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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Fuller v Happy Shopper Markets Ltd & Anor [2001] EWHC Ch 702 (14 February 2001) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2001/702.html Cite as: [2001] 1 WLR 1681, [2001] WLR 1681, [2001] L & TR 16, [2001] 2 EGLR 32, [2001] 25 EG 159, [2001] 2 LLR 49, [2001] 2 Lloyd's Rep 49, [2001] EWHC Ch 702

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Chancery Division

		14 February 2001

1. Giving judgment, LIGHTMAN J said:
2. This is an appeal by the first defendant, Happy Shopper Markets Ltd (HSM), and the second defendant, Nurdin & Peacock plc (N & P), against two decisions of Master Moncaster made on 13 June 2000. I shall refer to N & P and HSM (which is the wholly owned subsidiary of N & P) together as the defendants. By the first decision, he refused an application by HSM for summary judgment on its claim as landlord against its tenant, the claimant Mr John Fuller (Mr Fuller), for possession of the shop, with residential accommodation above, at 76 Fairlee Road, Newport, Isle of Wight (the property). By the second decision, he refused the application by both HSM and N & P for summary judgment on Mr Fuller's claim for damages against HSM and N & P for breach of a settlement agreement dated 23 March 1994 (the settlement). The master held that there were arguable issues that must proceed to trial. In the course of the hearing before me, the parties sensibly agreed that, in place of deciding whether HSM and N & P were entitled to summary judgment, I should finally decide four preliminary issues of law, the resolution of which would save substantial costs at the trial of the action, which is fixed for hearing on 5 March 2001. I have done so with the valuable assistance of counsel.
3. The principal issue in this action is whether a levy of distress for rent by HSM on 4 February 1997 was lawful. Mr Fuller maintains that it was unlawful on the ground that, notwithstanding certain admitted arrears of rent on his part at the date that distress was levied, a larger sum was due to him that should be offset against, and cancel out, the arrears of rent. Upon this application, I am concerned with two of the alleged components of this larger sum. The first is a claim by Mr Fuller for damages for breach of the settlement. The second is a claim to the repayment of what Mr Fuller alleges were overpayments of rent made by him under a mistake of fact and/or law. For the purpose of this application, I must assume the existence of the alleged breach of the settlement, and that the sums claimed as overpayments were indeed overpayments made under a mistake of fact and/or law. It is common ground that whether the claimed damages for breach of the settlement should have been offset turns upon whether HSM is liable to Mr Fuller in respect of the breach. It is also common ground that whether the claimed overpayments should be offset turns upon: (1) whether a demand by Mr Fuller for repayment was legally required before such overpayments became repayable. There was no demand before the distress was levied, and, accordingly, if a demand were necessary, Mr Fuller could not maintain that there was a debt in the amount of the overpayments due to him at the date that distress was levied that could be offset. (2) Whether, assuming that the overpayments gave rise both to an immediate right to repayment on the part of Mr Fuller and (as is common ground) to a right on his part to a legal (or an independent) set-off against any rent later falling due, such set-off operated33 automatically to reduce the rent due at the date of levying distress, or could only do so later if and when proceedings relating to the rent due were commenced. (3) If the right of legal set-off did not so operate, whether the overpayments gave rise to a right of equitable (or transaction) set-off that did so operate.
4. While the first issue relating to the breach of the settlement is simple, the second relating to the overpayments is more difficult, and raises important questions of law not confined to the field of landlord and tenant.

Facts

5. In 1991 Mr Fuller, then the freehold owner of the property, sold the property to HSM (which granted him a lease), and entered into a franchise agreement with HSM. Mr Fuller thereafter made allegations of misrepresentation and other wrongdoing against HSM, and the dispute so arising was settled by the settlement. The material terms of the settlement read as follows:

In consideration of John Leslie Fuller agreeing that:

(i) all his existing contractual relationships including for the sake of certainty any relationships arising by virtue of the leases and underleases… have terminated; and…

(iii) all liabilities and claims that he may have against Happy Shopper Markets Limited and Nurdin & Peacock Plc, howsoever arising, are fully and finally settled.

Happy Shopper Markets Limited and Nurdin & Peacock Plc will enter into a new lease with John Leslie Fuller… and Nurdin & Peacock Plc will satisfy John Leslie Fuller's existing financial liability to third parties incurred in the period up to and including 29th October 1993 but only to the extent that such financial liability has been disclosed to and accepted by Nurdin & Peacock Plc and Happy Shopper Markets Limited.

