Rectification – Chartbrook not followed

Opportunity for an appellate court to clarify the correct test to apply in deciding whether the written terms of a contract may be rectified because of a common mistake.
Held: The appeal failed. The judge was right to conclude that an objective observer would have understood – just as Barclays in fact understood – that the accession deeds were not intended to do more than fill the gap in the security.
‘we are unable to accept that the objective test of rectification for common mistake articulated in Lord Hoffmann’s obiter remarks in the Chartbrook case correctly states the law. We consider that we are bound by authority, which also accords with sound legal principle and policy, to hold that, before a written contract may be rectified on the basis of a common mistake, it is necessary to show either (1) that the document fails to give effect to a prior concluded contract or (2) that, when they executed the document, the parties had a common intention in respect of a particular matter which, by mistake, the document did not accurately record. In the latter case it is necessary to show not only that each party to the contract had the same actual intention with regard to the relevant matter, but also that there was an ‘outward expression of accord’ – meaning that, as a result of communication between them, the parties understood each other to share that intention.’

Flaux, Leggatt, Rose LJJ
[2019] EWCA Civ 1361
Bailii
England and Wales
Citing:
Not Followed – Chartbrook Ltd v Persimmon Homes Ltd and Others HL 1-Jul-2009
Mutual Knowledge admissible to construe contract
The parties had entered into a development contract in respect of a site in Wandsworth, under which balancing compensation was to be paid. They disagreed as to its calculation. Persimmon sought rectification to reflect the negotiations.
Held: . .
Cited – Daventry District Council v Daventry and District Housing Ltd CA 13-Oct-2011
The appellant challenged refusal of rectification of its agreement with the defendant. They asserted either mutual or unilateral mistake. The parties had agreed for the transfer of housing stock and management staff to the respondents. The claimant . .
Cited – Henkle v Royal Exchange Assurance Company 14-Nov-1749
(Court of Chancery) Lord Hardwicke LC was in ‘no doubt, that this court has jurisdiction to relieve in respect of a plain mistake in contracts in writing as well as against frauds in contracts: so that if reduced into writing contrary to intent of . .
Cited – The Right Honourable Mary Countess Dowager of Shelburne, John Hamilton Fitzmaurice, An Infant, By The Said Countess, His Grandmother And Next Friend v Morough Earl of Inchiquin And Others 22-Mar-1781
On a claim to rectify a written agreement made in contemplation of marriage, Lord Thurlow LC considered it ‘impossible to refuse, as incompetent, parol evidence, which goes to prove, that the words taken down in writing were contrary to the current . .
Cited – The Marquis Townshend v Stangroom 21-Jul-1801
. .
Cited – Calverley v Williams, Williams v Calverley 2-Jul-1790
The question was whether a particular piece of land was correctly included in the description of the land to be conveyed under a contract of sale.
Lord Thurlow LC said that:
‘ . . if both [parties] understood the whole was to be conveyed, . .
Cited – Fowler v Fowler 12-May-1859
Lord Chelmsford LC said that a party seeking rectification must establish clearly ‘that the alleged intention to which he desires’ (the instrument) ‘to be made conformable continued concurrently in the minds of all parties down to the time of its . .
Cited – Mackenzie v Coulson 1869
James V-C said: ‘Courts of Equity do not rectify contracts; they may and do rectify instruments purporting to have been made in pursuance of the terms of contracts. But it is always necessary for a plaintiff to show that there was an actual . .
Cited – Lovell and Christmas Ltd v Wall CA 1911
The written contract contained a restrictive covenant limiting the defendant’s freedom to carry on the business of a ‘provision merchant’ other than on behalf of the plaintiff company. On the facts found, the parties in their discussions before the . .
Cited – Shipley Urban District Council v Bradford Corporation ChD 1936
The parties had reached a clear common understanding in their negotiations as to how they intended the price of water supplied to the plaintiff council by the defendant corporation to be calculated; but, as each party only had power to contract . .
Cited – Crane v Hegeman-Harris Co Inc CA 1939
Judgment approved . .
Cited – Crane v Hegeman-Harris Co Inc ChD 1939
A continuing common intention of the parties to a document alone will not suffice to justify rectification. For rectification to be appropriate, there must be convincing proof that the concluded instrument does not represent the common intention of . .
Cited – Frederick E Rose (London) Limited v William H Pim Junior and Co Limited 1953
The plaintiffs, who were London merchants, had been asked by Egyptian buyers to supply ‘feveroles’. Not knowing what this term meant, they asked the defendants’ representative, who responded that ‘feveroles’ meant horsebeans. Relying on this . .
Cited – London Weekend Television Ltd v Paris and Griffith ChD 1969
Megaw J said: ‘Where two persons agreed expressly with one another what was the meaning of a particular phrase but did not record their definition in the contract itself, if one of the parties sought to enforce the agreement on the basis of some . .
Cited – Joscelyne v Nissen CA 1970
A father entered into a written contract with his daughter by which he transferred to her his car hire business in return for her agreement to pay him a pension and discharge certain expenses. In their discussions it had been agreed between them . .
Cited – Lloyd v Stanbury 1971
A purchaser who had been let into possession before completion and had spent money on improvements to the property was not entitled to claim for such expenses because they would not usually have been within the contemplation of the parties. As to . .
Appeal From – FSHC Group Holdings Ltd v Barclays Bank Plc ChD 22-Jun-2018
Claim for rectification of two Deeds . .
Cited – Re Butlin’s Settlement Trusts 1976
Sir Billy Butlin had executed a voluntary settlement to allow a majority of trustees to exercise a power under the settlement. By a drafting error the settlement did not give effect to this intention.
Held: The court could rectify the . .
Cited – Britoil plc v Hunt Overseas Oil Inc CA 1994
After the failure of the attempt by the Texan oil tycoon, Nelson Bunker Hunt, in the 1970s to corner the world silver market, his fortune collapsed and his companies were forced to sell off assets. In 1979 two of those companies (the defendants in . .
Cited – Gallaher Limited v Gallaher Pensions Limited, C Foster, D Silver ChD 21-Jan-2005
Construction of amendments to pension scheme. . .
Cited – Munt v Beasley CA 4-Apr-2006
Mummery LJ expressed the view that an outward expression of accord, although established on the facts of that case, was not a strict legal requirement for rectification where the party resisting rectification had in fact admitted that his true state . .
Cited – Tartsinis v Navona Management Company ComC 19-Jan-2015
The parties disputed the price to be paid in a sale of shares under a contract for their sale. The company which owned a fleet of ships. The shares were sold by two Greek businessmen, Mr Mihail Tartsinis and Mr Antonis Nikolaou, to Navona Management . .
Cited – Ryledar Pty Ltd v Euphoric Pty Ltd 20-Apr-2007
Campbell JA asked rhetorically: ‘If two negotiating parties each had a particular intention about the agreement they would enter, and their intentions were identical, but that intention was disclosed by neither of them, and they later entered [into] . .
Cited – JIS (1974) Ltd v MCP Investment Nominees I Ltd ChD 2002
Hart J said: A particular intention may, as it seems to me, as a matter of the general nature of human discourse, be communicated by one party to another without express words necessarily being used. It may therefore sometimes be possible for the . .
Cited – JIS (1974) Ltd v MCP Investment Nominees I Ltd CA 9-Apr-2003
The parties agreed for a lease to be granted of a new building. Part had been intended to be excluded for shops, but permission was not obtained, the shops area was included and leased back. When the tenants sought to determine the lease, the . .
Cited – Re IBM Pension Plan ChD 2012
The court considered an application to rectify a pension scheme.
Held: Warren J said: ‘There needs to be cogent evidence of the intentions of both the trustee and the employer where the power of amendment requires the consent of both. . . In a . .
Cited – Caraman, Rowley and May v Aperghis 1923
Two contracts for the sale of sultanas on cif terms were drawn up by a broker acting for the sellers. By mistake, the broker used a form intended for spot contracts instead of the form for cif contracts with the result that the written contracts did . .
Cited – Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales 1982
(High Court of Australia) Mason J said: ‘The implication of a term is to be compared, and at the same time contrasted, with rectification of the contract. In each case the problem is caused by a deficiency in the expression of the consensual . .
Cited – Cooperative Insurance Society Ltd v Centremoor Ltd CA 1983
Rectification of a contract was sought.
Held: While it must be shown what was the common intention, the exact form of words in which the common intention is to be expressed is immaterial if, in substance and in detail, the common intention can . .
Cited – A Roberts and Co Ltd v Leicestershire County Council ChD 1961
The court considered the circumstances required for rectification of a contract after a unilateral mistake. Pennycuick J said: ‘a party is entitled to rectification of a contract upon proof that he believed a particular term to be included in the . .
Cited – American Airlines Inc v Hope HL 1974
A claim was made for the rectification of an aviation insurance contract.
Lord Diplock said: ‘Rectification is a remedy which is available where parties to a contract, intending to reproduce in a more formal document the terms of an agreement . .
Cited – Thomas Bates and Sons Ltd v Wyndham’s Lingerie Ltd CA 21-Nov-1980
An application was made for rectification of a rent review clause in a lease. When executing the lease, the tenants’ officer, Mr Avon, noticed that the rent review clause in the lease drafted by the landlords was defective in not including a . .
Cited – Agip SpA v Navigazione Alta Italia SpA, ‘The Nai Genova’ CA 1984
Rectification was sought of an escalation clause in a charter-party which provided for a base figure in US dollars to be increased by reference to Italian inflation. The plaintiffs claimed that an accord had been reached that the base figure should . .
Cited – Britoil plc v Hunt Overseas Oil Inc CA 1994
After the failure of the attempt by the Texan oil tycoon, Nelson Bunker Hunt, in the 1970s to corner the world silver market, his fortune collapsed and his companies were forced to sell off assets. In 1979 two of those companies (the defendants in . .
Cited – Holaw (470) Ltd v Stockton Estates Ltd ChD 2000
In a sale and immediate sub-sale of land, the contracts used different standard terms and conditions. The result was that the sub-sale excluded a right of access to the property.
Neuberger J summarised the law in what were then uncontroversial . .
Cited – Swainland Builders Ltd v Freehold Properties Ltd CA 2002
Swainland Builders Ltd owned the freehold of a block of flats. It had granted 99-year leases at ground rents of all the flats except numbers 11 and 18. It had intended to sell the block subject to the retention of flats 11 and 18 which it initially . .
Cited – Re Hetherington 1990
The court looked to whether a decision of a superior court was binding when the point had not been argued: ‘In my judgment the authorities clearly establish that even where a decision of a point of law in a particular sense was essential to an . .
Cited – Kadhim v Housing Benefit Board, London Borough of Brent CA 20-Dec-2000
A lower court was not bound to follow a decision of a higher court, where the decision at issue had been based, on the relevant point, on an unargued assumption about the law, which had in turn been pivotal to the decision of that higher court: ‘The . .
Cited – Kiriacoulis Lines Sa v Compagnie D’Assurances Maritime Aeriennes Et Terrestres (Camat) and Another (‘The Demetra K’) CA 16-Jul-2002
The court set out the elements to be satisfied before ordering a rectification of a commercial contract, in particular, the need for an antecedent agreement with outward expression of a common intent, and convincing evidence sufficient to discharge . .
Cited – Crossco No 4 Unltd and Others v Jolan Ltd and Others ChD 31-Mar-2011
. .
Cited – Day and Another v Day CA 27-Mar-2013
Appeal against refusal of order to rectify a conveyance of 1985.
Held: The conveyance was in the nature of a voluntary settlement and in such a case what is relevant is the subjective intention of the settlor. . .
Cited – Mackenzie v Coulson 1869
James V-C said: ‘Courts of Equity do not rectify contracts; they may and do rectify instruments purporting to have been made in pursuance of the terms of contracts. But it is always necessary for a plaintiff to show that there was an actual . .
Cited – Lovell and Christmas Ltd v Wall CA 1911
The written contract contained a restrictive covenant limiting the defendant’s freedom to carry on the business of a ‘provision merchant’ other than on behalf of the plaintiff company. On the facts found, the parties in their discussions before the . .
Cited – Inland Revenue Commissioners v Raphael and Ezra HL 1935
Parties to a contract should be presumed to have intended what in fact they have said.
The function of the recitals in a lease is to narrate the history leading up to the making of the lease.
Lord Wright said: ‘ . . the principle of the . .
Cited – George Cohen Sons and Co Ltd v Docks and Inland Waterways Executive CA 1950
The landlord negotiating a new lease proposed to the tenant that ‘the terms and conditions contained in the present lease to be embodied in the new lease where applicable.’ The tenant accepted this offer, but the new lease as executed made the . .
Cited – The Olympic Pride (Etablissements Georges et Paul Levy v Adderley Navigation Co Panama SA 1980
In the case of a bilateral transaction, there must be convincing proof that the concluded instrument does not represent the common intention of the parties to allow rectification. The policy reason for the need for convincing proof is that certainty . .
Cited – Westland Savings Bank v Hancock 1987
Tipping J set out the requirements for rectification for common mistake: ‘(1) That, whether there is an antecedent agreement or not, the parties formed and continued to hold a single corresponding intention on the point in question.
(2) That . .
Cited – Mannai Investment Co Ltd v Eagle Star Assurance HL 21-May-1997
Minor Irregularity in Break Notice Not Fatal
Leases contained clauses allowing the tenant to break the lease by serving not less than six months notice to expire on the third anniversary of the commencement date of the term of the lease. The tenant gave notice to determine the leases on 12th . .
Cited – Pimlico Properties Limited v Driftwood Developments Limited 10-Nov-2009
Court of Appeal of New Zealand – Rectification is an equitable remedy whereby a written contract which does not reflect the common intention of the parties can be modified or corrected so that it does. . .
Cited – Pimlico Properties Limited v Driftwood Developments Limited 10-Nov-2009
Court of Appeal of New Zealand – Rectification is an equitable remedy whereby a written contract which does not reflect the common intention of the parties can be modified or corrected so that it does. . .
Cited – Ahmad v Secret Garden (Cheshire) Ltd CA 6-Aug-2013
The tenant appealed against an order for the rectification of the lease agreement between the parties. The recorder at first instance had found that both parties had been mistaken in their belief about the effect of a lease and had granted . .
Cited – Marley v Rawlings and Another SC 22-Jan-2014
A husband and wife had each executed the will which had been prepared for the other, owing to an oversight on the part of their solicitor; the question which arose was whether the will of the husband, who died after his wife, was valid. The parties . .
Cited – Robb v James 28-Feb-2014
(New Zealand Court of Appeal) The Court contrasted ‘the state of some uncertainty as to the requisites for rectification in English law’ (referring to the Daventry case) with the ‘relatively settled’ position in New Zealand where ‘Tipping J’s 1987 . .
Cited – Rawlinson and Hunter Trustees SA and Others v Director of The Serious Fraud Office CA 31-Jul-2014
Documents had been disclosed in error in related proceedings, and the appellants now challenged refusal of an order that their use within the current proceedings should be restrained. . .
Cited – Simic v New South Wales Land and Housing Corporation 7-Dec-2016
(HIGH COURT OF AUSTRALIA) In holding that certain performance bonds should be rectified in order to correct a common mistake, applied the traditional test of asking what was the actual or true common intention of the parties
Kiefel J (with . .
Cited – Tartsinis v Navona Management Company ComC 19-Jan-2015
The parties disputed the price to be paid in a sale of shares under a contract for their sale. The company which owned a fleet of ships. The shares were sold by two Greek businessmen, Mr Mihail Tartsinis and Mr Antonis Nikolaou, to Navona Management . .
Cited – LSREF III Wight Ltd v Millvalley Ltd ComC 8-Mar-2016
. .
Cited – Van der Linde v Van der Linde ChD 1947
Evershed J said that the remedy of rectification is not appropriate if the grantor’s real intention: ‘be no more precise than this, namely, that he intended, by whatever formulation of words was appropriate or possible, to achieve the result that he . .
Cited – Racal Group Services Limited v Ashmore CA 1995
The company had covenanted to pay an annual sum to charity. Since the last payment under the covenant was to be made less than three years after the execution of the deed, an intended tax advantage was not secured.
Held: The company’s appeal . .
Cited – AMP (UK) Plc and Another v Barker and Others ChD 8-Dec-2000
The claimants were interested under a pension scheme. Alterations had been made, which the said had been in error, and they sought rectification to remove a link between early leaver benefits and incapacity benefits. The defendant trustees agreed . .
Cited – Futter and Another v Revenue and Customs; Pitt v Same SC 9-May-2013
Application of Hastings-Bass Rule
F had created two settlements. Distributions were made, but overlooking the effect of section 2(4) of the 2002 Act, creating a large tax liability. P had taken advice on the investment of the proceeds of a damages claim and created a discretionary . .

