Thomas Bates & Son Ltd v Wyndham’s (Lingerie) Ltd [1980] EWCA Civ 3 (21 November 1980)

A landlord sought rectification of a lease where the rent review clause omitted provision for arbitration in default of agreement. The tenant's director knew of this omission but did not inform the landlord. The Court of Appeal upheld rectification based on unilateral mistake where one party knowingly failed to correct an error.

Facts

Thomas Bates & Son Ltd (landlords) granted a fourteen-year lease to Wyndham’s (Lingerie) Ltd (tenants) for factory premises in Essex in 1970. The lease contained a rent review clause providing for rent to be agreed between the parties at the end of the fifth and tenth years. However, unlike previous leases and the option clause which gave rise to the new lease, the rent review clause omitted any provision for arbitration in default of agreement. The lease was prepared by Mr Bates, the landlords’ managing director, without legal assistance.

When the time for the first rent review arrived, the landlords discovered the omission. It emerged that Mr Avon, the tenants’ director, had been aware of the defect from the time the lease was signed, having been advised by the tenants’ solicitors, but had not drawn this to the landlords’ attention.

Issues

Primary Issue

Whether the lease should be rectified to include provision for arbitration in default of agreement on the reviewed rent.

Secondary Issue

What standard should apply for determining the rent under the rectified clause.

Judgment

The Court of Appeal unanimously upheld the trial judge’s order for rectification.

Rectification for Unilateral Mistake

Lord Justice Buckley held that rectification could be granted where one party erroneously believed the document contained a particular term, the other party was aware of the omission and that it was due to a mistake, that other party failed to draw the mistake to attention, and the mistake benefited that other party.

The court found that the parties had a common intention that rent should be agreed or, in default, fixed by arbitration. This was evidenced by the option clause exercised to create the new lease and the correspondence between the parties. The omission was clearly due to Mr Bates’ mistake in preparing the lease, and Mr Avon knowingly allowed this mistake to go uncorrected.

Standard of Proof

Lord Justice Brightman clarified that the standard of proof for rectification is the civil standard of balance of probability, but convincing proof is required to counteract the cogent evidence of intention displayed by the signed instrument itself.

Rent Assessment

The court held that the rent should not be the market rent (as the trial judge had declared) but rather such rent as it would be reasonable for these particular landlords and tenants to agree, having regard to all relevant circumstances affecting negotiations between them.

Implications

This case is significant for establishing the principles governing rectification for unilateral mistake. It confirms that rectification may be granted even where the mistake is not mutual, provided one party knew of the other’s mistaken belief and failed to correct it. The case also clarifies the evidential requirements for rectification claims and the proper construction of rent review clauses where the rent is to be agreed between the parties.

Verdict: Appeal dismissed. The trial judge’s order for rectification was upheld, with the lease rectified to insert provision for determination of rent by a single arbitrator appointed by the President of the Royal Institution of Chartered Surveyors in default of agreement. The declaration regarding market rent was varied. The appellants were ordered to pay the respondents’ costs.

Source: Thomas Bates & Son Ltd v Wyndham’s (Lingerie) Ltd [1980] EWCA Civ 3 (21 November 1980)