England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM YORK COUNTY COURT
HIS HONOUR JUDGE IBBOTSON

		Royal Courts of Justice Strand, London, WC2A 2LL
		3rd March 2010

Sir Richard Buxton:

1. This is an appeal from a decision of HHJ Ibbotson in the York County Court entered last April. It concerns a dispute between two gentlemen, the defendant in the court below and the appellant here, Mr Lane, and the claimant in the court below the respondent here, originally Mr ESP Robinson, who has regretfully died since the events that gave rise to these proceedings. He is represented now by his executors.
2. In the court below Mr Lane acted for himself. Mr Robinson's interests were represented by his solicitor. Before us we have had the benefit of submissions by Mrs Nicola Preston on behalf of the respondent, to which I will come in due course. For a considerable time it appeared that the appellant, who became an appellant in circumstances which I shall in due course explain, was going to represent himself here also. Very fortunately, though, we have had the benefit of submissions by Mr Matthew Slater acting pro bono and instructed by the Bar Pro Bono unit, and we thank all of those who are responsible for those arrangements. I myself have no doubt at all that the conduct of this appeal has been materially assisted by having the advantage of professional representation on both sides.
3. It is perhaps important to note that the substance of the dispute between HHJ Ibbotson was not the possibly somewhat recondite issues of law that appeared in the case before us, but very largely a factual dispute as to whether or not certain agreements had been entered into at all. The judge heard evidence from those concerned and made findings which, although Mr Lane sought to appeal to this court, were clearly not challengeable and no permission has been given for them to be considered.
4. The agreements that the judge found to have entered into can be described as follows. This is largely taken from his summary of his findings, very clearly and helpfully set out in paragraph 14 of his judgment. Mr Lane owned a flat. In October 2000 Mr Robinson agreed to buy Mr Lane's flat for the sum of £45,000. I say that in shorthand; I will come back in a minute to exactly what the judge said about that agreement. That agreement was purely oral; there was no written agreement between the two gentlemen at all. As part of that agreement Mr Robinson paid the sum of £15,000 as the judge originally said "on account of the price". There was no finding made as to any other terms save that the judge found in paragraph 2 of his judgment:

"The original arrangement was, I find, for him Mr Robinson to complete his purchase within six months."

5. Whatever exactly was meant by completing his purchase within six months that did not happen, as Mr Robinson did not pursue the matter further, except that (and I think it is irrelevant for our purposes but I will just mention it) he took some part in the management of the flat, which was let out to tenants.
6. In May 2004 Mr Lane sold the flat for £88,000 to another purchaser. That sale having gone off as the judge found, Mr Lane agreed to repay the sum of £15,000 and Mr Robinson agreed to forbear from pressing for that payment, and it was also agreed that Mr Lane should pay half of the excess on the sale price -- over £45,000 -- that is to say, the price he actually obtained in lieu of interest. It was that latter agreement that the judge was concerned with in the dispute between these two gentleman -- that is to say, as I have said already, whether agreement had been made at all -- and he expressed himself in these terms, in paragraph 15 and following of his judgment, which I shall quote:

"15. Did the defendant agree to repay the £15,000 and half the excess over £45,000?

16. As regards the first sum, there might have been room for legal argument as to whether the deceased, having failed to complete his purchase, was entitled to repayment of the £15,000. As a payment on account it represented a deposit, which would not normally be returnable if the sale did not proceed by reason of the purchaser's default. On the sale of land the customary deposit is 10%, paid on exchange of written contracts. It is however unnecessary for me to decide this issue because the question is whether a subsequent agreement in the terms alleged by the claimants was made and, if so, whether the defendant broke it

17. I am satisfied from the evidence […] that the defendant was under financial pressure making it difficult if not impossible for him to repay £15,000 to the deceased when the sale went off. I am satisfied that the defendant agreed to repay the deposit and that deceased agreed to forbear from pressing for payment. That forbearance constituted such consideration as to support the agreement and render it enforceable."