6. Pursuant to the settlement on the same day, HSM granted Mr Fuller a lease (the lease) of the property for the term of 21 years from 29 October 1993 at the rent (for the period of seven years from 31 March 1994) of £ 13,500 pa, payable by quarterly instalments. Clause 4 of the lease reads as follows:
7. …

(2) In case the premises or any part thereof shall at any time during the said term be so damaged or destroyed by fire or other risk against which the Landlord shall have insured as to be unfit for occupation and use then (unless the insurance money shall be wholly or partially irrecoverable by reason solely or in part of any act or default of the tenant the rent hereby reserved or a fair proportion thereof according to the nature and extent of the damage sustained shall be suspended until the premises shall again be rendered fit for occupation and use and any dispute with reference to this proviso shall be referred to arbitration in accordance with the Arbitration Act 1950 or any statutory amendment or re-enactment thereof…

8. According to Mr Fuller, on 10 January 1994, as a result of bad storms, the property sustained severe damage to the flat roof at the rear of the property, which resulted in "water ingress" and which rendered parts of the property unfit for use and occupation. Storm damage was a risk against which HSM had insured. Again according to Mr Fuller, in breach of an implied obligation, HSM delayed informing the insurer of the damage, progressing negotiations with the insurer and applying the proceeds of the insurance in reinstatement, and, in so doing, left the damage unrepaired until August 1996.
9. On 17 September 1994 Mr Fuller wrote a letter to N & P (the 1994 letter), the relevant extract from which reads as follows:

Dear Mr Lamb,

Further to our telephone conversation I would again confirm my concern about the state and dis-repair of the roof here at Seaclose Stores and it is well over 9 months since the original storm damage. The roof damage is worsening as the time goes by without any repairs being done and your repeated delays in attending to this matter will only make things worse.

There is also the point of reimbursement of rents paid during the time the roof has been damaged. All of the first floor, ground-floor storeroom offices and conservatory are affected and unusable. This amounts to 60/70% of the property and therefore at least this amount of the rent should not be payable according to the terms of the lease. There is mention of arbitration to decide this amount and I would ask you to put this matter in hand please. I would maintain that we are entitled to all of the rent to be suspended as many times now the shop area itself has not been operable owing to the water reaching this area when it rains and the imminent danger relation to wet electrics etc.

…

Yours sincerely,

[signed]

John L. Fuller

pp SEACLOSE STOREE

10. At this date, Mr Fuller had already paid, without deduction, two full quarters' rent since the storm damage. After receipt of the letter, no action was taken by either party to put the arbitration in hand. Mr Fuller, however, continued for a period to pay the full reserved rent up to and including the September 1995 quarter. Thereafter, he failed to pay any rent. By reason of this non-payment of rent, on about 4 February 1997 HSM authorised and instructed the bailiffs to levy a distress, upon the basis that there were rent arrears of £ 22,737.67; the bailiffs levied distress, seized and later sold goods, according to Mr Fuller, at a substantial undervalue.
11. The critical question in this case is whether HSM was entitled to levy distress when it did, and this turns upon whether there was indeed any such sum due as rent from Mr Fuller to HSM. Mr Fuller raises a number of issues on this question that can only be investigated after extensive examination of the evidence at the trial. But four issues of law are convenient to be tried now. They cannot, and will not, decide the question of whether the distress was lawful, but a decision on these issues will (it is considered) substantially shorten the length of trial.

Construction

12. The first issue raised is whether, as a matter of construction of the settlement and lease, Mr Fuller can set off, against the rent due at the date of the distress, sums claimed against N & P for breach of its obligation under the settlement. Mr Fuller's case is made in paras 13A and 22A of the amended particulars of claim, which read as follows:

13A. Given the terms of the settlement agreement and the events which led to it, it is averred that, for the purposes of the obligation to satisfy the claimant's said existing financial liability to third parties, the parent/subsidiary distinction should be ignored and the two defendants should be regarded as one entity. Further, or in the alternative, in taking on the said obligation, the second defendant is to be regarded as the agent or alter ego of the first defendant. The claimant will refer to paragraph 2.1522 paragraph 11 of Palmer's Company Law.

Accordingly, references hereinafter to the "second defendant" in the context of the said obligation should be understood as referring to the defendants jointly and/or severally.

22A. Given the terms of the settlement agreement and the events which led to it, it is averred that, for the purposes of granting the new lease, the parent/subsidiary distinction should be ignored and the two defendants should be regarded as one entity.

