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In Favour Of Cases From Times Gone By

In Favour Of Cases From Times Gone By

Posted by justis1 | 07 January 2015

6149266403_c6f6507ee5_o“If you don’t know history, then you don’t know anything. You are a leaf that doesn’t know it is part of a tree,” said the novelist Michael Crichton.

History is as important for lawyers as any historian. Having an awareness of cases from times gone by, many of which will have set precedent for the law we see today, is fundamental for a true and thorough understanding of the law. Without this, we risk ignorance.

Without the case of Cooper v Phibbs [1867] LR 2 HL 149, heard before the Appellate Committee of the House of Lords, we wouldn’t have one of the leading authorities that set out how the equitable remedy of rescission is available in a case of common mistake. This mistake must be one of fact rather than law, notwithstanding that they may involve conclusions of law. A mistake as to private rights will be treated as one of fact for this purpose.

Res Sua – when goods already belong to the purchaser

In Cooper, an agreement was entered into by parties to a three-year lease on the mistaken assumption that the purported lessee, Phipps, did not already have an equitable interest in the property, a fishery in Ireland. Phibbs was acting as an agent for five sisters who believed that they had inherited the fishery from their father (Cooper’s uncle), who believed he owned it in fee simple. Cooper discovered that the fishery had at all material times been trust property, and that he was entitled to an equitable life interest by virtue of his uncle’s will. In truth the property he leased was his own and belonged to him, but he was misled by the misinformation given to him by his uncle, who was represented by the respondents, before his death (a fact in error).

Before the courts Phibbs sought to rescind the contract on the ground that it had been operating under a common mistake as to the rights over the property, an argument that was upheld by the House of Lords, Lords Cranworth, Westbury and Colonsay sitting. They found that the agreement was not binding in equity upon appellants and respondents, requiring occupation rent to be paid for the said piece of land, and the cottage and buildings thereon. A transfer of ownership is impossible when the party seeking to buy already owns the property. This point was clarified by the great Lord Denning in Solle v Butcher [1950] K.B. 671, in which he identified an equitable jurisdiction which permits a court to intervene, where the parties have concluded an agreement “that was binding in law under a common misapprehension of a fundamental nature as to the material facts or their respective rights”.

The times are changing? Great Peace Shipping Ltd, Bell v Lever Bros Ltd and common mistake

The importance of Cooper can be seen in the fact that it was, most recently, applied in the High Court case of Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd (Cape Providence) [2003] QB 679. It was confirmed in Great Peace that rescinding a contract on the basis of common mistake results from, per Lord Phillips M.R., “a rule of law under which, if it transpires that one or both of the parties have agreed to do something which it is impossible to perform, no obligation arises out of that agreement”. Similar statements on the doctrine of rescission of a contract on the grounds of common mistake, in equity, will also be found in the pages of “Chitty on Contracts 31st Ed” and “Megarry & Wade: The Law of Real Property 8th Ed.”.

At the same time, Great Peace brought doubt on Lord Denning’s enumeration in Solle v Butcher that an equitable remedy for shared common mistake existed at a lower standard than that at common law. This finding undoubtedly stemmed from the case of Bell v Lever Bros [1932] AC 161 which tested the doctrine from Cooper, bringing into question whether rescission on the grounds of common mistake was found in equity. In that case, the House of Lords found that there was no mistake and therefore the contract could not be rescinded. Lever Brothers Ltd’s compensation package agremeement with their employee Cooper and vice-chairman Mr Snelling could not be rescinded. The parties received what they had bargained for. For a contract to be void by common mistake the mistake must involve the subject matter of the agreement and be of such fundamental character as to bring about an assumption without which the parties would not have entered into the agreement.

A high standard became associated with a finding of common mistake after Bell, something criticised by Lord Denning in Solle when he reduced the threshold with his recital of an equitable remedy for a shared common mistake. This dicta of Denning is of little suprise when we consider that Solle cited Cooper as authority.

 

A snapshot of the legal treatments Cooper v Phibbs has received. Note how Solle neturally treated Cooper while Great Peaceapplied it.
Cooper_v_Phibbs_Precedent_Map


Over the years judges have tried to reconcile the decisions in Solle, Cooper and Bell, particularly in Great Peace, where it was brought into question whether such an equitable doctrine could stand with Bell. Solle and Cooper remain good law today on the area of common mistake in equity, as does Bell on mistake at common law. It now appears to be the case that two strands of law are forming, the principles of which remain hotly contested.

Can you now imagine how the above image would appear without the doctrine of Cooper on mistake in equity? Without this precedent, however disputed it may be, we would be without a case that has shaped this area of contract law as we know it. We would be ignorant. We would be the leaf that doesn’t know it is part of a tree.

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