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Cite as: [2008] EWCA Civ 442

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		Neutral Citation Number: [2008] EWCA Civ 442
		Case No: B2/2007/0058

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Wandsworth County Court
His Honour Judge Winstanley
5WT01008

Royal Courts of Justice
Strand, London, WC2A 2LL

22/05/2008

B e f o r e :

LORD JUSTICE WALLER
Vice-President of the Court of Appeal, Civil Division
LORD JUSTICE DYSON
and
SIR ROBIN AULD
____________________

Between:

	Schweppe	Appellant
	- and -
	Harper	Respondent

____________________

Socrates Papadopoulos (instructed by Sinclairs Solicitors) for the Appellant
James Holmes Milner (instructed by Messrs Slater Bradley) for the Respondent
Hearing date : 17th March 2008
____________________

HTML VERSION OF JUDGMENT
____________________

Lord Justice Waller :

This is an appeal from a decision of His Honour Judge Winstanley given on 15 December 2006. Mr Schweppe's case was that he had made an "all or nothing" contract under which he was entitled to a fee if Mr Schweppe achieved the annulment of Mr Harper's bankruptcy. The judge found that some contract had been made orally, under which Mr Schweppe would receive a fee of £50,000, but found that it was a condition of Mr Schweppe being entitled to any fee not only that Mr Schweppe would achieve annulment but also that he would find finance from a third party, a Mr MacClancy. The judge found that Mr Harper was free to "change horses at any time". He found that if Mr Harper chose to obtain his own finance the fee would not be due, and he found that any contract between Mr Schweppe and Mr Harper was terminable at will. He thus found that, although Mr Schweppe had done a great deal of work, when Mr Harper decided to try and find finance elsewhere and withdrew his instructions to Mr Schweppe, he was entitled so to do and Mr Schweppe had no claim either to £50,000 or damages.

One difficulty for the judge and this court in considering precisely what was agreed and what is the proper interpretation of what was agreed is that there are no documents passing between the parties recording the terms of whatever was offered or accepted. If anything was offered or agreed it was at meetings.

A further difficulty was that before the judge there was a fundamental conflict between Mr Schweppe and Mr Harper as to what had occurred at the meetings. Indeed Mr Harper's case was that Mr Schweppe was simply helping him as a friend; that the £50,000 discussed at a meeting on 26^th November 2003 was a loan from Mr MacClancy to be used to do some building works, alternatively it was a fee contingent on Mr Schweppe doing various things including carrying out certain building work as required by the council and successfully raising money to discharge the bankruptcy. So far as the evidence was concerned the judge resolved almost all issues in favour of Mr Schweppe, finding Mr Harper to be an unsatisfactory witness but, once the facts as to what had been offered or agreed had been identified by the judge, he still had the difficult task of deciding precisely what any bargain actually amounted to.

The decision in this case rests ultimately on what was said at a meeting on 26^th November 2003 but that needs to be seen in the context of what happened leading up to that meeting and what happened thereafter.

The facts

Mr Harper was made bankrupt on 7 October 1995 and although he was discharged from his bankruptcy on 7 June 1998 that was not the end of the bankruptcy. Mr Harper owned three properties 1 Balmuir Gardens Barnes, 79 Oakhill Road Putney, and 4 Beverly Road Barnes. These properties were vested in the Trustee in Bankruptcy but for some years the trustee did not take any steps to take possession so as to collect the rents or realise the value of the properties.

In late 2002 or early 2003 Mr Harper told Mr Schweppe about his bankruptcy, and Mr Schweppe expressed an interest in seeing if anything could be done to annul the bankruptcy and save the properties for Mr Harper. His suggestion was that the way to do this would be to obtain third party finance to pay off Mr Harper's creditors, thereby getting the properties released by the Trustee in Bankruptcy. Mr Schweppe also informed Mr Harper that he had a contact, Mr Peter MacClancy, who might be prepared to provide finance.

In April 2003 Mr Harper's trustee in bankruptcy, Isadore Goldman, began to take an interest in the three properties. Mr Harper arranged a meeting with Mr Schweppe. He asked Mr Schweppe whether he was prepared to deal with the Trustee in Bankruptcy with a view to getting the bankruptcy annulled. Mr Schweppe was prepared to do so. When asked what the fees would be, his answer was to the effect that he did not know how much work would be involved but for a straightforward annulment he estimated it would cost £5,000 to £10,000. Mr Harper agreed and instructed Mr Schweppe to work on obtaining the annulment, with the aim of preserving the three properties. At this meeting it seems there was no discussion as to precisely where any finance would come from.

Mr Schweppe did a great deal of work negotiating with the Trustee, collating details of Mr Harper's creditors and preparing accounts. Mr Schweppe concluded that to obtain an annulment between £300,000 and £390,000 would be needed, depending on the extent of the debts that could be disputed and depending on a further point as to whether statutory interest would have to be paid. In June/July Mr Schweppe revised his estimate of his likely fee to £25,000. His fee (he said) was always to be on an all or nothing basis i.e. so far as Mr Schweppe was concerned all, if he achieved annulment and (I assume) thereby preserve the three properties, nothing if he did not.

In August 2003 Mr Harper wished to take up Mr MacClancy's offer of finance and a meeting was arranged between Mr MacClancy, Mr Schweppe and Mr Harper on 16 September 2003. At that meeting Mr MacClancy outlined the terms on which he was prepared to provide finance. He did so first to Mr Schweppe and then to Mr Harper. The judge made the following findings on this aspect:-

"39. There is no doubt that the terms were discussed between Mr Schweppe and Mr MacClancy, and I shall turn to part of Mr MacClancy's statement for that. In paragraph 21 it says:

"We", that is I and Mr Schweppe, Mr Harper is not present
at this discussion - "agreed I would be paid an arrangement fee of 1% on the sum actually advanced and an interest rate of between 2% and 3% over the London Interbank Rate would be paid, the actual interest rate would depend on the amount of monies actually required to be advanced – a smaller amount would attract a higher rate, a larger amount would attract the lower rate. It was also agreed that I should agree, in lieu of repayment of the loan, that the defendant could transfer one of the defendant's properties to me, (to be subsequently identified) and I should take the transfer at a discount to its par value (to be subsequently negotiated), and that would be accepted as amounting to repayment of the loan."

