Stonard v Green Shoots Capital UK Ltd – don’t forget to record it in writing!

“The Moving Finger writes…” but sometimes it doesn’t write everything.  A recent High Court decision serves as a timely reminder that, whilst a contract may be oral in whole or part, contractual terms are best fully recorded in writing at the time of the contract.  Failure to do so can give rise to grave uncertainties.  In this blog, we consider the judgment in Stonard v Green Shoots Capital UK Ltd [2021] EWHC 927 (Ch) (Stonard) and its implications for all contracting parties.

Background

In Stonard, the Court considered the terms of a consultancy agreement which were partly written and partly oral. The chief objective of the consultancy agreement was for the claimant to promote investments in alternative investment products, mainly in hedge funds, to institutional investors. If the claimant introduced investors to investment managers, who then made investments in funds that were part of the defendant’s network, the investment managers would pay a commission to the defendant.  The defendant would, in turn, provide a share of that commission to the claimant.

Whilst the parties agreed that the claimant would be remunerated on a fee-sharing basis, the precise basis of the remuneration was in dispute – the parties did not agree on whether a specific percentage was agreed and, if so, in what amount.  The Court thus had to determine the contractual terms which were expressly or impliedly agreed by the parties in relation to remuneration.

The written part of the  consultancy agreement was dated 28 November 2014 and signed on 1 December 2014.  The oral part of the agreement was said to have been agreed in a telephone conversation between the claimant and the defendant’s managing director on 1 December 2014.  During the conversation, it was said that an agreement was reached as to the claimant’s percentage fee entitlement.

Key written terms of the agreement

In the written consultancy agreement, reference was made to a schedule.  The schedule was said to contain the details of the claimant’s remuneration.  The agreement stated that it should be read in conjunction with the schedule, a copy of which would be provided to the claimant upon request. The schedule was not attached to the agreement and by the time a copy of the schedule was made available to the claimant on 30 August 2019, the relationship between the parties had become strained.

The claimant brought a claim against the defendant concerning the proposed calculation and basis upon which she was to be remunerated, and whether this would be determined on a percentage fee sharing basis or by some other calculation method.

In order to determine the basis of remuneration, the Court had to consider, amongst other things, whether the parties were bound by the terms of the schedule to the consultancy agreement – an integral component of the agreement, whose purpose was to outline the basis on which the claimant would be paid – or whether the parties were bound by the oral agreement asserted by the claimant.

Court’s conclusion

The Court found that the parties were not bound by the schedule, which was created after the consultancy agreement had been signed.  The parties had intended for the terms they had agreed orally to be binding for the time being and at least until such schedule had come into existence. The schedule was not binding because it had merely been contemplated – it had not come into existence until much later. The defendant had admitted that the schedule sent on 30 August 2019 did not come into existence until on or about 29 August 2019, i.e. the day before it was sent to the claimant.  The defendant also confirmed that there were no earlier schedules held on file.

The Court found that the parties had orally agreed a fee sharing arrangement of 70:30, in favour of the claimant, in the call of 1 December 2014 at least until such time as a schedule had been drafted. No schedule was created until after the material introductory work had been undertaken by the claimant.

Implications of the judgment

What does this judgment mean for contracting parties? The High Court’s decision in Stonard highlights the importance of ensuring that the contractual terms to agreements are all documented in writing.  It is also a reminder of the general principle that what parties put in writing in the aftermath of agreeing a contract is, generally, extraneous.

Where contracting parties are considering entering into an agreement, they should ensure that the terms of the agreement are all recorded in writing.  If you are considering entering into an agreement and would like advice on the contractual terms, or if you find yourself embroiled in a contractual dispute, please do not hesitate to contact Zahira Hussain or another member of the team.  The team has extensive experience of dealing with contractual matters.

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