The facts of the case can be summarized as follows. Mr Graves granted his ex-wife a one-year tenancy of a house he owned. Mrs Graves paid £12,000 of the £17,000 capital she still possessed as a deposit and the rent was agreed at £1,150 per month. The evidence clearly showed that the tenancy agreement was entered into under the common assumption that Mrs Graves would be entitled to housing benefit and that this would pay the rent.2 Mrs Graves was re-qualifying as a radiologist and had no other means of paying rent. Mr Graves had reason of his own why he wanted rent paid this way. He was still subject to a maintenance order in favour of the parties’ son and was concerned that Mrs Graves would pay no rent as a means of getting maintenance from him. Mr Graves had transferred his share of the equity (£8,500) in another property the parties jointly owned to Mrs Graves and the parties had agreed that he would not pay maintenance for the son after that. But this agreement had never been submitted to the court which made the maintenance order and the latter remained in force. After paying the deposit above and the first month’s rent, Mrs Graves entered into possession of the property and soon after discovered that she would not be receiving housing benefit. In Mr Graves’ application for possession of the property, Mrs Graves argued that the tenancy agreement was void for common mistake. She did not advance any argument to the effect that the tenancy agreement was merely voidable, as both parties’ submissions clearly showed that they accepted the death of the Solle v. Butcher 3 doctrine following the later Court of Appeal decision in The Great Peace.4

The Deputy District Judge held that possession should be granted to Mr Graves but that Mrs Graves should be entitled to restitution of the money she paid minus the occupation rent she was required to pay for the period she stayed on in the property after the one-year tenancy had expired. In upholding this decision, the Court of Appeal first looked to see whether the tenancy agreement itself supplied an answer to the question “what to do if Mrs Graves is not entitled to housing benefit?” Thomas LJ directed himself to the words of Steyn J (as he then was) in Associated Japanese Bank (International) Ltd v. Credit du Nord:5