Lists of cited by and citing cases may be incomplete.

Contract, Equity

Updated: 01 November 2021; Ref: scu.640097

The seller had obtained a summary order for specific performance of a contract for the sale of land against the buyer.
Held: The breach was continuing and was still capable of being remedied by compliance with the order for specific performance. The seller was entitled, after the buyer had failed to comply with the order, to apply to court to put an end to the contract and claim damages for breach. A plaintiff who is refused specific performance or an injunction is left to his damages in contract or tort. The measure of such damages is exactly what it would be at common law.
Lord Wilberforce said: ‘In my opinion, the argument based on irrevocable election, strongly pressed by the appellant’s counsel in the present appeal is unsound. Election, though the subject of much learning and refinement, is in the end a doctrine based on simple considerations of common sense and equity. It is easy to see that a party who has put an end to a contract by accepting the other party’s repudiation cannot afterwards seek specific performance. This is simply because the contract has gone – what is dead is dead. But it is no more difficult to agree that a party who has chosen specific performance, may quite well thereafter, if specific performance fails to be realised say, ‘very well, then the contract should be regarded as terminated’.
It is quite consistent with a decision provisionally to keep alive, to say, ‘Well this is no use – let us now end the contract’s life’. A vendor who seeks (and gets) specific performance is merely electing for a course which may or may not lead to implementation of the contract – what he elects for is not eternal and unconditional affirmation, but a continuance of the contract under the control of the court which control involves the power, in certain events, to terminate it.’ and
‘In cases where a breach of a contract for sale has occurred, and the innocent party reasonably continues to try to have the contract completed, it would to me appear more logical and just rather than tie him to the date of the original breach, to assess damages as at the date when (otherwise than by his default) the contract is lost.’
In the law of contract, the date of breach rule ‘is not an absolute rule: if to follow it would give rise to injustice, the court has power to fix such other date as may be appropriate in the circumstances.’

