Jersey Unreported Judgments

[2005]JRC166

royal court

(Samedi Division)

24^th November 2005 

Before     :

F.C. Hamon, Esq., O.B.E., Commissioner and Jurats Tibbo and Newcombe.

 

 

 

Summary: Question of the legality of a contract and the possible damages arising from a breach of that contract.

 

Advocate D. F. Le Quesne for the Plaintiffs.

Advocate O. A. Blakely for the Defendant.

 

judgment

COMMISSIONER HAMON:

1.        This case has taken a most unusual course.  On 19^th September 2005, six witnesses including the plaintiffs and the defendant were sworn and the plaintiffs' advocate opened with his submissions.  The six witnesses were duly heard (there were two defence witnesses, including the defendant) and Advocate Le Quesne and Advocate Blakely made their closing submissions.  The case ran for two days.  It was on the final day of the trial that the Deputy Bailiff explained in great detail that there was in his view an apparent bias.  The matter was fully aired between the Deputy Bailiff and counsel.  The argument was, as it always is, fairly and succinctly explained by the learned Deputy Bailifff and each of the plaintiffs directly told the Court that they wished the trial to continue with the Deputy Bailiff sitting.

"Deputy Bailiff: Mr Le Quesne?

Advocate Le Quesne: Sir, I have instructions. The instructions are the same but it might be as well if they were conveyed directly to the Court.

Mrs  Eden:  Yes, Sir ..

Deputy Bailiff:  Yes, Mrs Eden?

Mrs Eden: Sir, it is our wish that we continue.

Deputy Bailiff:  Very well, and you've had full chance to think about it?

Mrs Eden:  I have that and I wish to thank the Court for their consideration.

Deputy Bailiff:  Miss Bons?

Miss Bons: the same for me, yes.

Deputy Bailiff:  You're of the same mind?

Miss Bons:  Yes."

Once the trial had concluded, the Deputy Bailiff, on reflection, felt unable to give a  judgment and wrote in a very detailed letter to both counsel, saying that (although the case did not finish until 7.0 p m) he had reconsidered the matter overnight and was not able to continue to sit.  His letter finishes in this way -

"I am conscious that this will come as a considerable disappointment to both parties and I regret very much having to take the decision.  However there must be a risk of their allowing their undoubted short term interest in avoiding a re-hearing to outweigh their long term interest in having a tribunal free of any risk of bias. I must take account of the overall interests of justice.  I must apologise for not having reached this decision yesterday afternoon and thereby allowing the extra costs of the afternoon to be incurred.

It occurs to me that, if either or both parties are unhappy with my decision, they could appeal to the Court of Appeal as a matter of urgency.  I am sure arrangements could be made for an urgent special sitting.  Were the Court of Appeal to rule that I did not need to recuse myself, I would be willing to continue to sit with the Jurats in order that they might reach their decision.  Any such appeal would be an interlocutory appeal but I would view favourably any application for leave to appeal.

If, on the other hand, the parties do not think that that is an appropriate step, they will have to make arrangements for a new hearing.  It is a matter entirely for the parties but I suppose that consideration could be given to trying to reduce the costs by keeping the same Jurats and treating the evidence already given (as per the transcript) as the evidence in the case.  However that is not a matter for me and is entirely a matter for the parties and any new presiding judge.

I stand ready to hold any short hearing which may be necessary to consider the consequences of this letter although I am conscious that we were informed that Advocate Blakely is away for the next two weeks."

Neither party wished to appeal on this point and each agreed that I should sit to give the judgment of the Jurats on the case.

2.        Knowing nothing of the case, I was asked to deliver the Jurats' verdict.  It took some time for the transcript to be prepared.  I read the transcript and the learned Jurats, having also read the transcript, met on several occasions and when they were ready, I met with them together.

3.        The question that the Court has to decide was whether a contract was made and if it were made, the amount of damages flowing from the breach.  Counsel for the plaintiffs had no doubt that a fully enforceable contract was made, but the learned Jurats (who are not judges of law) have particularly asked me to consider this question as one that they each consider to be of essential importance.

4.        There is one matter that must be dealt with.  In his opening, Advocate Le Quesne stated -

"I should make it clear here that the case the plaintiffs are making on agency is in fact going to be rather different from the case as pleaded in 16.2 because I accept that Mr. Franco of  Primal Properties, was not authorised to conclude an agreement on behalf of the defendant.  That would be a rather unusual agency arrangement and I accept that the usual agency arrangement applied.  Our case is that he was authorised to negotiate the sale of the business".

5.        It would, without doubt, have been useful to the Court to have heard Mr. Franco.  He was in the Island and apparently continues to work as an estate agent but as Advocate Le Quesne said -

"Well, you raise your eyebrows, Sir".   I think that without going into too much detail I think that both sides have formed the view that he is not a witness upon whom they would want to place any reliance".

