IN THE SUPREME COURT OF JUDICATURE CCRTF 1999/0429/B3
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EPSOM COUNTY COURT
(His Honour Judge Hull QC)
Royal Courts of Justice
Strand
London WC2
Thursday, 21st October 1999
B e f o r e :
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-v-
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MR S J P WIDDUP (instructed by Messrs Cowan and
Wood, Dorking) appeared on behalf of the Appellant Defendants.
MR G ADAMS (instructed by Messrs Tozers, Exeter) appeared on behalf of the Respondent
Plaintiffs.
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Lord Justice Chadwick will give the first judgment.
This is an appeal against an order made on 16th February 1999 by His Honour Judge Hull QC in the Epsom County Court in proceedings brought by Mr Anthony Nutt and his wife, Mrs Simonetta Nutt, against Mr Philip Read and his wife, Mrs Yvonne Read, in relation to a chalet-type building and land at Betchworth Fort Caravan Site, Boxhill, Surrey.
The Betchworth Fort Caravan Site is held by Mr and Mrs Nutt as tenants under a lease granted by Mrs Rosemary Worth for a term of 15 years from 12th June 1995 at a nominal rent of £1. At the time that the lease was granted Mrs Worth and her husband, Mr Leslie Worth, had been operating that site for many years. Mr and Mr Worth sold the business to Mr Nutt in 1995 as part of the arrangements under which Mrs Worth granted the lease to Mr and Mrs Nutt. Since June 1995 the business has been carried on by Mr Nutt.
The site comprises a number of defined plots, or pitches, as well as common recreational space, paths, a car park and service buildings. Each of the defined plots, or pitches, is occupied by a chalet or caravan; for which privilege the owner of that chalet or caravan pays a fee. Pitch No. 23 is occupied by a wooden chalet known as "The Rest".
"The Rest" has been on that pitch for many years - probably since 1922. It comprises a principal structure, used as a sitting room and two bedrooms, with two extensions - one used as a kitchen and bathroom and the other as a sun lounge. The principal structure is made up of large pre-formed parts resting on brick or concrete piers. The extensions are built of tongued-and-grooved boarding; the sides resting on sleeper walls or piers. The chalet has been occupied as a residence - as distinct from holiday accommodation - since the last war. Until March 1995, shortly before Mr Nutt's purchase of the business, the chalet was occupied by Mr Leslie Kick. Mr Kick died in March 1995, and his interest in the chalet - whatever that interest might have been - passed to his daughter, Mrs Maureen Campbell, as his executor.
On 26th June 1995 Mrs Campbell wrote to Mr Nutt, indicating that she wished to sell the chalet; and asking for his advice as to "what conditions apply in selling a property on the site". Mr Nutt replied through his solicitors, Messrs Bells, on 17th August 1995. They wrote:
... you must appreciate that you do not have a legal right to assign or indeed sell the pitch upon which the chalet stands without the proprietors' consent.
In the circumstances as you have no rights to assign or indeed the right to station the chalet on the pitch please confirm that you will be selling the chalet off site.
That letter indicates the solicitors' view that the chalet known as "The Rest" was alienable from the land on which it stands; could be removed from the site; and if sold, should be sold off-site. In practice, of course, what might be expected to happen would be that the chalet would be sold to someone who would take a site licence from Mr and Mrs Nutt; so that the chalet would remain where it was.
Mrs Campbell instructed solicitors, Messrs Foster Wells. Further correspondence took place -Foster Wells asserting that Mrs Campbell had the benefit of an agreement which was protected by the Mobile Homes Act 1983 and Bells asserting that the Act would not apply to the chalet. In a letter dated 8th February 1996, after setting out the statutory definition of a caravan in section 29(1) of the Caravan Sites and Control of Development Act 1960, Bells wrote:
In this case the deceased resided in a wooden chalet which was affixed to the pitch and is incapable of being moved. The current structure does not satisfy the definition of caravan.
For my part, I find it difficult to reconcile the two statements - the one in the letter of 17th August 1995 that the chalet should be sold off-site, and the other in the letter of 8th February 1996 that the chalet is incapable of being moved - made by Bells on Mr Nutt's behalf.
