Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
THE HONOURABLE MR JUSTICE MORLAND
Between :
| Margaret Brennan | Claimant/Respondent |
| - and - |
|
| Bolt Burdon (1) London Borough of Islington (2) Leigh Day & Co (3) | 2nd Defendants/Appellant |
Mr Philip Bartle Q.C. (instructed by Alison Trent & Co) for the Claimant/Respondent
Mr John Norman (instructed by Barlow Lyde & Gilbert) for the 2nd Defendants/Appellant
Hearing dates : 21st October 2003
Judgment
Mr Justice Morland : Judgment.
An overall view of this litigation does little credit to the legal profession. The claimant respondent to this appeal is now being advised by at least the sixth firm of solicitors whom she has consulted. Dilatoriness has been the characteristic of the progress of her claim at least until the 26th April 2002.
Since 1988 the claimant has been the tenant of a flat of which Islington Council, the appellant 2nd defendants, was the landlord. She alleges that she had suffered personal injuries from carbon monoxide exposure, which escaped from a faulty gas boiler. She alleges that the exposure occurred in two periods 1988 – 15.11.95 and 13.8.96 – 16.10.98. Islington Council were contractually bound to maintain and repair the boiler.
She complained by letter to the Council dated as long ago as the 10th August 1991 that her health was being adversely affected by the condition of her flat although at that date she attributed it to the building materials used (See page 192 Appeal Bundles).
She wrote again to the Council on the 16th August 1991 (See page 194)
"With regard to the problems of skin & eye irritation, breathing difficulties and extreme fatigue and drowsiness which I’ve been experiencing in my flat, and further to the inspection visit by your Mr J Dixie & an Engineer from the Gas Section of Islington Council on 26th July – who done nothing but look at the cupboard in which the air vent is situated, the location of the boiler, and the silverware which I’d kept in that cupboard & which has become completely blackened by a soot-like substance – and, based on these observations, decided that the air-vent should be sealed up on the outside because the fumes from the boiler were coming straight back into the kitchen (an enclosed area off the sitting-room), I confirm that this air-vent was sealed up from the outside on the afternoon of 12 August.
However, I now understand that if the wall in the kitchen where the boiler & air-vent are situated, is a cavity wall and the problem might not be resolved. Indeed it would be worsened if the fumes from the boiler flue are seeping into the cavity & into the kitchen through the inner vent."
The Council wrote to her in August 1991 (see page 119)
"RE: AIR QUALITY INVESTIGATION.
I am writing to inform you of the results of the above investigation. Firstly, because of the siting(sic) of the airbrick in you kitchen, the tarnished state of the silverware in your kitchen cupboard and the sulphurous smell inside it, it seems highly likely that fumes from the boiler flue have been re-circulating. The analysis result on black dust samples taken from the cupboard and airbrick revealed a low pH (acid) and sulphurous odour )there was not enough dust to analyse properly). In addition "Gastec" tube sampling on 6th August 1991 indicated the presence of a very small amount of hydrogen disulphide gas, which could easily have originated from boiler fumes. The recent blocking of your kitchen airbrick by Gas Detection should therefore eliminate this source of contamination.
Tests were also carried out using the "Gastec" apparatus in your kitchen cupboard for carbon monoxide and hydrocarbons, and at the kitchen window for ozone. None of these tests showed any presence of these gasses."
On the 9th June 1992 her consultant physician from Guy’s wrote to the Council with a copy to her (See page 211).
"I am writing to support Miss Brennan’s request that she be considered for suitable re-housing. Since moving to her present accommodation some four years ago she has never felt well and has been troubled by continuing irritation of her eyes and nose, associated with dryness of the skin, drowsiness and loss of memory.
These complaints first occurred not long after an operation on her nose but we have not been able to associate the present symptoms with that illness or to find any alternative medical diagnosis, apart from the possibility that she has been, and to some extent still is, affected by fumes in her flat.
I understand that there was a problem with a faulty gas central heating system which would have given exposure to carbon monoxide and although this has now been corrected it could be related to some of her continuing problems notably the loss of memory. This however does not seem to explain the whole problem and on-site inspections by both the Environmental Health Department and staff from my department recorded the noted and irritant atmosphere. Investigations have been inconclusive but we did study some heavily tarnished silverware which proved to have a coating of silver sulphide presumably from exposure to hydrogen sulphide gas. We also considered the possibility of formaldehyde vapour release from cavity wall insulation but were unable to confirm whether or not such building treatment had been used.