Lord Wilberforce
[1980] AC 367, [1979] 2 WLR 487, [1979] 1 All ER 883
England and Wales
Citing:
Cited – Ogle v Vane 1868
. .
Cited – Radford v De Froberville 2-Jan-1977
A contract was made for the sale of a plot of land adjoining a house belonging to the plaintiff (the vendor) but occupied by his tenants, under which the defendant (the purchaser) undertook to build a house on the plot and also to erect a wall to a . .

Cited by:
Cited – William Sindall Plc v Cambridgeshire County Council CA 21-May-1993
Land was bought for development, but the purchaser later discovered a sewage pipe which very substantially limited its development potential. The existence of the pipe had not been disclosed on the sale, being unknown to the seller.
Held: . .
Cited – Surrey County Council and Mole District Council v Bredero Homes Ltd ChD 1992
Land was agreed to be sold for development in accordance with an existing planning permission. Instead a later permission was obtained, and more houses were built. The plaintiff had not sought to restrain or prevent the breach, but now sought . .
Cited – Oliver Ashworth (Holdings) Limited v Ballard (Kent) Limited CA 18-Mar-1999
In order for the landlord to claim double rent where a tenant held over unlawfully after the tenancy was determined, the landlord must not do anything to indicate that the lease might be continuing, for example by denying the validity of break . .
Cited – Smith New Court Securities Ltd v Scrimgeour Vickers HL 21-Nov-1996
The defendant had made misrepresentations, inducing the claimant to enter into share transactions which he would not otherwise have entered into, and which lost money.
Held: A deceitful wrongdoer is properly liable for all actual damage . .
Cited – Surrey County Council v Bredero Homes Ltd CA 7-Apr-1993
A local authority had sold surplus land to a developer and obtained a covenant that the developer would develop the land in accordance with an existing planning permission. The sole purpose of the local authority in imposing the covenant was to . .
Cited – Collins Stewart Ltd and Another v The Financial Times Ltd QBD 20-Oct-2004
The claimants sought damages for defamation. The claimed that the article had caused very substantial losses (andpound;230 million) to them by affecting their market capitalisation value. The defendant sought to strike out that part of the claim. . .
Cited – Pegler Ltd v Wang (UK) Ltd TCC 25-Feb-2000
Standard Conract – Wide Exclusions, Apply 1977 Act
The claimant had acquired a computer system from the defendant, which had failed. It was admitted that the contract had been broken, and the court set out to decide the issue of damages.
Held: Even though Wang had been ready to amend one or . .
Cited – Domb and Another v Isoz CA 29-Nov-1979
In a chain of conveyancing transactions, a solicitor sent his contract and deposit to his vendor’s solicitor, asking him to hold it to his order pending exchange. On the next day, that vendor’s solicitors agreed to an exchange of contracts over the . .
Cited – Golden Strait Corporation v Nippon Yusen Kubishka Kaisha (‘The Golden Victory’) HL 28-Mar-2007
The claimant sought damages for repudiation of a charterparty. The charterpary had been intended to continue until 2005. The charterer repudiated the contract and that repudiation was accepted, but before the arbitrator could set his award, the Iraq . .
Cited – Alcoa Minerals of Jamaica Inc v Herbert Broderick PC 20-Mar-2000
(Jamaica) Damage had been caused to the claimant’s property, but, because of his lack of funds, he was dependent upon the receipt of the damages to carry out the works of repair necessary. By the time the matter came to trial, inflation meant that . .
Cited – Personal Representatives of Tang Man Sit v Capacious Investments Ltd PC 18-Dec-1995
The claimant, Capacious Investments Ltd, brought proceedings against Tang’s estate for damages for the loss of use and occupation, and also an account of profits and damages for loss and damage incurred, for example by encumbering the property with . .
Mentioned – Ramzan v Brookwide Ltd CA 19-Aug-2011
The defendant had broken through into a neighbour’s flying freehold room, closed it off, and then included it in its own premises for let. It now appealed against the quantum of damages awarded. The judge had found the actions deliberate and with a . .
Cited – Hooper and Another v Oates CA 20-Feb-2013
The parties had agreed for the purchase of land, but the buyer, Mr Oates, failed to complete. A notice to complete was served, and on non-compliance, the repudiation was accepted. It proved difficult to resell, and they suffered substantial losses. . .
Cited – Downs and Another v Chappell and Another CA 3-Apr-1996
The plaintiffs had suceeded in variously establishing claims in deceit and negligence, but now appealed against the finding that no damages had flowed from the wrongs. They had been sold a business on the basis of incorrect figures.
Held: . .
Cited – Downs and Another v Chappell and Another CA 3-Apr-1996
The plaintiffs had suceeded in variously establishing claims in deceit and negligence, but now appealed against the finding that no damages had flowed from the wrongs. They had been sold a business on the basis of incorrect figures.
Held: . .

Lists of cited by and citing cases may be incomplete.

Equity, Contract

Leading Case

Updated: 01 November 2021; Ref: scu.185672

Right of Recovery of Money Paid under Mistake

Kleinwort Benson had made payments to a local authority under swap agreements which were thought to be legally enforceable when made. Subsequently, a decision of the House of Lords, (Hazell v. Hammersmith and Fulham) established that such swap agreements were unlawful. Kleinwort Benson then sought restitution of the payments on the basis of a mistake of law.
Held: It should be recognised that there was a general right to recover money paid under a mistake, whether of fact or law. ‘the mistake of law rule no longer forms part of English law.’ Where the law was deemed to have changed after a court decision, money paid under a view of the previous settled law became recoverable. The law is deemed always to have been as now found. The limitation period ran from the date of the discovery of the error of law. The old rule is not to be followed. Money paid under a mistake of law should be recoverable on the same footing as money paid under a mistake of fact, subject in the same way to the defences available in the law of restitution, which include the defence of change of position. ‘I should consider whether parties in the position of the appellant bank were mistaken when they paid money to local authorities under interest swap agreements which they, like others, understood to be valid but have later been held to be void. To me, it is plain that the money was indeed paid over under a mistake, the mistake being a mistake of law. The payer believed, when he paid the money, that he was bound in law to pay it. He is now told that, on the law as held to be applicable at the date of the payment, he was not bound to pay it. Plainly, therefore, he paid the money under a mistake of law, and accordingly subject to any applicable defences, he is entitled to recover it.’ and ‘The present rule, under which in general money is not recoverable in restitution on the ground that it has been paid under a mistake of law, should no longer be maintained as part of English law, from which it follows that the facts pleaded by the bank in each action disclose a cause of action in mistake. There is no principle of English law that payments made under a settled understanding of the law which is subsequently departed from by judicial decision shall not be recoverable in restitution on the ground of mistake of law.’
Lord Lloyd of Berwick discussed the ability of the common law to change: ‘This brings us to the central question. Nobody now suggests that the common law is static. It is capable of adapting itself to new circumstances. Is it then capable of being changed? or is it only capable of being developed? The common sense answer is that the common law is capable of being changed, not only by legislation, but also by judicial decision. This is nowhere clearer than when a long-standing decision of the Court of Appeal is overruled. Indeed in a system such as ours, where the Court of Appeal is bound by its own previous decisions, the main justification for the existence of a second tier appeal is that it enables the House to re-direct the law when it has taken a wrong turning. ‘