Further, or in the alternative, in granting the new lease, the first defendant is to be regarded as the agent or alter ego of the second defendant.

The claimant will refer, among other things, to the fact that:

(i) All rent demands sent to the claimant emanated from the second defendant and all rent was paid to the second defendant;

(ii) All monies for insurance premiums were demanded by, and sent directly to, the second defendant.

13. I am disposed merely to repeat in respect of this issue what Mr Stephen Boyd, counsel for Mr Fuller, aptly said when he made his brief submission on it and left it with me: "It is not my best point". But I should perhaps add that it is a hopeless point, for the settlement makes it quite clear that the rights of Mr Fuller in respect of the satisfaction of liabilities are rights against N & P alone, and the lease granted by HSM (which Mr Fuller accepted in satisfaction of the obligations assumed by HSM and N & P to grant the lease) conferred the right to rent on HSM alone. There is no basis for any suggestion of the agency of N & P for HSM in the assumption of the obligations under the settlement, or of HSM for N & P in granting and accepting the benefit of Mr Fuller's covenants in the lease. Likewise, there is no basis for any claim to rectification of either instrument, and there are no such exceptional34 circumstances as can conceivably bring into play any piercing of the corporate veil. The mere facts that one was the parent company and the other the wholly owned subsidiary, and that N & P may have acted as agent for HSM in the management of the property, are quite insufficient for this purpose.

Demand and right to monies had and received

14. I turn now to the second and much more difficult issue, namely assuming (as alleged by Mr Fuller) that, after the storm, £ 2,092.50 of each quarter's rent should have been suspended under clause 4(2) of the lease (leaving only £ 1,282.50 payable quarterly), that this sum of £ 2,092.50 was an overpayment made under a mistake of fact and/or law and that it was received by HSM to Mr Fuller's use prior to the date of the distress, whether Mr Fuller had an immediate entitlement on payment to repayment of such overpayments, or whether Mr Fuller became so entitled only after he had made a demand for repayment.
15. As a matter of principle, there is no reason why a demand for payment of moneys had and received should be required before a right to repayment arises, for the right of restitution arises at the moment that unjust enrichment takes place: Kleinwort Benson Ltd v South Tyneside Metropolitan Borough Council [1994] 4 All ER 972 at p978 per Hobhouse J. But the case of Freeman v Jefferies (1868-69) LR 4 Ex 189 is cited as authority in support of the proposition that a demand is necessary. In that case, the claimant (the incoming tenant) agreed to buy from the defendant (the outgoing tenant) his interest in a farm at a price determined by two valuers. The claimant paid £ 2,000 on account; the valuation took place; the claimant gave to the outgoing tenant a post-dated promissory note for £ 3,319, being the amount of the valuation (after deducting the £ 2,000 paid on account); and the claimant entered into possession. At a later date, when the claimant sold his interest in the farm to a third party, he claimed to have discovered errors in the valuation in respect of the inclusion of items that ought not to have been included, and items that did not exist. Nevertheless, he paid the promissory note at maturity without objection, but later, without any prior complaint or demand for repayment, he sued the defendant, claiming as moneys had and received to his use the whole price paid, namely £ 5,319; alternatively, the deposit of £ 2,000; alternatively, the remaining £ 3,319; or, alternatively, an undefined sum that a jury should find to be the value of the items that ought not to have been included in the valuation: see p194. The Court of Exchequer held that he was not entitled to recover. Kelly CB, and Martin and Pigott BB held that the valuers' award was final between the parties. Kelly CB and Martin B held that the conduct of the claimant had made it impossible to restore the parties to their original condition, or to do justice between them (ie rescind), and that therefore the claimant could not maintain an action for money had and received. Martin and Bramwell BB held that, to enable the claimant to maintain an action for money paid by mistake as money had and received by the defendant, notice of the mistake must have been given to the defendant and a demand made.
16. The view expressed by Martin and Bramwell BB must be viewed in the context of the claim made by the claimant for rescission and the return of the full price, a claim not limited to the alleged overpayment. Thus, Martin B said at pp199-200:

