Commercial premises — Negotiation of lease — Landlords paying business rate — Landlords contending that provision to pay business rate inserted by mistake — Landlords seeking rectification — Rectification granted
At all times, the plaintiffs were the registered proprietors of freehold land and premises at Bell Brook Estate, Bell Lane, Uckfield, Sussex. It was agreed between agents acting on behalf of each party, that the plaintiffs would let to the defendant premises forming part of the estate for a term of 30 years at £80,000 pa exclusive (PAX). It was common ground that the phrase meant exclusive of rates. That provision was in a document entitled “Memorandum of letting” which had been prepared in an earlier negotiation with other prospective tenants which had fallen through. That agreement was subsequently incorporated into a formal agreement for a lease dated June 7 1991 with the draft lease annexed thereto. However, the lease and draft lease provided in clause 5.3 a covenant by the tenant to pay and indemnify the landlords against “all rates, taxes, assessment … except the uniform business rate …”. In clause 7.8 it was stated that subject to the tenant paying rent, the landlords “shall pay the uniform business rate”. The lease also contained an “entire agreement” clause. The plaintiffs submitted, in the alternative, that the mistake was known to the defendant which failed to draw it to the notice of the plaintiffs. The plaintiffs did not perceive the error from start to finish.
Two years later the dispute came to light when there was a demand for rates which the defendant sought to pass on to the landlords. The plaintiffs paid some, but by no means all, of the rates demanded. The plaintiffs claimed rectification and repayment of £14,000 paid in business rates.
Held Judgment for the plaintiffs.
1. The “entire agreement” clause was to define where the contractual terms were to be found: see McGrath v Shah (1987) 57 P&CR 452. However, it was not capable of excluding liability for mistake as rectification was not about finding contractual terms outside the four corners of the document.
2. With regard to unilateral mistake, rectification could be achieved where there was a species of equitable estoppel where one party to a transaction knew that there was a mistake in his favour but did nothing to correct it. With the terms in the memorandum of letting in mind, it would have been apparent that there had been a departure from the agreement, and anyone with any knowledge of the usual practice in commercial lettings would have spotted that the provision that the landlords should pay the rates was unusual.
3. There had been a common intention as displayed in the memorandum of letting. However, a provision was inserted in the agreement for the lease which had been inconsistent with that common intention.
4. The mistake had been perceived by the defendant, and although no one expects a solicitor or adviser to act as nursemaid to the other side, it would make it inequitable to withhold relief by insisting that the plaintiffs be bound to a bargain they never intended to make and the defendant knew was never intended.
5. To say that the defendant ought to succeed because the process was started by a crass error on the part of the plaintiffs did not impress the court as a ground for exercising its discretion in the defendant’s favour.
Edwin Prince (instructed by Bunkers, of Hove) appeared for the plaintiffs; Timothy Fancourt (instructed by Dibb Lupton & Broomhead) appeared for the defendant.
