Richards v Harvey

An oral commercial discussion creates a binding contract only where, objectively, the parties intended legal relations and agreed all terms regarded as essential, or required by law, for a concluded agreement. The court may consider the parties’ subjective understanding, subsequent conduct and surrounding circumstances when evaluating what was communicated. Discussions may remain subject to contract even without those words, and a party asserting that qualification bears a heavy evidential burden. Without prejudice protection is distinct from subject to contract and does not itself prevent a binding settlement. Where performance must be undertaken by a company, a director’s participation does not ordinarily make him personally liable without clear words or circumstances indicating personal responsibility.

The claimant sought damages exceeding US$6.8m, alleging that an oral agreement was made with the defendant at a meeting in Barbados on 4 February 2014. The alleged arrangement concerned marketing and selling units at the Kings Beach Village development, pausing possession proceedings, and sharing sale proceeds. The defendant contended that the discussion was only an in-principle proposal, subject to legal advice, and that any commitments were made on behalf of Tropical Mist Ltd rather than personally.

The central questions were whether a binding agreement was made at the meeting, what its terms were, and whether the defendant was personally bound.

1. The claim was dismissed. No binding agreement was made at the meeting on 4 February 2014. The claimant’s own correspondence showed that he understood the proposal remained subject to the defendant obtaining advice from his lawyers.
2. Applying the objective approach described in RTS v Molkerei Alois Muller [2010] UKSC 14, the court considered the words, conduct and surrounding circumstances. The defendant had been advised immediately before the meeting not to commit himself without legal advice. The parties’ previous negotiations had generally been subject to contract, and the defendant’s conduct after the meeting was inconsistent with a concluded agreement.
3. The evidence did support a later, limited arrangement. By 13 March 2014 the defendant had confirmed a six-month pause in the possession proceedings to allow marketing of the units. Tropical Mist Ltd was to sell as mortgagee, retain the proceeds of the first sale to discharge its debt, and pay the claimant 50% of later net proceeds. There was no agreement to provide a two-year marketing period or to extend the pause beyond six months.
4. The defendant was not personally bound. The obligations concerned proceedings and sale proceeds belonging to Tropical Mist Ltd. An objective observer would understand the defendant to be acting for that company. Control of the company and the use of personal pronouns did not establish personal liability.
5. In any event, the claimant established no recoverable loss. The alleged sales were speculative, and the claimed income and proceeds were principally assets or income of the relevant companies rather than the claimant personally.