Lord Browne-Wilkinson, Lord Goff of Chieveley, Lord Lloyd of Berwick, Lord Hoffmann, Lord Hope of Craighead
Gazette 18-Nov-1998, Gazette 10-Feb-1999, Times 30-Oct-1998, [1998] UKHL 38, [1999] 2 AC 349, [1998] 4 All ER 513, [1998] 3 WLR 1095, [1998] Lloyds Rep Bank 387
House of Lords, Bailii
England and Wales
Citing:
Limited – David Securities Pty Ltd v Commonwealth Bank of Australia 1992
(High Court of Australia) Moneys paid away as a result of a causative mistake of law are recoverable: ‘the payer will be entitled prima facie to recover moneys paid under a mistake if it appears that the moneys were paid by the payer in the mistaken . .
Appeal from – Kleinwort Benson Ltd v Birmingham City Council CA 20-May-1996
No defence of unjust enrichment was available to defend a claim on a failed interest rate swap agreement. . .
Cited – Hazell v Hammersmith and Fulham London Borough Council HL 1991
Swap deals outwith Council powers
The authority entered into interest rate swap deals to protect itself against adverse money market movements. They began to lose substantial amounts when interest rates rose, and the district auditor sought a declaration that the contracts were . .
Overruled – Bilbie v Lumley and Others 28-Jun-1802
Contract Not Set Aside for Mistake as to Law
An underwriter paid a claim under a policy which he was entitled in law to repudiate for non-disclosure. Although he knew the relevant facts, he was not aware of their legal significance. He claimed back the money he had paid.
Held: A contract . .
Cited – University of Wollongong v Merwally 22-Nov-1984
(High Court of Australia) Deane J said: ‘A parliament may legislate that, for the purposes of the law which it controls, past facts or past laws are to be deemed and treated as having been different to what they were. It cannot however objectively . .
Cited – Henderson v Folkestone Waterworks Co 1885
The plaintiff had paid water rates to the defendant calculated in accordance with the law as it was held to be by the Court of Appeal. After payment, the House of Lords in the Dobbs case changed the law, and if calculated under the changed law the . .
Cited – In re Roberts 1905
A compromise made under a mistake of law can be set aside. . .
Cited – Baker v Courage and Co 1910
The plaintiff had owned a public house. On selling the leasehold to the defendants brewers, they had overpaid him by andpound;1,000. He deposited a sum at interest with the defendants. When he came to withdraw the last of the deposit (by coincidence . .
Cited – Derrick v Williams CA 1939
The plaintiff had accepted a payment into court on a basis that a Court of Appeal decision declared the law in a form which precluded the recovery of certain types of damages. Subsequently the House of Lords reversed the Court of Appeal decision and . .
Cited – Commissioner of State Revenue v The Royal Insurance Australia Ltd 7-Dec-1994
(High Court of Australia) A payment had been made under statute which was later repealed with retrospective effect.
Held: The monies paid under the retrospectively repealed statute had not been paid under a mistake of law at common law. . .
Cited – In re Hollis’ Hospital and Hague’s Contract ChD 5-Jul-1899
In October, 1898, a contract was entered into on behalf of the present trustees of Hollis Hospital for the sale of certain freehold property belonging to the hospital.
The property contracted to be sold formed part of certain property which . .
Cited – In re Downshire Settled Estates CA 1953
A scheme of arrangements was proposed on behalf of infant beneficiaries to three settlements. The object of the scheme was to avoid losses to the beneficiaries by reason of inheritance tax.
Held: The court rejected the contention that it had . .
Cited – Hazell v Hammersmith and Fulham London Borough Council QBD 1990
The issue before the courts was whether, in the absence of any express power authorising the Council to do so, the Council was within its power under s 111(1) of the Local Government Act 1972 to enter into certain swap transactions;
‘The fact . .
Cited – Kelly v Solari CEC 18-Nov-1841
Recovery was sought of money (pounds 200) paid an error of fact. There had been a life policy, but it had lapsed before the death of the life assured. The policy had been marked ‘lapsed’ but the marking had been overlooked.
Held: Where money . .
Cited – Lowry v Bourdieu 1780
A mistake of law was not a good ground for recovery of money paid in error. . .
Cited – Woolwich Equitable Building Society v Inland Revenue Commissioners (2) HL 20-Jul-1992
The society had set out to assert that regulations were unlawful in creating a double taxation. It paid money on account of the tax demanded. It won and recovered the sums paid, but the revenue refused to pay any interest accrued on the sums paid. . .
Cited – Brisbane v Dacres 1813
The commander of a naval vessel, HMS Arethusa, had paid to the Admiral in command a proportion of freight received for the carriage of publicly owned bullion on board the Arethusa in the belief that this was due to the Admiral as a matter of usage. . .
Cited – Lipkin Gorman (a Firm) v Karpnale Ltd HL 6-Jun-1991
The plaintiff firm of solicitors sought to recover money which had been stolen from them by a partner, and then gambled away with the defendant. He had purchased their gaming chips, and the plaintiff argued that these, being gambling debts, were . .
Cited – Wilson and M’Lellan v Sinclair 1830
Lord Brougham LC said that since Brisbane v. Dacres it had been considered an established point that a mistake must be ‘in the fact’ to allow recovery of money paid in error. . .
Cited – Hazell v Hammersmith and Fulham London Borough Council CA 2-Jan-1990
The authority entered into interest rate swap agreements, whose validity was challenged. The court considered what were the functions of a local authority within the Act. ‘We agree with the Divisional Court that in [section 111(1)] the word . .
Cited – Dixon v Monkland Canal Company 1831
Recovery of money paid in error of law. . .
Cited – In re Hallett’s Estate; Knatchbull v Hallett CA 1880
Where a trustee of a policy used money received from others to make payment of premiums on an insurance policy, they would be entitled to a lien on the policy. Where an asset was acquired exclusively with trust money, the beneficiary could either . .
Cited – Morgan Guaranty Trust Co of New York v Lothian Regional Council IHCS 19-Jan-1995
Money paid under error in law is repayable according to equity, and without statutory authority on the ground of unjustified enrichment. . .
Cited – Westdeutsche Landesbank Girozentrale v Islington London Borough Council; Kleinwort Benson Ltd v Sandwell Borough Council ChD 23-Feb-1993
A bank, having made payment under an void interest rate swap agreement to a local authority, was entitled to recover the payments made under the equitable doctrine of restitution. It would be wrong to allow the local authorities to enjoy an unjust . .
Cited – Regina v Inland Revenue Commissioners, Ex parte Woolwich Equitable Building Society HL 25-Oct-1990
The society challenged the validity of transitional provisions in the 1986 regulations on the ground that they were ultra vires. The House considered the specific presumption against double taxation, and also a power in general terms to make . .
Cited – Earl Beauchamp v Winn HL 1873
The rules in equity as to restitution after a payment made under a mistake of law apply as much to mistakes of fact as to mistakes of law. . .
Cited – In re Diplock CA 1948
S 26 of the Act of 1939 would operate to postpone the running of time in the case of an action at common law to recover money paid under a mistake of fact, and would likewise apply to an analogous claim in equity to recover money paid under a . .
Cited – Phillips-Higgins v Harper QBD 1954
A claim was made to recover monies due under a contract where the plaintiff had failed to realise that the balance was due to her, and by that mistake the action was concealed from her.
Held: Pearson J said: ‘But that is not sufficient. . .
Cited – Stirling v Earl of Lauderdale 1733
The maxim ignorantia juris non excusat did not apply only to the law of delict. . .
Cited – Kiriri Cotton Co Ltd v Dewani PC 1-Dec-1959
(Eastern Africa) A premium had been paid in consideration of the grant of a sub-lease of property contrary to the provisions of an ordinance. Restitution was ordered because payment had been made pursuant to a contractual obligation rendered void by . .
Cited – Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd HL 15-Jun-1942
A contract for the supply by the respondents of special machinery to be manufactured by them was treated as an ordinary contract for the sale of goods. It began valid, but suffered frustration by the outbreak of war.
Held: Lord Wright restated . .
Cited – In re Condon, Ex parte James 1874
The Trustee in bankruptcy has relevant duties as the Trustee as an officer of the Court. Such a Trustee would not engage in conduct which could be seen to involve an unfair use of that position, and ‘where it would be unfair’ for a trustee in . .
Cited – Regina v Tower Hamlets London Borough Council, ex parte Chetnik Developments Limited HL 1988
The House was asked whether a rating authority could refuse to repay rates which had been paid by mistake.
Held: ‘Parliament must have intended the rating authorities to act in the same high principled way expected by the court of its own . .

