Farrar & Anor v Rylatt & Ors

An appellate court should interfere with trial findings only where a critical finding lacks an evidential basis or reflects a demonstrable misunderstanding or failure to consider relevant evidence. A different view of the evidence is insufficient. An alleged oral profit-share agreement should be assessed separately from an alleged trust, but vague, inconsistent and unsupported evidence may fail to prove the agreement. A Subject to Contract label ordinarily applies to the whole commercial document. It cannot be selectively disapplied where the document anticipates later formal contracts, the parties change, and subsequent conduct shows that the arrangement remained provisional.

The appellants claimed declarations concerning alleged profit-share arrangements for two developments. The Hazel Grove claim relied on an alleged oral agreement between Neil Farrar and the Rylatts, said also to create an express trust. The Barns claim relied on unsigned Heads of Terms marked Subject to Contract, which referred to a proposed joint venture and 50:50 profit division.

Following a trial in the Technology and Construction Court in Leeds, HH Judge Raeside QC rejected both claims. The appellants alleged that the judge had conflated the alleged trust with the oral agreement, wrongly rejected the Hazel Grove evidence, and failed to give effect to the profit-share provisions or later events concerning The Barns. The central issues were whether the judge’s factual findings could be disturbed and whether any binding profit-share agreement arose despite the contractual qualification.

1. Disposition. Coulson LJ, with whom Rose LJ agreed, dismissed the appeals concerning both Hazel Grove and The Barns. Although the first-instance judgment could have explained some matters more clearly, the appropriate appellate response was not to substitute positive declarations. If a material error had been established, a new trial would ordinarily have been required.
2. Hazel Grove. The court applied the restrictive approach to appellate interference with factual findings stated in Fage UK Limited and another v Chabani Limited and another [2014] EWCA Civ 5 and Henderson v Foxworth Investments Limited [2014] UKSC 41. An appeal could succeed only if the findings lacked evidential support or involved a demonstrable misunderstanding or failure to consider relevant evidence. The alleged oral profit-share agreement and alleged express trust were, at root, separate allegations and should have been addressed distinctly. However, the judge was entitled to find that Neil’s evidence was increasingly imprecise and confusing as to the parties, date and terms, while there was no contemporaneous document or reliable corroboration. The burden of proving the oral agreement therefore remained unsatisfied. The marketing evidence did not compel any different conclusion.
3. The Barns. The Subject to Contract qualification applied to the Heads of Terms as a whole. It could not be carved out so that clauses concerning the proposed joint venture and profit share were binding while the remainder remained provisional. The approach was consistent with the treatment of such wording in Winn v Bull [1877] 7 ChD 29, Goodwood Investments Holdings Limited Inc v Thyssenkrupp Industrial Solutions AG [2018] EWHC 1056 Comm and Regalian Properties PLC and another v London Docklands Development Corporation [1995] 1 WLR 212. The unsigned document did not create a binding land sale, building contract or joint-venture profit-share agreement. The land-sale element also failed under section 2 of the Law of Property Act 1925.
4. Subsequent conduct. RTS Flexible Systems Limited v Molkerei Alois Muller GmbH and Co KG (UK Production) [2010] UKSC 14 was distinguished as an exceptional, fact-sensitive case in which subsequent conduct and performance made it unrealistic to deny contractual formation. Here, the building work was performed under a separate contract, no profit share was paid, the contemplated parties changed, and repeated requests showed that a formal profit-share agreement remained outstanding. The later conveyance, JCT contract and attachment of the Heads of Terms did not remove the qualification. The attachment could not create personal obligations between differently identified parties without a novation, and the alternative argument was unpleaded and raised too late.

• Court of Appeal (Civil Division). On appeal from the Technology and Construction Court in Leeds, the court upheld the rejection of both claims concerning Hazel Grove and The Barns and dismissed the appeals.
• Technology and Construction Court. HH Judge Raeside QC rejected the appellants’ claims for declarations concerning the alleged profit-share agreements.