 was, evidently, intended to be half the going rate of interest. But that intention was not implemented for all months between November 1992 and August 1997. In each of those months Base Lending Rate was below 8%, in some months by as much as 2.75%.
39. For my part I would set aside the judge's order regarding interest. I would award interest from 1st April 1998 as that is the commencement of the Council's first financial year after the claim was notified. I would award it at a rate equal to 1% over Base Lending Rate for the time being.
40. For all these reasons, given the undertakings referred to in paragraph 32, I would affirm paragraphs 1,2,3 and 4a of the judge's order. In lieu of paragraph 4b the order should provide for payment of the sum repayable under paragraph 4a with interest from 1st April 1998 at 1% over the Base Lending Rate (as defined) for the time being.
Lord Justice Sedley:
41. I agree with the judgment of Morritt LJ. I agree too with the comments upon it of Sir Christopher Staughton.
Sir Christopher Staughton:
42. I agree that this appeal should be dismissed for the reasons given by
Morritt LJ. It is a matter of some satisfaction, in my view, that we can and
do regard ourselves as bound by the decision in Solle v. Butcher (1950)
1KB 671. That decision has now stood for over 50 years. Despite scholarly
criticism it remains unchallenged in a higher court; indeed there have been
remarkably few reported cases where it has been considered during that long
period. As this case shows, it can on occasion be the passport to a just
result.
43. At first I was attracted by the proposal that the Chichester District
Council should be allowed to keep the excess payments that were made before the
Lessee first complained of the mistake. An outfit such as the Council has to
budget from year to year, and to extract money from its taxpayers accordingly.
It could be considered a hardship if its calculations are falsified
retrospectively. Since the equitable remedy of rescission may be granted on
terms, there could in my view be a term that the Lessee should not seek to
recover overpayments made before 1st April 1998.
44. However, on reflection I do not think that such a term would be
appropriate in this case. It is, I suppose, a common occurrence that a
District Council's forecast of its financial affairs for the coming year is
falsified to some extent. And as Morritt LJ points out, the overpaid money is
to be regarded as, in effect, the Lessee's money. In the particular
circumstances of this case, I would do no more to assist the Council in its
misfortune than he proposes by varying the judge's order as to
interest.
Order: Appeal against paragraphs 1, 2, 3 and (4) of judge's order dismissed. Appeal against paragraph 4(b) allowed. Costs - Chichester Council to pay 85% of costs of appeal. Permission to appeal to the House of Lords refused.
(Order does not form part of the approved judgment.)