Sale of land – Contract – Offer and acceptance – Claimant company carrying on business of developing land – Claimant entering discussions with defendant owners about developing their land – Whether partied entering into binding agreement for sale of land for development – Claim dismissed
The claimant company carried on business as a property developer and promoter of land for development. It entered into promotion agreements with landowners. Such agreements were not a contract for sale or other disposition of an interest in land and was not subject to section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. However, the fact that a promotional agreement had not been executed did not preclude the possibility that an oral agreement had been made which was intended to be followed and superseded by a duly executed promotional agreement. The defendants were members of a family who farmed land at Bent Farm, to the south-west of Congleton in Cheshire, which comprised 183 acres.
In early 2012, the claimant wanted to promote land for development at Congleton and had a plan which included part, if not all, of the defendants’ land. A meeting took place between the claimant’s representatives and the second defendant, who was the legal and beneficial owner of the farm, along with his wife, the first defendant. A second meeting followed, prior to which the claimant provided a pro forma promotional agreement to the defendants. That meeting was subsequently followed by a telephone conversation. A dispute arose as to whether, among other things, a binding agreement had been formed between the claimant and all the defendants or the claimant on one side and the first and second defendants on the other.
The claimant argued that, on the evidence, it had entered into a binding oral agreement with the defendants.
Held: The claim was dismissed.
(1) There was no requirement that an agreement for the promotion of land for development should be made in writing. Even though the parties might have reached agreement on essential matters, their agreement might be “in principle” only and not, at that point, binding because there were further terms to be agreed. Further, in the context of commercial contracts, the courts would 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 were to want refrain from committing themselves to being bound until they had a written document, prepared or reviewed by lawyers, which they had considered and executed. Doubt might 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 was a binding agreement depended not upon the subjective state of mind of the parties but upon whether, viewed objectively, the communications between them, by words and/or conduct, led 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: Cheverny Consulting Ltd v Whitehead Mann Ltd [2006] EWCA Civ 1303 and RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG [2010] UKSC 14 considered.
(2) As regards the approach to be taken to oral evidence where the witnesses were required to recall events from the past, it was notable that human memory was fallible. Outside the context of litigation, recollection of events from the past might be defeated or distorted by a variety of influences and circumstances. Recollection for the purposes of litigation was susceptible to the same and to additional influences and circumstances. The best approach for a judge to adopt in the trial of a commercial case was 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: Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) considered.
(3) In the present case, on the evidence, there had been no binding agreement between the claimant and the defendants. The second meeting had been attended by the defendants in order to hear and consider what the claimant would propose. The terms of the pro forma agreement sent to the defendants prior to that meeting stated that a landowner committed identified land to promotion for development as a consequence of executing and thereby entering into a promotional agreement. The record of the meeting referred only to “offer” and “proposed” in the context of the meeting and references to “agreement” could only have been to an executed promotional agreement. The contemporaneous communications between the parties’ solicitors had all been conducted “subject to contract” and the claimant had understood the agreement to have been “in principle”. Even though some elements had been agreed at the meeting, the evidence on that point fell far short of the standard of proof required to enable the court to make a finding that there had been a free standing oral agreement. The same applied to the telephone conversation. There was nothing of sufficient substance throughout the whole course of dealings between the claimant and the defendants to justify a finding that an oral agreement had been entered into as contended for by the claimant.
Wilson Horne (instructed by Knights Solicitors LLP) appeared for the claimant; Stephen Jourdan QC (instructed by Michelmores LLP) appeared for the defendants.
Eileen O’Grady, barrister
Click here to read transcript: Gladman Developments Ltd v Sutton and others