Cited by:
Cited – Deutsche Morgan Grenfell Group Plc v The Commissioners of Inland Revenue, HM Attorney General ChD 18-Jul-2003
The taxpayer sought to bring an action for restitution by the revenue of sums paid under a mistake of law. Under the Metallgesellschaft decision, rights of election for recovery of overpaid tax applied only between UK resident companies.
Held: . .
Cited – Niru Battery Manufacturing Company, Bank Sepah Iran v Milestone Trading Limited CA 23-Oct-2003
The claimant had contracted to purchase lead from some of the defendants. There were delays in payment but when funds were made available they should have been repaid. An incorrect bill of lading was presented. The bill certified that the goods had . .
Applied – Margaret Brennan v Bolt Burdon, London Borough of Islington, Leigh Day and Co QBD 30-Oct-2003
The claimant had sought relief for the injury to her health suffered by condition of her flat. The legal advisers had settled the matter, thinking that the claim had not been timeously served. The defendant appealed an order that the compromise was . .
Applied – Pankhania v The London Borough of Hackney ChD 2002
A brochure listing properties to be sold at auction decribed the property as being subject to a terminable licence. In fact it was a secure tenancy. The question arose as to whether a misrepresentation of law could found a cause of action.
Distinguished – S v S (Ancillary Relief: Consent Order) FD 4-Mar-2002
An order for ancillary relief had been made by consent. Later the House of Lords issued a judgment which changed the law which had been the basis of the decision to accept the settlement. The wife now sought to set aside the consent order, and . .
Cited – Oliver Ashworth (Holdings) Limited v Ballard (Kent) Limited CA 18-Mar-1999
In order for the landlord to claim double rent where a tenant held over unlawfully after the tenancy was determined, the landlord must not do anything to indicate that the lease might be continuing, for example by denying the validity of break . .
Cited – George Worme Grenada Today Limited v The Commissioner of Police PC 29-Jan-2004
PC (Grenada) The defendant was editor of a newspaper which carried a story severely defamatory of the prime minister. He was convicted of criminal libel, and appealed.
Held: The appeal was dismissed. The . .
Cited – DFS Furniture Company Plc v Commissioners of Customs and Excise CA 16-Mar-2004
The taxpayers said that the Commissioners’ assessment to VAT was out of time, and appealed a finding that it was not. They said that time should run from the point at which the Commissioners knew the facts upon which the assessment was based. The . .
Cited – Brennan v Bolt Burdon and Others, London Borough of Islington, Leigh Day and Co CA 29-Jul-2004
The claimant sought damages for injury alleged to have been suffered as tenant of a house after being subjected to carbon monoxide poisoning, and also from her former solicitors for their delay in her claim. The effective question was whether the . .
Cited – Inland Revenue and Another v Deutsche Morgan Grenfell Group Plc CA 4-Feb-2005
The company sought repayment of excess advance corporation tax payments made under a mistake of law. The question was the extent of the effect of the ruling in Klienwort Benson, in particular whether it covered sums paid as taxation, and how the law . .
Cited – National Westminster Bank plc v Spectrum Plus Limited and others HL 30-Jun-2005
Former HL decision in Siebe Gorman overruled
The company had become insolvent. The bank had a debenture and claimed that its charge over the book debts had become a fixed charge. The preferential creditors said that the charge was a floating charge and that they took priority.
Held: The . .
Cited – Halpern and Another v Halpern and others ComC 24-Mar-2006
The deceased parents, being orthodox Jews, had first made standard wills and then made provision accoding to Jewish law. A dispute after the second death was referred to a Beth Din arbitration. After an initial resolution, various distributions were . .
Cited – Meretz Investments Nv and Another v ACP Ltd and others ChD 30-Jan-2006
The applicant challenged the exercise of a power of sale under a mortgage, saying that the mortgagee’s purposes included purposes not those under the mortgage. The parties had been involved in an attempted development of a penthouse.
Held: The . .
Cited – Smithkline Beecham Plc Glaxosmithkline UK Ltd and Another v Apotex Europe Ltd and others (No 2) CA 23-May-2006
The parties to the action had given cross undertakings to support the grant of an interim injunction. A third party subsequently applied to be joined, and now sought to take advantage of the cross undertakings to claim the losses incurred through . .
Cited – Lloyds Bank Plc v Independent Insurance Co Ltd CA 26-Nov-1998
The bank had made an electronic transfer of funds for a customer in satisfaction of that customer’s proper debt, but it was done under a mistake of fact as to the cleared status of funds received.
Held: The appeal was turned down. The bank was . .
Cited – Deutsche Morgan Grenfell Group Plc v Inland Revenue and Another HL 25-Oct-2006
The tax payer had overpaid Advance Corporation Tax under an error of law. It sought repayment. The revenue contended that the claim was time barred.
Held: The claim was in restitution, and the limitation period began to run from the date when . .
Cited – Awoyomi v Radford and Another QBD 12-Jul-2007
The claimant sought damages from the defendant barristers who had represented her in criminal proceedings. They had not passed on to her the statement made by the judge in chambers that if she pleaded guilty he would not impose a sentence of . .
Cited – Sempra Metals Ltd v Inland Revenue Commissioners and Another HL 18-Jul-2007
The parties agreed that damages were payable in an action for restitution, but the sum depended upon to a calculation of interest. They disputed whether such interest should be calculated on a simple or compound basis. The company sought compound . .
Cited – Somerville v Scottish Ministers HL 24-Oct-2007
The claimants complained of their segregation while in prison. Several preliminary questions were to be decided: whether damages might be payable for breach of a Convention Right; wheher the act of a prison governor was the act of the executive; . .
Cited – Fender (Administrator of FG Collier and Sons Ltd) v National Westminster Bank Plc ChD 26-Sep-2008
The administrator sought declarations as to whether to treat the bank as a secured or unsecured creditor.
Held: The court directed the Administrator to recognise the Bank as a secured creditor, as if the Deed of Release had never been . .
Cited – Kommune and Another v DEPFA Acs Bank ComC 4-Sep-2009
Local authorities in Denmark sought to recover sums paid to the defendant banks for swap trading, saying that the payments had been outwith their powers. . .
Cited – Brazzill and Others v Willoughby and Others CA 27-May-2010
The regulated bank Kaupthing Singer and Friedlander Ltd (KSF) was in financial difficulties. The Bank of England required KSF to credit to a trust account all future deposits. KSF later went into insolvency. Some deposits had been credited to the . .
Cited – Jones v Churcher and Another QBD 18-Mar-2009
. .
Cited – The Law Debenture Trust Corporation Plc v Elektrim Sa and Another ChD 20-Jul-2009
. .
Cited – Bloomsbury International Ltd and Others v Sea Fish Industry Authority and Another QBD 24-Jul-2009
Parties challenged the legality of a levy imposed by the defendant for the purposes of supporting the sea food industry. They said that a levy imposed on fish products imported to the UK was beyond the powers given by the 1981 Act, and was contrary . .
Cited – Haugesund Kommune and Another v Depfa Acs Bank CA 27-May-2010
. .
Cited – Littlewoods Retail Ltd and Others v HM Revenue and Customs ChD 19-May-2010
The claimants had overpaid large sums of VAT over several years, and been, eventually, refunded, with simple interest. The claimants now said that the interest should have been compounded. The revenue contended that such a claim was excluded under . .
Cited – Deutsche Bank Ag v Vik and Another ComC 19-Mar-2010
. .
Cited – Franked Investment Group Litigation Test Claimants v Inland Revenue and Another CA 23-Feb-2010
. .
Cited – Marine Trade Sa v Pioneer Freight Futures Co Ltd Bvi and Another ComC 29-Oct-2009
The parties stood to make substantial losses against each other under contracts for differences after the dramatic fall in the freight market in the financial turmoil of late 2008. . .
Cited – Thin Cap Group Litigation, Test Claimants In v Revenue and Customs ChD 17-Nov-2009
. .
Cited – Test Claimants In The Franked Investment Income Group Litigation v Inland Revenue SC 23-May-2012
The European Court had found the UK to have unlawfully treated differently payment of franked dividends between subsidiaries of UK companies according to whether all the UK subsidiaries were themselves UK based, thus prejudicing European . .
Cited – Aspect Contracts (Asbetos) Ltd v Higgins Construction Plc SC 17-Jun-2015
Aspect had claimed the return of funds paid by it to the appellant Higgins under an adjudication award in a construction contract disute. The claimant had been asked to prpare asbestos surveys and reports on maisonettes which Higgins was to acquire . .
Cited – Revenue and Customs v The Investment Trust Companies SC 11-Apr-2017
Certain investment trust companies (ITCs) sought refunds of VAT paid on the supply of investment management services. EU law however clarified that they were not due. Refunds were restricted by the Commissioners both as to the amounts and limitation . .
Cited – Prudential Assurance Company Ltd v Revenue and Customs SC 25-Jul-2018
PAC sought to recover excess advance corporation tax paid under a UK system contrary to EU law. It was now agreed that some was repayable but now the quantum. Five issues separated the parties.
Issue I: does EU law require the tax credit to be . .

Lists of cited by and citing cases may be incomplete.

Contract, Equity

Leading Case

Updated: 31 October 2021; Ref: scu.135173

There had been a contractual licence to use names and trademarks for sports shoes. An earlier action between the parties had been stayed on the terms scheduled to a Tomlin order, which provided for Inter-Footwear to pay andpound;105,000 in three instalments and to have a licence (partly exclusive and partly non-exclusive) to use the names and marks. If any instalment was not paid on the due date, the whole unpaid balance became due at once and the licensor could determine the licence. There was a delay in payment of the second instalment and the licensor terminated the licence.
Held: The court had no jurisdiction to grant relief from forfeiture. Oliver LJ said that taken at its narrowest The Scaptrade case ‘may be said to establish no more than this: that the equitable jurisdiction to relieve against forfeiture does not extend to a time charter not being a charter by demise. There is, however, the more general proposition to be derived from it, that, even where the primary object of the insertion of a forfeiture clause may be said to be to secure the payment of money or the performance of some other obligation, the equitable jurisdiction does not extend to contracts which do not involve the transfer or creation of proprietary or possessory rights.’ There is a need for certainty in commercial contracts and the court doubted whether the licensor’s right to terminate the licence in the event of default could be primarily a security for the payment of money: ‘This is sufficient to dispose of the appeal, but, in fact, there appears to us to be another reason why the equitable jurisdiction to grant relief could not apply to a case such as this. The case is one of contract only and, in so far as there were any rights created or transferred which could be described as ‘proprietary’, they were rights which rested only in contract and to that extent distinguishable from the legal estate created by the grant of a lease or a mortgage. Assuming that relief were capable of being granted, effectively it could be granted only by compelling the plaintiffs to re-grant the permission which had been revoked. An exclusive licence to use a trade mark creates no estate, although it enables the licensee to obtain an injunction if the licensor, in breach of contract, seeks to use the mark in competition with him. Thus, effectively, the licensee applying for relief from forfeiture is in exactly the same position as the charterer in [The Scaptrade].’
Oliver LJ
[1984] 1 WLR 776
England and Wales
Citing:
Cited – Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana (The Scaptrade) HL 1983
The House considered giving relief from forfeiture where an owner had justifiably withdrawn his vessel in accordance with the terms of the charter.
Held: A withdrawal clause under a time charter, exercised on the ground of the charterer’s . .

