“As I said at the outset whilst there have, over the years, been a number of agreements and discussions between the parties Hermes International’s ownership of the trade mark JOHN LOBB is well documented. John Lobb Limited has received proper consideration for the acquisition by Hermes of those exclusive rights and Hermes is entitled to continue to use, exploit and protect those rights as any trade mark owner would be.”
“A The Sale Agreement (24 May 1976 ) and Amending Agreement (28 October 1980 ) have dealt with the sale of the trade mark John Lobb registered in France on12 June 1975 . B In accordance with further agreements the John Lobb/Lobb (word mark and / or with device) trade mark was registered, for its protection, in various countries around the world by JLSA [the Appellant] ("the Mark"). C JLL [the Respondent] and JLSA have fully cooperated to maintain and develop a mutual business built on the Trade Mark and trade name Lobb with a view to ensuring that standards continue into the future.”
“G JLSA is the legal and beneficial owner and registered proprietor of the Mark throughout the world and has all the rights in the Mark save in respect of the rights enjoyed by JLL as set out in clause 1 below. A schedule of the Mark currently owned by JLSA is attached at Appendix B”
“1.1 JLSA hereby agrees that JLSA's previous agreement to permit JLL's exclusive right to use the Mark in relation to its UK business in made to measure hand made Products ("JLL Products") continues subject to the terms of this agreement. 1.2 JLSA agrees that JLL may also continue to use in the UK the Mark on products ancillary to the JLL Products which (for the avoidance of doubt) include solely shoe care trees, shoe care products, belts, cases and riding boot accessories (“Ancillary Products").”
“1.3 JLL acknowledges JLSA's ownership rights in the Mark and agrees that it will only use the Mark in relation to its UK business operated from 9 St James Street, London SWI (or such replacement premises in the UK as JLL may in its absolute discretion decide to operate from) (the “JLL Premises") and only in relation to JLL Products and Ancillary Products. JLL agrees not to open any business outside the UK under or by reference to the Mark or to expand its UK business using the Mark beyond JLL Premises (other than in the normal course of its business conducted from there) provided always that: 1.3.1 JLSA acknowledges JLL's right: 1.3.1.1 to continue, subject to the provisions of clause 1.3.2.1, soliciting orders for its UK business operated from the JLL Premises through marketing and fitting trips outside the UK; and 1.3.1.2 to continue responding to unsolicited orders from outside the UK through the sale of JLL Products and Ancillary Products from the JLL Premises. 1.3.2 JLL agrees that: 1.3.2.1 when fitting trips are undertaken outside the UK, details will not be displayed on the JLL website or in any other kind of promotion or advertising. Direct contact with customers and potential customers will continue as usual. ln accordance with the terms of this clause 1.3 JLL will not arrange these events in venues where JLSA has an outlet or concession or in such venues that are adjacent to any JLSA boutique, outlet or concession, and or in Madrid, Dubai, Qatar and Moscow. 1.3.2.2 2 it will continue to support JLSA made to measure and ready to wear activities around the world and in the UK through its activities at the JLL Premises.” 1.3.1 JLSA acknowledges JLL's right: 1.3.1.1 to continue, subject to the provisions of clause 1.3.2.1, soliciting orders for its UK business operated from the JLL Premises through marketing and fitting trips outside the UK; and 1.3.1.2 to continue responding to unsolicited orders from outside the UK through the sale of JLL Products and Ancillary Products from the JLL Premises. 1.3.2 JLL agrees that: 1.3.2.1 when fitting trips are undertaken outside the UK, details will not be displayed on the JLL website or in any other kind of promotion or advertising. Direct contact with customers and potential customers will continue as usual. ln accordance with the terms of this clause 1.3 JLL will not arrange these events in venues where JLSA has an outlet or concession or in such venues that are adjacent to any JLSA boutique, outlet or concession, and or in Madrid, Dubai, Qatar and Moscow. 1.3.2.2 2 it will continue to support JLSA made to measure and ready to wear activities around the world and in the UK through its activities at the JLL Premises.”
