An agreement by underwriters to settle an insurance claim on the basis that the insured’s business interruption policy was a gross profits policy subject to the application of average, when in law the policy was declaration-linked and not subject to the application of average, was not void for mutual mistake, as the mistake in question did not render what the parties believed to be the subject matter of the agreement "essentially and radically different" from what it was.

Comment: this case illustrates how difficult it is to unscramble a settlement agreement even when both parties have proceeded under a financially significant mistake of law. Here both sides mistakenly thought that the policy was on a gross profits basis rather than a declaration-linked basis, with the consequence that the claimant received about £200,000 from the defendant insurers instead of about £300,000. But because the parties had understood all the other salient points concerning the contract such as the facts giving rise to the claim (a fire at a nightclub), the period of business interruption caused by the fire, the estimated level of gross profits and everything else about the nature of the cover, the mistake was not so radical as to entitle the court to intervene.