Oak Investment Partners XII Ltd Partnership v Boughtwood & Ors

Where a company transfers valuable property under a deed in return for agreed consideration which is not paid, the court may find that the consideration remains an outstanding debt. The relevant intention is assessed objectively, with particular weight given to the resolution and minutes of the board authorising the transaction. An inaccurate acknowledgment of payment does not necessarily prevent that conclusion where the parties knew payment had not occurred and the deed is capable of rectification. Estoppel by deed fails where the acknowledgment resulted from a mistake and was not intended to bind the parties. Estoppel by convention also fails where there was no genuine shared assumption that payment had been made.

The judgment supplemented the court’s earlier decision in the same proceedings, concerning the valuation of Mr Boughtwood’s shares in QED Group Ltd. The court was asked, on written submissions and the evidence already taken at trial, whether £750,000 was a debt owed by QED to PML for the assignment of intellectual property rights on 13 November 2007.

The deed stated that the consideration had been received, although it was common ground that QED had never paid the sum. The central issues were the parties’ intention, the effect of the inaccurate acknowledgment, and the respondents’ reliance on estoppel by deed and estoppel by convention.

1. The court held that the assignment of the intellectual property rights was intended to take place only in return for genuine economic value of £750,000. If QED did not pay that sum, it owed the amount to PML.

2. The intention of the parties was assessed objectively. The most important evidence was the resolution and minutes of the PML board, which authorised the deed after considering that £750,000 represented fair market value. The intention of the QED board was found to be the same. Mr Boughtwood’s personal understanding was not determinative.

3. The acknowledgment in the deed that the consideration had been received was factually inaccurate. The parties knew that the contemplated transfer of funds had not occurred and that QED had no other source from which to make the payment. The acknowledgment was therefore a mistake and was not intended to operate as a binding statement that payment had occurred.

4. The deed was capable of rectification so as to record that the assignment was made in return for QED’s promise to pay £750,000. The defence based on estoppel by deed accordingly failed.

5. The defence based on estoppel by convention also failed. There had been no genuine shared assumption that QED had paid £750,000. The shared understanding was that QED had received a valuable asset and was expected to provide appropriate consideration. Requiring payment was not unconscionable.

6. The court accordingly ruled that the £750,000 was a debt owed by QED to PML.