Whitehead Mann Ltd v Cheverny Consulting Ltd

Where parties use solicitors to prepare formal written agreements for execution, the normal inference is that they intend to become bound only when every relevant party has executed the documents. This inference may be displaced by an objectively ascertainable change of intention or subsequent events creating an estoppel.

Signing some documents within a linked contractual package does not, without more, commit a party to every unsigned document. An appellate court may set aside findings materially dependent on a witness statement which the witness substantially qualified or withdrew in oral evidence, where the trial judge did not explain why the statement retained evidential weight. A new trial may be required if the resulting factual uncertainty prevents the appellate court from resolving the remaining issues.

The respondent claimed damages under a consultancy agreement concerning an entitlement to shares. It alleged that an unsigned side letter formed part of the parties’ contractual arrangements and expanded the business included in calculating that entitlement.

A deputy High Court judge found that the side letter had been agreed, held that an entire agreement clause did not deprive it of contractual effect, and awarded damages of £501,934 and costs. The appellant challenged the judge’s reliance on a witness statement which had been materially qualified during oral evidence. It also disputed the legal effect of the unsigned letter.

The central questions were whether the factual finding that the side letter had been agreed could stand and whether partial execution of a package of agreements made the unsigned letter contractually binding.

1. Appeal allowed by a majority; new trial ordered. The Chancellor, with whom Moses LJ agreed, held that the deputy judge had materially relied on written evidence which the witness substantially qualified and departed from in oral testimony. Those qualifications deprived the relevant passages of evidential value unless the judge explained why weight could nevertheless be placed on them. No such explanation was given. The conclusions founded upon that evidence could not stand without sufficient independent support.

2. The factual consequences could not safely be determined by the Court of Appeal. The erroneous reliance on the witness’s account potentially affected the rejection of another witness’s evidence and the finding that the side letter had been agreed. Without a proper conclusion about which contracts had been concluded and when, the remaining contractual issues could not be resolved.

3. The Chancellor held that, where solicitors act on both sides and arrange the execution of formal written agreements, the normal objective inference is that the parties intend to be bound only when the agreements have been signed or executed by every relevant party. This was particularly so where a transaction comprised several agreements involving different parties.

4. Contractual obligations in such circumstances become binding only if the documents are executed by all parties, the parties’ continuing intention objectively changes, or subsequent events estop a non-executing party from relying on the absence of execution. No estoppel had been pleaded. The findings below were insufficient to determine one.

5. Signature of some documents within the package did not itself bind the relevant parties to every unsigned document. The deputy judge’s contrary legal conclusion was rejected. The side letter had never been signed on behalf of the intended company, and the contemporary documents did not establish that execution of the other agreements compelled its signature.

6. Carnwath LJ dissented. He considered that the contemporary documents independently established agreement to the side letter. In his view, the parties’ intentions took a new turn when they began executing the linked documents, and commercial common sense showed that they became committed to the whole package. He would also have construed the entire agreement clause as excluding only earlier agreements, not documents forming part of the concurrently agreed package, and would have dismissed the appeal.

1. Court of Appeal (Civil Division): By a majority, allowed the appeal from the Chancery Division and ordered a new trial before another judge. Carnwath LJ dissented and would have dismissed the appeal. [2006] EWCA Civ 1303

2. High Court, Chancery Division: Mr Nicholas Davidson QC, sitting as a deputy High Court judge, held that the unsigned side letter had been agreed and was not excluded by the entire agreement clause. He awarded the claimant damages of £501,934 and costs.