Be that as it may, by 3rd April 1996, Mrs Campbell - no doubt recognising the difficulties with which she was faced in seeking to sell the chalet to anyone else - had agreed to sell the chalet to Mr Nutt at a price of £5,000. That sale was completed on 10th May 1996.
In the meantime, Mr Nutt had been in negotiation with Mr Read as to the terms on which Mr and Mrs Read should be allowed into occupation of "The Rest". In or about March 1996 it had been agreed between them that, subject to Mr Nutt acquiring the chalet from Mrs Campbell, Mr and Mrs Read would purchase "The Rest" from Mr Nutt at a price of £8,500. On 16th April 1996 Mr Read paid £8,000 to Mr Nutt. It is not in dispute that that was in part payment of the purchase price. Mr and Mrs Read went into occupation of the chalet on or about 8th May 1996. The terms on which they did so are not recorded in any formal document. Nevertheless, on 13th April 1996 Mrs Read had signed a standing order directing her bank to pay to Fort Leisure (which was the name under which Mr Nutt carried on business at the caravan site) the sum of £70 on the first day of each month. At some time thereafter, Mr Nutt signed a document addressed "To whom it may concern", which was in these terms:
This letter is confirmation that on the 16th April 1996, Mr and Mrs P Read purchased from me Anthony Nutt, Proprietor of Betchworth Fort Park situated at the above address, the chalet and all its contents known as 'The Rest'. Mr and Mrs P Read are now the rightful owners of 'The Rest' which is pitched on my site as a residential chalet.
On 25th October 1996, Messrs Tozers - who had been instructed by Mr Nutt as solicitors in place of Bells - served on Mr and Mrs Read what purported to be a notice to quit by a landlord of premises let as a dwelling. The notice was in these terms:
As solicitors and agents for and on behalf of Mr Anthony Nutt of Hilltop, Fort Road, Boxhill, Surrey ... hereby give you NOTICE TO QUIT and deliver up possession to him of ALL THAT pitch and surround known as 'Rest' at Betchworth Fort Park, Boxhill, Surrey. This notice shall take effect to bring your agreement to occupy to an end on the 16th May 1997 or at the expiration of six months of your tenancy which shall expire next after the expiration of six months from the service of this notice.
Notwithstanding that notice, Mr and Mrs Read remained in occupation of "The Rest". These proceedings were commenced by the issue of a summons in the Reigate County Court on 5th December 1997. In particulars of claim served with the summons, the plaintiffs, Mr and Mrs Nutt, referred to the agreement, made in March 1996, under which Mr and Mrs Read would purchase "The Rest" from Mr Nutt at the price of £8,500; and a further oral agreement that Mr and Mrs Read would be entitled, from year to year, to station "The Rest" on pitch 23, occupying it themselves as their residence and paying a pitch fee of £70 per week. It was alleged that the effect of the notice of 25th October 1996 was to terminate what was described as "the licence to station 'The Rest' on pitch 23" with effect from 16th May 1997; with the consequence, as alleged, that the Reads were thereafter trespassers. The Nutts' claim - as originally advanced - was for an injunction restraining the Reads from continuing to trespass; an injunction requiring them to remove the "The Rest" from the site; and damages for trespass. In addition, Mr Nutt claimed £500 as the balance of the purchase price and £1,092 said to be due in respect of unpaid pitch fees.
A defence and counterclaim was served on behalf of the Reads. It raised the point, at paragraph 2, that the chalet formed part of the land on which it was situated and was incapable of being sold separately from the land or removed elsewhere. The defence asserted, in paragraph 5, that in March 1996 Mr Nutt had represented to the Reads (i) that "The Rest" was a property which he could sell to them and (ii) that he had acquired, or was about to acquire, the chalet from Mr Kick's estate at a price of £7,500. It is said that, on the basis of those representations, and on the basis of an oral agreement that Mr Nutt would repurchase the chalet from them if and when they vacated the plot, the Reads agreed to buy "The Rest" for £7,500, to pay the Nutts their legal expenses, and to pay £70 per month as a site fee for pitch 23.