The parties have entered into an agreement for the sale of the defendant's interest in the farm, stock and crops, for an entire sum to be put on it by two valuers, and of which 2000l. was paid down... A promissory note is given for the amount of the valuation according to the agreement, and is paid; the plaintiff enters into possession of the farm; he again sells his interest, and so ceases to be able to return to the defendant what he had got from him; and now, the valuer on this sale having discovered what he thinks to be a mistake (and what we must suppose to be such) in the former valuation, the plaintiff without notice brings an action against the defendant to recover the whole sum which he has paid under that valuation. We are asked to treat the whole affair as a nullity, and are told that this is the essence of justice. But the effect contended for could only be produced by a rescission of the contract, and the contract cannot be rescinded unless the parties can be restored to their original condition. But if one party has done an act by reason of which it has become impossible to put the other in the same situation as before, there can be no rescission, and the remedy, if any, must be on the contract. It is contended that under these circumstances, a contract will be implied to return the money; but I am not of that opinion. If an action lies for recovering the money paid for those items which ought not to have been included in the valuation, it would be an action for the return of a portion of the money paid, on the ground that the consideration had failed, and after notice given that it had failed. But unless some communication has been made by the plaintiff, he is not entitled to recover either the whole or any part of this sum. On the ground, therefore, that the plaintiff is not in a position to sue without having made a demand on the defendant, I am of opinion that this rule must be made absolute.

17. Bramwell B began his judgment thus:

I give no opinion on many of the questions which have been discussed; but on the ground I am about to mention I think this rule must be made absolute. The plaintiff's case is this: "I have paid money which I was not bound to pay, and which, if I had known facts which I now know, I should not have paid. I paid it on the footing of a valuation having been made, when, in fact, no valuation had been made; neither a valuation including in distinct items the matters which were to be valued, nor a valuation in general of the whole of the items for which I ought to pay." But if the plaintiff were under the circumstances entitled to be repaid the sum he claims, he ought to have given notice to the defendant of the facts by reason of which he was so entitled; because until he did so there could be no duty on the defendant to pay, it over.

18. It is fair to say, that the language he later uses is consistent with a general requirement of a demand in the case of a claim for money had and received, but it is clear that he very much had in mind that the claims made included a claim for total repayment, that he made no distinction between a claim for partial and total repayment, and, clearly, a claim for total repayment was tantamount to rescission. As Goff & Jones The Law of Restitution (5th ed) points out at p195, the authorities he relied upon did not support the existence of any such general requirement for a demand in the case of a claim for money had and received. Bramwell B relied upon the analogy of trover, and on the authority of Wilkinson v Godefroy (1839) 9 A & E 536. But, in trover, demand and refusal are evidence only that the tort has been committed, and Wilkinson v Godefroy was concerned with recovery of money from a stakeholder to whom it had been entrusted, in which case a demand is necessary to throw upon the depositee a duty to repay.
19. In Baker v Courage & Co [1910] 1 KB 56, Hamilton J held that there was no requirement for a demand where the claim is for repayment of moneys paid under a mistake common to both parties (as opposed to a unilateral mistake). Referring to the judgments of Martin and Bramwell BB in Freeman v Jefferies, he said at p66:

in that case at the time the first instalment of the money was paid neither the plaintiff nor the defendant made any mistake. The mistake was made by the two valuers who were subsequently employed to value the farm which was the subject- matter of the sale. It was not until the plaintiff afterwards consulted a third valuer on his negotiating for the resale of the property that he discovered that the former valuers had included in their valuation certain items which they ought not to have included, and after this he paid over the balance of the money to the defendant at a time when he knew of the valuers' mistake but the defendant did not. It was under those circumstances that Martin and Bramwell BB held that there was no duty on the defendant to repay the excess valuation until after notice of the mistake, which was not his mistake and of which he was unaware. I think it is clear that they so decided without reference to a case in which not only the party paying paid under a mistake, but also the party receiving the money was under a mistake at the time when he received it. In my opinion, therefore, the case of Freeman v Jefferies does not support the contention of the defendants.

He accordingly distinguished the judgments of Martin and Bramwell BB on the ground that the mistake in Baker v Courage was a mutual mistake of both parties and not the unilateral mistake of the party who made the payment.

20. In my view, when the case of Freeman v Jefferies is properly understood, the law is clear: if the rescission of a contract gives rise to a right on the part of a party to repayment of moneys had and received, the due exercise of the right of rescission, by giving notice of rescission, must precede the accrual of the right of action for money had and received. But in the absence of some such special consideration, and, in particular, where no question of rescission arises, eg where the contract35 is void or (as on the facts of this case) where there is an over-payment, the general rule is that no notice or demand is required. I am confirmed in reaching this conclusion by the views expressed in Goff & Jones The Law of Restitution (5th ed) p195 and Graham Virgo's The Principles of Restitution p770, which affirm the general rule that no demand is required and that Freeman v Jefferies should not be allowed to stand in the way of reaching this conclusion. There is a good reason why this should be so, which is hinted at by Hamilton J in Baker v Courage [1910] 1 KB 56 at p65, and spelt out by Graham Virgo:

Despite certain dicta [in Freeman v Jefferies] that a restitutionary cause of action will accrue only once the plaintiff has demanded return of the enrichment, the better view is that there is no such requirement, for otherwise the plaintiff would be able to postpone the date from which the limitation period begins to run until it suits him or her to inform the defendant of the restitutionary claim.

