Dear Colleagues,

Cranston J has given judgment in a case involving the capacity of public authorities and change of position: Charles Terence Estates Ltd v Cornwall Council & Anor [2011] EWHC 2542 (QB) http://www.bailii.org/ew/cases/EWHC/QB/2011/2542.html. The case involved a housing scheme, which saw the local authority enter into leases with a property developer, in order to provide housing for those in need. The authority, Cornwall Council, stopped paying rents, and the company sued for the unpaid rents (there were also some loans involved).

The Council alleged both private law and public law grounds for challenging the validity of the leases. A plea of common mistake failed ([53]-[60]). However, the Council did succeed on one of the public law grounds that they had failed to have regard to the market rent value of the properties, which was a breach of the fiduciary duty which was owed to taxpayers. The leases were therefore void. The judgment contains a summary of the principles applicable to when a public authority can invoke lack of capacity.

As a result of this conclusion, the Council had a claim for restitution of the rents, and the company relied upon change of position. The Council argued that the defence was not available because the company had been involved in the unlawful contracts. However, Cranston J rejected this argument, holding that the company had always acted in good faith and that, notwithstanding some anticipatory changes of position and a lack of clarity as to where the money had gone, the defence was made out: '[99]...the equitable outcome is that since the councils have had the benefit they were supposed to under the terms of the leases it is proper that the level of rent payable in respect of Cornwall's occupation should be the amount that was agreed.'

Given that change of position was available, it was not necessary to consider the company's potentially interesting argument under Article 1 of the Protocol of the ECHR (at [100]-[101]).

Best wishes,

James





--
James Lee
Lecturer and Director of Careers
Academic Fellow of the Inner Temple
Birmingham Law School
University of Birmingham
Edgbaston
Birmingham
B15 2TT, United Kingdom

Tel: +44 (0)121 414 3629
E-mail: j.s.f.lee@bham.ac.uk<mailto:j.s.f.lee@bham.ac.uk>



Web: http://www.birmingham.ac.uk/staff/profiles/law/lee-james.aspx

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