Paragraph 23 of the counterclaim is in these terms:
Further, the agreement proceeded on a fundamental mutual mistake namely that 'The Rest' was a chattel which could be sold, and accordingly the agreement was void.
Taken alone, it is not clear whether "the agreement" referred to in that paragraph is the agreement to purchase the chalet from Mr Nutt, or a wider agreement made with both Mr and Mrs Nutt which includes both the purchase of the chalet and the right to occupy the site. But I am prepared to assume that the pleader intended to refer to the agreement with Mr Nutt alone. That assumption is consistent with the allegation in paragraph 24 that the consideration for "the agreement" had wholly failed. Paragraph 27 of the counterclaim, as originally drawn, alleged that the defendants were entitled to be repaid the sum of £8,000 as money paid under a mistake, or under a void contract, or under a contract the consideration for which had totally failed.
On the basis of those allegations, the Reads claimed repayment of the sum of £8,000 paid to Mr Nutt in April 1996 and payment of all monies which they had spent in improving "The Rest". But they claimed, also, a declaration that they occupied "The Rest" as assured tenants. That claim is based on paragraph 28 of the counterclaim, which is pleaded in these terms:
On the 8th May 1996 the Defendants entered into occupation of 'The Rest' as their principal home and paid the Plaintiffs the sum of £70 per month. Accordingly they will allege that the chalet was let to them as a separate dwelling and that they are assured tenants of 'The Rest'.
An assured tenancy in that context (a pre-Housing Act 1996 tenancy) is a tenancy which satisfies the requirements of section 1 of the Housing Act 1988 - that is to say, a tenancy under which a dwellinghouse is let as a separate dwelling.
The allegations and claims made in the defence and counterclaim gave rise to an amendment to the particulars of claim. Paragraph 14, introduced by the amendment, was in these terms:
Alternatively if which is denied the agreement proceeded on a fundamental mutual mistake namely that The Rest was a chattel which could be sold the agreement was void and the parties should be restored so far as possible to the position they would have been in but for the void agreement and in particular the Plaintiffs are entitled to possession of The Rest and the Defendants should compensate the Plaintiffs in equity for their use and occupation of The Rest and the surrounding pitch.
It is, I think, reasonably clear that, in that paragraph, the "agreement" referred to is the whole agreement between the Nutts and the Reads, including both the agreement to purchase the chalet from Mr Nutt and the agreement for the occupation of the site.
The position, then, as it would have appeared to the judge from the pleadings, was that the Reads were asserting two distinct agreements: (i) an agreement with Mr Nutt for the purchase of the chalet and (ii) an agreement with Mr and Mrs Nutt for the occupation of pitch 23. Further, they were asserting that the first agreement was void on the grounds of mutual mistake - alternatively that there had been a total failure of consideration - and that the second agreement had given rise to an assured tenancy under the Housing Act 1988. The Nutts, on the other hand, were asserting that there was, in effect, a single composite agreement which comprised both the sale of the chalet and the right to occupy the site; and that, if there had been a fundamental mutual mistake, that composite agreement was void in its entirety.
The judge made the following findings of fact. First, he found that the chalet was annexed to the land. Second, he found that the parties entered into the transaction on the basis of a common mistake that the chalet was distinct from the land and could be bought and sold separately from it; as would have been the case if it were a caravan or a mobile home. Third, he found that Mr Read had paid £8,000 towards the purchase price and legal fees and had spent not less than £6,000 in making improvements to the chalet. Fourth, he found that the fee which was to be paid for the right to occupy pitch 23 was £70 per month; and not £70 per week, as Mr Nutt had contended in his pleading and his evidence. There is no appeal from any of those findings of fact.
On the basis of those findings of fact, the judge reached the following conclusions. First, he found that the agreement for the sale of the chalet was void for mistake. In that context it is clear that the judge was referring only to the agreement between Mr Nutt and the Reads for the sale of the chalet; rather than to any wider agreement which included the right to occupy. Second, he found that the Reads had acquired an assured tenancy by their entry into possession of pitch 23 and their occupation of the chalet as a dwellinghouse. Third, he found that "the transaction", based as it was upon a mistake common to both parties, was voidable. In that context he must, I think, have been intending to refer to the transaction between Mr and Mrs Nutt, on the one hand, and Mr and Mrs Read, on the other hand; that is to say, to the agreement for the occupation of pitch 23 which, as he had held, had given rise to an assured tenancy. That it is that agreement which he held to be voidable seems to me to be a necessary inference from his earlier finding that the agreement between Mr Nutt and the Reads for the sale of the chalet was void.