Legal set-off

21. The defendants concede that, if no demand were necessary, Mr Fuller was entitled to a right of legal (or independent) set off of his overpayments of rent against his unpaid rent. The question accordingly arises of whether the right of legal set-off can be invoked by the tenant against a landlord exercising his remedy of distress, ie whether, in determining if rent was due to the landlord entitling him to distrain, the right of the tenant to legal set-off of past overpayments of rent is to be taken into account and offset against any unpaid rent. (I should make it clear that the legal set-off that is under consideration in this context is quite distinct from the related defence of abatement made available by the common law, eg to a purchaser of goods sued for the price in respect of a breach of warranty: see Sim v Rotherham Metropolitan Borough Council [1987] Ch 216.
22. The right of legal set-off was statutorily created by section 13 of the Insolvent Debtors Relief Act 1729, which reads:

Where there are mutual debts between the plaintiff and the defendant… one debt may be set against the other, and such matter may, be given in evidence upon the general issue, or pleaded in bar, as the nature of the case shall require…

23. Legal set-off is a procedural device designed to avoid circuity of actions and enabling the parties to have their various disputes tried in one action instead of two or more. The transactions giving rise to the mutual debts need have no connection. The only requirement is that the cross-claims must both be due and payable, and either liquidated or capable of being quantified by reference to ascertainable facts that do not, in their nature, require estimation or valuation: see Hoffmann LJ in Aectra Refining & Manufacturing Inc v Exmar NV [1994] 1 WLR 1634 at pp1649A-B and 1651.
24. An equitable (or transaction) set-off is a cross-claim arising out of the same transaction as the claimant's claim, or one so closely connected that it operates in law or in equity as a complete or partial defeasance of the claimant's claim: see Hoffmann LJ in Aectra at p1649A-B. The cross-claim is so closely connected if it would be unconscionable for the claimant to insist upon satisfaction for his claim without giving credit for the claim made against him by the other party. Equitable set-off operates not merely procedurally, but substantively as a defence. The historical development of the law relating to the availability of set-off in the case where a landlord has levied or intends to levy distress is to be found in the judgments of Hoffmann and Neill LJJ in Eller v Grovecrest Investments Ltd [1995] QB 272*. It is plain that, in early times, a tenant could not invoke a legal set-off or an equitable set-off against a landlord levying distress. The law however developed, and (as the Court of Appeal held in Eller) these developments led to the courts affording the tenant's claim to equitable set-off the status of a self-help remedy defeating or satisfying (in whole or in part) the landlord's claim. But no such recognition was afforded to legal set-off. It was a remedy available only in judicial proceedings, and a tender by the debtor of the creditor's claim after deduction of the cross-claim was not a valid tender. It could only operate as a defence, reducing the amount of the indebtedness when raised or pleaded as such in proceedings: see Wood on English and International Set Off (1989) at paras 1.15-6. Quoting the passage at para 1.20 in Wood, to the effect that the English courts had not seriously reviewed the rationale for limiting legal set-off to judicial proceedings, it was submitted by Mr Boyd, on behalf of Mr Fuller, that it should be reviewed in this case. He submitted that the time had come to treat legal set-off as equally effective as equitable set-off for this purpose, and he prayed in aid what Lord Denning MR said in Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1978] QB 927 at p974F (in a passage cited with approval by Hoffmann and Neill LJJ in Eller):

Over 100 years have passed since the Judicature Act 1873. During that time the streams of common law and equity have flown together and combined so as to be indistinguishable the one from the other. We have no longer to ask ourselves: What would the courts of common law or the courts of equity have done before the Judicature Act? We have to ask ourselves: what should we do now so as to ensure fair dealing between the parties?

and what Neill LJ said in Eller at p280G:

In principle… I can see no reason to distinguish between the position of a landlord who is asserting his right in respect of arrears of rent by a claim for possession or by an action in debt, on the one hand, and that of a landlord who is asserting identical rights, but who is availing himself of the remedy of distress. In both cases the proper question to be determined is, looking at the state of account between the parties in the light of their rights under the lease, is any sum due to the landlord.