"40. They had this meeting in September when they met at the pub, the only meeting when all three of them were present and, most importantly, Mr Harper was present. Mr McClancy says at paragraph 25:

"At this meeting, the proposed transaction was fully discussed. All the terms previously discussed with Mr Schweppe" – and I have just recited those – "set out above were discussed between the defendant and myself in the meeting, which lasted for an hour and a half. The defendant and I agreed all the financial terms, although I understood that the precise amount of finance which would be required would depend on the outcome of further work remaining to be undertaken by Mr Schweppe."

41. As I say, I found Mr MacClancy to be a witness of truth but at its highest his statement means that interest will be 2% or 3% above London Interbank Rate. The amount to be borrowed has to be settled, there is no discussion of an upper limit and presumably there must have been some upper limit. Mr MacClancy will have a property transferred to him but that is to be identified and, fourthly, it is to be transferred at a discount to its par value to be subsequently negotiated. So there is a great deal yet to be settled."

Problems also developed with the London Borough of Wandsworth, who began to press for the properties to be brought up to the standard required for multiple occupied premises, which Mr Schweppe again spent time dealing with.

As at October 2003 the judge summarises the position in this way:-

"14. Pausing there, and I am now in about October 2003, all matters I have mentioned so far are to be taken as findings of fact, they are not really in dispute. The one thing in my judgement that emerges is that the claimant had been doing a great deal of work for the defendant. He had started making arrangements for this third party finance through Mr MacClancy, he had had a lot of meetings with him and they had all met together in London. He had corresponded extensively with the trustee in bankruptcy and had attended a number of meetings, which you can see referred to in the correspondence. He had collated details of creditors, interest and costs with a view to assessing the sum outstanding which would be required to annul the bankruptcy, and he corresponded to an extent with creditors.

15. It is plain that, by this stage, it had gone way beyond what it might have started as: one friend helping out another. This was a business transaction now in which the claimant was aiding the defendant and had been, I find, since those letters written in April 2003. I accept the evidence that Mr Schweppe gives that, after the letters came from Isadore Goldman, he said he could not do this for nothing and, when asked about his fees, he said £5,000 or £10,000 or it might be more.

16. I reject for two reasons the defendant's assertion that the claimant was doing all this as a pal for nothing: first, the nature, extent and complexity of the work that was being done and, secondly, my general reservation, to which I shall come in greater detail, about Mr Harper as a witness on whom I can rely. He is not a witness on whom I can rely, but I shall give some detailed reasons for that."

A meeting then took place on 26 November 2003. The judge's findings as to what occurred were as follow:-

"23. This meeting of 26^th is important because it is where it is asserted by Mr Schweppe that the agreement was made over his fees. What is Mr Schweppe's evidence about that? In fact it is very brief in his statement, where he says:

"I began by saying I wanted to discuss and agree my fee. Should be £50,000. Mr Harper immediately agreed, indicating that I had done a marvellous job."

24. Mr Schweppe added in oral evidence when he was referred to Mr Harper's note "£50,000 fee agreed to end" that it was all or nothing: it was £50,000 if I completed the job. I find that what is meant by that is that completing the job was arranging the third party finance that was integral to what he was going to do. There was no question of the bankruptcy being annulled independently of the arranging of third party finance. It was a package that was being presented and his good friend, Mr MacClancy, who had lots of money, was looking around for investments in England, so the completion of the job was getting the third party finance, using it to get the bankruptcy annulled on the basis that Mr Harper still owned the properties.

25. Other things were mentioned in the defence for which Mr Schweppe may have undertaken some responsibility, but the £50,000 fee was not contingent upon them. For example, sorting things out with Wandsworth, or getting new tenants: that was a problem that needed to be sorted out along the way and with which he was helping, but it was not part of the fee work, because, if I look later at other people to whom he went for money, it was plain that the service for which he was prepared to pay a substantial fee was to get third party finance to get this bankruptcy annulled. Neither is the fee contingent upon any promise, or failure to carry out a promise, for example to pay any shortfall or mortgage on Balmuir Gardens. It is all to do with getting his bankruptcy annulled and getting the third party finance. I reject the evidence of Mr Harper for the reasons I have given that these other issues were somehow contingent upon him, being responsible for Schweppe's fees.

26. So there is the contract at its highest as put by Mr Schweppe. I accept that that degree of agreement was reached at the meeting and I accept the evidence of Mr Schweppe. If I need to give my reasons for that separately, I have already indicated that Mr Harper is an unreliable witness, he is unreliable in money matters. He was still interested in Mr MacClancy's money becoming available and prepared very readily, in my judgment, to agree to make a payment at a future time. That cost Mr Harper nothing because he knew in his own mind that, when the future date came, whether he had paid or not would be up to him.

27. The explanation that he gave about this note of a £50,000 fee agreed, in his statement at page 49 he says it was a loan from Mr MacClancy to do building work required by the London Borough of Wandsworth to Balmuir Gardens. In my judgment, you cannot apply the word "fees" to that kind of work, fees are fees. Fees are the sort of thing that Mr Schweppe would receive if he brought this job off. In any event, I did not understand why he was saying that in his statement, because in his amended defence he admits it was agreed that, if the defendant carried out works and fulfilled the agreement, including raising the money to discharge the bankruptcy, he would be paid £50,000.

28. One could go all round the houses and look at this evidence, and there you have it at the end of paragraph 2 of the defence, flatly contradicting what he says in his statement about that £50,000, it is at page 49 or paragraph 49, it is admitted in the defence. That is where we have come to as at 26 November. I accept the claimant's case about the contractual arrangements that he made with the defendant over annulling his bankruptcy. Nothing is in writing, it is all oral and I have recorded what it is: it is getting the third party finance, annulling the bankruptcy and Mr Harper retaining control of his properties."

After the meeting in November Mr Harper gave authority to various parties to deal with Mr Schweppe, including a firm, Moorhead James, who were to take proceedings to seek to achieve the annulment of the bankruptcy. Mr Schweppe continued his negotiations with the expected source of third party finance, Mr MacClancy. At a meeting of Mr Harper's creditors on 22 December 2003 the creditors refused to accept that statutory interest was not payable. Moorhead James issued an application on the statutory interest point on 16 January 2004 which was due to be heard on 9 February. Moorhead James sent some correspondence to Mr Schweppe on 10 or 11 February 2004 in relation to which Mr Schweppe telephoned Moorhead James.