7. Those are the crucial paragraphs of this judgment. The judge then went on to consider the actual question of whether the defendant, Mr Lane, also agreed to pay half of the excess over £45,000 and, as we have seen, he did. On that basis the judge ordered that Mr Lane should pay the £15,000 and also the sum that represented the balance between the £45,000 and the £88,000. In total, a sum of £42,000.
8. Mr Lane, acting for himself, although he had the advice of solicitors before the trial started, applied to this court for permission to appeal, principally complaining -- indeed almost exclusively complaining -- about the judge's findings of primary fact. That application came before me on paper and I considered that there were no grounds for going behind those findings and nor was there any basis for justification for introducing any further evidence or documents to which Mr Lane in his homemade skeleton made some reference. I, however, continue with my order as follows:

"I am however concerned about, and give permission in relation to, the judge's analysis of the legal structure of the agreements, in §§ 15-17 of the judgment. If the payment of the £15,000 by the deceased was indeed a deposit, as the judge states in his §16, then as he further states the deceased was not entitled to its return, and the promise by the defendant to repay it was not supported by consideration. If the payment by the deceased was not a deposit but a payment on account, the deceased might have been entitled to its return, but depending on the terms of the first agreement, as to which no findings were made. Rather, the judge says in his §17 that the defendant's agreement to repay the £15,000 was supported by consideration in the form of the deceased agreeing to forbear from pressing for payment, scil. of that same sum. I do not see how an agreement to pay x, to which the other party was not previously entitled, can be supported as consideration by the other party agreeing not to press for the payment of x. The matter would be different if the other party agreed not to press for some other and pre-existing debt, but that is not how the judge put the matter."

9. So that is the basis upon which permission to appeal was given. As I say, that was not a point taken by Mr Lane; it was not a point that appears to have been pursued below. I considered that it was, however, open to this court because the issue of consideration had been raised, although not in quite those terms in the defence, and that was no doubt the reason why the judge found it necessary to say something about it as he did.
10. That concern was met by a submission in writing by Mrs Preston in what I will call "the first agreement" -- that is to say the original exchange in October 2000 between Mr Robinson and Mr Lane had been a contract for the disposition of sale of interest in land. By Section 2 of the Law of Property Miscellaneous Provisions Act 1989 such a contract is void if it is not expressed in writing. This was not expressed in writing; there was therefore no contract; therefore the deposit (assuming it was a deposit) was not a contractual deposit, and therefore Mr Robinson was entitled to its return by ordinary restitutionary principles, and therefore, by agreeing to forbear from pressing for that return, he had given the consideration that the judge thought he had for what we will call "the operative agreement" -- that is to say the agreement upon which was actually brought before him. I have to confess that I saw no answer to that objection. In his well-sustained submissions before us Mr Slater said that it was surprising that the County Court judge had not adverted to that point in his judgment (he was good enough not to say it was surprising, but I have not done so also) but it seemed to me to be no answer to it.
11. Today Mr Slater has advanced an interesting argument which does not undermine (because it could not do so) the basic point made by Mrs Preston, but has rather said that the first agreement should not be interpreted or analysed as an agreement for the disposition of an interest in land. It was in the nature of what is colloquially called "a lockout agreement" of the sort that was discussed in this court in Pitt v PHH Asset Management Ltd [1994] 1 WLR at page 327. What he said had occurred here was not that these two gentlemen in the year 2000 have made any agreement to sell the land; they had simply made an agreement that the land would remain unsold provided that Mr Robinson came up with the balance of the purchase price. In those circumstances it was an agreement like that which Peter Gibson LJ had analysed in Pitt.
12. I am afraid that that submission, well sustained though it was, fails simply on an analysis of what the judge found. Mr Slater was inclined to say that the judge had not made entirely clear findings -- at least I think he was inclined to say -- about the nature of this agreement. That is not so. One has to remember, of course, that the judge was trying to construct this agreement out of conflicting oral evidence given by Lane who, as far as I can see, received no legal advice at all before entering into these transactions; and I did, I think, have the added difficulty that, by the time the trial came on, Mr Robinson was dead. How the judge described the background is to be found in paragraph 2 of his judgment, and he said this:

"[Mr Lane owned the flat]. He wanted to sell it and use the proceeds to buy a plot of land and build a house on it. In September 2000 he had a purchaser, Mr Morton, to the flat at £44,950. The deceased [Mr Robinson] wanted to buy it for himself and offered £45,000. The defendant agreed to sell it to him and in October 2000 withdrew from the sale to Mr Morton. He did not enter into a written contract..."

