Laurence v Lexcourt Holdings Ltd

JurisdictionEngland & Wales
Judgment Date1978
Date1978
Year1978
CourtCourt of Appeal (Civil Division)
[CHANCERY DIVISION] LAURENCE AND ANOTHER v. LEXCOURT HOLDINGS LTD. [1976 L. No. 650] 1977 Dec. 7, 8, 9, 13 Mr. Brian Dillon Q.C. (sitting as a deputy judge of the Chancery Division)

Contract - Innocent misrepresentation - Rescission - Agreement for 15 year lease of premises as “offices” - Planning permission restricted to part of premises - Restriction known but forgotten by lessors - Subsequent planning permission limited to two years - Whether lessees entitled to rescind - Contract - Mistake - Mutual mistake as to essential matter of fact - Agreement for lease for 15 years - Premises for office use - Planning permission for use for part of premises only - Subsequent permission limited to two years - Right to rescind

Pursuant to an agreement made on February 26, 1974, the plaintiffs let to the defendants, the first and second floors of business premises for use as offices for a term of 15 years from March 1, 1974. Both parties assumed there was planning permission for use of the whole of the first and second floors as offices. Planning permission had in fact been limited to the ground floor and to part only of the first floor, and that was known to one of the plaintiffs, though he had forgotten it. In April 1974 searches made by the defendants disclosed the limited permission, but both sides agreed that the plaintiffs should apply for permission for office user for the whole of both floors. That was done in September 1974 after completion of some fire precautions work. Permission was granted in October 1974 but only for a period expiring in October 1977 on account of the local authority's future road plans for the site. There followed correspondence between the parties as to a possible short tenancy but no alternative arrangements were made. In April 1975 the defendants gave up possession of the premises after notice to the plaintiffs and removed to temporary accommodation.

In the plaintiffs' action for specific performance of the agreement of February 1974, the defendants counterclaimed for rescission of the agreement on the grounds of misrepresentation and mistake. By their reply the plaintiffs alleged that any right to rescission had been waived by acquiescence and affirmation of the agreement: —

Held, (1) that for the plaintiffs to describe the premises as offices and to offer to let them as offices for a term of 15 years when the only available planning permission for use as offices was limited to two years, i.e. up to the end of October 1977, amounted to misrepresentation and it was no defence that the defendants could have discovered that for themselves (post, p. 1137C–F).

In re Davis & Cavey (1883) 40 Ch.D. 601; Charles Hunt Ltd. v. Palmer [1931] 2 Ch. 287 and Redgrave v. Hurd (1881) 20 Ch.D. 1, C.A. applied.

(2) That there had been a common mistake between the parties the the agreement was made because they had both believed that unrestricted planning permission was available for use of the premises as offices, that that mistake was fundamental and the defendants were not disentitled from relying on it because they had failed to make searches (post, pp. 1137F–G, 1138C–D, F–G).

Solle v. Butcher [1950] 1 K.B. 671, C.A. and Grist v. Bailey [1967] Ch. 532 considered.

(3) That on the facts, the defendants had never affirmed the agreement of February 1974 and their claim to rescission was not barred by acquiescence; accordingly they were entitled to rescind the agreement (post, p. 1140A)

The following cases are referred to in the judgment:

Best v. Glenville [1960] 1 W.L.R. 1198; [1960] 3 All E.R. 478, C.A.

Davis & Cavey, In re (1888) 40 Ch.D. 601.

Edler v. Auerbach [1950] 1 K.B. 359.

Esso Petroleum Co. Ltd. v. Mardon [1976] Q.B. 801; [1976] 2 W.L.R. 583; [1976] 2 All E.R. 5, C.A.

Flight v. Booth (1834) 1 Bing. N.C. 370.

Grist v. Bailey [1967] Ch. 532; [1966] 3 W.L.R. 618; [1966] 2 All E.R. 875.

Hill v. Harris [1965] 2 Q.B. 601; [1965] 2 W.L.R. 1331; [1965] 2 All E.R. 358, C.A.

Hunt (Charles) Ltd. v. Palmer [1931] 2 Ch. 287.

Redgrave v. Hurd (1881) 20 Ch.D. 1, C.A.

Solle v. Butcher [1950] 1 K.B. 671; [1949] 2 All E.R. 1107, C.A.

The following additional cases were cited in argument:

Cremdean Properties Ltd, v. Nash (1977) 244 E.G. 547, C.A.

Goldsmith v. Rodger [1962] 2 Lloyd's Rep. 249, C.A.

