Peter Savva v Cuckoo Hill Limited & Anor

A party cannot establish an alleged oral variation or supersession of carefully drafted written agreements merely by asserting that funds were intended for later investment. The court assesses the evidence as a whole, including documentary gaps and the inherent plausibility of the alleged agreement.

Under Insolvency Act 1986, section 423, the relevant purpose test is satisfied where any purpose of an undervalue transaction is to put assets beyond a claimant’s reach or prejudice the claimant’s interests. A victim need not have been specifically contemplated when the transaction occurred.

Deliberate failure to disclose a contractually significant sale may postpone limitation under section 32 of the Limitation Act 1980.

The claimant sold a property to the first defendant under a written agreement for £600,000. Payment was due when the second of two development houses was sold. A separate agreement required the second defendant to make periodic payments to the claimant.

The defendants alleged that an oral agreement authorised the claimant’s money to be invested in a Maidstone development. The claimant denied that agreement and claimed the unpaid purchase price, sums due under the separate agreement, relief under section 423 of the Insolvency Act 1986, and damages for inducing breach of contract.

The issues included the alleged oral variation, the dissipation of the first defendant’s funds, the second defendant’s liability, and limitation.

1. Outcome. Judgment was entered for the claimant for £600,000 against the first defendant, £11,170 against the second defendant, interest and declaratory relief.
2. The alleged oral agreement was not established. The written Sale Agreement and Interest Agreement had been prepared on the second defendant’s instructions. The alleged oral agreement was vague, unsupported by reliable documents, and inherently implausible in the circumstances. The first defendant therefore had no contractual defence to the £600,000 claim.
3. For section 423 of the Insolvency Act 1986, the question was whether any purpose of the transaction was to put assets beyond the reach of a claimant or otherwise prejudice the claimant’s interests. The court applied the approach in JSC BTA Bank v Ablyazov [2019] B.C.C. 96. The claimant was a victim for the purposes of sections 423 and 424, applying Sands v Clitheroe [2006] BPIR 1000, and was entitled to relief under section 425.
4. The unexplained withdrawal of the first defendant’s funds was inferred to have been made for the second defendant’s direct or indirect benefit, leaving the company unable to pay the claimant. The second defendant had acted dishonestly and in breach of his statutory duty to act in the best interests of the company’s creditors.
5. The elements of inducing breach of contract stated in Northamber PLC v Genee World Limited & Ors [2024] EWCA Civ 428 were satisfied. The second defendant could not rely on the protection available to a director acting bona fide within the scope of authority. The court treated Antuzis v DJ Houghton Catching Services Ltd [2019] Bus. L.R. 1532 as an example of director liability.
6. The claims were brought in time. The court drew an adverse inference from the defendants’ failure to disclose documents establishing when the claimant’s money had been withdrawn. Deliberate failure to tell the claimant that the second house had been sold constituted deliberate concealment under section 32 of the Limitation Act 1980, postponing limitation.
7. The court did not need to decide whether the alleged variation would independently have failed for non-compliance with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, as explained in McCausland v Duncan Lawrie Ltd [1997] 1 WLR 38.