Evidence Of An Oral Contract Cannot Easily Be Inferred

The case of Savva v Cuckoo Hill Ltd & Anor [2025] EWHC 286 (Ch) highlighted that evidence of an oral contract cannot easily be inferred.

Peter Savva (“C”) sold a property to the second defendant’s (Marios Stylianides (“D2”)) company, Cuckoo Hill Limited (“D1”) for £600,000 on 20 June 2014.

A Defence Rooted In An Oral Contact

What was key was that the purchase price was not payable on completion but after the sale of the second of two houses to be developed on the same. D1 and D2 are collectively referred to as Ds.

D2 did not inform C when the two properties were sold. C discovered this through his brother some years later.

C brought a claim against Ds on 14 November 2022 and won the case. Ds defended the claim on the basis of an oral agreement on 20 June 2014 and the limitation act. The oral agreement of D2 was that C permitted Ds to invest C’s money in another development in Maidstone, but this was successful.

C denied the oral variation agreement.

Difficulty Proving An Oral Contract Without Documentary Evidence

The case highlights the difficulty in proving the existence of an oral contract in which there is limited documentary evidence. A point highlighted by the judge:

In considering such documentary evidence as exists and the absence of other documentary material I bear in mind the observation of Popplewell J in Edgeworth Capital (Luxembourg S.A.R.L v Aabar Investments PJS [2018] EWHC 1627:

“the absence of a contemporaneous written record by those with business experience may count heavily against the existence of an oral contract, because in the twenty-first century the prevalence of emails, text messages and other forms of electronic communication is such that most agreements and discussions which are of legal significance, even if not embodied in writing, leave some form of electronic footprint. Moreover where parties contemplate that they will instruct lawyers to draft detailed written agreements between them, there is a presumption that they intend the terms of their bargain to be those reflected in such carefully drafted agreements, not those in any prior or contemporaneous oral conversation, even in the absence of a boilerplate entire agreement clause.

It seems a key issue for Ds was that a contract on 20 June 2014 in writing apparently superseded on the same day by an oral agreement.

Judgment Highlights

The second defendant was an unsatisfactory witness. His witness statements lacked any clear explanation as to what he claimed to have been agreed with the claimant about investing £600,000 in future projects or when it was said to have been agreed and he was unable to provide any clarity when cross-examined. At least three times his response to a challenge to there being any oral agreement was along the lines: if there was no such agreement why did it take the claimant so long to ask for the return of his money. He also acknowledged when questioned about not having told the claimant about the sale of the houses that he was “guilty” of not telling him.

…

The parties had prior to 20 June 2014, agreed terms and the second defendant had instructed Mr Crowther to draft documents reflecting those terms. It is inherently implausible that parties would, on the same day as signing the written Sale Agreement and Interest Agreement, agree orally to a contract superseding them. The opportunities for reaching any oral agreement after that day were limited by the claimant’s return to Cyprus the following day.

The claimant was firm in his oral evidence and adamantly denied that there was any oral agreement varying or superseding the Sale and Interest Agreements.

The second defendant’s evidence of the existence of the oral agreement was hopelessly vague. The second defendant could not say when the oral agreement was reached and could not identify any terms as to repayment or otherwise. There is scant documentation about the Maidstone Project and, once the November 2016 Letter and January 2017 Letters are put to one side, there is nothing evidencing the claimant’s participation in the project.

…

I am not satisfied that there was ever any oral agreement varying the terms of the Sale Agreement. The second defendant evidently wished to have the claimant’s funds available for intended further investment purposes and appears to have treated them as so available but has not established that he or the first defendant had any contractual entitlement to do that. The case of the defendants on the oral agreement fails on the facts.

…

No explanation for the withdrawal of funds from the first defendant has been provided by the second defendant. It is to be inferred and I do infer that the second defendant knew that withdrawal of the money from the first defendant would inevitably lead to the first defendant being unable to pay its debt to the claimant and breach its contract with him and would render the first defendant insolvent, thereby prejudicing the claimant. I infer also that the funds were withdrawn for the second defendant’s direct or indirect benefit, possibly for investment in the Maidstone Project without consideration being paid to the first defendant. The second defendant has fabricated the alleged oral agreement as the only way of explaining away his unauthorised use of money owed by the first defendant to the claimant. I conclude that he has fabricated also the cash payments to Wiltons and to the claimant and the November 2016 Letter and the January 2017 Letters in an attempt to draw the claimant into transactions, which in truth were nothing to do with the claimant. I conclude also that the second defendant was acting dishonestly and in breach of his statutory duty to act in the best interests of the first defendant’s creditors.