“1.4 JLSA agrees not to use the Mark in the UK in relation to made to measure hand made products provided that this shall not prevent JLSA from responding to orders from the UK for such products made in its Paris premises.”
“2.1 JLL and JLSA are committed to the preservation of the quality and standards associated with the use of the Mark around the world. 2.2 The parties have, and will continue, in relation to their respective businesses to promote the Mark and associated goodwill, and in support of this objective JLSA agrees that it will offer assistance to JLL. 2.3 JLSA’s assistance pursuant to the provisions of clause 2.2 will be at JI,SA's discretion and agreed with JLL from time to time. JSLA agrees that it will, for a period of 5 years (“the Initial Payment Term”) make annual payments of£65,000 . At the end of the Initial Payment Term JLSA will agree to make annual payments for a further 5 years ("the Second Payment Term") in the sum of£35.000 per annum. 2.4 JLSA will pay JLL on the signing of this agreement the sum of£2 l,294.58 representing the remaining amount due to JLL under the Radlett Agreement. The first annual payment under this agreement for the period March 2007 to March 2008 will be paid on or before l0 March 2008 and on or before the l0 March in each subsequent year of the agreement. JLSA does not require the payment to be put towards any particular marketing activity and accepts JLL's assurance that it will be used in the general best interests of the Mark.”
“3.1 As owner of the Mark as set out hereto in Appendix A, JLSA shall (at its absolute discretion) carry out the registration and renewal of the existing and future trade marks, subject as regards the latter to the possibility of achieving effective protection thereof, 3.2 For the purposes of the maintenance and/or defence of the Mark, JLSA shall remain sole judge of the measures to be taken and will bear the costs of filing, renewal and defence of the Mark. JLL shall however be obliged, at its own cost, to give JLSA any reasonable help and assistance it may request.”
“26. Paragraphs 21 and 22 above are repeated. Accordingly, the 2008 Agreement was entered into by both the Claimant and the Defendant on the basis of a fundamentally mistaken and commonly held belief as to the ownership rights in the John Lobb Marks.”
“20. The DLA Letter contained the following material assertions of fact (emphasis added where relevant): a. In 1975 Eric Lobb began negotiating with Hermès for the sale to Hermès of a majority of the shares in the Defendant. Part of that agreement was to be the acquisition by Hermès of the rights to the Trade Mark throughout the world; b. In March 1976, the agreement for the purchase of the shares was signed and Eric Lobb confirmed that, before he received any payment for the shares, he would transfer the trade mark rights to Hermès/the Defendant; c. Consideration for the transfer of the trade mark rights was instalment payments calculated as a percentage of turnover payable over a number of years from 1976 to 1985; d. Between 1976 to 1992, the Defendant, exercising its acquired trade mark rights, applied for registered protection for the Trade Mark around the world; e. In 1992, Eric Lobb, the Claimant and the Defendant entered into a further agreement with the aim of confirming the Claimant’s right to use the Trade Mark only for the manufacturing and commercialisation of made-to-measure hand-made footwear and confirming the Defendant’s exclusive rights to everything else.” a. In 1975 Eric Lobb began negotiating with Hermès for the sale to Hermès of a majority of the shares in the Defendant. Part of that agreement was to be the acquisition by Hermès of the rights to the Trade Mark throughout the world; b. In March 1976, the agreement for the purchase of the shares was signed and Eric Lobb confirmed that, before he received any payment for the shares, he would transfer the trade mark rights to Hermès/the Defendant; c. Consideration for the transfer of the trade mark rights was instalment payments calculated as a percentage of turnover payable over a number of years from 1976 to 1985; d. Between 1976 to 1992, the Defendant, exercising its acquired trade mark rights, applied for registered protection for the Trade Mark around the world; e. In 1992, Eric Lobb, the Claimant and the Defendant entered into a further agreement with the aim of confirming the Claimant’s right to use the Trade Mark only for the manufacturing and commercialisation of made-to-measure hand-made footwear and confirming the Defendant’s exclusive rights to everything else.”