Cited by:
Appeal from – Sport International Bussum BV v Inter-Footwear Ltd HL 2-Jan-1984
A contractual licence was granted to use names and trademarks for sports shoes. An earlier action between the parties had been stayed on the terms scheduled to a Tomlin order, which provided for Inter-Footwear to pay a sum in instalments and to have . .
Cited – Ultraframe (UK) Ltd v Fielding and others ChD 27-Jul-2005
The parties had engaged in a bitter 95 day trial in which allegations of forgery, theft, false accounting, blackmail and arson. A company owning patents and other rights had become insolvent, and the real concern was the destination and ownership of . .
Cited – Oceanbulk Shipping and Trading Sa v TMT Asia Ltd CA 15-Feb-2010
The parties had settled their disagreement, but now disputed the interpretation of the settlement. The defendant sought to be allowed to give in evidence correspondence leading up to the settlement which had been conducted on a without prejudice . .

Lists of cited by and citing cases may be incomplete.
Updated: 14 October 2021; Ref: scu.230289

The owner only of an equitable interest in goods may not assert his interest against a bona fide purchaser of the legal title to the goods. International Factors v. Rodriguez was decided per incuriam to the extent that it held that equitable rights conferred a status to sue in conversion, or that the holding was obiter.
Mummery LJ said: ‘There was no valid reason for Macmillan not joining LB as a defendant to the first action, so that all claims in relation to the title to the Berlitz shares could be decided in the same action and bind all interested parties . . it is an abuse of the process of the court to bring [the action] against LB: the substantial issue raised in it (i.e. the title to the Berlitz shares) has already been decided, on both law and fact, in the first action in circumstances which preclude the parties in this action from attempting to litigate that issue again.’
Mummery Hobhouse, Pill LJJ
Times 14-Jan-1998, Gazette 04-Feb-1998, [1997] EWCA Civ 3068, [1998] 4 All ER 675, [1998] 2 BCLC 659
Bailii
England and Wales
Citing:
Per incuriam – International Factors v Rodriguez CA 1978
(Majority) Cheques were made payable to a company which had entered into a factoring agreement with the plaintiffs. The cheques were sent to the company in settlement of debts owed to the company but which had been assigned to the plaintiffs. The . .

Cited by:
Cited – Mazur Media Limited and Another v Mazur Media Gmbh in Others ChD 8-Jul-2004
Proceedings were brought in England. The respondents sought a stay, saying the company was subject to insolvency proceedings in Germany.
Held: Our domestic insolvency law was not applicable to foreign proceedings, and so could not be used to . .
Approved – Morris v Wentworth-Stanley CA 4-Sep-1998
Two actions had been brought by a contractor against the partners in a farming partnership. Those actions were consolidated. One of the partners died and when the plaintiff found that out he discontinued his claims against the deceased partner and . .
Cited – Barrett v Universal-Island Records Ltd and others ChD 15-May-2006
The claimant was entitled to share in the copyright royalties of Bob Marley and the Wailers, and claimed payment from the defendants. The defendants said that the matters had already been settled and that the claim was an abuse of process, and also . .
Cited – Iran v The Barakat Galleries Ltd QBD 29-Mar-2007
The claimant government sought the return to it of historical artefacts in the possession of the defendants. The defendant said the claimant could not establish title and that if it could the title under which the claim was made was punitive and not . .

Lists of cited by and citing cases may be incomplete.
Updated: 08 October 2021; Ref: scu.143467

A contract for the supply by the respondents of special machinery to be manufactured by them was treated as an ordinary contract for the sale of goods. It began valid, but suffered frustration by the outbreak of war.
Held: Lord Wright restated in the English language the maxim ‘nemo debet locupletari aliena jactura of the civil law: ‘It is clear that any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognised to fall within a third category of the common law which has been called quasi-contract or restitution.’
Viscount Salmon said: ‘when one is considering the law of failure of consideration and of the quasi-contractual right to recover money on that ground, it is, generally speaking, not the promise which is referred to as the consideration, but the performance of the promise. If this were not so, there could never be any recovery of money, for failure of consideration, by the payer of the money in return for a promise of future performance, yet there are endless examples which show that money can be recovered, as for a complete failure of consideration, in cases where the promise was given but could not be fulfilled.’ and ‘In English law, an enforceable contract may be formed by an exchange of a promise for a promise, or by the exchange of a promise for an act . . . but when one is considering the law of failure of consideration and of the quasi-contractual right to recover money on that ground, it is, generally speaking, not the promise which is referred to as the consideration, but the performance of the promise.’
Viscount Simon LC said that: ‘In English law an enforceable contract may be formed by the exchange of a promise for a promise or by the exchange of a promise for an act . . but when one is considering the law of failure of consideration and the quasi-contractual right to recover money on that ground, it is, generally speaking, not the promise that is referred to as the consideration but the performance of the promise.’
Lord Wright, Viscount Simon
[1942] UKHL 4, [1943] AC 32
Bailii
England and Wales
Citing:
Overruled – Chandler v Webster 1904
When a contract is frustrated, ‘the loss lies where it falls.’ . .

Cited by:
Cited – Kleinwort Benson Ltd v Lincoln City Council etc HL 29-Jul-1998
Right of Recovery of Money Paid under Mistake
Kleinwort Benson had made payments to a local authority under swap agreements which were thought to be legally enforceable when made. Subsequently, a decision of the House of Lords, (Hazell v. Hammersmith and Fulham) established that such swap . .
Cited – Lipkin Gorman (a Firm) v Karpnale Ltd HL 6-Jun-1991
The plaintiff firm of solicitors sought to recover money which had been stolen from them by a partner, and then gambled away with the defendant. He had purchased their gaming chips, and the plaintiff argued that these, being gambling debts, were . .
Cited – Rowe, Regina (on the Application of) v Vale of White Horse District Council Admn 7-Mar-2003
The local council sought to claim payment for sewerage services enjoyed by a householder.
Held: Where a supplier has supplied services to another and there is no contractual relationship in existence, the law may afford to the supplier . .
Cited – Goss and others v Laurence George Chilcott As Liquidator of Central Acceptance Limited (In Liquidation) PC 23-May-1996
(New Zealand) Mr and Mrs Goss, had been granted a loan by the claimant finance company under a mortgage instrument that had been avoided by the claimant because it had been fraudulently altered by Mr Haddon, an employee of the claimant, without the . .
Cited – Sharma and Another v Simposh Ltd CA 23-Nov-2011
The parties created an oral (and therefore void) contract for a development, the claimants paid a deposit, expressed to be non-refundable, and the defendant builders completed the building work. The buyers backed out. The developer now appealed . .
Cited – Barnes (As Former Court Appointed Receiver) v The Eastenders Group and Another SC 8-May-2014
Costs of Wrongly Appointed Receiver
‘The contest in this case is about who should bear the costs and expenses of a receiver appointed under an order which ought not to have been made. The appellant, who is a former partner in a well known firm of accountants, was appointed to act as . .
Cited – Prudential Assurance Company Ltd v Revenue and Customs SC 25-Jul-2018
PAC sought to recover excess advance corporation tax paid under a UK system contrary to EU law. It was now agreed that some was repayable but now the quantum. Five issues separated the parties.
Issue I: does EU law require the tax credit to be . .

