Agreement Set Aside When Only One Side Meets Obligations

When two young men who were friends and sometime business associates decided to buy a flat together in 1997, they arranged it so that the property was registered in the name of the one who had paid the larger share of the deposit. He took out a mortgage and the arrangement was that his friend would carry a somewhat larger share of the incidental costs, so they expressly agreed that they would own the property in equal shares. The second man did not, however, make a greater contribution towards the running costs and, indeed, over time he paid less than his friend.



The two men fell out in 2008. When the property came to be sold, they had different views as to how the proceeds should be split. The question for the court was in what proportions was the flat (now worth considerably more than the £188,000 purchase price) owned?



When the lower court found that the agreement between the two men that the flat should be owned equally overrode the evidence that their contributions to the costs of ownership were far from equal, an appeal was almost inevitable.



In the Court of Appeal, Lady Justice Arden concluded, “In my judgment, the agreement did not apply in the events which unfolded. It only covered the case where there was a slight imbalance in contributions.”



In the Court’s view, the 50:50 agreement was predicated on the second man paying a greater share of the ongoing expenses and was no longer valid when this did not occur. The agreement had to be considered as a whole, and whereas one of the men had met his obligations under it, the other had not. It could not therefore be considered to be enforceable. The Court ruled that a 75:25 split was appropriate.