“21. The DLA Letter therefore contained fundamental errors of fact. In particular: a. It asserted that in 1975/1976 Eric Lobb agreed to transfer to Hermès, and did so transfer, the right to protect and exploit the Trade Mark throughout the world (i.e. to assign to Hermès/the Defendant the entire worldwide goodwill and reputation in the John Lobb name built up by the predecessors in title to the Claimant over a period exceeding 125 years); b. This assertion was and is manifestly false, having regard (in particular) to the term of the 1976 Agreement set out at paragraph 8b above. All that Eric Lobb was agreeing to transfer in terms of trade mark rights was the registered French mark, which the Defendant required in order to conduct the French based business which it was (in substance) acquiring; c. Accordingly, it was also incorrect that the consideration (payable under the 1976 Agreement) was for “the trade mark rights” as asserted and described in that letter; d. It was also incorrect that the Defendant applied for registered protection for the Trade Mark “exercising its acquired trademark rights”
“22. Accordingly, any agreement subsequently made between the parties to the 1992 Agreement which reflected this wholly inaccurate series of factual assertions and which assumed the Defendant’s ownership of the John Lobb Marks would not be one which accorded with the intention of the parties as set out in paragraph 16 above, but would be one which assumed a fundamentally different and false set of factual and legal premises – in particular as to the ownership of the John Lobb Marks outside France.”
“23. The written agreement between the parties hereto dated6 March 2008 (“the 2008 Agreement”) was just such an agreement. Thus, in particular: a. By preamble D (iv), the Defendant agreed pursuant to its ownership of the John Lobb Marks to continue the protection of the John Lobb Marks where necessary; b. By preamble G, the Defendant was stated to be the legal and beneficial owner and registered proprietor of the John Lobb Marks throughout the world and had all the rights in those Marks save in respect of the rights enjoyed by the Claimant as set out in Clause 1 of that Agreement; c. By Clause 1.3, the Claimant acknowledged the Defendant’s ownership rights in the John Lobb Marks and agreed that it would only use those Marks in relation to its UK business operated from 9 St James’s Street, London SW1 (or any replacement UK premises which it might choose) and only in relation to hand-made made-to-measure footwear and in relation to ancillary product (limited to shoe trees, shoe care products, belts, cases and riding boot accessories); d. By Clause 3.1, the Defendant as owner of the John Lobb Marks would at its absolute discretion carry out the registration and renewal of the existing and future marks. 24. There were further material provisions of the 2008 Agreement as follows: a. By Clause 5, that the term thereof would be “without limit of time” except for the right of the Defendant to terminate the Agreement in the event of a change of control of the Claimant of a specified character; b. By Clause 2, certain payments were to be made on an annual basis by the Defendant to the Claimant in relation to the first 10 years of the term of the Agreement. Such payments: i. Amounted in total to£500,000 ; ii. Were specified as being in respect, not of royalties, but of the Claimant’s efforts in promoting the John Lobb Marks and associated goodwill; c. No further payments were to be made by the Defendant to the Claimant beyond the end of that 10 year period; d. By Clause 6, the 2008 Agreement was to be governed by and construed in accordance with the laws of England and Wales, and the parties to it submitted to the exclusive jurisdiction of the English Courts. A copy of the 2008 Agreement is at Annexe 5 to these Particulars of Claim.” a. By preamble D (iv), the Defendant agreed pursuant to its ownership of the John Lobb Marks to continue the protection of the John Lobb Marks where necessary; b. By preamble G, the Defendant was stated to be the legal and beneficial owner and registered proprietor of the John Lobb Marks throughout the world and had all the rights in those Marks save in respect of the rights enjoyed by the Claimant as set out in Clause 1 of that Agreement; c. By Clause 1.3, the Claimant acknowledged the Defendant’s ownership rights in the John Lobb Marks and agreed that it would only use those Marks in relation to its UK business operated from 9 St James’s Street, London SW1 (or any replacement UK premises which it might choose) and only in relation to hand-made made-to-measure footwear and in relation to ancillary product (limited to shoe