Lists of cited by and citing cases may be incomplete.
Updated: 10 August 2021; Ref: scu.236543

The parties contracted for the sale and purchase of two Chine Vases. The seller did not complete, and the buyer sought specific performance.
Held: A purchaser of ‘articles of unusual beauty rarity and distinction’ was entitled to obtain them in specie. The Court will enforce specific performance of a contract to purchase chattels, if damages will not be an adequate compensation: ‘a mere compensation in damages is not a sufficient remedy and satisfaction for the loss of the performance of the contract’.
But where the contract, although not actually fraudulent, was one in which the parties were not on an equal footing, the Plaintiff knowing, and the purchaser being ignorant, of the value of the thing sold, and the price appeared to be inadequate, the Court refused relief.
Kindersley V-C
[1859] EngR 710, (1859) 4 Drew 651, (1859) 62 ER 250
Commonlii
England and Wales

Updated: 30 July 2021; Ref: scu.288062

The court was asked whether the terms of a lease and lease back amounted to an unconscionable bargain and was unenforceable.
Held: The court affirmed the decision at first instance, but emphasised the need for unconscientious behaviour rather than a mere disparity of bargaining power. Unequal bargaining power or objectively unreasonable terms provide no basis for equitable interference in the absence of unconscientious or extortionate abuse of power where exceptionally, and as a matter of common fairness, ‘it was not right that the strong should be allowed to push the weak to the wall’.
Dillon LJ, Waller LJ, Dunn LJ
[1985] 1 WLR 173, [1984] EWCA Civ 2, [1985] 1 All ER 303
Bailii
England and Wales
Citing:
Appeal from – Alec Lobb (Garages) Ltd v Total Oil Ltd QBD 1983
To establish that a contract was unconscionable, a party had to have made an unconscientious use of its superior position or superior bargaining power to the detriment of someone suffering from some special disability or disadvantage. This weakness . .
Cited – Gilford Motor Co Ltd v Horne CA 1933
The defendant was the plaintiff’s former managing director. He was bound by a restrictive covenant after he left them. To avoid the covenant, he formed a company and sought to transact his business through it. At first instance, Farwell J had found . .
Cited – Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd HL 1968
Agreement in Restraint of Trade Unenforceable
The defendant ran two garages under solus agreements with the plaintiffs who complained when the defendants began to purchase petrol from cheaper alternative sources. The House was asked whether the solus agreements were be regarded in law as an . .
Cited – DHN Food Distributors Ltd v Tower Hamlets London Borough Council CA 1976
The business was owned by DHN and the land upon which the business was operated was owned by a wholly owned subsidiary, Bronze. The Council acquired land owned by Bronze on which DHN operated its cash and carry warehouse. The Council submitted that . .
Cited – Amoco Australia Pty Ltd v Rocca Bros Engineering Co Pty Ltd PC 1975
A court looking to see if an unconscionable bargain had been reached could look at whether or not the transaction benefits the mortgagor. The fact that a covenantor had obtained and would continue to enjoy benefits under the relevant agreement which . .
Cited – Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company HL 1894
Exceptions to Freedom to Trade
The purchaser of the goodwill of a business sought to enforce a covenant in restraint of trade given by the seller.
Held: At common law a restraint of trade is prima facie contrary to public policy and void, unless it can be shown that the . .
Cited – The Vancouver Malt and Sake Brewing Company Limited v The Vancouver Breweries Limited PC 2-Feb-1934
(British Columbia) Lord Macmillan stated: ‘The law does not condemn every covenant which is in restraint of trade, for it recognizes that in certain cases it may be legitimate, and indeed beneficial, that a person should limit his future commercial . .
Cited – The Vancouver Malt and Sake Brewing Company Limited v The Vancouver Breweries Limited PC 2-Feb-1934
(British Columbia) Lord Macmillan stated: ‘The law does not condemn every covenant which is in restraint of trade, for it recognizes that in certain cases it may be legitimate, and indeed beneficial, that a person should limit his future commercial . .
Cited – Bennett v Bennett CA 1952
The wife sued for arrears of maintenance payments payable under a deed in consideration for which the wife covenanted not to proceed with the prayers in the petition for maintenance, to consent to their being dismissed, and not to present any . .
Cited – Chemidus Wavin Ltd v Societe pour La Transformation et L’exploitation des Resines Industrielles SA CA 1973
. .
Cited – Goodinson v Goodinson 1954
W covenanted that for so long as the weekly payments of maintenance for herself and the child were punctually made, she would not commence or prosecute any matrimonial proceedings against the husband. The husband fell in arrears and she claimed the . .

Cited by:
Cited – Chagos Islanders v The Attorney General, Her Majesty’s British Indian Ocean Territory Commissioner QBD 9-Oct-2003
The Chagos Islands had been a British dependent territory since 1814. The British government repatriated the islanders in the 1960s, and the Ilois now sought damages for their wrongful displacement, misfeasance, deceit, negligence and to establish a . .
Cited – Boustany v Piggott PC 1995
In discussing what was said to be unconscionable contract, the Board accepted that ‘It is not sufficient to attract the jurisdiction of equity to prove that a bargain is hard, unreasonable or foolish; it must be proved to be unconscionable, in the . .
Cited – Yorkshire Bank Plc v Tinsley CA 25-Jun-2004
The defendant’s husband had charged the matrimonial home on several occasions to the claimant. It was found that the first charges were affected by undue influence and could not be enforced. The defendant argued that the last charge which replaced . .
Cited – Strydom v Vendside Ltd QBD 18-Aug-2009
The claimant sought recovery of a sum paid to the defendant as a commission by his union during his claim for personal injuries at work, relying on a term he sought to have implied into his contract, that the costs position should not be . .

Lists of cited by and citing cases may be incomplete.
Updated: 29 July 2021; Ref: scu.186675

A gift may be recovered where it was made under the mistaken belief that the donee is someone else. The mistake must be as to a fact which, if true, would create a liability to pay .
Scott LJ said of the Kerrison case that ‘it was definitely decided by Hamilton J. and by the House of Lords that the plaintiff was entitled to recover a payment made to the defendants for the purpose of meeting an anticipated liability although he then knew that no actual liability had yet attached to him.’ The mistake of fact, in the words of Scott LJ ‘must be in some aspect or another fundamental to the transaction’
Scott LJ, Lord Greene MR
[1938] 1 KB 49, [1937] 3 All ER 92
England and Wales
Citing:
Cited – Kerrison v Glyn, Mills, Currie and Co HL 1912
The plaintiff arranged with his bankers for them to honour cheques of one Patterson and when they advised the plaintiff of the amount of the cheques so honoured, the plaintiff would pay Kessler and Co. The plaintiff paid andpound;500 to the . .

Cited by:
Cited – Regina v Gilks CACD 27-Jun-1972
The appellant had placed a bet at a betting shop on a certain horse. A horse with a similar name won, but by mistake the shop paid out on the bet. The appellant knew of the mistake, but refused to return the winnings. He now appealed against his . .

Lists of cited by and citing cases may be incomplete.
Updated: 22 July 2021; Ref: scu.539757

The court considered the circumstances under which rectification could properly be ordered in respect of a deed. Brightman LJ said: ‘It is clear on the authorities that a mistake in a written instrument can, in certain limited circumstances, be corrected as a matter of construction without obtaining a decree in an action for rectification. Two conditions must be satisfied: first, there must be a clear mistake on the face of the instrument; secondly, it must be clear what correction ought to be made in order to cure the mistake. If those conditions are satisfied, then the correction is made as a matter of construction. If they are not satisfied then either the claimant must pursue an action for rectification or he must leave it to a court of construction to reach what answer it can on the basis that the uncorrected wording represents the manner in which the parties decided to express their intention. In Snell’s Principles of Equity 27th ed p 611 the principle of rectification by construction is said to apply only to obvious clerical blunders or grammatical mistakes. I agree with that approach. Perhaps it might be summarised by saying that the principle applies where a reader with sufficient experience of the sort of document in issue would inevitably say to himself, ‘Of course X is a mistake for Y’.’
Brightman, Lawton and Oliver LJJ
[1982] 2 EGLR 111, (1981) 263 EG 61
England and Wales
Cited by:
Cited – JIS (1974) Ltd v MCP Investment Nominees I Ltd CA 9-Apr-2003
The parties agreed for a lease to be granted of a new building. Part had been intended to be excluded for shops, but permission was not obtained, the shops area was included and leased back. When the tenants sought to determine the lease, the . .
Cited – Littman and Another v Aspen Oil (Broking) Ltd CA 19-Dec-2005
A lease had been granted with a break clause, which the tenant exercised. The Landlord said it had not complied with its obligations and was not free to exercise that clause. The clause had included the word ‘landlord’ where it should have read . .
Cited – Chartbrook Ltd v Persimmon Homes Ltd and Others HL 1-Jul-2009
Mutual Knowledge admissible to construe contract
The parties had entered into a development contract in respect of a site in Wandsworth, under which balancing compensation was to be paid. They disagreed as to its calculation. Persimmon sought rectification to reflect the negotiations.
Held: . .
Approved – KPMG Llp v Network Rail Infrastructure Ltd CA 27-Apr-2007
The parties disputed the interpretation of a break clause in their lease. Carnwath LJ said that courts should not readily accept that parties have made mistakes in formal documents: ‘correction of mistakes by construction’ is not a separate branch . .
Cited – Campbell v Daejan Properties Ltd CA 20-Nov-2012
The tenant appealed against an order requiring the amendment of what was found to be an obvious error in the lease as to the responsibility of the lessor to make repairs to certain walls and rooves, and the apportionment of liability for payment of . .
Cited – Pink Floyd Music Ltd and Another v EMI Records Ltd CA 14-Dec-2010
The defendant appealed against an order made on the claimant’s assertion that there were due to it substantial underpayments of royalties over many years. The issues were as to the construction of licensing agreements particularly in the context of . .

