The importance of credibility has been underlined by the court in William Allan Jones and another v Andrew McCarthy [2022] EWCH 2186 (Ch), a damages claim for breach of the terms of an agreement to exchange assets.
In February 2008, the parties agreed that the defendant would obtain beneficial ownership of a yacht registered in the British Virgin Islands owned by the second claimant in exchange for the first claimant acquiring a villa near Palma Mallorca registered to the defendant, and a mooring on mainland Spain.
The defendant sold the yacht in autumn 2008 for around £1m and retained the proceeds of sale, the first claimant having cleared the mortgage. The villa was not sold until 2016 at a price of €1.1m and the defendant retained the proceeds of sale. The claimants sought damages for breach of the 2008 agreement or alternatively an account of profits and a constructive trust over the proceeds of sale of the villa. The defendant argued that the first claimant told him that the yacht was mortgage-free and that delays in clearing the mortgage and providing the logbook meant that he lost an earlier sale of £1.39m. He also argued that the first claimant had agreed to transfer his beneficial share in the villa to a third party in satisfaction of a debt due. The parties agreed that the contract relating to the villa was governed by the law of England and Wales.
The parties disputed the terms agreed in 2008 and their later business dealings, each accused the other of lying on oath and of giving inconsistent evidence. The court focused on the oral agreement between the parties since there was no signed documentation relating to the exchange. The court accepted the evidence of the purchaser in the abandoned sale of the yacht, which was supported by contemporaneous e-mails, that the defendant had withdrawn from the sale which coloured its assessment of the defendant’s overall credibility. On the balance of probability, it was likely that the first claimant had informed the defendant of the mortgage on the yacht and that the delay in clearing the mortgage and providing the logbook did not lead to the loss of the sale.
The court also found it to be part of the 2008 agreement that title to the villa would remain in the defendant’s name, for tax reasons, since both parties envisaged that it would be sold on. This explained the need for a power of attorney so that the first claimant could direct a sale at an optimal time. The defendant’s dealings with the villa in 2013 and/or 2016 – including his dealings with the third party to diminish the debt due by the first claimant – and the sale of the property in November 2016 – constituted a breach of his obligations under the 2008 agreement by which it was intended that the first claimant and not the defendant would sell the villa to a third party.
The loss to the first claimant was the value of the property at the date of sale of €1.1m with a deduction for fees of €75,000.
Louise Clark is a property law consultant and mediator