trees, shoe care products, belts, cases and riding boot accessories); d. By Clause 3.1, the Defendant as owner of the John Lobb Marks would at its absolute discretion carry out the registration and renewal of the existing and future marks. a. By Clause 5, that the term thereof would be “without limit of time” except for the right of the Defendant to terminate the Agreement in the event of a change of control of the Claimant of a specified character; b. By Clause 2, certain payments were to be made on an annual basis by the Defendant to the Claimant in relation to the first 10 years of the term of the Agreement. Such payments: i. Amounted in total to£500,000 ; ii. Were specified as being in respect, not of royalties, but of the Claimant’s efforts in promoting the John Lobb Marks and associated goodwill; c. No further payments were to be made by the Defendant to the Claimant beyond the end of that 10 year period; d. By Clause 6, the 2008 Agreement was to be governed by and construed in accordance with the laws of England and Wales, and the parties to it submitted to the exclusive jurisdiction of the English Courts. A copy of the 2008 Agreement is at Annexe 5 to these Particulars of Claim.”
“If one applies the passage from the judgment of Lord Alverstone CJ in Blakeley v Muller & Co 19 TLR 186, which we quoted above to a case of common mistake, it suggests that the following elements must be present if common mistake is to avoid a contract: (i) there must be a common assumption as to the existence of a state of affairs; (ii) there must be no warranty by either party that that state of affairs exists; (iii) the non-existence of the state of affairs must not be attributable to the fault of either party; (iv) the non-existence of the state of affairs must render performance of the contract impossible; (v) the state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible.”
“Where the mistake is common, that is shared by both parties, there is consensus ad idem, but the law may nullify this consent if the parties are mistaken as to some fact or point of law which lies at the basis of the contract. In summary, if: (i) the parties have entered a contract under a shared and self-induced mistake as to the facts or law affecting the contract; (ii) under the express or implied terms of the contract neither party is treated as taking the risk of the situation being as it really is; (iii) neither party was responsible for or should have known of the true state of affairs; and (iv) the mistake is so fundamental that it makes the “contractual adventure” impossible, or makes performance essentially different to what the parties anticipated, the contract will be void.”
“25. There are marked differences between the two formulations and particularly the way in which the second and fourth elements are described.4 The second element is described in relation to the allocation of risk, rather than there being no warranty, and the fourth element is described, in the alternative to impossibility of performance, by reference to the contractual adventure being essentially different to that which was anticipated. 26. Chitty goes on to set out paragraph [76] in the judgment of Lord Phillips in The Great Peace at 6-35 and this is followed in 6-36 to 6-51 with a detailed analysis of each of the elements. It is clear from the analysis that the editors of Chitty do not accept the formulation by Lord Phillips as being a complete summary of the doctrine of common mistake.”
“76 Drawing these considerations together, the elements of a common mistake which has the effect of rendering the contract based on that common mistake void are as follows: (1) There must have been, at the time of the conclusion of the contract, an assumption as to the existence of a state of affairs substantially shared between the parties. (2) The assumption itself must have been fundamental to the contract. (3) That assumption must have been wrong at the time of the conclusion of the contract. (4) By reason of the assumption being wrong, the contract or its performance would be essentially and radically different from what the parties believed to be the case at the time of the conclusion of the contract; alternatively, the contract must be impossible to perform having regard to or in accordance with the common assumption. In other words, there must be a fundamental difference between the assumed and actual states of affairs. (5) The parties, or at least the party relying on the common mistake, would not have entered into the contract had the parties been aware that the common assumption was wrong. (6) The contract must not have made provision in the event that the common assumption was mistaken.”