On the basis that "the transaction" was voidable, the judge directed himself that the court had power to grant rescission. He considered the terms on which rescission should be granted. He said this, at page 18, lines 9-13, in the transcript of his judgment:
It is conceded, as I have said, that the terms for rescission should include repayment of the £8,000 and such sums as Mr Read has laid out in improvements. In my judgment, Mr Read is entitled to a proper allowance for his own labour.
He went on, at lines 19-27:
It was suggested that Mr Read should pay money for his use and occupation of the chalet over the last two and a half years. I do not propose to make such an order. Mr Nutt has had the use of the £8,000 in respect of the chalet structure and has stipulated for and received a plot fee of £70 per calendar month. By parity of reasoning, because Mr Read has been enjoying the improvements he has made and the use of the chalet, I shall not award interest on the sums of £8,000 and £6,000 to Mr Read.
On a strict analysis, the judge's observation that the terms for rescission should include both "repayment of the £8,000" and payment of "such sums as Mr Read has laid out in improvements" is open to criticism. If, as he had held, the agreement for the sale of the chalet was void, then Mr Read was entitled to repayment of the £8,000 paid under that agreement as a matter of right and not as a term on which rescission was granted of the voidable agreement for the occupation of pitch 23. But, on the other hand, Mr Read would not have been entitled to recover money laid out in improvements simply on the basis of establishing that the agreement for the sale of the chalet was itself void. But payment in respect of the improvements could properly be imposed on Mr and Mrs Nutt as a term upon which rescission of the agreement to occupy the pitch was granted.
Some degree of confusion between the agreement which he had held to be void and the agreement which he had held to be voidable is reflected in the first of the orders which the judge indicated that he would make. At page 19, line 16, he said this:
I therefore propose the following orders subject to any further submissions.
One, the agreements [in the plural] between the parties for the sale of 'The Rest' and the occupation of plot 23 are rescinded by order of the court, such rescission to be on the following terms.
As I have indicated, if one of the agreements was void at law for mistake, then, strictly, there could be no question of rescinding that agreement on terms: it was void, with whatever consequences in law followed from that finding.
The judge considered the submission made on behalf of the Reads that rescission of the agreement to occupy pitch 23 was inappropriate in the circumstances that an assured tenancy had been created by that agreement. He said this, at page 18, line 28 to page 19, line 3:
I regard the submission by Mr Widdup [counsel for the Reads] that Mr Read should continue to enjoy an assured tenancy as wholly inconsistent with the rescission of the transaction, which I think is the just solution to the problem.
It is against that element of his judgment that Mr and Mrs Read appeal to this court. They do so with the leave of a single judge, Lord Justice Potter, granted on paper on 15th April 1999. They assert that the judge gave no, or no sufficient, reasons for the exercise of his discretion in favour of rescission; alternatively that, in deciding to rescind the agreement which had given rise to the assured tenancy, he failed to take into account a number of facts - including (i) that the defendants would be homeless on vacating "The Rest", (ii) that the plaintiffs would recover possession of "The Rest", even though there were no grounds for granting possession under the Housing Act 1988, and (iii) that, on obtaining possession, the plaintiffs would obtain the benefit of the improvements to the property resulting from the defendants' expenditure and labour. It was said that the value of the chalet had increased, by reason of those improvements, from £12,500 to £28,750.