It was at this moment he was informed that his authority to deal with Mr Harper's affairs had been withdrawn. He was given no reason and Mr Harper never himself contacted Mr Schweppe.

It seems that Mr Harper had in early February contacted other potential lenders. If Mr Harper did not have to pay any fee to Mr Schweppe, the terms offered by these other sources of finance were more attractive than those being suggested by Mr MacClancy.

The application for directions as to whether statutory interest was payable was heard on 18 March 2004 and the court, according to the headnote in Harper v Buchler [2004] BPIR 724, as follows:-

"Statutory interest was not a bankruptcy debt within the meaning of s.382 of the 1986 Act. For the purposes of an application for an annulment under s.282(1)(b) of the 1986 Act, it was not necessary to show payment of statutory interest in addition to the principal debts. Re a Debtor (no 37 of 1976) ex parte Taylor v The Debtor considered."

The application for annulment was heard on 4^th November 2004. On this occasion the court held as follows [see Hasner v Buchler No 2 [2005] BPIR 577 at 581] :-

"15. In those circumstances, I am concerned that, although the bankrupt would appear to be in a position to repay some of the funds, there is going to be a substantial shortfall and, of course, his proposal completely ignores statutory interest. In fact, he is not going to be helped by pursuing an annulment using funds from these sources and could place himself in a worse position.

16. In conclusion, taking account of the general principles set out by Deputy Registrar Barnett, in my judgment this is a case where it is entirely proper and appropriate for statutory interest to be paid to the creditors before an annulment will be granted. I take account of the following: (i) the creditors have had to wait a substantial period of time – some 10 years – to receive payment. (ii) This is now a solvent estate and there are more than sufficient assets available to pay all debts, costs and statutory interest. Happily for the bankrupt, during the period of time that has elapsed since the bankruptcy order, the value of the properties which form the subject matter of the estate has increased significantly. In my judgment it would be quite wrong if he alone were to benefit from that windfall. (iii) The bankrupt's conduct is open to criticism, he has failed to co-operate fully with his trustee and has failed to deal with his tax returns. (iv) The introduction of third-party funds would seem inappropriate when the assets, if realised, would be sufficient to pay all debts, costs and statutory interest.

17. I am not prepared to exercise my discretion in the bankrupt's favour to grant an annulment. In my judgment any compromise must take account of statutory interest, which shall be paid from the date of the bankruptcy order. This application for an annulment is dismissed."

Thus some criticisms were made of the conduct of Mr Harper but key was the fact that sufficient finance had not been arranged to cover statutory interest and the application for annulment failed at this stage.

In 2005 the Trustee in Bankruptcy obtained possession of one of the properties and sold it. On 21^st March 2005 Mr Schweppe commenced these proceedings claiming a fee of £50,000, alternatively damages.

Ultimately Mr Harper made a successful application for annulment on 22 December 2006.

The judge's analysis

. . .

35. The claimant and defendant, as I have said, entered into a contract for services that had existed since April. Its terms in themselves firmed up as they went along and by 26 November those terms had become that the defendant would pay the claimant £50,000 on completion of the task: third party finance, annulling the bankruptcy and Mr Harper retaining the properties.

. . .

43. Mr Schweppe, by leaving matters on that oral basis from the meeting, left himself open to the contractual possibility that Mr Harper would change horses at any time before the deal was concluded. Everyone was aware there was pressure from the trustee in bankruptcy to conclude the deal, and there was nothing to prevent Mr Harper from doing this.

44. The only piece of law to which I have been referred that, in my judgment, bears on this in any particular way is in implied terms Mr Blakey has argued for and expressed the parties would co-operate towards obtaining the annulment, and neither party would prevent the other from performing the agreement. If it is left open, if you are not tied by a term of the contract to remain, one could see, for example, to suggest a term that Mr Harper was irrevocably tied to the contract in some way is a term of the contract one would not begin to imply. These are circumstances in which, in ending his arrangement with Mr Harper, he was doing no more than he was entitled to do under the contract and that is exactly what he did.

45. We can see from the facts that he went to Mr Krikorian, whom I have already mentioned, to try to realise a loan from another source to pay off his creditors. That did not work and he went to someone else. Any talk of reasonableness of notice, in my judgment, just does not enter the situation here, because what Mr Schweppe had prepared and put forward never amounted to any definite proposal for the defendant to accept. I have said that third party finance was an integral part of the package for which he was being paid the fee of £50,000. If it was not, he might just as well have used some solicitors but, back to the money situation, there was no binding contract for a loan from Mr MacClancy and no final agreement. It was just a proposal.

46. I shall add here that I reject Mr Harper's evidence when he says that he knew in February that Mr MacClancy would not lend, he had heard from someone that he was interested in a property. Mr MacClancy wrote a letter much later, I believe on 23 September 2004. To a certain extent, it is self-serving, he admitted that he wrote it at the request of Mr Schweppe, but that letter was written to bring matters to an end. That was its purpose at that time, and I reject Mr Harper's evidence that somehow in general terms the money was not available in February. It was available, I have found already, but there was no legally binding agreement to provide it, no terms agreed. In those circumstances, Mr Schweppe left himself open to Mr Harper withdrawing at any time. He could have protected himself by a contractual arrangement but did not. My finding is that he did not even think about it at the time, he did not consider those circumstances, and he has to bear the consequences of that.

47. Therefore, I reject any suggestion that there are terms to be implied in this contract. It has a way of working without the necessity of implying terms. It is just that Mr Schweppe put himself under the burden of bringing off a deal that was acceptable to Mr Harper before anyone else, and he simply was not able to do that. In the terms of this particular contract, therefore, he is not entitled to his money."

The judge seems to initially accept there was a contract for services, i.e. a bilateral contract, but appears, ultimately, to be holding there was no contract at all and would have been no contract until completion of "the deal".

Appellant's submissions

In relation the judge's analysis Mr Papadopoulos submitted that the judge has found a bilateral contract. He however submitted that the judge had made various errors. The first, and most important error, lay in failing to appreciate that, although (as Mr Schweppe accepted) the obtaining of the annulment was a condition precedent to entitlement to the fee, the same was not true of the obligation on Mr Schweppe to raise finance from Mr MacClancy or indeed any third party. Mr Papadopoulos excused the fact that the way he was putting the case in the Court of Appeal may have been different from the way it was argued at the trial, on the basis that it had never been suggested to Mr Schweppe that the raising of finance was a condition precedent to entitlement to the fee. He accepted that it was always contemplated that Mr Schweppe would seek third party finance and that the fact he was doing so had a bearing on the increase in his fee. But, he submitted, there was a distinction between it being in contemplation that Mr Schweppe would go out and obtain third party finance, and it being a condition precedent to payment of the fee that he would obtain third party finance, assuming he could obtain annulment either without finance or on finance obtained by Mr Harper himself. In particular, he submitted, it cannot have been intended by the parties that Mr Harper would be free to prevent Mr Schweppe earning his fee by simply going off and arranging his own finance.