ACTION

By writ dated February 26, 1976, the plaintiffs, Kenneth Gordon Laurence and Roy Frederick Laurence, claimed against the defendants, Lexcourt Holdings Ltd., specific performance of an agreement made on or about February 27, 1974, whereby the plaintiffs would let to the defendants for a term of 15 years from March 1, 1974, the first and second floors of 50 Midland Road, Wellingborough, at a rent of £2,250 per annum with reviews at the end of the third, seventh and eleventh years; damages in addition to or in lieu of specific performance or for breach of contract. By their defence, the defendants denied that the plaintiffs were entitled to relief by reason of misrepresentation, mis-description and fundamental mistake and they counterclaimed rescission of the agreement and damages. By their reply the plaintiffs contended that any entitlement to rescind the agreement was waived by acquiescence and affirmation in that the defendants took no steps to rescind until April 1975.

The facts are stated in the judgment.

Timothy Lloyd for the plaintiffs.

Roy McAulay for the defendants.

MR. BRIAN DILLON Q.C. read the following judgment. In this action the plaintiffs, Kenneth Gordon Laurence and Roy Frederick Laurence, who are brothers, are claiming against the defendants, Lexcourt Holdings Ltd., specific performance of an agreement for lease. This agreement, which is not in dispute, was made either orally on February 26, 1974, or by an exchange of letters of February 26 and 27, recording the terms discussed and agreed on February 26. It was an agreement whereby the plaintiffs agreed to let the first and second floors of no. 50 Midland Road, Wellingborough, to the defendants for a term of 15 years, from March 1, 1974, at a yearly rent of £2,250, with reviews at the end of the third, seventh and eleventh years.

The defendants took possession of the premises on the day after the agreement had been made, but they gave up possession in the latter part of April 1975, and they now claim to rescind the agreement or alternatively to resist specific performance on the grounds of negligent misrepresentation, common mistake and illegality. Certain further possible defences were pleaded but these are now abandoned.

A further issue which has been debated, however, is an issue of acquiescence or affirmation of the contract in that the plaintiffs say that even if, which is strenuously denied, the defendants would have been entitled to rescission if they had acted more speedily they have lost that right by failing to exercise it promptly after the relevant facts had become known to them.

The basic facts are not really in dispute and I find them as follows. The freehold of the entire premises, no. 50 Midland Road, was bought by the plaintiffs in 1970. The premises were then unoccupied and not in a good condition. They had previously been used as a pair of shops, with living accommodation on the first and second floors above. Having no doubt done some conversion work the plaintiffs have since 1971 occupied the ground floor of no. 50 as offices for the purposes of their own business, which is concerned with building work and the ownership and development of properties. They also for some six months in the latter part of 1971 occupied part but not the whole of the first floor as further offices for their own business. They did this under the authority of a planning permission from the Northamptonshire County Council dated January 8, 1971. This planning permission specified as the development thereby permitted “change of use from shops with living accommodation over to offices on ground floor and part first floor. Remainder of first floor and second floor not to be used.” I accept from Mr. Kenneth Laurence that the reason why the planning permission was thus limited and did not extend to the whole of the first floor or to the second floor was merely that there were at that stage no sufficient fire escapes from those floors. In consequence the remainder of the first floor and the whole of the second floor remained unoccupied until the defendants took possession after the agreement for lease of February 1974 had been made. The plaintiffs had originally had it in mind that they might in time want to occupy the whole of no. 50 for their own offices but towards the end of 1973 they dropped this idea and decided instead to try to let off the whole of the first and second floors. They had certain work done, and in February 1974 they instructed an estate agent, Mr. Pendered of Swindall, Pendered and Atkins, to find a tenant.

The defendants, who carry on business as an accounting company doing accounts for other companies, were at that time sharing other accommodation in Wellingborough with an associated company and were badly in need of more space to house their administrative staff. Towards the end of October 1973, therefore, they had instructed Mr. Pendered to find offices for them, and they had looked over various suggested premises and rejected them. When, therefore, Mr. Pendered received his instructions from the plaintiffs he at once thought of the defendants, rang Mr. Blythe, a director of the defendants, and told him that he had found an ideal suite of offices for the defendants. On the next day Mr. Blythe and Mr. Smart, the defendants' accountant, went over the rooms on the first and second floors of 50 Midland Road with Mr. Pendered. Shortly afterwards Mr. Piercy, the defendants' managing director, went over the premises with Mr. Blythe and Mr. Smart, and on February 21, 1974, Mr. Pendered wrote to both parties' solicitors, recording agreement, subject to contract, on the grant of a lease. Mr. Pendered probably supposed...

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