Summary

A written agreement recording a reviewed rent which had been determined on the basis of a common mistake was to be rescinded, and the amount of any overpayment was recoverable as money had and received. However, interest on the amount overpaid was payable from the date when the claim was notified, and not from the date when the overpayment was made. * Leave to appeal to the House of Lords refused.

Facts

Appeal by the defendant council from the decision of Nicholas Stewart QC by which he granted the plaintiff's action for rescission of a written agreement ('the 1991 agreement') as to the amount of a reviewed rent, on the ground of common mistake. By a lease granted in 1969 a vacant plot of land was demised by the council to the plaintiff's predecessor, subject to a covenant on the tenant's part to build a factory and associated buildings on the plot within three years of the demise. The lease contained provision for the ratio of the annual rack-rent to the ground rent to be determined within three years of the date of the demise. On every rent review the same ratio was to be applied, disregarding any buildings that might have been added to the premises after the initial determination of the annual rack-rent. In 1972 a memorandum was prepared recording the required ratio. That ratio was applied in 1991, on the first rent review, and the amount of the rent was recorded in the 1991 memorandum. In August 1997 the plaintiff discovered that the rent fixed in 1991 included the associated buildings whereas the 1972 memorandum recorded an annual rack-rent that did not include the associated buildings, since these had not in fact been constructed within three years of the demise. The plaintiff therefore contended that the associated buildings were additions that fell within the terms of the disregard provided for by the lease. In 1998 the plaintiff brought proceedings for: (a) a declaration that the disregard should be applied; (b) an order for rectification of the 1991 memorandum; (c) repayment of the rent overpaid since 1991; and (d) further or other relief. On the second day of trial the judge allowed the plaintiff's application for leave to add a claim for rescission of the 1991 memorandum. The judge ordered rescission of the 1991 memorandum and repayment of the overpaid rent with interest from the date of overpayment on the accruing balance at the rate of 4 per cent for the period before the plaintiff's letter before action in August 1997 and 8 per cent thereafter. On this appeal the council contended that: (i) the judge should not have allowed the amendment; (ii) there was no mistake adequate to justify the order made; (iii) any relief to which the plaintiff was entitled was statute-barred under s.5 Limitation Act 1980 or by laches or delay; and (iv) it should not be liable to repay the amount overpaid, or alternatively interest thereon, before August 1997.

Held

The grant of leave was well within the judge's discretion and the Court of Appeal would not interfere. In any event, leave had not been necessary since the amendment fell within the conventional claim in the prayer for "further or other relief". (2) The only possible conclusion on the evidence before the judge was that both parties had been acting under a common mistake. (3) Even if the claim fell within s.5 of the Act, it also fell within s.32(1) of the Act, since the plaintiff was asking to be relieved from the consequences of a mistake. It followed that time only ran from when the plaintiff actually discovered the mistake "or could with reasonable diligence" have done so. There was no basis for saying that the plaintiff had failed to exercise reasonable diligence so as to enable the limitation point to succeed. There had been no delay once the mistake had been discovered, and any prejudice to the council on the re-negotiation of the rent for 1991 onwards, which arose from the fact that its negotiating position had been disclosed on discovery, could be dealt with by way of suitable undertakings from the plaintiff. (4) The judge had erred in principle in relation to the question of interest. The period was far too long, and the rate far too high. Interest would be awarded at the rate of 1 per cent over base from 1 April 1998, being the council's first full financial year after notification of the claim was given.

Appeal dismissed save to the extent indicated.