The parties in Abberley v Abberley [2019] EWHC 1564 (Ch) were farmers who could not agree how to divide assets between them following the dissolution of their partnership. So they resorted to mediation, during which they agreed to divide the partnership land between them. But, following the mediation, further points were raised, which led, ultimately, to a dispute about the status of the heads of terms.
Did the fact that the parties had contemplated signing a more formal document deprive the heads of terms of any contractual status? The judge cited Immingham Storage Co. Ltd v Clear plc [2011] EWCA Civ 89, in which the Court of Appeal ruled that a provision that a “formal contract will then follow in due course” did not indicate that there was only a “subject to contract” agreement. Furthermore, although the heads of terms contemplated further documents, such as transfers and a farm business tenancy agreement, they did not, on their face, contemplate a further formal agreement.
The next point that the judge considered was whether the parties had intended to enter into a legal relationship at all. And, given that the whole point of the mediation was to resolve a long-running family dispute, and that the parties’ solicitors had signed the document on their behalf (as required by the mediation agreement in order to bind them), the judge considered that they had. But were the heads of terms sufficiently certain to create a legally binding agreement? The judge noted that the object of the court is to do justice between the parties and that, if he was satisfied that there was an intention to contract, he must do his best to give effect to that intention.
The heads of terms did not include a coloured plan. But the judge decided that the parties had understood which land was to be transferred – and the fact that no uncertainty was voiced at the time or in the months that followed supported this conclusion. Furthermore, Mordern College Trustees v Mayrick [2006] EWHC 574 established that, although a property description may be vague, parol evidence is admissible if a document contains sufficient internal information to enable the property to be identified.
One of the parties’ objectives had been to ensure that the land continued to be farmed in conjunction with the farm itself – and this helped to resolve any uncertainty about the commencement date of the farm business tenancy. It was clear that the tenancy could not commence before the land was transferred to the partner who had left the business. So it was reasonably certain that the tenancy was to commence when the land was transferred to him.
Furthermore, the essentials of the rest of the points agreed (which included an option to purchase and an overage provision) were set out in the heads of terms with sufficient certainty for the creation of a binding agreement. And the fact that attempts were then made to agree further details, and that subsequent documentation contained variations of how the heads of terms were to be put into effect, did not detract from that.
Finally, there had been no express agreement on the points raised after the mediation. So all the terms agreed at the mediation were included in the heads of terms, and they did comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.
Allyson Colby is a property law consultant