25. But the character of a legal set-off as a procedural, rather than a self-help, remedy is the product of the legislation to which it owes its existence; this characterisation is as much alive today as ever, and the decision in Eller should not be read as challenging its continuance. This is apparent from the decision of the Court of Appeal in Aectra, where the Court of Appeal reaffirmed the procedural character of legal set-off. Hoffmann LJ said in a judgment (with which Hirst LJ agreed) starting at p1648H:

Independent set-off, as its name suggests, does not require any relationship between the transactions out of which the cross claims arise. In English law it is based on section 13 of the Insolvent Debtors Relief Act 1729…

The procedural basis of independent set-off is reflected in the rule that the mere existence of liquidated cross-claims does not automatically extinguish the smaller debt… It operates only by express or implied agreement or through the judicial process by which the account is taken. As Sir George Jessel MR said in Talbot v Frere (1878) 9 ChD, 568, 573 "there could not be a set-off until action brought and set-off pleaded." The Act of 1729 is expressed in procedural terms… (p 1650)

26. Lord Hoffmann repeated this message in Stein v Blake [1996] AC 243, where he said at p251B-D:

Legal set-off does not affect the substantive rights of the parties against each other, at any rate until both causes of action have been merged in a judgment of the court. It addresses questions of procedure and cash-flow. As a matter of procedure, it enables a defendant to require his cross-claim (even if based upon a wholly different subject matter) be tried together with the plaintiffs claim instead of having to be the subject of a separate action. In this way it ensures that judgment will be given simultaneously on claim and cross-claim and thereby relieves the defendant from having to find the cash to satisfy a judgment in favour of the plaintiff (or, in the 18th century, go to a debtor's prison) before his cross-clairn has been determined.

27. Accordingly, in my view, a legal set-off (unlike an equitable set-off) does not operate to reduce the indebtedness of the tenant to the landlord and therefore cannot be offset against the arrears of rent accrued due at the date when the distress was levied. It continues to be necessary to distinguish between legal and equitable set-off for this purpose.

Equitable set-off

28. In my view, it is quite plain that Mr Fuller is entitled to invoke the doctrine of equitable set-off. The claim by HSM to unpaid rent, and36 the claim by Mr Fuller to repayment of overpaid instalments of rent, all arise out of the same transaction (the lease) and are so closely related that it would be unconscionable for HSM to claim the unpaid rent without giving credit for the overpayments. Mr Mark Wonnacott, counsel for the defendants, however, submitted that the defence of equitable set-off is available only in cases where, on the facts, a legal set-off is not available. In my view, this submission misunderstands the true relationship between the two forms of set-off. Equitable set-off arises where the relationship between the claims is such that equity insists that the one should operate in defeasance of the other. Only where this relationship between the claims is not present is it necessary, or appropriate, to invoke the doctrine of legal set-off. As I have already said, for a legal set-off no such relationship between the claim and cross-claim is insisted upon: they may be independent of each other. If they are not independent of each other, the more efficacious equitable doctrine will apply and alone will sensibly be invoked. The position is the same where the facts give rise both to a defence of abatement and a defence of equitable set-off. In such a situation, it is unnecessary to look beyond the defence of equitable set-off: see Sim v Rotherham [1987] Ch 216 at pp258-259.

Conclusion

29. I therefore decide that in the taking of the accounts to ascertain what (if any) rent was due from Mr Fuller at the date of the levying of distress, the sums claimed in damages from N & P are to be ignored, but any overpayments of rent can, and must, be taken into account, for they were immediately repayable and were the subject of a right of equitable set-off against the arrears of rent. This means that a landlord is bound to take the greatest care before levying distress that there are no claims on the part of the tenant that may be available by way of equitable set-off to be offset against, and satisfy, the rent outstanding. In any ordinary case, he would be well advised to give notice of his intention and invite the tenant to agree what is owing and to inform him whether there are any cross-claims, and (if so) to identify them. The ancient (and perhaps anachronistic) self-help remedy of distress involves a serious interference with the right of the tenant, under Article 8 of the European Convention on Human Rights, to respect for his privacy and home, and, under Article 1 of the First Protocol, to the peaceful enjoyment of his possessions. The human rights implications of levying distress must be in the forefront of the mind of the landlord before he takes this step, and he must fully satisfy himself that taking this action is in accordance with the law.

The electronic text of this judgment was provided by Estates Gazette, whose assistance is gratefully acknowledged.