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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Joanne Properties Ltd v Moneything Capital Ltd & Anor [2020] EWCA Civ 1541 (19 November 2020) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2020/1541.html Cite as: [2022] 1 P & CR 1, [2020] Costs LR 1645, [2020] EWCA Civ 1541 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr Anthony Metzer QC
Deputy High Court Judge
QB-2018-000668
Strand, London, WC2A 2LL |
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B e f o r e :
LADY JUSTICE ROSE
and
LORD JUSTICE STUART SMITH
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Appellant |
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- and - |
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MONEYTHING CAPITAL LIMITED (1) MONEYTHING (SECURITY TRUSTEE) LIMITED (2) |
Respondents |
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MR IAIN MACDONALD (instructed by DWF Law LLP) for the Respondents
Hearing date : 11th November 2020
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Crown Copyright ©
Lord Justice Lewison:
The issue
Background to the dispute
i) The sum of £140,00 was to be ring-fenced, representing "sums that may be determined to be payable to [either party] subject to the terms on which the claim is resolved"; and
ii) Any balance was to be ring-fenced for the resolution of a dispute relating to another charge over the property
in favour of a third party.
The communications
"David [Goldberg] confirmed that this was a firm offer with instructions from [Joanne]
to make to [Moneything] and if accepted, that was the matter concluded, save that we still had to work out the mechanics of how the funds got released from the ring fenced sums."
"We trust that your instructions accord with our understanding that the claim has been settled on terms…"
and he enclosed a consent order to dispose of the proceedings. The draft consent order contained a number of terms that had not previously been discussed. He explained that it was in Word format so that tracked changes could be made.
Subject to contract
"It is everyday practice for a solicitor, who is instructed in a sale of land, to start the correspondence with a letter "subject to contract" setting out the terms or enclosing a draft. He does it in the confidence that it protects his client. It means that the client is not bound by what has taken place in conversation. The reason is that, for over a hundred years, the courts have held that the effect of the words "subject to contract" is that the matter remains in negotiation until a formal contract is executed."
"As everybody, including Mr Christos himself, knows, that expression, when used in relation to the sale of land, means that, although the parties have reached an agreement, no legally binding contract comes into existence until the exchange of formal written contracts takes place."
"The meaning of that phrase is well-known. What it means is that (a) neither party intends to be bound either in law or in equity unless and until a formal contract is made; and (b) that each party reserves the right to withdraw until such time as a binding contract is made."
"But there is this overwhelming point: Everything in the opening letter was "subject to contract." All the subsequent negotiations were subject to that overriding initial condition."
"parties could get rid of the qualification of 'subject to contract' only if they both expressly agreed that it should be expunged or if such an agreement was to be necessarily implied."
"… when parties started their negotiations under the umbrella of the "subject to contract" formula, or some similar expression of intention, it was really hopeless for one side or the other to say that a contract came into existence because the parties became of one mind notwithstanding that no formal contracts had been exchanged. Where formal contracts were exchanged, it was true that the parties were inevitably of one mind at the moment before the exchange was made. But they were only of one mind on the footing that all the terms and conditions of the sale and purchase had been settled between them, and even then the original intention still remained intact that there should be no formal contract in existence until the written contracts had been exchanged."
"Accordingly, in my judgment, the judge, with great respect, fell into the error which was adumbrated by Brightman J, namely of thinking that because parties got near a contract or conveyance, because parties assumed that they would go happily on until matters had become binding, therefore the "subject to contract" qualification either ceased to have effect or was replaced by a new contract. That, in my judgment, is not the position. It is always the case that in "subject to contract" negotiations one side or both from time to time speak as though there was a contract or would be a contract, and that is because everybody looks on the bright side and thinks a sale is going to take place. The fact of the matter is that for very good reasons the "subject to contract" formula enables one to see at once whether there is or is not a contract—either a contract exchanged or conveyance executed and delivered—or whether parties are in the negotiation stage. Once one gets away from principle, then all is difficulty, and reliance on odd conversations and letters produces uncertainty in law."
"We agree … that, in a case where a contract is being negotiated subject to contract and work begins before the formal contract is executed, it cannot be said that there will always or even usually be a contract on the terms that were agreed subject to contract. That would be too simplistic and dogmatic an approach. The court should not impose binding contracts on the parties which they have not reached. All will depend upon the circumstances."
"Whether in such a case the parties agreed to enter into a binding contract, waiving reliance on the "subject to [written] contract" term or understanding will again depend upon all the circumstances of the case, although the cases show that the court will not lightly so hold."
Incomplete agreements
Application to the facts
The judgment below
i) The only real issue in dispute was the destination of the ring-fenced sum of £140,000.
ii) The correspondence referred to a full and final settlement, not a partial settlement.
iii) No mention was made in correspondence of any other terms of the agreement.
iv) Mr Sekar (the moving spirit behind Joanne)
subjectively thought that the dispute had been compromised.
v) Although there remained certain administrative matters to be agreed, they were not material for the purposes of the settlement.
Result
Lady Justice Rose:
Lord Justice Stuart-Smith: