Johal & Anor v Johal

An agreement to compromise a doubtful claim may be supported by consideration where the claimant honestly believes that the claim has a reasonable prospect of success. A family setting does not create a presumption that an agreement is non-binding where the meeting is convened to resolve a dispute concerning business ownership. An agreement to relinquish an equitable claim need not identify the precise interest or prescribe formal transfer steps. Payment terms may be sufficiently certain if the court can ascertain them from the parties’ agreement or imply a reasonable payment date.

The claimants, two brothers, sued their brother for the unpaid balance of promises made at a family meeting. The defendant had agreed to pay each claimant £168,000, of which £42,000 had been paid, in return for their withdrawing claims to beneficial interests in businesses operated through a company owned by him.

The defendant denied that the payments were contractual, contending that they were gifts, that there was no intention to create legal relations, and that the arrangement was too uncertain. The court therefore had to determine whether a binding compromise agreement had been made and, if so, whether it was supported by consideration and sufficiently certain for enforcement.

1. Contract and consideration. The court found that the parties agreed that each claimant would receive £168,000 in four instalments in return for giving up any claim to an interest in the businesses. An agreement to abandon a claim is valuable consideration where the claimant believed in good faith that the claim had a reasonable prospect of success. It is unnecessary to decide whether the underlying claim would ultimately have succeeded.
2. The claimants had reasonable grounds for their belief. Relevant matters included evidence of oral family arrangements, their substantial involvement in the businesses, Jugar’s role as manager of the pub, and the defendant’s own approach offering payment to secure their exit from the business.
3. Intention to create legal relations. The meeting was convened to resolve a dispute about ownership and payment for relinquishing business claims. It was therefore predominantly commercial, despite taking place between family members. The ordinary onus of proving absence of contractual intention applied to the defendant. The later proposal to document the agreement did not establish that it was subject to signature.
4. Certainty. It was unnecessary to agree the precise nature or value of the claim being relinquished. The compromise prevented the claimants from asserting any such equitable interest in future. The court could determine the instalment dates from the evidence; absent such findings, payment would likely have been due immediately or on reasonable demand.
5. Judgment was entered for each claimant for £126,000, with interest calculated on the basis that the unpaid balance fell due in three equal instalments six, 12 and 18 months after 12 June 2013.