“If that test is right, then the claimant has no difficulty meeting it. The difference between the defendant having the entire legal and beneficial ownership of the Marks and the claimant having beneficial ownership of all the Marks other than those registered in France is stark.”
“35. As it seems to me, it is not possible to construe the 2008 Agreement as containing a warranty by the claimant that the defendant is the legal and beneficial owner of the Mark, or for the contract be taken to allocate the risk in the event that the assumption is wrong. The common understanding is clear from Recital G and clause 1.3. The contract does not go on to specify what is to happen if that understanding proves to be wrong. 36. It is impossible to conclude that the claimant’s case on this point is bound to fail and the claimant has a real prospect of showing that there is no allocation of risk between the parties about how the 2008 Agreement is to operate if the common understanding proves to be wrong.”
“37. I turn to the second element that Mr Davies says is absent. Mr Mill accepts that the contract was not impossible to perform. The defendant has made substantial payments to the claimant which it has accepted, the defendant has continued to take steps to protect the Marks and the parties together have respected the operation of the agreement that leaves the UK market to the claimant. If it is the case that impossibility of performance is a sine qua non, then it must follow that the claim is bound to fail.”
“38. It is clear, however, that impossibility of performance may need to be measured against the common assumption; the test may also be that performance is essentially different to that common assumption. If that is the test, the defendant is unable to show that the claimant’s case with regard to the second element that is relied upon is bound to fail. The defendant is also unable to establish, were it to be necessary to do so, that the claimant’s case in this regard has no real prospect of success. 39. I do not accept that the essential elements of the doctrine of common mistake can be reduced to the formulation provided by Lord Phillips. It is clear there is disagreement about the way in which the constituent elements of the doctrine should be formulated and disagreement about its doctrinal basis. The elements of the doctrine cannot be taken to have been entirely settled by the Court of Appeal in The Great Peace.”
“(1) It is necessary for the 2008 Agreement to be construed in its admissible context. Although part of the story has been provided, and the court has been taken to communications between the parties, there are many unresolved issues that cannot be dealt with by making assumptions in favour of the applicant. The doctrine of mistake, as it seems to me, needs to be applied in this case against findings of fact at a trial. (2) The doctrine of mistake, even if it is properly seen as a settled doctrine, is likely to apply in different ways depending upon the precise assumption that is relied upon. (3) I do not consider the doctrine is sufficiently settled to enable the court to take two of the elements that are described in the judgment of Lord Phillips MR at paragraph [76] in The Great Peace and simply apply them as if they were part of a statute. The approach adopted to the doctrine in Chitty and the judgment of Mr McDonald Eggers in Triple Seven v Azman Air suggest that the law is continuing to refine and develop.”
“41. Finally, even if the defendant were to be right in its submissions based upon the analysis set out in the judgment of Lord Phillips MR in The Great Peace this is a case that warrants a trial. It matters not whether this is seen as an application of the principle derived from Hughes or the second limb ofCPR rule 24.2 . The claimant’s case may not be a strong one (I express no view about this one way or the other) and it may fail at a trial. It is, however, a case that is unsuitable for summary disposal on the defendant’s first ground.”
“15. As Ms Anderson QC rightly reminded me, the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows: i) The court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman[2001] 2 All ER 91 ; ii) A “realistic” claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel[2003] EWCA Civ 472 at [8] iii) In reaching its conclusion the court must not conduct a “mini-trial”: Swain v Hillman iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10] v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5)[2001] EWCA Civ 550 ; vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd[2007] FSR 63 ;”
“vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd[2007] EWCA Civ 725 .”