On balance the most striking thing is that Mrs. Brennan’s symptoms are relieved when she is able to move away from the flat and stay with friends. Thus whilst we cannot prove conclusively the cause for her symptoms I believe that there is enough evidence to justify making a special effort to re-house her in alternative accommodation."
As a result of Miss. Brennan’s receipt of a copy of this letter there was a risk that the limitation period would begin to run against her in respect of earlier exposure to gas fumes.
There are two actions. I am only directly concerned with the 1st action which is against Bolt Burdon, solicitors whom she consulted in July 1993, the 1st defendants, Islington Council, the 2nd defendants, and Leigh Day, whom she consulted in about October 1995, the 3rd defendants.
Leigh Day instructed a Mr Shannon, a boiler expert who inspected Miss. Brennan’s flat on the 15th November 1995. He reported (See page 255)
"In our opinion noxious flue gas, produced by the combustion of Natural Gas in the boiler, has been entering the premises.
The incorrect positioning of the Balanced Flue Terminal, in a recess of the building, and less than 600mm from a re entrant corner of the building has resulted in an inability of the discharge flue gas to be effectively discharged and diluted by surrounding external air.
As a result the loss of room seal, due to poor or inadequate Maintenance to rectify a missing "butterfly nut" and defective sealing strip to serve the casing, this air and wind pressure has been able to force noxious flue gas into the kitchen and lounge.
Such combination of defects cannot other than have resulted in the "Occupier" being exposed to considerable volumes of noxious flue gas."
On the 15th November 1995 Mr Shannon shut down the boiler declaring it unsafe.
In November 1995 Leigh Day instructed Counsel who advised that Mrs Brennan’s claim was substantially time-barred. Leigh Day explained to her (see page 282).
"As Mr Ramsden has stated, there may well be a claim for continuing loss but the chances of success in such an action are less than 50%. This would not be sufficient to satisfy the Legal Aid Board.
I confirm that Mr. Ramsden had not had sight of Mr. Shannon’s report prior to producing his advice, as his advice was required as a matter of urgency. I do not think it likely that Mr. Ramsden’s advice would have changed in the light of Mr. Shannon’s report"
For reasons given in their letter to her Leigh Day ceased to act for her (See page 276) in the middle of February 1996 when she consulted Procaccini Farrell who were to become the 3rd defendants in the 2nd action.
Procaccini Farrell instructed an Environmental Health Officer who inspected the flat on the 4th June 1996 who reported (see page 287)
"Conclusion and Recommendations.
Repair.
The property has had no heating or hot water since the gas central heating boiler was considered unsafe and switched off under the Gas Safety (Installation and Use) Regulations 1994. I consider the flat to be unfit because of the lack of piped hot water supply to the bath, wash hand basin and kitchen sink.
In order to bring the property up to a reasonable standard the following work should be carried out.
The central heating boiler should be repaired or renewed tested and left safe for use by a suitably qualified engineer.
Repair to the kitchen window and bathroom plaster work should be carried out.
In my opinion.
The dwelling is unfit for human habitation having regard to sec 604 of the Housing Act 1985 in respect of a lack of hot water system to the kitchen and bathroom.
The landlord is failing in the repairing obligations implied into the tenancy by Sec 11 of the Landlord and Tenant Act 1985.
The Landlord is failing in the duty of care imposed by Sec 4 of the Defective Premises Act 1972"
Both this report and Mr Shannon’s report were sent to the Council on the 9th August 1996
On the 13th August 1996 a gas-fitter on behalf of the Council re-connected the boiler and pronounced it now healthy and sound (see page 295). It remained operational emitting noxious flue gas until the 16th October 1998 when Mr Shannon on a second inspection shut it down again. He reported (See page 311).
"The "Landlord" their servant(s) or agent(s) have failed to rectify the serious and dangerous defects with the boiler and it’s installation since our previous investigation on 15th November 1995.
They have also failed, as far as we are aware from evidence currently at our disposal, to carry out responsible annual servicing in accordance with their statutory duty in accordance with the Gas Safety (Installation & Use) Regulations 1994 Clause 35 (3) (a & b) which would be expected to identify defects. (Appendix 1a & 1b)"
Time went on but Miss. Brennan’s claims progressed not at all. She next consulted Levenes, the 4th defendants in the 2nd action, in April 1998. Levenes made no progress. So Miss. Brennan consulted ASB Law to whom her Legal Aid certificates were transferred on the 9th August 2000. ASB Law are the solicitors who issued the claim forms and Particulars of Claim in both the 1st and 2nd actions.
