Pirhayati v Rowshanian

A total failure of consideration does not arise merely because a promised lease assignment is not completed. Where the purchaser has occupied and traded from the premises throughout the relevant term, the benefit received may prevent restitution of sums paid towards the price.

The assessment should account for the rights received and those lost. The value of unreceived statutory tenancy rights may be set against the unpaid balance of the price, with appropriate allowance for use and occupation. Permission to appeal may be refused where the proposed challenge has no reasonable prospect of success, and a proportionate costs order will rarely warrant appellate intervention.

The claimant agreed to purchase the defendant’s leasehold shop premises for £180,000, paying by instalments and entering occupation before the agreement was written. After the head landlord refused consent to assignment, the contract was discharged. The claimant had paid £99,321 and sought its return. The defendant claimed sums for use and occupation and other relief.

The Central London County Court, Judge Rich QC, assessed the claimant’s damages by reference to the value of the lost rights under the Landlord and Tenant Act 1954, set off the unpaid purchase balance and rent, and awarded a net £88. Each party was ordered to bear its own costs. The claimant challenged the failure-of-consideration analysis and costs order. The defendant challenged the tenancy-end date, rent rate, strike-out of claims and costs. The central issue was whether the claimant’s occupation meant that the consideration had wholly failed.

1. Both applications for permission to appeal were refused. The claimant’s proposed appeal had no reasonable prospect of success, and the defendant’s proposed grounds, including his application for permission out of time, did not justify further proceedings.
2. The claimant had occupied and traded from the premises throughout the relevant lease term, apart from relatively short exclusions. It therefore could not be said that the consideration for the purchase payments had wholly failed. The claimant had received a substantial benefit, although the lease itself and the associated rights under the Landlord and Tenant Act 1954 had not been assigned.
3. Wright v Collis was distinguishable. In that case, the purchaser’s payment was recoverable despite occupation because the vendor could not grant the promised lease. The present claimant’s continuing occupation and trading meant that the facts and benefit received were materially different: (1848) CB 150.
4. The judge was entitled to assess the claimant’s loss by valuing the statutory tenancy rights that would have accompanied an assignment. The £100,000 compensation payable by the landlord was properly treated as the value of those rights. The outstanding purchase balance of £80,679 was set off against that amount, and the rent attributable to the 108-day period before statutory termination was also brought into account, producing the net award of £88.
5. The judge was entitled to use £65,000 per annum as the available evidential rate. A later consent arrangement fixing a higher retrospective interim rent did not require reopening the assessment, particularly since the claimant was not a party to those negotiations and reopening would have been unfair and disproportionate.
6. Permission out of time to challenge the interlocutory strike-out was properly refused. The defendant had been represented, the issue had been fully argued, no timely appeal had been made, and he had not shown prejudice. The judge had dealt with the legitimate claims before him.
7. Costs remained a matter of discretion. The conclusion that neither party had effectively won, and that each should bear its own costs, was rational, proportionate and not susceptible to appellate interference. As both applications were made without notice, each party was to bear his own costs.

1. Court of Appeal (Civil Division): On 10 April 2006, Lord Justice Wall refused both linked applications for permission to appeal.
2. Central London County Court: Judge Rich QC assessed the claimant’s damages following discharge of the lease-purchase contract, allowed set-off for use and occupation, awarded a net £88, and ordered each party to bear its own costs.