Landlord and tenant — Rectification of lease — Rent review clause — Evidence of mutual mistake — Lease referred to rent reviews at the end of the seventh and 14th years of the term whereas the intention was that the reviews should be every fifth year of the term — It appeared from the travelling draft of the lease that it had been modelled on a precedent of a 21-year term with reviews at seven and 14 years — This had been corrected to five years in one part of the relevant clause but not in another — Held that all the conditions for rectification were satisfied, namely clear evidence of mistake, instrument falling to represent the parties’ common intention, intention continuing down to date of execution — Point raised as to whether the plaintiffs as successors in title of the original landlords with whom the negotiations were conducted had an entitlement or equity to have the lease rectified — Held that section 63(1) of the Law of Property Act 1925 provided authority, if it were necessary, that the transfer of the reversion to the present landlords was effectual to pass the original landlords’ interest to have the lease rectified — Order for rectification, deleting reference to seventh and 14th years and inserting ‘each fifth year of the term’
This was an
action for rectification set down in the witness list, in accordance with Order
19, rule 7, of the RSC, although the defence had been struck out for failure to
comply with an order for discovery. The action accordingly proceeded as a
witness action, but with oral evidence in support of the plaintiffs’ case only.
The plaintiffs, Boots The Chemist, claimed rectification of the rent review
clause in a lease, the defendant tenant being Mr G L Street.
Christopher
Priday (instructed by Lovell, White & King) appeared on behalf of the plaintiffs;
Michael T Briggs (instructed by Sharpe Pritchard) represented the defendant.
Giving
judgment, FALCONER J said: This action comes before me as an action set down
for hearing in the witness list, although in fact it has already been the
subject of an order by the master striking out the defence for failure on the
part of the defendant to comply with an order for discovery. But the action is
an action for rectification of a lease, and that being so, in accordance with
the practice note which is to be found under Order 19, rule 7, at the foot of p
369 in The Supreme Court Practice, which reads:
In actions in
the Chancery Division for rectification of an instrument oral evidence is in
practice required and therefore such actions are ordered to be set down in the
witness list.
The matter has,
as I have already mentioned, come before me as an action in the witness list.
I have already
dealt with and given judgment on an application at the outset by counsel on
behalf of the defendant that the order made by the master should be varied to
allow him to appear and take a point on the defence. I rejected that
application and so the hearing has proceeded upon the footing that I heard oral
evidence in support of the plaintiffs’ case.
The matter is
a relatively simple one in that it concerns rectification of a lease and in
particular a clause dealing with the interval of the rent review provisions to
be found in the lease. I need refer only to the relevant clause, which is
clause 8(1). I should perhaps preface it by saying that the lease is for a term
of 25 years and the relative provision in the operative part of the lease
relating to the rent is:
YIELDING AND
PAYING THEREFOR during the said Term hereby granted . . .
— and then
some words not relevant —
for the first
five years thereof the yearly rent of £2,750 (subject to review as hereinafter
mentioned) . . .
That is all I
need to read from that. The review clause is clause 8(1), and that is in these
terms:
The Lessors
shall be entitled by notice in writing given to the Lessee at any time during
the first six months of every fifth year of the Term to call for a review of
the yearly rent for the time being payable under this Lease and if upon such
review it shall be found that the then current rack rent value of the premises
is greater than the rent then payable hereunder the yearly rent then payable
shall be increased to the amount of current rent value as aforesaid as from the
end of
and I draw
particular attention to these words, which are the words in question, which are
said to be a mistake
the seventh
and fourteenth years of the Term as the case may be.
The
plaintiffs’ claim is that plainly there is a mistake, as indeed there plainly
is in some way in that clause. The mistake, they say, is that the words:
the seventh
and fourteenth years of the Term as the case may be
should be
amended to read:
each fifth
year of the Term.
I have been
satisfied on the evidence that the initial antecedent agreement prior to the
execution of the lease, which came some considerable time after the initial
antecedent agreement by which the terms were agreed because of the defendant’s
difficulties in obtaining finance and planning permission, quite clearly was
upon the footing that there should be rent reviews every five years. It is
sufficient for me to refer to the letter of February 12 1974, which is the
first in a bundle of correspondence from Mr Smith, who was called to give
evidence before me, then the negotiator for the agents acting for the then
landlords, who were the predecessors in title of the present plaintiffs. It is
in these terms:
Further to
our meeting on Tuesday morning, I have advised my clients of your offer to rent
the above premises at £2,400 per annum, subject to contract for a term of 25
years with rent reviews at five-yearly intervals on a full repairing and
insuring basis.