On the 7th June 2001 the claim form in the 1st action was issued.
ASB Law obtained a report dated the 13th July 2001 from Professor Morris, Head of the Neuro/psychological Unit at King’s College Hospital who gave the opinion.:-
"This assessment is aimed at determining whether neuropsychological impairments are consistent with carbon monoxide poisoning. It is known that such poisoning causes impairments in relation to attention, memory and executive functioning and her profile clearly fits this description.
In conclusion, her current neuro-psychological symptoms are consistent with carbon monoxide poisoning and also the level of functional disability that has occurred in the last decade. This has resulted in her being unable to work and clearly she now presents as somebody who is incapable of the skilled secretarial work which she conducted in her career up to the late 1980s. Given the time since the period of poisoning there are unlikely to be changes in brain functioning, and any gains to be made are through adapting to her disabilities which I believe she has done to some extent spontaneously through her own efforts. She may, however benefit from specialist neurorehabilitation aimed at improving memory and organisational skills."
Although the last possible date for limitation so far as Miss. Brennan’s claim for damages for personal injuries against the Council was concerned was the 16th October 2001, the claim form, Particulars of Claim together with the Schedule of Damage and the reports of Professor Morris and Mr Shannon were not served until Saturday 6th October 2001.
On the 8th November 2001 Bolt Burdon and Leigh Day made applications to set aside the claim form under C.P.R. Part 11 rule 1 because it had not been served within 4 months of the date of issue in breach of CPR Part 7 rule 5(2).
On the 14th November 2001 the claim form in the 2nd action against Leigh Day, Islington Council, Procaccini Farrell and Levenes was issued.
On the 22nd November 2001 Mr Cohen, a solicitor employed by the Council, telephoned Mr Scarles, an assistant solicitor, who had conduct of Mrs Brennan’s claim, at ASB Law. Mr Cohen asked for extension of time for service of the Council’s defence. Mr Scarles told him of the application to strike out by the other defendants and Mr Cohen said that he would contact the other defendant’s solicitors. (See pages 64 and 429).
On the 2nd January 2002 Miss Recorder Plumtree made an order that the claim form had not been validly served within 4 months and struck out the claims against Bolt Burdon and Leigh Day. She later made a wasted costs order against ASB Law. The Recorder in construing C.P.R. Part 6 rule 7 relying on the judgments of the Court of Appeal in Godwin .v. Swindon Borough Council [2001] 4 All E.R. 641 and of McCombe J. in Anderton v. Clwyd County Council EWHC QB 161 decided that the claim form was served on Monday 8th October 2001 (See pages 357-363).
On the 7th January 2002 Junior Counsel for Miss Brennan orally advised Mr Scarles against appealing the Recorder’s decision repeating to him the informal opinion given to him by Mr Ronald Walker Q.C. that:-
"[1] Rule 6.7. of the CPR was badly drafted and that Mr Justice McCombe had incorrectly construed the rule in Anderton .v. Clywd County Council [2001] EWHC QB161 (25 July 2001)
[2] Lord Justice May’s comments in Godwin .v. Swindon Borough Council [2001] All ER 641 would make it extremely difficult to get permission to appeal. Lord Justice May was regarded as the "Guru" of the CPR and there would be a small chance of getting two Court of Appeal Judges to go against him."
There was a telephone conversation on the 15th January 2002 when Mr Scarles updated Mr Cohen on the litigation (See page 430).
The appeal before me by the Council is against the decision of Deputy Master Eastman refusing the Council’s application to stay the claimant’s claim against the Council in the 1st action. The Deputy Master gave judgment on the 11th June 2003 and the following day granted leave to appeal on a point of law.
The Council’s contention was that the claim had been compromised. There was a binding contractual compromise. For that reason I have set out the background against which the contract of compromise was made, its matrix.
For Miss. Brennan Mr Bartle Q.C. submitted that the contract of compromise was void because of a common mistake of law. The common mistake of law was that the claim form had not been validly served.
