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Cite as: [2013] EWCA Civ 1506

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		Neutral Citation Number: [2013] EWCA Civ 1506
		Case No: B2/2012/0281

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM WINCHESTER COUNTY COURT
(RECORDER PATTERSON)

Royal Courts of Justice
Strand
London WC2A 2LL

25 July 2013

B e f o r e :

LORD JUSTICE FLOYD
--and--
MR JUSTICE SALES
____________________

Between:

	PUREWAL	Appellant/Claimant
	--and--
	SOHAL & OTHERS	Respondents/Defendants

____________________

(DAR Transcript of
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____________________

The Appellant appeared in person
The Respondents appeared by Mrs Sohal on her own behalf and for the other respondents, with the agreement of the Court

____________________

HTML VERSION OF JUDGMENT
____________________

Lord Justice Floyd:

This is an appeal from the decision of Mr Recorder Patterson, sitting in the Southampton County Court on 16 December 2011. The claimant, who is the appellant before us, entered into what he thought was a valid agreement to buy an Indian takeaway restaurant from the defendants, Mr and Mrs Sohal and Mr Jan, who are the respondents before us. In short, in the action Mr Purewal claimed that he had been sold the freehold of the premises. The respondents contended that that was not the case. The action proceeded, and it was determined that Mr Purewal had not been misled as to what he was buying. But the Recorder pointed out that the agreement being one for the disposition of an interest in land, it was void unless made by deed or otherwise recorded in writing. As there was no writing, he concluded that the agreement was void. It then fell to the Recorder to determine what the appropriate remedies for the parties were in those circumstances.

The sum of damages was calculated in the course of the hearing immediately following the giving of judgment. We have been provided with a transcript of those proceedings in which a number of different figures were brought into the equation. It is not necessary to go very far into the details of those calculations because I have come to the very clear conclusion that they proceeded on an incorrect basis in principle.

The correct principle, as it seems to me, is that Mr Purewal, given that the agreement is void, should have been entitled to recover all the sums actually paid by him under the void agreement. Those sums were paid under a mistake and therefore fall to be recovered on that basis. Equally, however, he would be obliged to give credit for the benefits which he himself received under the void agreement. Those benefits, it seems to me, are twofold. Firstly, he enjoyed the occupation of the premises. Secondly, he had the benefit of the goodwill which subsisted in the premises as a going concern, which was recognised in the sum which he was prepared to pay for what was in essence a leasehold interest. The calculation therefore needs to take account on the credit side, so far as Mr Purewal is concerned, of all the sums which he in fact paid and on the debit side of all the benefits which he received under the agreement.

The judge arrived at a figure of £22,435.68 as payable to Mr Purewal from the Sohals. By his appeal Mr Purewal contends that a further sum of approximately £11,000 ought to have been brought into account as well as other sums. He claims the amount originally set out in his claim of some £51,000.

As I have said, I have come to the conclusion that the judge approached the calculation on an incorrect basis. What we have to do on this appeal is determine what a correct calculation would arrive at, doing the best we can with the materials which have been drawn to our attention.

Taking first the sums paid by Mr Purewal, those fall under three headings. Those are, firstly, the lump sum which he paid towards the purchase price of £64,000, namely £40,000; secondly, payments which were made to service a loan for the balance of the purchase price of £24,000; and thirdly, the rent actually paid.

The payments made pursuant to the loan were as follows: Mr Purewal originally claimed that he had paid £11,129.13, but it has been satisfactorily demonstrated to me that that figure includes three payments (which were not in fact made) of £412.19. The calculation therefore shows that under that head one should allow Mr Purewal only £9,892.56. So far as the rent is concerned, there does not appear to be any dispute that he actually paid £13,202.96. That being so, according to my calculations, the overall sum paid by Mr Purewal which he can claim back under the void agreement is some £63,095.52. I turn then to the sums for which Mr Purewal must give credit.

First of all, it seems to me that the credit must include what Mr Purewal would have paid by way of a market rent. There was no evidence before the judge, and none before us, of whether the rent actually paid by Mr Purewal was a market rent, save for this, that he does appear to have been given a significant discount over the rent which was paid to the Council, who were, as I understand it, the freeholders of the premises. That, it seems to me, justifies an uplift over what he did in fact pay of some 20 per cent. The rent he paid was £90 per week at 80 per cent. If one uplifts that to represent the full rent, one comes to a figure which is £22.50 greater. Over the period of occupation, that sum of £22.50 per week multiplies out to £2,430. There is also an adjustment to be made for rent which was in fact unpaid. I have therefore arrived at a figure of £16,678.96 in respect of market rent. There is also a further sum of £1,088 in respect of unpaid service payments, which the judge did take into account in his calculations but which needs to be added to the £16,600 figure that I have mentioned.

The second element, as it seems to me, is more problematic, and that is that a payment which should be made to represent the goodwill in the business which was a going concern at the point when Mr Purewal took it over.

The figure of £64,000 seems to me to represent a starting point for the value of the goodwill in the business over the remaining period of the 10-year lease which the Sohals had from the Council. If one were to apportion that in a linear fashion over those nine years and three months and calculate the proportion for two years and three months, one would arrive at a figure of some £15,500. But it seems to me that that must be a very significant underestimate of the actual value of the goodwill which Mr Purewal enjoyed. He was taking over a business as a going concern. In the earlier years in which he took it over, the value of the subsisting goodwill would be much greater. In later years he would have to use his own efforts and his own resources to continue the success of the business.

I therefore think that a very much higher proportion of the payment for goodwill should be attributed to the early years of the remaining period of the putative agreement. A straight line assessment is not, in my view, a fair reflection of the value which Mr Purewal in fact received for the goodwill in the two years and three months in which he had the benefit of it. We have very little material on which to base an assessment of how much greater than the £15,500 the value of that goodwill would be, but I have very little doubt that the value must be much closer to £25,000 than to £15,000, and for present purposes it is not necessary to be any more precise than that.

When one makes those calculations and sets off the benefits which Mr Purewal must give credit for against the sums which he is entitled to recover, I have no doubt that one would arrive at a figure lower than that which the judge actually arrived at. The figure which we would arrive at on that calculation is much closer to £20,000 than the £22,000 which he in fact awarded. In those circumstances, there is no basis for interfering with the sum which the judge in fact awarded, and it would follow that the appeal ought to be dismissed.

I would add only that I do not regret having arrived at that result. The business, when it was returned to the Sohals and Mr Purewal handed back the keys, was not in as good a condition, on any view, as it was when he took it over. The Sohals and Mr Jan feel quite strongly, as they made clear in their submissions before us, that they have suffered as a result of the failed agreement which they had with Mr Purewal to a much greater extent that our calculations in fact reveal. Be that as it may, the calculations on a proper basis do not justify any interference with the order which the judge made.

For my part, therefore, I would dismiss the appeal.

Mr Justice Sales:

I agree. There is no cross-appeal so it is not possible to award any lower sum in favour of Mr Purewal than that ordered by the judge. But, for the reasons given by my Lord, I am entirely satisfied that the sum ordered to be paid to Mr Purewal is more than adequate to meet the justice of the situation so far as this case is concerned.

Order: Appeal dismissed