West Sussex Properties Ltd v Chichester District Council

A rent-review mechanism must be applied by reference to the premises as they stood at the initial valuation date. Later additions must be adjusted under the contractual proviso before the agreed ratio is applied. A common mistake about the operation of that mechanism may justify equitable rescission where the mistake is fundamental and the claimant is not at fault. Limitation runs from discovery, or when the mistake could reasonably have been discovered, where the claim is founded on mistake. On rescission, overpaid money remains recoverable as the claimant’s property. Interest is discretionary and may run from a later date where the defendant could not reasonably have anticipated the restitutionary claim.

The lessee and Chichester District Council entered into a 1991 rent-review memorandum under a long lease. The rent was calculated by applying a 14:5 ratio recorded in a 1972 memorandum, but the parties mistakenly treated two phases of construction as having been completed together. The first phase alone had formed the subject of the initial 1972 valuation. The lessee later discovered that the contractual proviso required the value attributable to the second phase to be removed before applying the ratio.

A deputy judge allowed rescission of the agreement underlying the 1991 memorandum, ordered repayment of overpaid rent and awarded interest. The Council appealed on amendment, mistake, limitation, delay, restitution and interest. The central issues were whether rescission was available for the common mistake, whether the claim was time-barred or defeated by delay, and what repayment and interest should follow.

1. Appeal dismissed in substance; interest varied. The court upheld the declaration, rescission and repayment orders, but replaced the interest order. Interest was awarded from 1 April 1998 at 1 per cent above the Base Lending Rate. The Council was ordered to pay 85 per cent of the appeal costs.

2. The amendment was permissible. A claim for rescission was within the conventional claim for further or other relief, and there was no rule that equitable rescission had to be sought by pre-action notice. The judge’s discretion was not improperly exercised.

3. The Lease required the initial rack-rent valuation to reflect the premises as they stood on 23 June 1972. Phase 2 could not properly be included because the relevant permissions and consent had not then been obtained. The proviso supplied the later mechanism for removing the value attributable to buildings added after the initial determination. Applying the 14:5 ratio to the full 1991 value without that adjustment compared unlike premises and produced an unintended rent.

4. Both negotiators acted under a common mistake, but the mistake did not automatically invalidate the agreement from its inception. Rescission was nevertheless available in equity under