Errors two and three by the judge as identified by Mr Papadopoulos flowed, he submitted, from the first. Error two was to refuse to imply a term that Mr Harper would co-operate and/or would not prevent performance. How (Mr Papadopoulos asked rhetorically) could it be contemplated as being agreed between the parties that Mr Harper should be entitled to take the benefit of all the work performed by Mr Schweppe but frustrate the earning of the fee by an eleventh hour taking of finance from some third party ? As to the implied term relating to co-operation Mr Papadopoulos relied on Mackay v Dick (1881) 6 App Cases 251; as to an implied term not to prevent performance he relied on Stirling v Maitland (1864) B & S 841.

Mr Papdopoulos spelt out the claimant's case at trial as to the terms of the bilateral agreement which was said to have been concluded (which as I understand it remained his case before us ) in the following terms:-

"32. At the hearing the claimant's case was that:

a) At the April 2003 meeting, it was agreed that the claimant would deal with the trustee in bankruptcy, and work towards obtaining an annulment of the defendant's bankruptcy, for a reasonable fee.

b) At the 26 November 2003 meeting it was agreed that the claimant's fee would be £50,000 up to the end of the annulment

c) It was always understood that the claimant's fee would be an all or nothing fee – it would only be payable if the annulment was achieved.

d) It was an express, alternatively an implied term of the agreement that:

(i) The parties would co-operate towards obtaining the annulment; and

(ii) Neither party would prevent the other from performing the agreement.

e) In breach of the terms set out above, the defendant dismissed the claimant in mid February 2004, thus preventing him from securing the annulment on the defendant's behalf. Therefore the fee of £50,000 was payable.

f) If the claimant had not been dismissed, the annulment would have been secured, and the claimant would have earned his £50,000 fee."

Respondent's submissions

Mr Holmes-Milner in his skeleton concentrated on an argument that there was no room for incorporation of implied terms. But in oral argument his response was to take us to the findings of the judge quoted above. His submission was that, in reality, the judge was finding no contract at all. He submitted that Mr Harper was simply making an offer to pay a fee if a certain set of circumstances came to fruition. That, in Mr Holmes-Milner's submission, was an offer that Mr Harper was free to withdraw at any time before Mr Schweppe had completed the tasks. Mr Harper was furthermore entitled to make his offer to pay a fee, conditional on Mr Schweppe providing third party finance acceptable to him, and free to reject that finance and thus be under no liability to pay any fee to Mr Schweppe. He submitted the arrangement was more akin to the estate agent cases exemplified by Luxor v Cooper [1941] A.C. 108. As Mr Holmes-Milner put it, just as in such cases agents are in a race as to who can get a purchaser; so in this case Mr Schweppe was in a race to provide finance acceptable to Mr Harper and to obtain an annulment based thereon and if he failed, he did not earn his fee.

Discussion

The first question is whether there was any contract made between Mr Schweppe and Mr Harper and if so what kind of contract. The judge, as I have already said, at one stage refers to there being a contract for services which would involve promises on both sides but in other areas appears to treat what happened in November 2003 as simply amounting to an offer which Mr Harper was free to withdraw at any time.

The choice obviously lies between (i) Mr Harper making an offer which could be withdrawn at any time; (ii) a unilateral contract under which Mr Harper had made an offer to pay a fee if Mr Schweppe performed a task and which Mr Schweppe had accepted by conduct resulting in Mr Harper having no right to withdraw the offer, even if performance had not been completed; or (iii) a bilateral contract of services containing mutual promises. So far as a bilateral contract is concerned no-one has suggested that Mr Schweppe was promising in absolute terms to obtain an annulment or indeed promising in absolute terms to obtain third party finance, for failure to do either of which he would be liable in damages to Mr Harper.

The highest it could be put, if it were to be suggested that Mr Schweppe was making a promise of some kind (and this I understand to be Mr Papadopoulos' case), is that for a fee he undertook an obligation to use reasonable endeavours to obtain the annulment, which would either by implication or expressly include an obligation to obtain third party finance and/or an obligation to negotiate with creditors and/or negotiate with Mr Harper's trustee, but the fee would only be due if he achieved annulment.

The judge's findings ultimately seem to me to support the view that what occurred at the meeting was that Mr Schweppe was not actually promising to do anything in the sense of rendering himself liable if he did not pursue the obtaining of Mr Harper's annulment. The judge's view would seem to be that an offer was being made capable of acceptance but not through some promise by Mr Schweppe. Accordingly I propose first to consider whether on the basis that Mr Schweppe did not promise to do anything there came into existence what is called a unilateral contract.

If Mr Schweppe was not promising to do anything then his entitlement to a fee would depend on whether there was an offer by Mr Harper to pay a fee if Mr Schweppe performed some task, and either he had performed that task or, if not, [and this does not appear to have been considered as a possibility by the judge] whether he had by conduct performed the task to such an extent that a contract came into existence precluding Mr Harper from withdrawing the offer.

That requires to be considered first, precisely for what task Mr Harper was offering to pay £50,000 to Mr Schweppe and second, since it is common ground that Mr Schweppe did not complete performance following termination of his instructions, whether a contract ever came into being as a result of part performance, so as to preclude Mr Harper being entitled to withdraw the offer other than for breach or abandonment of the task by Mr Schweppe.

What task did Mr Schweppe have to perform to earn his fee? Mr Schweppe's evidence in chief was that what he had to achieve to earn the fee was the annulment of the bankruptcy and (although not explicit) thereby preserve the three properties for Mr Harper. The judge's view was that to earn the fee it was a condition that he had to produce the third party finance; indeed on one reading of the judge's judgment third party finance from Mr MacClancy.