In my view, the judge was plainly correct to treat the arrangements between the parties as comprising two distinct, but interlinked, agreements. The first agreement was with Mr Nutt for the sale of the chalet. The second agreement was with Mr and Mrs Nutt for the right to station the chalet on the land. Further, it seems to me plain that the judge was correct to hold that the first agreement was void in law. The contrary has not been argued on this appeal. The parties to that agreement thought that the chalet was capable of being sold separately from the land. That was a mistake so fundamental that it led, necessarily, to a conclusion that that agreement was void - see Bell v. Lever Brothers Ltd [1932] AC 161 and the other cases collected under para 5-028 in Chitty on Contracts (28 Edition, 1999, Vol 1, p.308). It followed that the £8,000 paid under it was repayable. There is no appeal against that conclusion. Indeed, it would be impossible for the Reads to advance any such appeal in the light of their own contention in paragraph 23 of the counterclaim; a contention which, in effect, the judge upheld.
That made it necessary for the judge to consider whether or not there were grounds on which to rescind the second of the two interlinked agreements; namely the agreement under which the Reads were to have occupation of pitch 23. He reminded himself of the decision of this court in Solle v. Butcher [1950] 1 KB 671; and, in particular, of the observations of Denning LJ at p.693:
A contract is also liable in equity to be set aside if the parties were under a common misapprehension either as to facts or as to their relative and respective rights, provided that the misapprehension was fundamental and that the party seeking to set it aside was not himself at fault.
In my view, the judge was right to reach the conclusion that the parties were, in this case, under a common misapprehension in relation to the agreement for the occupation of pitch 23; both as to the facts and as to their respective rights under that agreement. They were under the common misapprehension that pitch 23 did not include the chalet, "The Rest", which was upon it. They were under the misapprehension, therefore, that a letting of pitch 23 did not include a letting of anything which could be described as a dwellinghouse, so as to bring the letting within the Housing Act 1988. They were under a common misapprehension as to the rights which would arise from the agreement that they were making. There was no finding that Mr Nutt, or Mr and Mrs Nutt, were at fault in relation to that misapprehension. It reflected the advice which Mr Nutt had been given by his solicitors, Bells, in August 1995 in connection with his purchase of the chalet from Mrs Campbell. The judge expressed the view that all parties were hopelessly at sea about the true effect in law of their proposed transaction.
In those circumstances, the judge was right to reach the conclusion that he had power, in equity, to set aside the second agreement. He might have taken the view that the second agreement, also, was void in law; but he did not, and there is no appeal on that point. The question which he then had to consider was upon what terms should that agreement be set aside. He was not invited - as he might have been - to set aside the agreement on the basis that the Nutts would be required to offer to the Reads a new tenancy of pitch 23 and the chalet, "The Rest". The contention advanced before him on behalf of Mr and Mrs Read - and pursued in this court - was not that he should set aside the agreement on those or any other terms; but that he should not set aside the transaction at all. Further, he was never invited by counsel for Mr and Mrs Read to consider whether, if the agreement should be set aside, it should be on terms which provided for Mr and Mrs Read to have some share in any increased value of the chalet attributable to the improvements which they had carried out. The submission to the judge was that they should be compensated for the cost to them of those improvements; not that they should be compensated for the increased value to the Nutts of the chalet with the benefit of those improvements.
In the circumstances that it was no part of the appellants' case before the judge that rescission of the second agreement should be on terms, it seems to me impossible to criticise him for failing to regard the matters to which I have referred as matters which he should take into account; or as terms which were sought by the Reads if rescission were to be ordered. He made his decision as to the terms of rescission on the basis of the arguments put before him; and, on the basis of those arguments, reached what seems to me to be the only conclusion that he could reach - namely that the agreement for the use of pitch 23 should be rescinded on the grounds that it had been entered into on the basis of a fundamental mistake; and that it would be wrong to refuse to rescind it simply because it gave rise to an assured tenancy - see Solle v. Butcher.
I should add that it was no part of the appellants' case in this court that the judge was wrong not to impose more stringent terms on the respondents as a condition of rescission. The appeal was advanced on the basis that the judge was wrong to order rescission on any terms. That, I think, is a submission which cannot be sustained.
For those reasons it seems to me that this is an appeal which must be dismissed.
I agree.
I also agree.
Order: appeal dismissed with costs; defendants' liability under that order for costs having been assessed at nil, order nisi made against the Legal Aid Fund pursuant to section 18 of the Legal Aid Act 1988; date in para 3 of judge's order amended to 1st November 1999 and date in para 2 amended to 21st January 2000.