There was a
subsequent offer by the defendant which raised the rent but thereafter the
question of the term of 25 years and of the rent reviews at five-yearly
intervals did not arise. I have had it explained to me how the error appears to
have arisen. The travelling copy draft of the lease which is before me shows
clause 8(1) and the clause as originally typed out. I have had evidence to show
that it was taken from a corresponding lease in respect of shops in the
premises below the offices, the subject of the lease in suit. The lease for the
shops below was a 21-year term one with rent reviews at seven and 14 years of
the term, and the evidence established that the rent review clause had been
copied and taken out and placed in the draft for the lease in question.
At the first
appearance of the words ‘the seventh and fourteenth years’ the travelling draft
quite clearly has been typed out with crosses and replaced by ‘every fifth
year’. That is exactly as it appears in the executed lease but what had been
overlooked was a similar correction towards the end of the clause, where the
words in the original draft, as in the executed lease, are:
as from the
end of the seventh and fourteenth years of the Term as the case may be
and of course
it is the plaintiffs’ case that the words ‘the seventh and fourteenth years of
the Term’ should be replaced by the words ‘each fifth year of the Term’ to make
them correspond with the amendment in the initial part of the clause, where the
words ‘the seventh and fourteenth years’ had been altered in the way I have
indicated.
I am satisfied
on the evidence that there was a mutual mistake. I have had the mistake
explained to me and it is quite plain how the lease should be rectified, if it
is to be rectified. I have been referred, very properly, by Mr Priday on behalf
of the plaintiffs, particularly in the absence of the defendant, his defence
having been struck out, to para 56 of the section on Mistake in Vol 32 of the
fourth edition of Halsbury’s Laws of England, dealing with the question
of rectification. I should read the first sentence of that paragraph:
To justify
the court in correcting a mistake in an instrument the evidence must be clear
and unambiguous that a mistake has been made.
That of course
is the first requirement and I am quite satisfied as to that. The sentence in
the paragraph goes on:
that the
instrument does not represent the parties’ common intention
and that is
perfectly plain and I am quite satisfied as to that.
The next
requirement is ‘what that common intention was’. I am quite satisfied that the
common intention was that there should be five-yearly reviews — the interval
should be five years. The passage goes on:
and that the
alleged intention to which it is desired to make the agreement conformable
continued concurrently in the parties’ minds down to the time of the execution
of the instrument.
I have already
indicated that it is clear from the evidence that there was never any
discussion after the initial antecedent agreement as to the terms that were
discussed in the letter, to which I have referred, of February 12 1975. There
was never any further negotiation of either the terms of the lease or the
interval at which the rent review was to be operated, so that, subject to a
point of law to which I shall refer in a moment, I am satisfied that all the
requirements set out in that paragraph are met with here and that, subject to
what I shall say in a moment, this is a proper case for making the order
sought.
Very
correctly, Mr Priday has drawn my attention to this point, which is indeed a
point of law that the counsel for the defendant, when he made an application
that I should set aside, or rather vary, the order of the master striking out
the defence, urged should be taken into account. It is this: the present
plaintiffs are not the original landlords with whom the negotiations were
conducted by the defendant and with whom the lease was made as landlords. The
present plaintiffs are the successors in title of the original landlords. The
question, shortly, is whether, as successors in title, they are entitled to the
benefit of such interest or equity to have the lease rectified in the way in
which it is sought to be rectified that would have existed in their
predecessors in title, the original landlords. Mr Priday deals with that
shortly by drawing my attention to the wording of section 63 of the Law of
Property Act 1925, subsection (1) of which reads:
Every
conveyance is effectual to pass all the estate right, title, interest, claim
and demand which the conveying parties respectively have in, to, or on the
property conveyed.
I need not read
any further. But he submits, I think rightly so, that under that provision the
transfer, which was a transfer of the freehold reversion, subject, of course,
to the lease, from the original landlords to the present plaintiffs, is
effective to pass such interest as there may be or may have been in the
original landlords to have the lease rectified in the manner now sought to have
it rectified.
That being so,
I am satisfied that this is a case in which I ought to make the order sought
and I therefore order rectification of the lease in the way sought in the
prayer of the statement of claim: that is to say, by deleting from clause 8(1)
of the lease the words:
the seventh
and fourteenth years of the Term as the case may be
and inserting
in place thereof the words:
each fifth
year of the Term.
It remains to
deal with the question of costs. Mr Priday has asked for costs. He has pointed
out that, as is plainly the case from the correspondence, the mistake having
been discovered some considerable time ago before the action was brought, the
plaintiffs, through their solicitors, drew the attention of the defendant to
the mistake and asked him to agree rectification. I should say that they asked
him to agree rectification offering to pay all necessary expenses. There was no
response and eventually the action had to be brought in order to secure the
rectification sought. However, it is not to be overlooked that the whole
question of the need for rectification, and I have held that there was a need
for rectification, arose because of an error on the part of the solicitors of
the plaintiffs’ predecessors in title acting originally. I think it would not
be a proper case in which I should grant costs to the plaintiffs and I make no
order as to costs.