After setting out the arguments of Mr Bartle and of Mr Norman for the Council and the authorities cited to him the Deputy Master concluded:-
"The first thing I have to decide is whether or not there was a fundamental assumption behind the contract, because if there is not any fundamental assumption behind the contract, then the whole of this argument does not get off the ground at all. Having heard the arguments and looked at the witness statements of both Mr Cohen and Mr Scarles, I am satisfied that there was a fundamental assumption behind the contract, common to both Mr Cohen and to Mr Scarles, and that that assumption was namely that the service of the first action against Islington was bad. And that because of that it was doomed to failure. I am satisfied that this was in both of their minds when assessing the consequences to their respective parties of the decision of the Recorder, and that it was behind the agreement that both entered into.
Further, going back to the passage I cited in Chitty at paragraphs 5.013 and 5.014, particularly 5.013, this was in effect a condition precedent to the contract. There may have been a multiplicity of forces acting on both of these solicitors’ minds at the time of reaching the agreement as Mr Norman has effectively said to me, and there may have been a number of other assumptions floating around, but I am satisfied that this was a fundamental assumption common to both of them."
Before dealing with the rival contentions I shall continue the narrative.
On the 13th February 2002 Mr Cohen and Mr Scarles had a conversation at the Croydon County Court when in the 2nd action the Council were seeking an extension of time for service of their defence. Mr Scarles had instructed Counsel, Mr Davies, on that application. Mr Scarles’s statement dated the 6th November 2002 carries the story on:-
"On 13 February 2002, at Croyden County Court, I met Mr Cohen who was representing LB1 on an application in connection with the claimant’s second claim CR106704. Prior to the application, in the presence of Mr Davies, I spoke to Mr Cohen who commented on the learned Recorder’s judgment and asked if, in the circumstances, I would be willing to discontinue the first claim, I said that I was provided that it was agreed that there would be no order for costs save for a detailed assessment of the claimant’s costs. However, I only agreed to this because of the learned Recorder’s decision. LB1 was the alleged primary wrongdoer and the questions of their liability had been investigated for over 10 years. It was clear to me that in view of the learned Recorder’s judgment, the claimant had no option but to discontinue the claim. If I had not agreed to Mr Cohen’s suggestion, I had no doubt that, as I have already explained, LB1 would have been able to strike out the claim and obtain an order for costs. As the claimant was legally aided, I had a duty to the Legal Services Commission and I could not allow costs to be incurred unnecessarily. My conversation with Mr Cohen about discontinuance lasted no more than a few minutes.
After the hearing, I received a letter from Mr Cohen in which he wrote that:
"Further to our meeting at court this morning, I understand that you wish to give notice of discontinuance of the first action against the Council and I consent to this on the basis that there will be no order for costs"
On 18th February 2002, I sent Mr Cohen a draft consent order. On 21 February 2002, I received a signed consent order from him. On 25th February 2002 I sent this to the court but, by an oversight I omitted to sign it. As a result, it was returned unsealed because the court refused to sign it.
On 12 March 2002, I received an e-mail from Mr Thompson of St James Church Legal Advice Centre informing me that the claimant did not agree to discontinue against LB1
ASB Law ceased to act for the claimant on 10 April 2002."
So Mrs Brennan instructed her sixth firm of solicitors, Alison Trent, who gave formal notice of change on the 26th April 2002. (See page 33).
Then followed correspondence between Alison Trent and Barlow Lyde Gilbert now acting for the Council, in which Alison Trent offered on behalf of Miss. Brennan a consent order whereby the claim against the Council was to be discontinued with no order as to costs. That offer was not finally accepted. Alison Trent withdrew the offer on the 15th July 2002. (See correspondence pages 443-457).
The reason for the withdrawal of the offer was that on the 15th July 2002 Alison Trent learnt of the decision of the Court of Appeal given on the 3rd July in Anderton v. Clywd County Council [2002] 3All ER 813 which reversed McCombe J.’s decision. On the 8th November 2002 Cox J. gave Mrs Brennan permission to appeal out of time. It was conceded that there was valid service of the claim form. The judgment of the Recorder was thereby reversed on appeal (See pages 417-427).
Mr Bartle submitted that, although there was no English authority for the proposition that a mutual mistake of law vitiated a contract ab initio, by analogy from comparable situations that was now the law.
Mr Norman did not accept this but conceded that a compromise was no different from any other type of contract and that even if comprised in a consent order the effect would be to render the contract of compromise void ab initio if the doctrine of common mistake of law applied. In my judgment this concession was rightly made (See Huddersfield Banking Co v. Henry Lister & Son Ltd [1895] 2 Ch 273 per Lindley L.J. who said at page 280:-
"nor have I the slightest doubt that a consent order can be impeached, not only on the ground of fraud, but upon any grounds which invalidate the agreement it expresses in a more formal way than usual."
