Gladman Developments v Sutton
In Gladman Developments v Sutton, the issue was whether a binding agreement had been made between the Claimant, a company which promotes land for development, and the Defendants, farmers who owned land on the outskirts of Congleton, in Cheshire.
The Claimant company asserted that an oral agreement had been made at a meeting, or on the telephone shortly after the meeting. If so, then, if the Claimant was successful in obtaining planning permission for the development of the land, the Defendants would be obliged to sell the land, and the Claimant would be entitled to a share of the proceeds, estimated to be over £5 million. In the light of the decision of the Court of Appeal in Nweze v Nwoko [2004] EWCA Civ 379, the Defendants accepted that an agreement of this sort did not have to be in writing (although they reserved the right to argue, in the Supreme Court, that Nweze was wrongly decided). The Defendants’ case was that there had been no agreement, but only negotiations about a possible agreement.
In his judgment, handed down on 1 July 2016, the Judge summarised the applicable law as follows:
“…. even though the parties may have reached agreement on essential matters, their agreement may be ‘in principle’ only and not, at that point, binding because there are further terms to be agreed. Further, and as appears from the judgment of Sir Andrew Morritt C in Cheverny Consulting Ltd v Whitehead Mann Ltd [2006] EWCA Civ 1303 at [42], in the context of commercial contracts, the courts will approach a dispute as to the formation or existence of a contract on the basis that the more complex the subject matter and terms the more likely the parties are to want refrain from committing themselves to being bound until they have a written document, prepared or reviewed by lawyers, which they have considered and executed. Sir Andrew Morritt observed that doubt may be easily avoided by conducting negotiations ‘subject to contract’; however, such a preface would not be relevant unless the parties were engaging in negotiations. Analysis of whether or not there is a binding agreement depends not upon the subjective state of mind of the parties but upon whether, viewed objectively, the communications between them, by words and/or conduct, leads to the conclusion that they intended to create legal relations and had agreed upon all the terms essential for the formation of legally binding relations”
The Defendants relied strongly on the contemporaneous documentation, which they submitted was the safest guide to what had happened. What the Judge said on this point is a useful reminder of the importance of the contemporaneous documents in a case of this kind:
“I also bear in mind the authorities cited as to the approach to be taken to oral evidence where the witnesses are required to recall events from the past. Human memory is fallible. Outside the context of litigation, recollection of events from the past may be defeated or distorted by a variety of influences and circumstances. Recollection for the purposes of litigation is susceptible to the same and to additional influences and circumstances. In Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) Leggatt J, at [15] – [22], considered the impact of the trial process in civil litigation upon evidence to be given in respect of recalled events or circumstances and concluded that the best approach for a judge to adopt in the trial of a commercial case is to place little if any reliance upon witnesses’ recollections of what was said in conversations or transpired at meetings and to base factual findings on inferences to be drawn from the documentary evidence and known or probable facts. That is valuable guidance which reaffirms a practice long adopted in the Chancery Division.”
The Judge then carefully reviewed the contemporaneous documents and the oral evidence, and held that there had been no binding agreement. The full judgment can be found below.
Stephen Jourdan QC acted for the successful Defendants.
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