And then the judge goes on to describe what I have already pointed out about how the £15,000 was paid on account; the matter to be completed within six months.

13. That is quite clearly a finding that what these two gentlemen did was actually agree to transfer the property. Mr Slater said that it could not have been an agreement to transfer the property because it was almost entirely innocent of detailed terms. It certainly was a very unusual agreement because, for a sale of a property of some substance, it was entered into in an extremely informal way; but there was sufficient in what the judge found as to the parties intentions, the most obvious points being the property sold at the price to be paid to make this an agreement that would be enforceable had it complied with the statutory condition as to writing. What they did not do, and what the judge did not find that they had done, was to enter into anything like a lockout agreement: that is to say that it was agreed that no sale would take place within a certain period. Mr Lane's failure to pursue his transaction with Mr Morton was not because he had made a lockout agreement with Mr Robinson, but because he had actually thought he had sold the property to Mr Robinson. The argument therefore about the lockout agreement, I fear, fails simply on the analysis of what the judge found about the contract, and that I fear is the end of the appeal and bears out the correctness, if I may say so, of the criticism that Mrs Preston made of the grounds on which permission was granted.
14. However, in the circumstances, we have gone on to consider whether there might be an alternative analysis of the agreement between the parties -- that is to say that the payment of the deposit was not a contractual deposit but a deposit given pre-contractually in earnest of an agreement to enter into a ultimately enforceable agreement something that Mr Robinson in fact did not do. That part of the law is, if I may say so, helpfully analysed in the Seventh Edition of Goff & Jones on Restitution at paragraph 20(36): the learned authors make it clear that one must distinguish between a contractual deposit and a pre-contract deposit and say that, if the payment is a pre-contract deposit, then, unless and until the contract is concluded, the prospective purchaser can require the deposit at any time. The various things to say about this is, firstly, this clearly was not a pre-contract deposit; it was a deposit made in the context of, and in the envelope of, what the parties thought was a binding agreement. Secondly, even if it had been a pre-contract deposit it is only in very rare circumstances that such a deposit is not returnable.
15. Those were summarised in the judgment of Sir Ernest Pollock MR in Chillingworth v Esche [1924] 1 Ch 97 at page 108, where he said that it was possible for the deposit not to be recoverable:

"…if he had, by appropriate words, made provision for that in the document, such provision could have been upheld."

That formula was picked up by Robert Walker LJ in the case of Gribbon v Lutton & Anr [2002] QB 902, where the lord justice said that:

"If the vendor stipulates for the payment of a non-returnable deposit linked to a clearly defined condition, the purchaser should lose any claim to return the deposit if he fails to meet the condition."

16. Mr Slater sought to argue that such a stipulation had been made in this case. That, with respect, is not so. It is quite clear that it would have to be, to qualify under Robert Walker LJ's rubric, an extremely precise and clear and express agreement to that effect. Quite apart from this not being a pre-contract deposit at all, there was no such precise agreement to that effect. These two gentlemen clearly did not turn their minds to those sorts of considerations.
17. Therefore the point about lack of consideration is not a good one. I fear there is another respect in which the grant of permission put things in a rather broad brush way. It does not arise in this appeal but I will simply put on the record that it is not as straightforward as I originally thought that a forbearance to pursue a invalid claim can never be a good consideration. The law as to that is pursued at some length in Chitty on Contracts, paragraphs 3050-3054. Had it been necessary to get that far in this case, we no doubt would have had some very interesting submissions on what those paragraphs say. However, in the upshot the appeal fails for the first reason that I gave.

Lord Justice Moore-Bick:

18. I agree. There is nothing I can usefully add.

Lord Justice Thorpe:

19. I too agree that the appeal should be dismissed for the reasons given by my Lord and I echo his appreciation for Mr Slater's contribution to its resolution.

Order: Application refused