And later, Advocate Le Quesne said -

"This is a joint bundle and my learned friend has asked that some document emanating from Mr Franco go into that bundle and they are in the bundle.  We think they are of some use to the plaintiffs' case, but even in those documents you will see indications as to the reasons why we find his evidence ... rather difficult, even in those documents he rather contradicts himself".

6.        I am not going to analyse the evidence in any great detail but some of the evidence of course is important and where there is a conflict the Jurats have had to consider whose evidence they prefer.  They have done this without any apparent difficulty and of course they saw the witnesses and were able to assess what weight they attached to his or her evidence.

7.        The first witness that they heard was Mr Robin Baudains.  His evidence was clearly important for the decision that the Jurats had to make.

8.        Mr Baudains owns the tea rooms at Portinfer.  The business was run on lease by the defendant, Mrs Isobel Whittingham.  Mr Baudains agreed to Mrs Whittingham selling the business, although the lease had not yet expired. The business of the tearoom comprised the kitchen, the seating area and a flat above the kitchen.  There was another separate flat, separately let.  There was on the agreed file a form of lease dated 27^th January 2003 between Mr Baudains and the plaintiffs.  It was obviously prepared by Mr Franco.  It is clearly stamped "Copy".  It is not signed.  It says, in one of the clauses, whatever this may mean  -

"Not to operate the business from the demised premises outside the hours of 9.30 a.m. to 9.30 p.m. seven days per week with no evening trading permission".

9.        The Court expressed surprise at this clause because Mr Baudains had said that the premises could only open until 5.30 p.m.

10.      Mr Baudains, in reply to a question from the Court said this -

"I don't actually remember that, to be honest with you, but I might've said you can probably stay open maybe in the summer only till 9.30 on a Friday or Saturday night, but not every day of the week because I've got my children at home sometimes and I wouldn't want them to be disturbed, or the other people living on the property.  And some car parking spaces are taken up by my tenants as well besides the patrons from the tearooms.  And if the car park's full up with the tearoom people, the tenants will have nowhere to park".

11.      In cross examination from Advocate Blakely, when asked if he would have been happy to sign the lease in the terms of that clause, he replied -

"No, I wouldn't, no".

"So, would you have signed that lease?"

"Well, I don't think I would, no".

12.      Mrs Eden put the matter fairly and squarely when she said -

"Mr Franco kept producing leases for us to look at and is this going to be OK. I would not have signed any lease.  With Mr Franco's permission, I would have taken it to a lawyer during that period when I got back after 1st January".

13.      Mr Duncan Stewart is an accountant with Le Rossignol Scott-Warren and Company.  Mr Stewart explained that when he was approached by Mr Read of Reads and Company (who did not give evidence) he told him that the accounts of the business were not available.  His firm was still in the process of preparing the first accounts for the business and they hadn't quite reached draft stage at that time.  He did not send accounts to Reads and Company. When asked about the allegation that the defendant had put £60,000 of the profits into her "back pocket", Mr. Stewart said that he thought there was absolutely no chance of that, because she would not have been selling the business for £30,000.  In any event, it appears to the Jurats that any monies taken out of the business would require adjustment of other figures other than cash, otherwise the net profit to turnover ratio would be disproportionate.  In other words, purchases and/or creditors would have to be adjusted and creditors would have to be paid in cash or through another bank account.  

14.      There are, in the Jurats' view, problems in the version given to the Court by the plaintiffs.  The plaintiffs say that on 17^th December, Mr Baudains offered to grant them a new three year lease of the premises including a one-bedroomed flat.  On 17^th December they agreed with the defendant to purchase the business for £28,000 - with completion by 15^th February and on 17^th December, Mr. Franco asked for a deposit of £5,000 which was paid on 18^th December.

15.      On 17^th December the plaintiffs had not seen the accounts, they had not received an inventory and the terms of the lease (particularly staying open until 9.30 p.m.) had not been agreed (and apparently would not be agreed) by the lessor and no lawyer had been consulted.  If the plaintiffs were correct (and the accountant thought it quite impossible) that the defendant had put £60,000 "in her back pocket" she was willing to sell a business making £71,000 a year for £28,000.

16.      The learned Jurats are not saying for one moment that the plaintiffs are not telling the truth but they feel that their enthusiasm perhaps coloured their objectivity.  They have had the opportunity of seeing the witnesses.  They believe Mrs Whittingham (who does not have perfect English) when she says that the shaking hands (which she admits) on 17^th was no more than a polite way of saying goodbye.

17.      The learned Jurats believe Mrs Whittingham when she says that she did not know that Mr Franco had taken a deposit - indeed, I find some of the documentation prepared by Mr Franco to be somewhat suspect, but of course Mr Franco was not called by either party to be examined and cross-examined on these and this was a decision by both parties.