Mr Bartle principally relied upon the majority decision of the House of Lords in Kleinwort Benson Ltd v. Lincoln C.C. [1999] 2 AC 349, a claim for restitution on the ground of unjust enrichment, in particular upon the speech of Lord Goff at page 379 et seq. At page 379F he said:-
"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."
At page 389. his conclusion was:-
"In the result, I would answer the questions posed for your Lordships under the various issues as follows.
Issue (1) 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
Issue 1(A) 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."
I have also derived great help from the speech of Lord Hoffman at page 398E:-
"At the end of the argument I was of opinion, perhaps not in a very focused way, that a person who pays in accordance with what was then a settled view of the law has not made a mistake. In fact it seemed to me that one could go further and say that if he had acted in accordance with a tenable view of the law he had not made a mistake. In fact it seemed to me that one could go further and say that if he had acted in accordance with a tenable view of the law, he had not made a mistake. In the first case he was right, and in the second neither right nor wrong, but in both cases his state of mind could be better described as a failure to predict the outcome of some future event (scilicet, a decision of this House) than a mistake about the existing state of the law".
On reflection, however, I have come to the conclusion that this theory was wrong, both in its stronger ("tenable view") and in its weaker ("settled view") form. The reason, I think, is that it looks at the question of what counts as a mistake in too abstract a way, divorced from its setting in the law of unjust enrichment.
The problem arises because (1) the law requires that a mistake would have been as to some existing fact or (on the view which your Lordships now take) the then existing state of the law but (2) a judicial statement of the law operates retrospectively. So this question is whether the retrospectivity of the law-making process enables one to say that holding a contrary view of the law at an earlier stage was a mistake".
And at page 399E:-
"The distinction therefore does not turn upon the fact that the person making the payment could not have discovered the true state of affairs about the law any more than about the facts. It turns upon the purely abstract proposition that in principle (and leaving aside the problem of Schrődinger’s cat) the truth or falsity of any proposition of existing fact could have been ascertained at the time, whereas the law, as it was subsequently be declared to have been, could not.
One must therefore ask why, in the context of unjust enrichment, this should make a difference. In both cases it has turned out that the state of affairs at the time was not (or was deemed not to be have been) what the payer thought. In the case of a mistake of fact, it is because things were actually not what he believed them to be. In the case of a mistake of law, it is by virtue of the retrospectivity of the decision. Does the principle of unjust enrichment require that this retrospectivity should be carried through into the question or whether the payer made a mistake?
In my view, it would be very anomalous if it did not."
Mr Bartle also referred me to the impressive judgment of Mr Rex Tedd Q.C. sitting as a Deputy High Court Judge in the Chancery Division in Pankhania .v. The London Borough of Hackney [2002] EWHC 2441(Ch) paragraph 58 of which reads:-
"I have concluded that the "misrepresentation of law" rule has not survived the decision in Klienwort Benson Ltd v. Lincoln City Council (supra). Its historical origin is as an off-shoot of the "mistake of law" rule, created by analogy with it, and the two are logically inter-dependent. Both are grounded in the maxim "ignorantia juris non excusat", a tag whose dubious utility would have been enhanced, had it gone on to explain who was not excused and from what. As it stands, it means no more than that ignorance of the general law does not excuse anyone from compliance with it, a proposition with which criminal lawyers are familiar. In translation, it has become distorted and amplified meaning, in such expressions as "everyone" is taken to know the Law", from which follow two further propositions (underpinning the "mistake of law" and "misrepresentation of law" rules respectively) (i) " as you are taken to know the law, it is your fault if you are mistaken as to it, even if I have misrepresented it to you, and because of that you should have no relief". Those two propositions bear little relation to, and do not follow logically from, the maxim "ignorantia juris non excusat", but save for its Latin roots, no basis for the "misrepresentation of law" rule is to be found, as Lane L.J. remarked in Andre. The distinction between fact and law in the context of relief from misrepresentation has no more underlying principle to it than it does in the context of relief from mistake. Indeed, when the principles of mistake and misrepresentation are set side by side, there is a stronger case for granting relief against a party who has induced a mistaken belief as to law in another, than against one who has merely made the same mistake himself. The rules of the common law should, so far as possible, be congruent with one another, and based on coherent principle. The survival of the "misrepresentation of law" rule following the demise of the "mistake of law" rule would be more than a quixotic anachronism. Its demise rids this area of the law of a series of distinctions, such as the "private rights" exception, whose principal function has been to distinguish the "mistake of law" rule, and confine it to a very narrow compass, albeit not to extinguish it completely."
