Oral Agreements Overview
Are oral agreements worth the paper they are NOT written on?
In a family dispute in the case of Gheewalla v Rasul & Ors [2022] EWHC 3180 (Ch) you can see the advantages of committing agreements to writing so that everyone knows where they stand.
Bear in mind that even after putting agreements in writing, disputes can still sprout. Different people may have different ideas about what the words might mean and whether the agreement included all the terms that were agreed, whether the written agreement was the only agreement that gave rise to the matters agreed between the parties.
However, look at it from the perspective of a judge at Court. If two people are at odds over what was verbally agreed in an oral agreement or if indeed there was an oral agreement in the first place then the Court is going to have a jolly hard job to unscramble the correct position and all the terms that might have been agreed.
How The Court May View An Oral Agreement Dispute
In this case, the Court considered the well-known position following the Mike Ashley pub agreement case and other matters fleshed out by Lord Leggatt who has put forward the notable position on matters of the law on memory:
In relation to all of the witness evidence, for the most part this relates to events that occurred many years ago. I remind myself of the warnings made by Leggatt J (as he then was) in Guestmin SGPS SA v. Credit Suisse (UK) Ltd [2013] EWHC 3650 (Comm) (‘Guestmin’) regarding the malleability of memory, particularly in the context of litigation (see Guestmin [16] to [20]).
The approach recommended in Guestmin was to place little reliance on witnesses’ recollections of what was said in meetings and conversations many years ago. Instead, the court should base factual findings from the documentary evidence and known or probable facts to the extent that it is possible to do so.
As was noted by Leggatt J in the later case of Blue v. Ashley [2017] EWHC 1928 (Comm) (‘Ashley’), the Guestmin approach has been widely followed and approved by the courts and has received support in research by academic psychologists (see Ashley at [68].
Of course, there may be cases where the court has little to go on by way of contemporaneous documentary evidence. This is one such case. The approach that the court should take in such cases was considered by the Court of Appeal in NatWest Markets plc and another v Bilta (UK) Ltd (In Liquidation) and others [2021] EWCA Civ 680 (‘Bilta’) where the court, at [51] said:
“Faced with documentary lacunae of this nature, the judge has little choice but to fall back on considerations such as the overall plausibility of the evidence; the consistency or inconsistency of the behaviour of the witness and other individuals with the witness’s version of events; supporting or adverse inferences to be drawn from other documents; and the judge’s assessment of the witness’s credibility, including his or her impression of how they performed in the witness box, especially when their version of events was challenged in cross-examination. Provided that the judge is alive to the dangers of honest but mistaken reconstruction of events, and factors in the passage of time when making his or her assessment of a witness by reference to those matters, in a case of that nature it will rarely be appropriate for an appellate court to second-guess that assessment.”
Mr Darton, in drawing my attention to this line of cases, suggested that the approach that the court should take from it when dealing with conflicting oral evidence in a matter that occurred many years ago, should be:
(i) to test the oral evidence against the contemporaneous documentary evidence and the known or probable facts (as per Bilta at [49]); and
(ii) to consider the overall plausibility of the evidence and the supporting or adverse inferences that can be drawn from other documents (as per Bilta at [51]; and
(iii) to consider the extent to which the Alleged Agreement Agreements have left a “documentary footprint” (as per Ashley at [65]).
I agree that this is the approach that the court should take. I would add, however, one further consideration arising from a case that Mr Mahmood reminded me of, Weisniewski v Central Manchester Health Authority [1996] EWCA Civ 596 (‘Weisniewski’). This is to take appropriate notice of the fact if there is evidence that is not before the court that a party might be expected to have adduced if that party’s case were true.
In Weisniewski, Brooke LJ (as he then was) delivered the Court of Appeal’s unanimous judgment in a matter relating to medical negligence. After considering prior authority, he derived the following principles:
“(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.
(2) If a court is willing to draw such inferences they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.
(3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.
(4) If the reason for the witness’s absence or silence satisfies the court then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.”
The Conclusion Of The Court
In this case, the Court concluded there were no oral agreements which were referred to as the “Alleged Agreements” giving rise to the family dispute over a hotel business:
In Sir Arthur Conan-Doyle’s short story “The Silver Blaze”, Sherlock Holmes famously solved the case by reference to “the curious incident of the dog in the night-time” – the curious incident being that the dog did not bark. A similar analysis may be applied in relation to the Alleged Agreements.
An agreement entitling someone to one third of the profits of a partnership that owns four hotels, is a very important thing. It is entirely unlikely that if such an agreement existed it would not have left a more substantial “documentary footprint” (to borrow the language from Bilta) over a period something like 20 years than was the case here.
Following the principles outlined in Weisniewski I consider that the other matters I have listed above that go to the inherent improbability of a one-third profit share being agreed, is strengthened by the deafening silence over the existence of such an agreement (with the one exception of the Newham proceedings) and the Claimant’s failure to bring forward any of the witnesses who should, on his evidence, have been able to attest to the existence of the arrangement.
Having taken full regard to the arguments put forward for and against the existence of the Alleged Agreements, in my view the evidence for the Alleged Agreements is thin at most. Certainly, it is insufficient to discharge the Claimant’s burden of proof in relation to this matter. This is so whether or not one accepts his view of the financing arrangements for the Partnership (as to which I make no finding). Accordingly, I find that the Alleged Agreements in the terms argued for by Mr Gheewalla did not exist and Mr Gheewalla’s claim for breach of a consultancy agreement must fail.
As I have found that the Alleged Agreements did not exist, the claim against Mr Rasul that he caused a breach of the Alleged Agreements must also be dismissed.
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