These lists may be incomplete.
Updated: 15 July 2021; Ref: scu.184537

The respondent resisted an order for specific performance of a contract, saying that the plaintiffs had reneged on an essential promise in a collateral contract.
Held: The defence failed. Lord Chelmsford said: ‘The exercise of the jurisdiction of equity as to enforcing the specific performance of agreements, is not a matter of right in the party seeking relief, but of discretion in the Court – not an arbitrary or capricious discretion, but one to be governed as far as possible by fixed rules and principles.’ and ‘The conduct of the party applying for relief is always an important element for consideration’.
References: (1873) LR 6 HL 414
Judges: Lord Chelmsford
Jurisdiction: England and Wales
This case is cited by:

• Cited – Ram, Regina (on the Application Of) v Parole Board Admn 12-Jan-2004
  The claimant had won an action for damages against the respondent. He was however released on licence, and subsequently became unlawfully at large. The question was whether the damages continued to be payable to him. The defendant insisted that the . .
  (, [2004] EWHC 1 (Admin))

These lists may be incomplete.
Last Update: 27 November 2020; Ref: scu.191983

Recovery was sought of money (andpound;200) paid an error of fact. There had been a life policy, but it had lapsed before the death of the life assured. The policy had been marked ‘lapsed’ but the marking had been overlooked.
Held: Where money is paid to another under the influence of a mistake in circumstances where if the true facts had been known the money would not have been paid, an action lies to recover the money and it is against the conscience of the recipient to retain it. Parke B said of Bilbie v Lumley that ‘All that that case decides is, that money paid with full knowledge of all the facts cannot be recovered back by reason of its having been paid in ignorance of the law’
A payment made in the knowledge that there was a ground to contest liability will be irrecoverable (Lord Abinger CB).
Lord Abinger CB accepted that Baron CB had put the matter too broadly at trial by using the expression ‘means of knowledge’. This was a very vague expression, and: ‘The safest rule however is, that if the party makes the payment with full knowledge of the facts, although under ignorance of the law, there being no fraud on the other side, he cannot recover it back again. There may also be cases in which, although he might by investigation learn the state of facts more accurately, he declines to do so, and chooses to pay the money notwithstanding; in that case there can be no doubt that he is equally bound. Then there is a third case, and the most difficult one, – where the party had once a full knowledge of the facts, but has since forgotten them. I certainly laid down the rule too widely to the jury, when I told them that if the directors once knew the facts they must be taken still to know them, and could not recover by saying that they had since forgotten them. I think the knowledge of the facts which disentitles the party from recovering, must mean a knowledge existing in the mind at the time of payment.’
Parke B agreed and said: ‘If, indeed, the money is intentionally paid, without reference to the truth or falsehood of the fact, the plaintiff meaning to waive all inquiry into it, and that the person receiving shall have the money at all events, whether the fact be true or false, the latter is certainly entitled to retain it; but if it is paid under the impression of the truth of a fact which is untrue, it may, generally speaking, be recovered back, however careless the party paying may have been, in omitting to use due diligence to inquire into the fact. In such a case the receiver was not entitled to it, nor intended to have it.’
Rolfe B mentioned two interpretations of the facts available to the jury: ‘first, that the jury may possibly find that the directors had not in truth forgotten the fact; and secondly, they may also come to the conclusion, that they had determined that they would not expose the office to unpopularity, and would therefore pay the money at all events.’
References: (1841) 9 M and W 54, [1841] EngR 1087, (1841) 152 ER 24
Links: Commonlii
Judges: Parke B, Lord Abinger CB, Gurney B, Rolfe B
Jurisdiction: England and Wales
This case cites:

• Cited – Bilbie v Lumley and Others ((1802) 2 East 469, Commonlii, [1802] EngR 245, (1802) 102 ER 448)
  An underwriter paid a claim under a policy which he was entitled in law to repudiate for non-disclosure. Although he knew the relevant facts, he was not aware of their legal significance. He claimed back the money he had paid.
  Held: A contract . .

This case is cited by:

• Cited – Kleinwort Benson Ltd v Lincoln City Council etc HL (Gazette 18-Nov-98, Gazette 10-Feb-99, Times 30-Oct-98, House of Lords, Bailii, [1998] UKHL 38, [1999] 2 AC 349, [1998] 4 All ER 513, [1998] 3 WLR 1095, [1998] Lloyds Rep Bank 387)
  Kleinwort Benson had made payments to a local authority under swap agreements which were thought to be legally enforceable when made. Subsequently, a decision of the House of Lords, (Hazell v. Hammersmith and Fulham) established that such swap . .
• Cited – Fisher v Brooker and Another ChD (Bailii, [2006] EWHC 3239 (Ch), [2007] FSR 12, [2007] EMLR 9)
  The claimant said that he had contributed to the copyright in the song ‘A Whiter Shade of Pale’ but had been denied royalties. He had played the organ and particularly the organ solo which had contrbuted significantly to the fame of the record.
  

These lists may be incomplete.Leading Case
Last Update: 21 August 2020; Ref: scu.236536

References: (1841) 9 M and W 54
Coram: Parke B, Lord Abinger CB, Gurney B, Rolfe B
Ratio: Recovery was sought of money (andpound;200) paid an error of fact. There had been a life policy, but it had lapsed before the death of the life assured. The policy had been marked ‘lapsed’ but the marking had been overlooked.
Held: Where money is paid to another under the influence of a mistake in circumstances where if the true facts had been known the money would not have been paid, an action lies to recover the money and it is against the conscience of the recipient to retain it. Parke B said of Bilbie v Lumley that ‘All that that case decides is, that money paid with full knowledge of all the facts cannot be recovered back by reason of its having been paid in ignorance of the law’
A payment made in the knowledge that there was a ground to contest liability will be irrecoverable (Lord Abinger CB).
Lord Abinger CB accepted that Baron CB had put the matter too broadly at trial by using the expression ‘means of knowledge’. This was a very vague expression, and: ‘The safest rule however is, that if the party makes the payment with full knowledge of the facts, although under ignorance of the law, there being no fraud on the other side, he cannot recover it back again. There may also be cases in which, although he might by investigation learn the state of facts more accurately, he declines to do so, and chooses to pay the money notwithstanding; in that case there can be no doubt that he is equally bound. Then there is a third case, and the most difficult one, – where the party had once a full knowledge of the facts, but has since forgotten them. I certainly laid down the rule too widely to the jury, when I told them that if the directors once knew the facts they must be taken still to know them, and could not recover by saying that they had since forgotten them. I think the knowledge of the facts which disentitles the party from recovering, must mean a knowledge existing in the mind at the time of payment.’
Parke B agreed and said: ‘If, indeed, the money is intentionally paid, without reference to the truth or falsehood of the fact, the plaintiff meaning to waive all inquiry into it, and that the person receiving shall have the money at all events, whether the fact be true or false, the latter is certainly entitled to retain it; but if it is paid under the impression of the truth of a fact which is untrue, it may, generally speaking, be recovered back, however careless the party paying may have been, in omitting to use due diligence to inquire into the fact. In such a case the receiver was not entitled to it, nor intended to have it.’
Rolfe B mentioned two interpretations of the facts available to the jury: ‘first, that the jury may possibly find that the directors had not in truth forgotten the fact; and secondly, they may also come to the conclusion, that they had determined that they would not expose the office to unpopularity, and would therefore pay the money at all events.’
Jurisdiction: England and Wales
This case cites:

• Cited – Bilbie v Lumley and Others ((1802) 2 East 469, Commonlii, [1802] EngR 245, (1802) 102 ER 448)
  An underwriter paid a claim under a policy which he was entitled in law to repudiate for non-disclosure. Although he knew the relevant facts, he was not aware of their legal significance. He claimed back the money he had paid.
  Held: A contract . .

(This list may be incomplete)
This case is cited by:

• Cited – Kleinwort Benson Ltd v Lincoln City Council etc HL (Gazette 18-Nov-98, Gazette 10-Feb-99, Times 30-Oct-98, House of Lords, Bailii, [1998] UKHL 38, [1999] 2 AC 349, [1998] 4 All ER 513, [1998] 3 WLR 1095, [1998] Lloyds Rep Bank 387)
  Kleinwort Benson had made payments to a local authority under swap agreements which were thought to be legally enforceable. Subsequently, a decision of the House of Lords, (Hazell v. Hammersmith and Fulham) established that such swap agreements were . .
• Cited – Fisher v Brooker and Another ChD (Bailii, [2006] EWHC 3239 (Ch))
  The claimant said that he had contributed to the copyright in the song ‘A Whiter Shade of Pale’ but had been denied royalties. He had played the organ and particularly the organ solo which had contrbuted significantly to the fame of the record.
  

(This list may be incomplete)
Leading Case
Last Update: 18 March 2019
Ref: 236536