For reasons which appear hereafter it may not matter whether the judge was right or wrong on this question but, since I do not think that the judge was right in so finding, I will state my reasons for disagreeing. First, if the judge was right then, if the sequence of events had been that Mr Harper had notified Mr Schweppe that he had his own finance but had not terminated Mr Schweppe's authority to proceed to obtain the annulment and with the use of that finance Mr Schweppe had obtained the annulment, still no fee would have been payable. That seems to me an unlikely construction of whatever bargain was made. Secondly, it seems to me that the obtaining of finance was only one of the things it was contemplated that Mr Schweppe would be likely to do in order to obtain the annulment. He would negotiate with the creditors and prepare accounts and, on the basis that he made no promise to actually do anything, he was free to do whatever he liked to try and achieve an annulment. It is unlikely that one aspect other than the achievement of the ultimate goal of annulment would be a condition precedent to entitlement to the fee. Even if it was part of the package, as the judge found that Mr Schweppe should produce the finance, it does not actually follow that the production of that finance was a condition precedent to payment in the sense that entitled Mr Harper to obtain finance elsewhere so as to be free of an obligation to pay a fee. It may have been a condition of the offer that Mr Schweppe should attempt to produce finance or actually produce finance acceptable to Mr Harper, failure to do which might have entitled Mr Harper to revoke the offer. That is producing something close to a bilateral contract (which I will consider hereafter), breach of which may entitle Mr Harper to terminate. But in this case there is no suggestion that Mr Schweppe was failing to provide the finance or that he had completed the task of producing a financial package for Mr Harper to consider– all that can be said is that the terms of any finance produced by Mr Schweppe had not been finally agreed.

It is also of significance that the obtaining of the third party finance seems not to have even been raised in April 2003 as something which was relevant to Mr Schweppe's entitlement to a fee. Furthermore it was apparently never put to Mr Schweppe in cross examination that anything other than annulment was a condition precedent to entitlement to the fee.

In my view, on the basis that no promise was being made by Mr Schweppe, the proper interpretation of what occurred at the November meeting was thus that Mr Harper was offering to pay £50,000 if Mr Schweppe achieved the annulment of the bankruptcy. It may have been understood that Mr Schweppe would continue to try and arrange finance in the same way as he would continue to negotiate where necessary with Mr Harper's creditors or his trustee in bankruptcy but in essence he was free to achieve the annulment in any way he could.

It would not, I think, be disputed that if Mr Schweppe achieved the annulment he would be entitled to his fee. I would furthermore add that I do not think it would be disputed that if it was a condition precedent that Mr Schweppe obtain third party finance, if he did so he would be entitled to his fee. Thus an offer was being made which was capable of acceptance.

However that leaves the critical question as to whether whatever offer was being made for whatever task it could be withdrawn at any time prior to completion of the task, i.e. whether there came into existence prior to completion of any task a unilateral contract. Even if it was part of the task that Mr Schweppe obtained third party finance acceptable to Mr Harper, the question would still arise as to whether there came into existence a unilateral contract preventing the offer being withdrawn in February 2004. Before examining that question, I should revert to the possibility that there was a bilateral contract.

The alternative to a unilateral contract is that there was a bilateral contract under which Mr Schweppe did promise to do something. This would elevate the understanding of the tasks which Mr Schweppe was expected to perform to obtain an annulment into promises that he would take all reasonable steps to obtain annulment including obtaining third party finance, negotiating with the creditors, etc, into a term of a contract so that if Mr Schweppe failed to do what it was understood he would do the contract could be terminated. If this was the proper interpretation of what was agreed it seems to me that the case for implying terms as to co-operation becomes more powerful but that hardly matters because on any view Mr Harper would not be entitled to withdraw his instructions unless Mr Schweppe had repudiated the contract by failing to perform his promises. There is no suggestion that Mr Schweppe was failing to perform when his instructions were withdrawn. On this interpretation Mr Schweppe would have a claim to damages on the basis of the repudiatory breach of contract when his instructions were withdrawn.

There is force in Mr Papdopoulos' submission that a bilateral contract of service was entered into. If so, that would provide a straightforward answer to the case, but that was not the finding of the judge and it is right that I should consider the matter on what I believe to be the judge's view, that there were no mutual promises as at November 2003.

On the basis that the proper interpretation of what occurred at the November meeting imposed no obligations on Mr Schweppe, the position is as follows. He had an offer from Mr Harper to pay a fee if he performed a certain task. The question is whether Mr Harper was free to withdraw that offer at any time before the task or tasks were performed.

This was not fully explored before us and may not have been explored before the judge. The following paragraphs of Chitty 29^th Edition provide the clearest guidance.

"2-076 Introduction An offer of a unilateral contract is made when one party promises to pay the other a sum of money (or to do some other act, or to forbear from doing something) if the other will do (or forbear from doing) something without making any promise to that effect: for example where A promises to pay B £100 if B will walk from London to York or find and return A's lost dog or give up smoking for a year. The contract in these cases is called "unilateral" because it arises without B's having made any counter-promise to perform the stipulated act or forbearance; it is contrasted with a bilateral contract under which each party undertakes an obligation. The distinction between the two types of contract is not always clear-cut.; but once a promise is classified as an offer of a unilateral contract, a number of rules apply to the acceptance of such an offer. First, the offer can be accepted by fully performing the required act or forbearance. Secondly, there is no need to give advance notice of such acceptance to the offeror. Thirdly, it is probable that the offer can be accepted only by some performance and not by a counter-promise, since such a counter-promise would not be what the promisor had bargained for. And fourthly, the offer can, like all offers, be withdrawn before it is accepted. It is the application of this fourth rule which gives rise to the greatest difficulty, for it raises the question of exactly when acceptance of such an offer can be said to have occurred.

2-077 Acceptance by part performance. It is disputed whether an offer of a unilateral contract can be withdrawn after the offeree has partly performed the stipulated act or forbearance. The first question (to be discussed here) is whether at this stage the offeree has accepted the offer; the second (to be discussed in Chapter 3) is whether he has provided any consideration for the offeror's promise. With regard to the first question, one possible view is that there is no acceptance until the stipulated act or forbearance has been completely performed. This may, indeed, be the position where it is the intention of both parties that, until then, the offeror should have a locus poenitentiae. But in most cases the offeree will not intend to expose himself to the risk of withdrawal when he has partly performed and intends to complete performance. It is now generally accepted that a distinction, originally put forward by Sir Frederick Pollock, is to be drawn between the acceptance of an offer and the conditions which have to be satisfied before the offeree can enforce the promise contained in the offer. In a unilateral contract the offeree is not entitled to enforce the promise until the performance is complete. But the acceptance generally takes effect as soon as the offeree has made an unequivocal beginning of the requested performance, so that thereafter the offeror cannot revoke. Of course it may be difficult in fact to tall when performance has begun, particularly where the offer amounts to a promise in return for an abstention. But if the conduct of the offeree goes beyond mere preparation to perform, and amounts to actual part performance, then the offeror cannot, as a general rule, withdraw."

