Barnsley & Ors v Noble

An informal agreement reached during negotiations does not become contractually binding merely because the parties later complete the transaction to which it relates. Contractualisation requires express agreement or a necessary implication from the parties’ conduct. An agreement may also be unenforceable where essential matters, including the identity of the payer, the payee or the payment mechanism, remain unresolved.

A negotiating party’s pessimistic opinion about the prospects of litigation is not ordinarily a representation of objective fact or an undertaking to disclose further information. Parties negotiating a division of jointly owned assets generally owe no positive duty of disclosure. A trustee exemption clause protected the defendant from monetary liability absent fraud or wilful wrongdoing.

The claim arose from the demerger of the Noble Organisation after the death of Michael Noble. The claimants represented Michael’s family interests; the defendant, Michael’s brother, represented his own interests and those of his family.

The parties informally discussed sharing any VAT repayments arising from claims based on fiscal neutrality. The proposed 75:25 division was recorded in negotiation slides but was omitted from the formal demerger documents. The claimants alleged contract, deceit, statutory misrepresentation, negligence, breach of the self-dealing rule and breach of fiduciary duty through non-disclosure.

The central issues were whether the VAT-sharing arrangement became binding on completion, whether statements about the claims were actionable, and whether the defendant was liable despite the will’s trustee exemption clause.

1. Contract. The action was dismissed. The parties had reached an informal understanding that 75% of any VAT recovery would go to the defendant’s side and 25% to the claimants’ side, but they had never agreed to make that understanding contractually binding. Completion of the documented demerger did not, without more, contractualise earlier non-binding arrangements. No such implication was necessary, obvious or required by the parties’ conduct: Modahl v British Athletic Association [2001] EWCA Civ 1447.
2. The arrangement was in any event too uncertain. The parties had not agreed who would pay, who would receive the payment, or the structure by which the payment would be made. Those matters were essential in this complex, tax-sensitive transaction. The court could not supply the missing machinery.
3. Misrepresentation. The defendant’s statement that he did not fancy the VAT claims and did not think they would succeed was an expression of opinion, not an objective statement of fact or an implied representation that he had reasonable grounds for that opinion. In the circumstances of a hard-fought negotiation, it was not a statement on which the claimant was intended or entitled to rely. The claimant was not induced by it. The deceit and Misrepresentation Act 1967 claim under section 2(1) therefore failed.
4. Negligence. The parties were negotiating a division of jointly owned assets. Applying the incremental approach to duties of care, the relationship did not attract a positive duty to disclose information about the VAT claims: Caparo Industries plc v Dickman [1990] 2 AC 605.
5. Equitable claims. The demerger was a transaction to which the self-dealing rule applied. A will provision authorising self-dealing was not satisfied because one trustee had an interest in the transaction in another fiduciary capacity. However, the defendant acted in good faith and the trustee exemption clause protected him from monetary liability. Wilful wrongdoing required conscious and wilful misconduct, not mere inadvertence.
6. The non-disclosure claim also failed. Even if a duty of full disclosure analogous to the fair-dealing rule existed, the exemption clause applied and fraud or wilful wrongdoing had not been established. The counterclaim did not arise. The action was dismissed.

The judgment records subsequent appeals as [2015] EWCA Civ 875 and [2016] EWCA Civ 799, but does not state their outcomes.