Business agreements should always be formally documented, and failing to do so is a recipe for dispute in the future. Recently, the Court of Appeal dismissed a man's appeal against the rejection of his claim that he had been promised a 50 per cent share in a retail company.
The company had been incorporated in 2014 and the man had begun working for it. He claimed that he and the company's director had reached an oral agreement that he should have 50 per cent of the shares in it, although the director would be the sole shareholder until he had obtained leave to remain in the UK. At a meeting with the director and the company's accountant in July or August 2015, by when he had obtained leave to remain, he contended that the accountant had been instructed to do whatever was needed to record his and the director's status as equal shareholders.
In late 2020 or early 2021, the relationship between the two men deteriorated and they discussed separating their business interests. After the director disputed the man's assertion that he was a shareholder in the company, he sought an order for specific performance of the alleged oral agreement.
The director denied that there had been any such agreement. He said that, at the meeting with the accountant in 2015, it had been agreed that the man would receive an equal share of the profits as an employee, but there had never been any agreement that he would receive shares.
The High Court rejected the man's claim. His evidence was described as unreliable, uncertain and contradictory and he had failed to satisfy the Court of the oral agreement. Nor did the evidence of the accountant, which suffered from similar inconsistencies, serve to corroborate the alleged agreement. The Court accepted the director's evidence that he had never agreed to anything more than the man receiving a half share of the profits of the business.
Ruling on the man's appeal against that decision, the Court of Appeal rejected his argument that the High Court had failed to consider compelling evidence in support of his claim as to the existence of the agreement and/or evidence which undermined the director's credibility. The overall decision for the Court was whether the parties had entered into the agreement and, taking into account all the evidence it had heard, it was entitled to reach the conclusion it had. The Court of Appeal was not persuaded that the High Court had demonstrably failed to take account of relevant evidence.
Challenges to the High Court's assessment of the witnesses' credibility were also rejected. That assessment was part of the trial process, and the Court of Appeal would not interfere with it unless it was rationally insupportable.