The reference to chapter 3 is to paragraph 3-168 which is in the following terms:-

"Unilateral contracts. In the case of a unilateral contract, the promise clearly provides consideration if he completes the stipulated act or forbearance (such as walking to York, or not smoking for a year). This amounts in law to a detriment to the promisee; and the promisor may also obtain a benefit: e.g. where he promises a reward for the return of lost property and it is actually returned to him. It was suggested in Chapter 2 that commencement of performance can amount to acceptance of an offer of a unilateral contract, and it is submitted that such commencement can also amount to consideration; for it may in law be a detriment to the promise to walk only part of the way to York or to refrain from smoking for part of the year. Difficult questions of fact may, indeed, arise in determining whether performance has actually begun and whether such a beginning was made "on the strength of" a promise. This is particularly true where the stipulated performance was a forbearance; but if an actual forbearance to sue can constitute good consideration, it must in principle be possible to tell when a forbearance has begun. Thus commencement of performance (whether of an act or of a forbearance) may provide both an acceptance and consideration and may accordingly deprive the promisor of his right to withdraw the promise. Of course, the promisor's liability to pay the amount promised (e.g. the £100 for walking to York) does not accrue before the promise has fully performed the required act or forbearance. The present point is merely that, after part performance by the promise, the promisor cannot withdraw with impunity."

The real point which seems to me to arise is whether the parties would have intended that Mr Harper would have a "locus poenitentiae", i.e. a right to withdraw his offer at any time, even if Mr Schweppe had performed much work towards achieving completion of the task or tasks. I say that is "the real point" because the arguments for there being intended to be such a right encompass other points which could be said to arise. In order for Mr Schweppe to achieve the annulment he needed the co-operation of Mr Harper. If Mr Schweppe negotiated third party finance it still had to be acceptable to Mr Harper. If it was contemplated that Mr Harper was to be completely free to turn down third party finance however good the offer obtained by Mr Schweppe and/or if it was contemplated that at any time right up to the moment of obtaining the annulment he could act in a way which prevented the annulment being obtained, there would be some force in the argument that he was at all times to be free to withdraw instructions and thus the offer.

If Mr Schweppe had not in fact done any work and thus not provided any consideration for the offer, I can accept that Mr Harper should be entitled to withdraw the offer, but what I cannot accept is that Mr Harper should be free to watch Mr Schweppe work once the offer has been made, take advantage of the work done, continue to seek an annulment and in those circumstances withdraw the offer. Even if it was a condition that Mr Schweppe should find third party finance to be entitled to his fee, if he had found terms that were reasonable, in my view Mr Harper would not have been entitled to reject that finance in order effectively to frustrate the offer.

The law surely should not countenance what would in effect be sharp practice unless driven to do so. If one takes the simple example, if A offers to pay £1000 if B walks from London to York, A should not be entitled to withdraw that offer once it is realised B is within very few miles of York. Furthermore, if as part of the offer A says "once within 10 miles you will have to paint the mile stones in a colour acceptable to me", A should not be entitled to act unreasonably in relation to the selection of colours so as to make completion of the task impossible.

Where there is an offer to pay for the performance of a certain task, part performance can produce a contract under which that offer cannot be withdrawn. That should be the more so where there has not only been part performance but there is a real benefit being accepted by the offeror from that part performance. In such a case the court should be reluctant to find that the offeror has reserved a right to withdraw the offer after part performance.

It seems to me that in this case Mr Schweppe had performed much of the work required to achieve annulment by February 2004; he was within a very few miles of York. Even if in addition it was a condition that he should find finance, he had not been given an opportunity to provide finance, i.e. finance which, if acting reasonably, Mr Harper would have been bound to accept. In my view therefore even if there was no bilateral contract as at November 2003 there was thus by February 2004 a contract under which Mr Schweppe was entitled to continue do what he could to achieve the annulment of Mr Harper's bankruptcy and under which Mr Harper was bound to co-operate to enable that to be done.

If it were necessary to do so I would find that even if the obtaining of finance was a condition precedent to receipt of a fee that Mr Harper was not free to withdraw instructions and terminate what by then was a contract as at February 2004.

It follows, as it seems to me that Mr Harper's conduct in seeking to terminate at will was a repudiatory breach of contract. That would be so if there was a bilateral contract concluded in November 2003 or whether what was made then was a unilateral offer accepted by conduct prior to February 2004. It seems that Mr Schweppe felt forced to accept the position and that that repudiation was accepted. Even if that is not a fair interpretation of events in February 2004, by the issue of the proceedings prior to the annulment ultimately being achieved that repudiation was accepted.

Damages

What then are the damages? Mr Papadopoulos submitted that Mr Schweppe is entitled to his fee of £50,000. He relied on Mackay v Dick. That was a case where there was a bilateral contract under which a piece of machinery had been sold. It was sold subject to being tested at site and the purchaser frustrated the test by not supplying the area of land on which the test could be carried out. The court held the whole price due.

Mr Papadopoulos gets some support from paragraph 2-084 in Chitty:-

"Extent of liability. It is generally assumed that, where a unilateral contract takes the form of a promise to pay money, an offeror who purports to withdraw after part performance by the offeree must either be liable in full or not be liable at all. There is, however, also an intermediate possibility. If, for example, the offer is withdrawn after the offeree has walked half-way to York, it is arguable that, on being notified of the withdrawal, he should desist and recover damages amounting to his expenses, or to the value of the chance of completing the walk, less the expenses which he would incur in that process."

Mr Holmes-Milner submitted that if there was a breach of contract, any damages must be assessed on the basis of a loss of a chance.

