Merer v Fisher & Anor

An appellate court should be very slow to interfere with a trial judge’s finding of fact based on oral evidence. It should intervene only where the finding is plainly wrong, giving proper weight to the trial judge’s advantage in hearing the witnesses. A judge need not make findings on every item of evidence or argument if the vital issues and their resolution are adequately explained. A sole shareholder may informally override directors, but the relevant intention must be communicated before the company enters the transaction. Specific performance should enforce agreed pre-emption machinery; a substitute valuation should not be imposed merely for convenience where the machinery has not failed.

The respondents sought to enforce a right of pre-emption over plot 7, which had been transferred by the company to Mrs Merer. The right had not been validly registered under the Land Charges Act 1925. The trial judge found that the alleged agreement to satisfy the consideration by writing off debts owed to Mr Merer had not been proved. He held that the right was binding and ordered Mrs Merer to transfer the land for £11,000.

Mrs Merer appealed the factual finding, the judge’s alternative legal conclusion under section 4(6) of the Act, and the remedy. The central issues were whether the factual finding was plainly wrong and whether the court could impose the joint expert’s valuation instead of enforcing the contractual machinery.

Lady Justice Arden gave the leading judgment. Lord Justice Mummery and Lord Justice Potter agreed.

1. Disposition. The appeal was dismissed on the challenge to the factual finding. The alternative legal issue under section 4(6) of the Land Charges Act 1925 therefore did not arise. The appeal was allowed on remedy: the order fixing the price at £11,000 was set aside and specific performance of the terms of the pre-emption contract was ordered.
2. Appellate review of fact. The principal issue depended on oral evidence about whether the company and Mrs Merer had agreed that the consideration would be satisfied by writing off debts owed to Mr Merer. Contemporaneous material showed some indebtedness and discussions about a possible write-off, but it did not determine the central agreement. The judge’s five reasons went to the nub of the case. The Court of Appeal was not entitled to substitute its own assessment unless the conclusion was plainly wrong. The evidence not expressly addressed by the judge did not meet that threshold.
3. Adequacy of reasons. A trial judge need not deal expressly with every argument or evidential point. The judgment must identify the issues vital to the result and explain their resolution sufficiently to enable the parties and an appellate court to understand the essential reasoning. The judge’s reasons satisfied that requirement.
4. Company authority. Under the principle illustrated by Re Duomatic, a sole beneficial shareholder may override directors informally without a special resolution. However, where the company acts through its directors, the shareholder must communicate the relevant instruction before the transaction. Mr Merer’s uncommunicated intention was insufficient.
5. Remedy. Sudbrook Trading Estate Ltd v Eggleton was distinguishable. In that case contractual valuation machinery had been prevented from operating by breach. Here there was a substantial dispute about whether consideration had been given, and the machinery had not failed. Cost-saving convenience supplied no principled basis for substituting the joint expert’s valuation.

1. Court of Appeal (Civil Division): Dismissed the appeal on the factual challenge, held that the statutory issue under section 4(6) did not arise, and allowed the appeal on remedy by setting aside the fixed valuation and ordering specific performance of the contractual terms.
2. High Court of Justice, Chancery Division: HHJ Weeks QC declared the right of pre-emption binding on Mrs Merer and ordered transfer of plot 7 for £11,000 by order dated 11 July 2002.