WILLIAM ALLAN JONES & Anor v ANDREW MCCARTHY

An oral agreement concerning land may be governed by the law of the country with which it is most closely connected, subject to the applicable-law rules for immovable property. A claim based on an expressly shared assumption requires communication of the assumption and an expectation that it will be relied upon. The ordinary measure of damages for failure to transfer land is its market value at the relevant time, subject to appropriate deductions. A foreign-law illegality defence requires a flexible public-policy assessment, including the purpose of the prohibition, competing policies and the seriousness of the breach. It should not provide a windfall to a party who participated in the relevant arrangement.

The claimants alleged that an oral 2008 agreement required the defendant to transfer control of a villa in Mallorca so that it could be sold to a third party. The defendant later revoked a power of attorney, dealt with a third party concerning the villa, and ultimately sold it in 2016. The claimants sought contractual damages and, alternatively, an account of profits and equitable relief.

The court determined the parties’ agreement, the effect of the later dealings, the applicable law governing equitable remedies, the measure of loss, possible deductions, and whether alleged avoidance of Spanish taxes defeated the claim.

1. Credibility. The court gave little weight to demeanour and assessed the evidence by reference to its content, consistency with other evidence, and inherent likelihood. The guidance in The Queen on the application of SS (Sri Lanka) v The Secretary of State for the Home Department [2018] EWCA Civ 1391 was applied.
2. Contract and breach. The 2008 agreement contemplated that the defendant would retain legal title to the villa for tax reasons but that the first claimant could direct its sale at an appropriate time. The defendant’s revocation of the power of attorney, dealings with Mr Proctor, reinstatement of the power in Mr Proctor’s favour, and sale of the villa amounted to breaches. The 2014 agreement did not novate the earlier arrangement because the claimant had not consented to it.
3. Estoppel. Applying the principles summarised in Tinkler v Revenue and Customs Commissioners [2021] UKSC 39, including the principles drawn from Revenue and Customs Commissioners v Benchdollar Ltd [2009] EWHC 1310 (Ch), there was no expressly shared assumption, conveyed expectation of reliance, sufficient reliance, or unjust element.
4. Applicable law and remedy. Under section 3(3) of the Contracts (Applicable Law) Act 1990, incorporating the Rome Convention, and Article 4, the agreement was most closely connected with Spain. The claimants were therefore confined to contractual remedies because of their concession concerning Spanish law.
5. Damages and illegality. The villa’s market value when sold was €1.1 million. A deduction of €75,000 for fees and taxes was appropriate. Applying the public-policy approach in Patel v Mirza [2016] UKSC 42, as considered in Magdeev v Tsvetkov [2020] EWHC 887 (Comm) and Haddad v Rostamani [2021] EWHC 1892 (Ch), the illegality defence failed. Allowing it would give the defendant a windfall, since he had participated in the tax arrangement and had himself avoided comparable tax on repurchase.
6. The claim for damages succeeded in the sum of €1,025,000. The parties were invited to agree and file a draft order within 14 days.