In my judgment it would be utterly anomalous if the supposed mistake of law rule did not apply in the law of restitution (Kleinwort Benson case) or in a claim for damages for misrepresentation (the Pankhania case) but still applied in contract cases. In reaching this conclusion I have considered the judgment of Bracewell J. in S .v. S [2002] 3 WLR 1372 who said at 1385G: "
"It is my opinion that the House of Lords decision is specific to the law of restitution and was not intended to apply across the board of every branch of Law"
I appreciate that there are excellent policy reasons why a consent order in ancillary relief cases should not be set aside on the ground that there has been a supervening event such as a mistake of law or change of law.
My conclusion that a common mistake of law does not prevent avoidance of a contract based upon such a mistake finds support in the Commonwealth.
In Classic International Pty Ltd .v. Lagos [2002] NSWSC 115 Palmer J. sitting in the New South Wales Supreme Court said at paragraph 38:-
"I am satisfied that both parties believed that the agreement for lease would validly take effect according to its terms and that had they known of the substantial variation which the Retail Leases Act 1994 would impose upon the agreement, they would not have entered into it"
Palmer J. went on to say:-
I do not need to consider the vexed question of whether the mistake in the present case is one of fact or one of law. As to whether, in the law of Australia, the doctrine of common "mistake applies to" a mistake of law, I need do no more that set out the following passage from Cheshire and Fifoot’s Law of Contract 8th Aust Ed., para 12.8:
"Operative mistake traditionally has been confined to mistakes of fact and not of law. This distinction has always been blurred and has been notoriously difficult to apply. It appears that equity did not draw a clear line between mistakes of fact and law. If there was such a rule, it was often honoured in the breach. In Western Australia the law/fact distinction has been abolished by legislation (with certain safeguards). The whole question has now almost certainly been laid to rest by the decision of the High Court in David Securities Pty Ltd v Commonwealth Bank (1992) 175 CLR 353. In that case the distinction between mistake of law and mistake of fact was rejected in the light of a very considerable body of judicial and academic criticism of the distinction.
…the rule precluding recovery of moneys paid under a mistake of law should be held not to form part of the law in Australia."
Admittedly, this was a case about the law of restitution and so it could be argued that the case has nothing to say about mistakes of law in contract. However, the High Court has also rejected the distinction between law and fact for the purpose of estoppel, (See Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387: Foran .v. Wight (1989) CLR 385; Commonwealth v, Verwayen (1990) 170 CLR 394) and so the conclusion is inescapable that the distinction must now be regarded as dead, wherever it might arise.
43 In my opinion, the conclusion expressed in the last sentence of this passage is correct and ought now to be accepted as the law in Australia.
46 For these reasons I am satisfied that the defendants have made good their defence of common mistake and that the mistake was fundamental to the Agreement for Lease. The plaintiff was not at fault as to how that common mistake arose. There is no circumstance which militates against setting aside the Agreement at their suit."
In Williamson v. Williamson [2003] SKQB 171 Krueger J. sitting in the Saskatchewan Court of Queen’s Bench said:-
"I am satisfied that at the time of negotiating a settlement and signing the interspousal contract both Trudy and Doug were of the mistaken assumption that the Crown lease land was not matrimonial property. Had the parties realized during their negotiations that the Crown lease land was property, they would have dealt with it in some fashion. Why did they not do so when they discovered their mistake?
26 Until 1989, at common law a mistake of law did not vitiate a contract. A mistake of fact in some circumstances could vitiate the contract. The difficulty was in distinguishing between a mistake of law and a mistake of fact. In order to grant relief "mistakes of law" were sometimes described as "mistakes of fact"
27 Mr Justice Dickson of the Supreme Court of Canada wrote a strong dissent in Hydro Electric Commission of Nepean .v. Ontario Hydro (1982) 132 D.L.R. (3d) 193, advocating the application of equitable principles for both mistake of fact and mistake of law. At page 211 he quoted Professor McTurnan:
"It would be best to abolish the mistake of law rule, place mistakes of law and of fact on an equal footing, and recognise that with mistakes of law the principle of conscious ignorance or conscious assumption of risk will often prevent relief…"
28 The dissent of Dickson J. was accepted by the majority of the Supreme Court of Canada in Air Canada .v. British Columbia (1989) D.L.R. (4th) 161. Thus, the distinction between mistake of fact and law was effectively abolished in Canada contract law. What equitable remedy is now available and when it ought to be applied has, however, become the subject of several conflicting and confusing judgments. Generally the courts require a mistaken assumption to be fundamental to the agreement before it justifies a remedy. The remedy, when prescribed, is usually rescission."