In my view Mr Holmes Milner is right on this aspect. This is not a Mackay v Dick case. The question whether Mr Schweppe would have earned his fee was dependant on the hypothetical acts of third parties in the sense used in Allied Maples v Simmons & Simmons [1989] 1 WLR. His brief was to obtain an annulment and, an annulment which preserved the three properties. The ultimate annulment did not do so. Whether the fee would ultimately have been earned would have depended on the raising of sufficient third party finance the negotiations for which were not complete by February 2004. The court in November 2004 in any event emphasised the discretionary nature of annulment and relied at least in part on acts of the bankrupt over which Mr Schweppe had no control in refusing an annulment at that stage. It cannot be certain that, simply because Mr Schweppe had been involved, an annulment would have been achieved so as to preserve the three properties.

If the sums involved in this case had been more substantial one might have contemplated sending the matter back, so that the loss of a chance could be assessed by the fact finding tribunal. But it would not be right to expose the parties to a further round of legal costs if that can be avoided. In my view we ought to do our best to assess the chance of Mr Schweppe achieving annulment if matters had continued without his instructions being withdrawn. The chances were clearly substantial but I do not think it can be put higher than 50% and I would award Mr Schweppe 50% of the fee, i.e. £25,000.

I would allow the appeal and award damages in that sum.

Lord Justice Dyson:

There is no doubt that the judge found that an agreement was made between the parties on 26 November 2003. It is necessary to decide whether the agreement was a binding contract and, if so, whether Mr Harper was permitted to terminate it before Mr Schweppe had applied for, let alone, obtained an annulment of the bankruptcy. Waller LJ is of the opinion that the agreement was either a bilateral or a unilateral contract. For the reasons that follow, I consider that the agreement was not a contract at all.

I propose to start with what was agreed. The judge's findings are to be found in paras 24 and 28 of his judgment. The core provision of the agreement made at the meeting of 26 November 2003 was that Mr Harper would pay £50,000 in consideration of Mr Schweppe obtaining the annulment. But at para 24, the judge found that "completing the job was arranging the third party finance that was integral to what he was going to do". Completion of the job "was getting the third party finance, using it to get the bankruptcy annulled on the basis that Mr Harper still owned the properties". At para 28 (again with reference to what was agreed on 26 November 2003), he said that the contractual arrangements were "getting the third party finance, annulling the bankruptcy and Mr Harper retaining control of the properties". At para 45 he reiterated that "third party finance was an integral part of the package for which he was being paid a fee of £50,000".

Mr Papadopoulos accepts that it was contemplated by the parties that the finance would be obtained by Mr Schweppe, but he submits that it was not a term of the agreement that he was obliged to obtain it. He says that Mr Harper was entitled to obtain the finance and that the judge was wrong to assume or infer that the finance had to be obtained by Mr Schweppe.

In my judgment, the judge was entitled to find that it was agreed that Mr Schweppe would obtain the finance as a necessary step to performing the core obligation of securing the annulment. Since finance from Mr Schweppe's friend Mr MacClancy was in the offing, it is not at all surprising that it was agreed that Mr Schweppe would be responsible for obtaining the necessary finance. The obtaining of finance was a fundamental element of the agreement. Without it, there could be no annulment. The agreement was that Mr Schweppe (and he alone) would obtain it.

Waller LJ has said at [33] that the judge was wrong to find that it was a condition of Mr Schweppe's entitlement to the fee that he had to obtain the finance. He suggests that this cannot be right because it would mean that no fee would be payable even if Mr Harper had told Mr Schweppe that he had his own finance and Mr Schweppe had gone on to obtain the annulment on the basis of that finance. I do not consider that this casts doubt on the judge's finding. It seems to me that in the situation postulated by Waller LJ, it would not be difficult to find that there had been an implied variation of the agreement or a waiver by Mr Harper of the right to insist on Mr Schweppe obtaining the finance as a condition of his entitlement to the fee. It is true that the obtaining of finance was only one of the things it was contemplated that Mr Schweppe would be likely to do in order to obtain the annulment. But it was fundamental and that fact does not cast doubt on the judge's finding.

Was the agreement a binding contract? At para 46 of his judgment, the judge said that finance was available in February 2004, but there was no legally binding agreement with Mr MacClancy to provide it, since terms had not been agreed. He continued: "In those circumstances, Mr Schweppe left himself open to Mr Harper withdrawing at any time. He could have protected himself by a contractual arrangement but did not". I take this to mean that the judge was of the view that there was no contract between Mr Schweppe and Mr Harper, although in para 47 he rejected any suggestion that there were terms to be implied "in this contract".

At all events, the question whether the agreement found by the judge was a contract is an issue of law which must be determined by this court. In my judgment, in the light of the judge's findings, this was a bilateral contract or no contract at all. I do not see how this can have been a unilateral contract. As the passages from Chitty quoted at [41] above show, a unilateral contract is made when A makes a promise to B to pay a sum of money (or do some other act or forbear from doing something) if B will do or forebear from doing something without B making any promise to that effect. It is unilateral because it arises where B does the stipulated act or forbearance without making any promise to do so. But on the judge's findings, this is a case of mutual promises: in return for Mr Harper's promise to pay £50,000 if Mr Schweppe obtained the annulment, Mr Schweppe promised to arrange the necessary finance and obtain the annulment.

In any event and more fundamentally, a unilateral contract cannot come into existence if A's promise is too uncertain to found a contract any more than a bilateral agreement between A and B can be a contract if it is too uncertain.

In my judgment, the central issue in this case is whether the bilateral agreement which the judge found to have been made was too uncertain to be a contract. There are two different ways in which this issue may arise on the facts of this case. First, it may be said that the agreement was too uncertain to be a contract, because the terms of the finance to be obtained were not agreed and, since Mr Harper as the borrower had not agreed what terms would be acceptable to him, that of itself rendered the agreement too uncertain to be a contract. The second way in which the issue may arise proceeds on the basis that the agreement was subject to a condition precedent that finance would be obtained by Mr Schweppe. Where an agreement is subject to a condition precedent, there is before the occurrence of the condition precedent no duty on either party to render the principal performance promised by him: see Chitty para 2-145.

Although what I have described as the core provision of the agreement was that Mr Schweppe would obtain an annulment of the bankruptcy order, I agree with Waller LJ that the obligation cannot have been more than an obligation that he would use reasonable endeavours to obtain an annulment. He could not guarantee success, not least because the grant of an annulment was a matter for the exercise of the court's discretion under section 282(1)(b) of the Insolvency Act 1986. That is well demonstrated by the facts of this case: on 4 November 2004 an application to annul the bankruptcy order was refused. Provided that Mr Schweppe used reasonable endeavours to obtain an annulment, he was not in breach of contract (if there was a contract). Moreover, since no time had been agreed within which Mr Schweppe was to obtain the annulment, if there was a contract it must have been subject to an implied term that he would carry out his obligations within a reasonable time.

