In an acrimonious dispute between parties to a joint venture the court has considered the principles applying to “subject to contract” correspondence in Sally Elizabeth Johnson v Howard Duncan Spooner and Quay Street Limited [2022] EWHC 735 (Ch).
The case concerned the George Hotel on the Isle of Wight which was leased to the second defendant company of which the first defendant was sole director and shareholder. In 2019 the claimant agreed to invest £150,000 in return for a half share of the business. The parties soon fell out.
The first defendant argued that the claimant had orally agreed to sell her share in the business to him at a meeting on 2 July 2020 and later varied by emails headed “subject to contract” on 8 July 2020. The claimant denied that any such agreement had been reached. It was necessary for the court to examine the words and conduct of the parties to decide whether, objectively, they intended to create legal relations and had agreed upon all of the terms they regarded or the law requires as essential for the formation of legally binding relations RTS Flexible Systems Ltd v Mokerei Alois Muller GmbH [2010] UKSC 14.
On 29 June 2020 the claimant sent an offer to the first defendant headed “without prejudice offer subject to contract”. It was expressed “to settle all outstanding issues between us and… to allow both parties to move on”. The offer was for the first defendant to pay the sum of £131,000 in instalments with a list of the claimant’s personal items to be collected from the hotel immediately and for other items to be returned by 31 October 2020. The claimant and first defendant met to discuss the terms of the offer on 2 July 2020. The first defendant claimed that at the end of that meeting they agreed that the claimant would be paid the sum of £133,084 in instalments, that he handed to her a copy of the notes he had made during the meeting headed “The Deal” and that they shook hands across the table in relation to it. The claimant denied any such agreement or being handed any documentation. Subsequently, the first defendant made an increased offer and on 8 July 2020 the claimant wrote to him “I accept your offer of £135,000 subject to contract… as per the suggested schedule”.
The trial judge regarded the first defendant as fundamentally credible and preferred his version of events to that of the claimant whose evidence could only be accepted where clearly corroborated. The claimant’s position was inconsistent with late disclosure of her handwritten annotations to a document headed “The Deal” which could only have been made at the meeting on 2 July 2020. The judge was satisfied that a conclusive agreement had been reached at the meeting on 2 July 2020 and that the email of 8 July 2020 was an agreed variation: both were effective immediately. The claimant’s removal of personal items from the hotel on 4 July 2020 when she made her goodbyes to staff was also consistent with a deal having been struck.
Louise Clark is a property law consultant and mediator.