Foskett on the Law and Practice of Compromise (5th Edition 2002) writes on page 53:-
"It is suggested that a mistake of law may now, if sufficiently fundamental to the compromise, operate to invalidate the agreement."
But makes this note:-
"This is also the view of the Editor of Chitty (1999); see Vol 1, para 5-018. It is easier to assert the proposition than to identify the circumstances in which a mistake of law could invalidate a compromise. Suppose that A and B settle a dispute before proceedings are issued against the background of the shared erroneous belief that the limitation period applicable to the dispute in question had not expired. Would that be a mistake of law? If so, would it be right for the compromise to be set aside?"
I was also guided by the exposition of principles by Steyn J. in Associated Japanese Bank .v. Credit du Nord [1989] 1 WLR 255, a mistake of fact case where there was a non-existence of machines of fundamental importance to a guarantee contract. Stein J. said at page 268D:-
"The first imperative must be that the law ought to uphold rather than destroy apparent contracts. Secondly, the common law rules as to a mistake regarding the quality of the subject matter, like the common law rules regarding commercial frustration, are designed to cope with the impact of unexpected and wholly exceptional circumstances on apparent contracts. Thirdly, such a mistake in order to attract legal consequences must substantially be shared by both parties, and must relate to facts as they existed at the time the contract was made. Fourthly, and this is the point established by Bell v. Lever Brother Ltd [1932] AC 161, the mistake must render the subject matter of the contract essentially and radically different from the subject matter which the parties believed to exist."
I also hark the salutary words of Vaughan Williams J. in the Huddersfield Banking case (supra) where it was held that a consent order, which had been completed and acted upon, but without affecting interests of third parties, was set aside by the Court upon the ground of common mistake of fact.
Vaughan Williams J. said at page 278:-
"I agree that if the arrangement come to was a compromise of doubtful rights and a give-and-take arrangement, parties to it could not afterwards have the compromise set aside because upon obtaining fuller information they thought they had made a bad bargain. But, having regard to the evidence, I am of opinion that this arrangement was not a compromise or give-and-take arrangement of the sort I have referred to."
Mr Norman for the Council submitted that compromises of disputes, apprehended litigation and litigation are in the public interest. I agree. Indeed they should be encouraged. In my judgment the Courts should be very slow to set aside and declare compromise agreements void on the ground of alleged common mistakes of fact or law. Before declaring a compromise agreement void the court must be satisfied that the mistake, in this case of law, was both common and fundamental to the making of the compromise agreement or to echo the language of Lord Atkin in Bell v. Lever Brothers [1932] AC.161 at page 225), was it the common assumption or pre-condition upon which the compromise agreement was made?
Mr Norman submitted that Mr Cohen and Mr Scarles were as happens in almost all settlements and compromises assessing from their client’s standpoint the various risks both factual and legal in continuance of the litigation. Relevant factors would include Miss Brennan’s difficulties over limitation and the Council’s risk of not obtaining their costs from Miss Brennan because she was legally aided. At the time of the compromise the costs that the Council had incurred were negligible but would escalate rapidly if the litigation continued.
In my judgment factually this case was not a compromise of the sort postulated by Mr Norman. The common assumption of Mr Scarles and Mr Cohen was that the claim form had not been validly served, that mistaken belief arose from the judgment of the |Recorder which was derived from McCombe J.’s erroneous decision in Anderton’s case (supra). That common mistaken assumption as to the law was the fundamental basis for and precondition of the compromise agreement, indeed its only springboard. Therefore, I dismiss the appeal.
I end with an exhortation that all parties including the claimant use their very best endeavours to reach a realistic settlement of Miss Brennan’s claim. The history of the dispute and the litigation does not enhance the reputations of the solicitors involved or of the Council as the provider of housing services. A rapid settlement is required to stop costs escalating out of all proportion.