In important respects, this agreement is similar to an agreement for the sale of land "subject to finance". In Lee-Parker v Izzet (No 2) [1972] 1 WLR 775, there was an agreement for the sale of a house "subject to the purchaser obtaining a satisfactory mortgage". Goulding J held that this condition was a condition precedent to the existence of a binding contract and that the condition was void for uncertainty. He said at p 779H that the concept of a satisfactory mortgage was too indefinite to be given any practical meaning. "Everything is at large, not only matters like the rate of interest and ancillary obligations on which evidence might establish what would be usual or reasonable, but also those two most essential points---the amount of the loan and the terms of repayment".

It seems to me that, although the agreement in the present case was not expressed as an agreement subject to a condition precedent, in substance that is what it was. The finance was a necessary, but not sufficient, condition of obtaining the annulment. Mr Papadopoulos submits that the loan was incidental to the annulment: the agreement was to obtain the annulment, not to obtain the finance. I have described the obtaining of the annulment as the "core" obligation. But the finance was an essential element of what the judge described as "the package" that the parties agreed that Mr Schweppe would provide. Without the finance, the annulment could not be obtained.

The details of the finance that would be required to obtain the annulment were not agreed at the meeting of 26 November. Nothing had been agreed about the amount that Mr Harper would need or wish to borrow, any arrangement fee, the rate of interest or the period of the loan or loans. It follows that in order to obtain the necessary finance, Mr Schweppe would have to procure an offer or offers from Mr MacClancy or somebody else and Mr Harper would have to a accept the terms that were offered. Until this was done, the condition of obtaining finance would not be satisfied.

Mr Papadopoulos concedes at paragraph 51 of his skeleton argument that, if the agreement was that Mr Schweppe would only be paid if particular finance was taken up and the detailed terms of that finance had not yet been finalised, then Mr Harper could walk away at any time because he had no obligation to agree any particular terms. He accepts that to imply a term that Mr Harper would co-operate with Mr Schweppe and would not prevent him from earning his fee would be inconsistent with the basic fact that Mr Harper had no obligation to agree to the terms of the finance. The reason why Mr Papadopoulos submits that this concession is not fatal to his case is that he says that this was not an agreement to provide finance at all.

I agree with him that an implied term that Mr Harper would not do anything to prevent Mr Schweppe from obtaining the annulment (and thereby earning his fee) would be inconsistent with the fact that the operation of the agreement was dependent on Mr Harper's satisfaction with the finance. As is stated at para 2-149 of Chitty: "The implied term [not to prevent the occurrence of the condition] can also be excluded by an express contrary provision, and, in particular, by a provision making the operation of a contract depend on the "satisfaction" of one of the parties with the subject-matter or other aspects relating to the other's performance". Examples are given, including Lee-Parker's case.

Sometimes it is said that a "subject to satisfaction" condition requires the discretion to be exercised in good faith. It will be a matter of construction of the particular agreement. It may also be possible in some cases to say that there is an implied term that the satisfaction will not be unreasonably withheld. At [44], Waller LJ says that, even if it were a condition that Mr Schweppe should find third party finance in order to be entitled to his fee, if he found finance on terms that were reasonable, Mr Harper would not be entitled to reject it in order effectively to frustrate the offer. I understand this in substance to mean that, if (as I have held) this was a bilateral agreement, it was subject to an implied term that Mr Schweppe would provide reasonable finance or finance on terms to which Mr Harper could not reasonably object.

But this is not how the case was put by Mr Papadopoulos and it is inconsistent with the concession to which I have referred. In any event, I consider that it is not possible to imply such a term. The concept of reasonable finance is too uncertain to be given any practical meaning. The reasoning of Goulding J in Lee-Parker's case is applicable. It is impossible for a court to determine the amount of loan and the terms of repayment that would be reasonable for Mr Harper to accept.

I should add that the fact that by February 2004 Mr Schweppe had done a good deal of the work required to achieve the annulment is not relevant. The question whether the bilateral agreement which the judge found to have been made on 26 November 2003 was a binding contract must be judged by reference to what was then agreed. Either it was sufficiently certain at that time or it was not.

In my judgment, it makes no difference to the result in this case whether the correct analysis is (i) that the condition was too uncertain to render the agreement a contract or (ii) that there was no contract until the condition was satisfied. For the reasons that I have given, I would hold that this agreement was too uncertain to be a contract.

This conclusion is not one to which I come with any enthusiasm. It is unattractive for the reasons that Waller LJ gives. But Mr Schweppe could have protected himself by stipulating that he should be given a certain time to do the work during which time his retainer could not be terminated. He would also have had to tighten up the provisions relating to the obtaining of finance to ensure that Mr Harper could not unreasonably refuse an offer of finance. As it is, he did not protect himself and (in return for the possible receipt of a substantially increased fee) took the risk that he would do a substantial amount of work for the benefit of Mr Harper and yet be prevented from completing the task and earning his fee.

I would dismiss this appeal.

Sir Robin Auld :

In the light of His Honour Judge Winstanley's unchallenged primary findings of fact, the fundamental question posed by this appeal is whether there was sufficient certainty of terms for the oral arrangement entered into by Mr Harper and Mr Schweppe at their meeting on 26^th November 2003 to give rise to a contract, whether bilateral or unilateral. It is common ground that what went on before that meeting, including much of the valuable work that Mr Schweppe had previously undertaken at Mr Harper's request towards securing annulment of the latter's bankruptcy is irrelevant, save to give context to the arrangement. On the Judge's finding, it was an all or nothing understanding that, if Mr Schweppe completed the task of securing the annulment by arranging third party finance critical to it, Mr Harper would pay him £50,000. As the Judge put it, in paragraphs 25 and 26 of his judgment:

"25 ... it was plain that the service for which ... [Mr Harper] was prepared to pay a substantial fee was to get third party finance to get this bankruptcy annulled. ... It is all to do with getting his bankruptcy annulled and getting the third party finance.

26. So there is the contract at its highest as put by Mr Schweppe. I accept that that degree of agreement was reached at the meeting and I accept the evidence of Mr Schweppe."