Parties agreeing rent exclusive of business rates – Landlord’s solicitor erroneously submitting draft showing inclusive rent – Tenant informing his solicitor that draft correct – Tenant’s solicitor proceeding on that basis notwithstanding obvious discrepancy between draft and earlier memorandum of agreement – Plaintiff’s claim for rectification allowed – Whether claim would have succeeded if based solely on conduct of tenant’s solicitor
The plaintiff was the freehold owner of shop premises in High Road, Leytonstone, London E11. In October 1995 an agent for the plaintiff advertised the premises as available for letting on a full repairing lease at a yearly rent of £12,000 exclusive of business rates. The response was poor, and in late December 1995 the plaintiff agreed, subject to contract, to let the premises to TTS Ltd for a six-year term at a rent (subject to review in the third year) of £12,000 inclusive of business rates. On 9 January 1996 the plaintiff’s solicitor sent a draft lease (the TTS draft), incorporating those terms, to TTS’s solicitors, who raised various points. While those were being discussed, the plaintiff was approached by the defendant, who was willing to take a 15-year lease on the terms initially advertised. On 1 February 1996 the plaintiff’s agent sent to the defendant’s solicitors a memorandum of a proposed letting, which recorded, inter alia, a rent exclusive of business rates. Enclosed with the memorandum was a copy of the plaintiff’s “standard lease”. However, the latter document, which the plaintiff’s solicitor had prepared by adapting the TTS draft, showed the rent as an inclusive rent.
When the discrepancy between the two documents was raised at a meeting between the defendant and his solicitor (C), on 9 February 1996, the defendant told C that the agreed rent was indeed inclusive. C did not mention the discrepancy in subsequent correspondence with the plaintiff’s solicitor who, like the plaintiff, remained unaware of the error that had been made in the process of adapting the earlier draft. Having terminated negotiations with TTS, the plaintiff leased the premises to the defendant for a 15-year term commencing 11 March 1996, the executed lease showing a reviewable rent of £12,000 inclusive of rates. In proceedings, in which the plaintiff sought rectification of the lease, the judge found as a fact that the defendant was aware at the date of his meeting with C that the standard lease did not correspond with what had been earlier agreed.
Held: Order that the lease be rectified.
1. A party seeking rectification for unilateral mistake had to prove that the defendant knew of the plaintiff’s mistake and took advantage of it. Lack of diligence on the part of the defendant or his agents, which led them to be unaware of the mistake, was not enough. Suspicion might be enough, but it was essential that the defendant had acted unconscionably and unfairly: Baden v Société Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509; Commissioner for New Townsv Cooper [1995] 2 EGLR 113 considered. Conversely, it was immaterial that the mistake was caused, as frequently occurred, by the negligence of the plaintiff or his adviser.
2.On the evidence before the court the defendant did take advantage of the plaintiff’s mistake when he told his solicitor that the rent had been agreed on an inclusive basis. The claim would not have succeeded if it had been founded solely on the conduct of C. While a careful and honest solicitor would in the circumstances have raised the question of rent with the other side, whatever he was told by his client, the court was not persuaded that C had acted dishonestly or with improper intent.
Nicholas Isaac (instructed by Selwyn Tash & Co) appeared for the plaintiff; James Butters (instructed by Bisessar & Co) appeared for the defendant.
Alan Cooklin, barrister