18.      Mrs Whittingham explained her dilemma to Advocate Le Quesne -

"Yes, because I mean, the position Mr Frank put me in, I, I mean, I was just against the wall, like I, I couldn't do anything else. I mean, they never let me know, nobody ever let me know till I make enquiries in January about the sales, the sales when I dropped the accounts off, I 'phone Mr Frank again, concerned, because ...concerned about the business and he said 'Well, they no very happy with the accounts'.  So I was concerned again. So I think was good opportunity for me, just in case Mrs Eden come back from holiday decide she wasn't happy with the accounts, she didn't want to buy the business.  I would sell the others the other.  I would lose the other interest buyers and I would lose them.  So what I mean, what's my position here?  I don't know".

19.      The Jurats are firmly of the opinion that Mr Franco (and I can see why the parties did not call him to give evidence) did not tell the defendant about the deposit and that she never received any of the bills that Mr Franco purported to have sent her.  The receipt drawn up by Mr Franco and undated is signed by him on behalf of his then firm but not signed by Mrs Whittingham.  The document is unusual in itself.  It is, as I have said, undated and it reads -

"We hereby acknowledge receipt in the sum of £5,000.00 (Five Thousand Pounds Sterling) lodged by Ms Janice Sarah Eden and Ms Yvette Martine Bons, as a token of their ability and willingness to proceed with the purchase of the business known as Portinfer Farm Tearooms, together with its licences, equipment and mobiliary effects, to be itemised in an inventory of "the contents", for a total consideration of £28,000.00 (Twenty Eight Thousand Pounds Sterling).

The deposit is paid on the strict understanding that:

a)        a new nine year lease is granted to the proposed purchasers by the landlord:

b)        if the purchasers elect not to proceed with the proposed acquisition for whatever reason, by the 15^th of February 2003, the deposit will be refunded in full.  In the meantime, neither the vendor nor their agents will market the business for as long as the deposit remains held by Primal Properties Ltd.

SIGNATURE                                                                SIGNATURE".

20.      In Selby v Romeril (1996) JLR 210 at 218 the Court said, having examined Pothier and the Code Civil -

"In our judgment, it may now be asserted that by the law of Jersey, there are four requirements for the creation of a valid contract, namely (a) consent, (b) capacity, (c) an "object" and (d) a "cause".

21.      The learned Jurats have asked me to say, in legal terms, that they are concerned that there was never a consent (a "consensus ad idem") to this agreement.

22.      The plaintiffs have pleaded in paragraph 6 of their pleadings -

"On 17^th December 2002 the plaintiffs met the defendant at the premises and orally agreed with her:

a)        to purchase the business for £28,000;

b)        that completion would be by 15^th February 2003;

c)        the business could not be offered for sale to a third party up to 15^th February 2003."

Having made the agreement, the plaintiffs and the defendant shook hands to signify that they were in agreement and were bound by the agreement".

23.      There is no argument as to what those terms are meant to imply, for in their further and better particulars, when the plaintiffs were asked -

"Please state whether it is alleged by the plaintiffs that items (a) (b) and (c) all formed part of one agreement or whether they were terms of separate agreements",

they replied -

"All three terms were part of the same agreement". 

24.      There is, in my view, no "lock out agreement" because if the terms are as agreed, the purchasers, who had not seen the accounts, had not seen an inventory, had not got the terms of the lease agreed, could pull out at any time up to 15^th February for any reason whatsoever while the defendant remained bound.  In the twenty-ninth edition of Chitty on Contracts, the "lock out agreement" matter was dealt with in this way -

"Collateral contracts: "lock out" agreements.  There is also the possibility that the freedom of action of the parties may be restricted by a collateral contract.  For example a vendor who has agreed to sell land "subject to contract" may, either at the same time or subsequently, undertake not to negotiate for the sale of the land with a third party.  Such a collateral agreement (sometimes called a "lock-out" agreement must itself satisfy the requirement of certainty and in Walford v Miles (1992) 2 AC 128 it was held that this requirement had not been satisfied where the agreement failed to specify the time for which the vendor's freedom to negotiate with third parties was to be restricted.  But in a later case (Pitt v PHH Asset Management Ltd (1994) 1 WLR 327) it was held that a vendor's promise not to negotiate with third parties for two weeks was sufficiently certain, and that the purchaser had provided consideration for it by in turn promising to complete within that time".

25.      There is no benefit in this clause for the defendant.  There is no "cause" (the deposit is refundable) and there is no promise to complete by 15^th February.  In fact, in the decision of the learned Jurats there was never an agreement to sell sufficient to justify the formation of a contract.

26.      I need go no further into the matter other than to say that in the view of the Jurats the plaintiffs have failed to prove their case.

Authorities

Selby v Romeril (1996) JLR 210.

Chitty on Contracts 29^th Ed'n.