Claimants selling chalet to defendants – Defendants renting pitch on claimants’ caravan and mobile home site – Claimants serving notice to quit – Whether appropriate to order rescission of agreement to rent pitch – Terms of rescission – Judge ordering rescission – Appeal dismissed
The claimants were the leasehold owners of Betchworth Fort Caravan Park, Box Hill, Surrey, where they carried on the business of running a site that comprised a number of pitches for chalets and caravans with common recreational space. In 1996 the claimants purchased a wooden chalet that had been on pitch 23 since at least 1945. Meanwhile they entered into negotiations for the sale of the chalet to the defendants. In April 1996 the defendants paid £8,000 for the chalet and arranged for £70 per month to be paid to the claimants as a pitch fee. They then commenced permanent occupation of the chalet.
On 25 October 1996 the first claimant served a purported notice to quit. Notwithstanding the notice, the defendants remained in occupation. In December 1997 the claimants issued proceedings, claiming that in April 1996 the defendants had agreed to purchase the chalet for £8,500 and to pay £70 per week to be entitled to station the chalet on pitch 23. The claimants claimed that the defendants were in breach of that agreement and were trespassers, and that they were entitled to an injunction to restrain the defendants from continuing the trespass and ordering them to remove the chalet. They further sought the balance of the purchase price, unpaid pitch fees and damages. The defendants claimed that they had agreed to purchase the chalet for £7,500 and to pay £500 towards the claimants’ legal fees and a pitch fee of £70 per month.
The judge held that the agreement to purchase the chalet was void because it had proceeded under the mutual mistake that it was a chattel that could be sold as personal property. He further held that the agreement of the parties allowing the defendants to station the chalet on pitch 23 had given rise to an assured tenancy, but that the agreement was voidable for mistake and was to be rescinded on the terms that the claimants pay the defendants the £8,000 paid for the chalet and £6,000 for money spent by the defendants on improvements, plus an allowance for labour. The defendants appealed, contending that the judge had given insufficient reasons for exercising his discretion in favour of ordering rescission of the agreement and had failed to take into account the facts that the defendants would be homeless and that the chalet had increased in value as a result of their improvements.
Held: The appeal was dismissed.
1. The judge had been correct to treat the arrangements between the parties as two distinct transactions interlinked. The first agreement had been for the sale of the chalet. The second agreement had been for the right to station the chalet and occupy it as a permanent residence. He had correctly concluded that the first agreement was void in law since it had been made on the misunderstanding that the chalet was capable of being sold separately and distinctly from the land.
2. The judge had been right to conclude that the second agreement had been entered into under a common misunderstanding of the respective rights of the parties, and to find that neither of the parties were at fault for the misapprehension. In those circumstances he had been right to reach the conclusion that he had the power to set aside the transaction in equity: Solle v Butcher [1950] 1 KB 671 considered.
3. The judge then had to consider whether and on what terms the second agreement should be set aside. He had reached the only conclusion that he could, that the agreement should be rescinded, and he had taken into account all the matters that had been argued before him, which had not included compensation for the increased value of the chalet as a result of the defendants’ improvements. Accordingly his conclusion could not be criticised. It would have been wrong to have refused to rescind the agreement simply because the defendants’ occupancy had given rise to an assured tenancy.
Guy Adams (instructed by Tozers, of Exeter) appeared for the claimants; Stanley Widdup (instructed by Cowan & Woods, of Dorking) appeared for the defendants.
Thomas Elliott, barrister