“12. In my view the judge should have followed his original instinct. It is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent’s case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant’s case is bad in law, the sooner that is determined, the better. 13. In cases where the issue is one of construction the respondent often seeks to persuade the court that the case should go to trial by arguing that in due course evidence may be called that will shed a different light on the document in question. In my view, however, any such submission should be approached with a degree of caution. It is the responsibility of the respondent to an application of this kind to place before the court, in the form of a witness statement, whatever evidence he thinks necessary to support his case. Where it is said that the circumstances in which a document came to be written are relevant to its construction, particularly if they are said to point to a construction which is not that which the document would naturally bear, the respondent must provide sufficient evidence of those circumstances to enable the court to see that if the relevant facts are established at trial they may have a bearing on the outcome. 14. Sometimes it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial. In such a case it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction.”
“(2) The court may strike out a statement of case if it appears to the court— (a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;” (a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;”
“It might be useful if I now summarised what appears to me to be a satisfactory way of approaching this subject. Logically, before one can turn to the rules as to mistake, whether at common law or in equity, " one must first determine whether the contract itself, by express or implied condition precedent or otherwise, provides who bears the risk of the relevant mistake. It is at this hurdle that many pleas of mistake will either fail or prove to have been unnecessary. Only if the contract is silent on the point, is there scope for invoking mistake.”
“That doctrine fills a gap in the contract where it transpires that it is impossible of performance without the fault of either party and the parties have not, expressly or by implication, dealt with their rights and obligations in that eventuality.”
“81. In William Sindall plc v Cambridgeshire County Council[1994] 1 WLR 1016 , 1035 Hoffmann LJ commented that such allocation of risk can come about by rules of general law applicable to contract, such as "caveat emptor" in the law of sale of goods or the rule that a lessor or vendor of land does not impliedly warrant that the premises are fit for any particular purpose, so that this risk is allocated by the contract to the lessee or purchaser.” “84. Once the court determines that unforeseen circumstances have, indeed, resulted in the contract being impossible of performance, it is next necessary to determine whether, on true construction of the contract, one or other party has undertaken responsibility for the subsistence of the assumed state of affairs. This is another way of asking whether one or other party has undertaken the risk that it may not prove possible to perform the contract, and the answer to this question may well be the same as the answer to the question of whether the impossibility of performance is attributable to the fault of one or other of the parties. 85. Circumstances where a contract is void as a result of common mistake are likely to be less common than instances of frustration. Supervening events which defeat the contractual adventure will frequently not be the responsibility of either party. Where, however, the parties agree that something shall be done which is impossible at the time of making the agreement, it is much more likely that, on true construction of the agreement, one or other will have undertaken responsibility for the mistaken state of affairs. This may well explain why cases where contracts have been found to be void in consequence of common mistake are few and far between.”
“62. Thus, the doctrine of mistake can only apply if there is a gap in the contract. If the parties have expressly or impliedly agreed what is to happen if they turn out to have been mistaken about the matter in question – in other words, if the risk of the mistake has been allocated by their contract – there is no scope for the doctrine. As Steyn J said in Associated Japanese Bank (International) Ltd v Credit du Nord SA[1989] 1 WLR 255 at 268: ‘Logically, before one can turn to the rules as to mistake … one must first determine whether the contract itself, by express or implied condition precedent or otherwise, provides who bears the risk of the relevant mistake. It is at this hurdle that many pleas of mistake will either fail or prove to have been unnecessary.’” ‘Logically, before one can turn to the rules as to mistake … one must first determine whether the contract itself, by express or implied condition precedent or otherwise, provides who bears the risk of the relevant mistake. It is at this hurdle that many pleas of mistake will either fail or prove to have been unnecessary.’”
“63. One way – although not the only way – in which the risk of a mistake may be contractually allocated is by one party warranting that the relevant state of affairs exists. So, for example, in McRae v Commonwealth Disposals Commission(1950) 84 CLR 377 the defendant sold to the claimant the wreck of an oil tanker, stated to be lying on a certain reef. Unknown to either party, the tanker did not actually exist (nor did the reef). Before the High Court of Australia an argument that the contract was void for mistake failed because the court held that the defendant had impliedly warranted that there was a shipwrecked tanker. The non-existence of the tanker was not therefore a state of affairs for which the contract failed to provide.”
