Purewal v Sohal & Ors

Where an agreement is void, sums paid under it may be recovered as payments made under a mistake. Recovery must be reduced by the value of benefits received under the agreement, including occupation of premises and the goodwill of a continuing business. Those benefits must be valued realistically. Market rent may be assessed by reference to evidence of discounted rent, and goodwill need not be apportioned on a simple linear basis where its value is greater in the earlier period. An appellate court will not interfere with the award where a proper calculation produces a lower sum and there is no cross-appeal seeking reduction.

The claimant agreed to acquire an Indian takeaway restaurant from the defendants. He claimed that he had acquired the freehold, but the trial judge found that he had not been misled about the subject matter of the transaction.

The agreement was nevertheless held void because it concerned the disposition of an interest in land and was not made by deed or recorded in writing. The Recorder awarded the claimant £22,435.68 after assessing the parties’ financial positions. The claimant appealed, contending that further sums, including approximately £11,000, should have been included in the calculation.

The central issue before the Court of Appeal was the correct basis for calculating the sums recoverable under the void agreement and the credit required for benefits received.

Lord Justice Floyd gave the leading judgment, with which Mr Justice Sales agreed. The appeal was dismissed.

1. Recovery of payments. Since the agreement was void, the claimant was entitled to recover all sums actually paid under it. Those payments were made under a mistake and were recoverable on that basis.
2. Credit for benefits. Recovery was subject to credit for the benefits which the claimant had received under the void agreement. These included occupation of the premises and the goodwill of the business as a going concern.
3. Valuation. The occupation benefit had to be assessed by reference to market rent. The evidence that the claimant had paid rent at a significant discount justified an uplift of approximately 20 per cent. The goodwill benefit should not automatically be apportioned on a straight-line basis over the remaining term of the proposed lease. Goodwill was likely to have had a greater value during the earlier period, when the claimant took over an established going concern, than during later years when he would have had to contribute his own efforts and resources.
4. Applying those principles, the sums paid totalled approximately £63,095.52. Credits included market rent of £16,678.96, unpaid service payments of £1,088 and a goodwill value assessed as closer to £25,000 than £15,000. A proper calculation produced a figure below the £22,435.68 awarded by the Recorder.
5. There was no cross-appeal. The Court therefore could not award a lower sum, and there was no basis for interfering with the judgment. Appeal dismissed.

• Court of Appeal (Civil Division): The appeal from the decision of Recorder Patterson was dismissed. The Court held that the award was more than adequate on a correct calculation.
• Winchester County Court: On 16 December 2011, Recorder Patterson held the agreement void and awarded the claimant £22,435.68.