Building contract – Profit share agreement – Oral agreement – Heads of terms – Appellants appealing against refusal of High Court to make declarations against defendants in respect of two alleged profit share agreements – Whether judge failing to deal with existence of oral agreement – Whether judge should have found binding profit share agreement as recorded in heads of terms – Appeals dismissed
The appellants sought declarations against the defendants in respect of two alleged profit share agreements arising out of two different developments in West Yorkshire, known as Hazel Grove and The Barns. The High Court rejected both claims.
In relation to Hazel Grove, the alleged profit share was said to arise from an oral agreement made in or around March 2013, the terms of which, amongst other things, “were to create and evidence a trust in respect of Hazel Grove under the terms of which the legal owner or owners of Hazel Grove holds or hold Hazel Grove and the proceeds of sale thereof on trust for the first and second respondents on the one hand, and the first appellant on the other, as the tenants-in-common of 50% each of the beneficial interest in Hazel Grove”. By contrast, the alleged profit share agreement in respect of The Barns arose out of a written but unsigned heads of terms document dated 4 November 2013 which provided, amongst many other things, that the first and second respondents would enter into a joint venture partnership with the first appellant which involved a 50:50 split of the net proceeds. The heads of terms was expressly said to be “subject to contract and without prejudice”.
It was the appellants’ case on appeal that, in respect of Hazel Grove, the judge failed to address the existence or otherwise of the oral agreement separately from the existence of the trust, and that his findings on the factual evidence generally were unclear, and did not appear to tally with his rejection of the appellants’ case. As to The Barns, the judge should have found that, despite the subject to contract tag, there was a binding profit share agreement as recorded in the heads of terms.
Held: The appeals were dismissed.
(1) The appellants’ complaints concerning Hazel Grove related to the judge’s findings of fact which amounted to a formidable hurdle for any appellant, the more so because this was an appeal from a specialist tribunal. Appellate courts should not interfere with findings of fact by trial judges, unless compelled to do so. That applied not only to findings of primary fact, but also to the evaluation of those facts and to inferences to be drawn from them. Accordingly, for all practical purposes, in order to appeal successfully against the findings of fact made by a judge at first instance, an appellant had to show that there was no evidence to support the findings made, or there was a demonstrable misunderstanding of, or failure to consider, relevant evidence. If all the relevant evidence was considered by the judge then, even if the appellate court might have come to a different conclusion, an appeal against the trial judge’s findings of fact would fail: Fage UK Ltd v Chabani Ltd [2014] EWCA Civ 5, Henderson v Foxworth Investments Ltd [2014] UKSC 41, Grizzley Business Ltd v Stena Drilling Ltd [2017] EWCA Civ 94, Wheeldon Brothers Waste Ltd v Millennium Insurance Co Ltd [2018] EWCA Civ 2403 followed.
In the present case, the judge appeared to consider that the existence or otherwise of the oral agreement was inextricably linked to the alleged trust. If an express agreement to create a trust could not be established, the judge seemed to have assumed that the alleged oral agreement also had to fail. Although the judgment on the Hazel Grove issues could have been more clearly expressed, there was no basis on which to allow the appeal. The judge concentrated on the express trust because that was the principal issue raised by the appellants but, in any event, he concluded that the existence of the entirely oral agreement had not been made out. The judge had assessed the evidence and made findings of fact which he was entitled to make.
(2) The correct approach to the question of whether there was a binding profit share agreement in respect of The Barns required a consideration of the position agreement by agreement, and in chronological sequence. When analysed in that way, the answers to the issues were clear. The heads of terms was not a binding contract in relation to the land sale because it was expressly subject to the subject to contract tag. There was no signed written agreement, contrary to section 2 of the Law of Property Act 1925, so the heads of terms could not be in law a binding contract for the sale of land. The heads of terms was not a binding contract in relation to the building element of The Barns. It envisaged that a further contract would be drawn up, which was what happened. The building contract element of the heads of terms was covered by the subject to contract tag. The tag applied to all of the terms because it was set out on the front of the heads of terms and was nowhere disapplied to any of its terms. The words of the heads of terms expressly anticipated that the parties would enter into a contract in the future. Clause 5 envisaged that there was to be a joint venture partnership, which would then, as employer, enter into a building contract with the nominated building contractor but there never was a joint venture partnership.
The heads of terms also made plain that the parties were not yet ready to agree the terms of any building contract because, amongst other things, there was the possibility that the identity of the purchasers would change. Therefore, the heads of terms did not represent a binding building contract. Furthermore, it did not represent a binding joint venture or profit share agreement. Any such agreement was said to be subject to contract. In any event, if this was a binding profit share agreement, it was between the first appellant, on the one hand, and the first and second respondents, on the other. But the first and second respondents did not buy the land and did not enter into the building contract. There was therefore nothing for them personally to share with the first appellant. There was also the problem that the heads of terms envisaged a formal joint venture partnership. Such a partnership was never formalised so that part of the proposal simply never happened. Accordingly, there was no profit share agreement between the parties as at 4 November 2013.
Sarah Lawrenson (instructed by Walker Morris LLP of Leeds) appeared for the appellants; Bruce Walker (instructed by Addlestone Keane Solicitors, of Leeds) appeared for the respondents.
Eileen O’Grady, barrister
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