“64. The main reason why pleas of mistake seldom succeed is that the risk of a mistake is usually allocated by the contract to one of the parties. Plainly, there is no room for the doctrine to operate if the contract states expressly what is to happen if the relevant assumption proves to be false. It may be harder to determine whether the contract impliedly allocates the risk. To take one of the examples given by Lord Atkin in Bell v Lever Bros[1932] AC 161 at 224: ‘A buys a picture from B; both A and B believe it to be the work of an old master, and a high price is paid. It turns out to be a modern copy.’ In practice in such a case the answer is likely to be found through construction of the contract. If the authorship of the picture is part of the description of the goods so that the seller has impliedly warranted its attribution, the risk will lie with the seller. If on the other hand there is no such warranty, the ordinary inference based on the principle of caveat emptor would be that the buyer is taking the risk.”
“Fourthly, and this is the point established by Bell v Lever Bros 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. While the civilian distinction between the substance and attributes of the subject matter of a contract has played a role in the development of our law (and was cited in speeches in Bell v Lever Bros Ltd), the principle enunciated in Bell v Lever Bros is markedly narrower in scope than the civilian doctrine. It is therefore no longer useful to invoke the civilian distinction. The principles enunciated by Lord Atkin and Lord Thankerton represent the ratio decidendi of Bell v Lever Bros Ltd.”
“94. Our conclusions have marched in parallel with those of Toulson J. We admire the clarity with which he has set out his conclusions, which emphasise the importance of a careful analysis of the contract and of the rights and obligations created by it as an essential precursor to consideration of the effect of an alleged mistake. We agree with him that, on the facts of the present case, the issue in relation to common mistake turns on the question of whether the mistake as to the distance apart of the two vessels had the effect that the services that the Great Peace was in a position to provide were something essentially different from that to which the parties had agreed. We shall defer answering that question until we have considered whether principles of equity provide a second string to the defendants' bow.”
“162. We revert to the question that we left unanswered at paragraph 94. It was unquestionably a common assumption of both parties when the contract was concluded that the two vessels were in sufficiently close proximity to enable the Great Peace to carry out the service that she was engaged to perform. Was the distance between the two vessels so great as to confound that assumption and to render the contractual adventure impossible of performance? If so, the defendants would have an arguable case that the contract was void under the principle in Bell v Lever Bros Ltd[1932] AC 161 .”
“The fact that the vessels were further apart than both parties had appreciated did not mean that it was impossible to perform the contractual adventure.”
“20. On this issue, the facts are simple and were not in dispute before the Judge. The settlement for the claimant's business interruption claim against the defendant underwriters was settled at about£205,000 on the common assumption that the Policy was not declaration-linked, whereas it was so linked, and, had the parties been aware of this, they would (I assume for present purposes) have settled at a figure about 50% higher. 21. As the Judge said, the leading modern case in which the circumstances in which a common mistake can vitiate a contract were considered was the decision of this court in Great Peace Shipping Ltd -v-Ttsavliris Salvage (International) Ltd[2002] EWCA Civ 1407 ,[2003] QB 679 . Relying on what Lord Phillips of Worth Matravers MR (giving the judgment of the court) said at paragraphs [73] to [76], the Judge held that the proper test to apply in this case was whether the mistake in question rendered the contract in issue “impossible of performance” (the expression also used by Lord Phillips when ultimately formulating the critical question in the Great Peace case itself at paragraph [162]). At least on the face of it, it seems difficult to quarrel with the Judge's view that, if that is the right test, it was self-evidently not satisfied here.”
“22. Mr Butler, who appears for the claimant, runs as his main argument the contention that this test was inappropriate in a case such as this; his alternative argument is that the test, if properly applied, was in any event satisfied here. I should in this context refer to the decision of this court in Brennan -v- Bolt Burdon[2004] EWCA Civ 1017 ,[2005] QB 303 . In that case, a personal injuries action was settled on the common assumption that the claim form had been served out of time, and a subsequent decision of this court showed that that assumption was wrong. The claimant unsuccessfully sought to impeach the settlement. 23. In paragraph [22] of his judgment, Maurice Kay LJ gave three reasons why the Great Peace decision gave rise to difficulties for the claimant, the first of which was that it was “quite simply not a case of impossibility of performance. The compromise has at all times remained performable …”
“24. In my opinion, it is unnecessary for us on this appeal to decide which view is preferable. Indeed, I suspect that ultimately, the two approaches may essentially amount to the same thing. If the doubts of Sedley LJ are justified, then, as Mr Butler argues, the right test is that propounded by Steyn J in Associated Japanese Bank (International) Ltd -v- Credit du Nord SA[1989] 1 WLR 255 . In a passage at p. 268F, cited and expressly approved in the Great Peace case at paragraphs [90] and [91], Steyn J said that, in order to vitiate a contract, “the mistake must render the subject matter of the contract essentially and radically different from the subject matter which the parties believed to exist”
“26. In my judgment, applying that approach, the mistake in this case did not render what the parties believed to be the “subject matter of the [Settlement agreement] essentially and radically different” from what it actually was. The parties correctly believed that they were settling a business interruption claim resulting from a fire at certain premises at which the claimant ran a night club; they made no mistake as to the period of interruption or the estimated level of gross profit, or indeed any other mistake about the claim or the nature of the cover, save that they assumed that it was on the gross profits basis, rather than on the declaration-linked basis. The difference between the actual and assumed subject matter of the settlement can in my view certainly be characterised as significant, but it is not an “essential … and radical …” difference.”
“65. The second reason why most arguments of mistake fail is that the doctrine only applies if the mistake is sufficiently fundamental. Two different formulations of this requirement have been approved. One is that the mistake in question has rendered the contract ‘impossible of performance’. The other is that the mistake ‘must render the subject-matter of the contract essentially and radically different from the subject-matter which the parties believed to exist’. The two approaches may essentially amount to the same thing: see Kyle Bay Ltd (t/a Astons Nightclub) v Underwriters subscribing under Policy No 019057/08/01[2007] EWCA Civ 57 ; [2007] 1 CLC 164, paras 24-25.”
“27. I suspect that it is normally not easy to say precisely why a difference such as there is in this case is not, or indeed is, radical and essential. If that is right, this case is no exception to the norm. However, it seems to me that the following factors strongly drive one to the conclusion that the difference in this case was not radical or essential. In conceptual terms, once one appreciates what was correctly assumed or agreed (as discussed in the preceding paragraph), it is hard to say that if one corrects the one aspect which was wrongly assumed, it would radically and essentially alter the nature of the contract. What was wrongly assumed was a detail, albeit a significant detail, of the basis on which the Policy was written: it did not go to the validity of the Policy, the parties, the property or nature of the business, or even the nature of the risks covered. In addition, if it is appropriate to look at the matter in commercial terms (as I believe it is in this case at any rate), although the claimant received some 33% less than it should have done, which is a significant, even a substantial, reduction on its entitlement, I do not think it can fairly be characterised as an “essentially or radically” different sum from its entitlement.”
“The difference between the defendant having the entire legal and beneficial ownership of the Marks and the claimant having beneficial ownership of all the Marks other than those registered in France is stark.”
“(4) By reason of the assumption being wrong, the contract or its performance would be essentially and radically different from what the parties believed to be the case at the time of the conclusion of the contract; alternatively, the contract must be impossible to perform having regard to or in accordance with the common assumption. In other words, there must be a fundamental difference between the assumed and actual states of affairs.”
“JLSA does not require the payment to be put towards any particular marketing activity and accepts JLL’s assurance that it will be used in the general best interests of the Mark.”
“The agreement was made on the supposition by both parties that nothing had happened which made performance impossible. This was a missuposition of the state of facts which went to the whole root of the matter.”