Beverley Winchester & Anor v Farmer

An appellate court need not resolve every issue raised in the pleadings if it is immaterial to the relief sought. A binding oral agreement may be established by the parties’ conduct and contemporaneous documents, despite friendship, informality or failed attempts to record the agreement in writing. An investor’s interest is not necessarily confined to the assets existing when the agreement was made; it may extend with the business, although the inclusion of later assets remains fact-sensitive. A term omitted from the pleadings may be reflected in the order where it was clearly raised in evidence, tested in cross-examination and caused no substantial prejudice. Commercial success does not retrospectively recharacterise an investment as a loan.

Beverley and Patrick Winchester appealed from a decision of His Honour Judge Gerald at the Central London Civil Justice Centre. The judge found that John Farmer had made advances totalling £119,500 under an oral agreement giving him a 20% interest in the care-home business and 20% of its net profits before the Winchesters’ salaries. He declared that the interest extended at least to Chippings, Upfield and Poplars and ordered an inquiry into later homes and unpaid profits. The appellants argued that the judge had failed to determine pleaded terms, decided an unpleaded term, misread the documentary evidence and relied on an impermissible finding about available finance. The central issue was whether those matters disclosed an error of law.

The appeal was dismissed.

1. The trial judge was not required to determine every disputed issue in the pleadings. His essential task was to decide whether the claimant was entitled to the relief sought. Issues immaterial to that relief could properly be left unresolved. The questions concerning termination had either been withdrawn or were not said to arise, since neither party alleged that the agreement had been terminated.
2. The evidence supported the finding that the agreement extended beyond Chippings. Profit-share payments had been made in respect of Upfield and Poplars, and contemporaneous documents supported the parties’ understanding that the arrangement covered the wider business. The nature and scope of any extension to later care homes, including homes operated under the Cavendish Care name, remained a factual question for the inquiry and was not determined by the order.
3. Even if the method of calculating profit before payment of the Winchesters’ salaries should have been pleaded expressly, no substantial injustice resulted. The point was stated in witness evidence, explored in cross-examination and reflected the basis on which earlier payments had been calculated. The judge was therefore entitled to include it in the order.
4. There was no misapplication of the burden of proof. The judge was entitled to prefer the claimant’s account and the documentary evidence over the explanation that payments were merely acts of generosity. The availability of another possible source of finance did not determine whether Farmer’s advance was made under the alleged agreement.
5. The eventual success of the business and the size of the returns could not be used retrospectively to treat the advances as a loan rather than an investment. Obiter, where parties have acted for a long period on the basis that they have a legal agreement, the court will strive, so far as possible, to supply gaps by implication.

The further inquiry and directions were left in place. The Court of Appeal did not decide whether the matter should later be transferred to a High Court Master.

• Court of Appeal (Civil Division) — The appeal was dismissed: [2013] EWCA Civ 1235.
• Central London Civil Justice Centre — His Honour Judge Gerald found an oral agreement giving Farmer a 20% interest in the care-home business and ordered an inquiry into its assets, later homes and unpaid profits.