Contract – Disposition of land – Enforceability – Section 2(1) of Law of Property (Miscellaneous Provisions) Act 1989 – Litigation between parties settled on basis of agreement under which appellant agreeing to make payment to respondents and first respondent executing declarations of trust granting beneficial ownership of two properties to appellant and his company – Whether appellant under enforceable obligation to make payment – Whether formality requirements of section 2(1) applying to agreement – Appeal dismissed
The appellant and the respondents were members of the same family. They fell out over the running of the family business, a Sherlock Holmes museum, and became embroiled in several sets of litigation concerning the ownership of that business, the appellant’s company, and a residential property in London, W2, (Albion Mews) in which the appellant lived but of which the first respondent was the sole registered proprietor.
In April 2013, following a reconciliation between the appellant and the first respondent, the two met for lunch and discussed a possible settlement of the litigation. Immediately afterwards, the appellant sent an email to his solicitor, copied to the first respondent, recording the basis of the proposed settlement. Its terms included the payment of £1m to each of the respondents by the appellant; in return, the first respondent was to grant beneficial ownership of a property (Parkgate Road) to the appellant’s company and execute a declaration of trust in favour of the appellant in respect of the Albion Mews property.
A few days later, there was a formal document signing meeting at which the first respondent executed two deeds of trust granting beneficial ownership of the Albion Mews property and the Parkgate Road property to the appellant and his company respectively. At that meeting, the appellant paid £300,000 to the second respondent in part payment of the £1m that she was to receive. Formal consent orders were then made where necessary to put an end to the litigation.
The appellant subsequently claimed that that he was under no enforceable obligation to make any further payment to the respondents. He argued that no concluded settlement agreement had ever been reached, since there was no written contract satisfying the formality requirements of section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 for contracts for the disposition of an interest in land.
Dismissing the claim, the judge found that a binding agreement had been concluded at the formal document signing meeting, on the terms of the earlier email, for which part of the consideration was the actual execution of the declarations of trust. He held that a contract where the consideration was the actual disposition of an interest in land, rather than an agreement to dispose of the interest, did not fall within section 2(1) of the 1989 Act and that the parties’ agreement was accordingly binding. He ordered the appellant to pay £1m to the first respondent and £700,000 to the second respondent. The appellant appealed.
Held: The appeal was dismissed.
Section 2 of the 1989 Act applied only to executory contracts for the future sale or other disposition of an interest in land. It did not apply to a contract which itself effected such a disposition. There was a distinction in that regard between a contract “for” the disposition of an interest in land and a contract “of” disposition: Target Holdings Ltd v Priestley (1999) 79 P&CR 305; [999] PLSCS 87, McLaughlin v Duffill [2008] EWCA Civ 1627; [2010] Ch 1; [2009] 2 EGLR 71 and Helden v Strathmore Ltd [2011] EWCA Civ 542; [2011] Bus LR 1592; [2011] 2 EGLR 39; [2011] 33 EG 64 applied; Joyce v Rigolli [2004] EWCA Civ 79; [2004] 1 P&CR D55; 2004] PLSCS 35 distinguished.
Applying that principle, the judge had reached the right conclusion on the unusual facts which he had found. Although the settlement agreement was based on the terms of the email, the judge had found explicitly that no contract was concluded until the formal document signing meeting. On that occasion, the execution by the first respondent of the two declarations of trust was itself an integral part of the formation of the contract. The first respondent did not execute the deeds pursuant to any prior binding obligation to do so, but rather they formed part of the consideration provided by her for the obligations undertaken by the appellant. The contract was only formed once the first respondent signed the deeds. As a matter of legal analysis, the contract was formed by an exchange of promises made by the appellant in return for performance by the first respondent in the shape of her execution of the two documents.
There was no conceptual or legal reason why a contract could not be formed by the exchange of a promise for a performance. That was the essence of so-called unilateral contracts, such as where a reward was offered for the return of lost property. In such a case, the contract was formed, at the latest, on the return of the property, which constituted both the acceptance by the offeree of the offer and the furnishing of consideration for the creation of the contract. In the instant case, the first respondent had not undertaken any executory, or future, obligation to execute the two deeds. Instead, their execution constituted both her acceptance of the appellant’s offer and the consideration moving from her for his promises. As such, the agreement was one which itself included an immediate disposition of interests in land; it was not a contract for the disposition of those interests at any future time. It followed that section 2(1) of the 1989 Act did not apply to it.
Hugh Sims QC and Matthew Brown (instructed by Gordon Dadds LLP) appeared for the appellant; Neil Hext QC and Joshua Folkard (instructed by Smithfield Partners Ltd) appeared for the respondents.
Sally Dobson, barrister
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