McCarthy v Jones & Anor

Factual and Procedural Background

The case concerns a contract made in 2008 between the Plaintiff and the Defendant involving an exchange of interests in a yacht and a villa located in Mallorca, Spain. Under the contract, the Defendant was to obtain ownership of the yacht, and the Plaintiff was to acquire the beneficial interest in the villa, although legal title remained with the Defendant. A power of attorney was granted to a Spanish lawyer to enable sale of the villa at the Plaintiff's direction. The Defendant breached the contract by revoking the power of attorney in 2013, reinstating it in favour of a third party rather than the Plaintiff in 2014, and ultimately selling the villa to a third party in 2016.

The Plaintiff was awarded damages of €1,025,000 for breach of contract by the trial judge following a two-day trial. The Defendant appealed the decision with permission. The appeal concerns whether the Plaintiff had ceased to be entitled to the beneficial interest in the villa or was estopped from denying that he had such interest.

Legal Issues Presented

1. Whether the Plaintiff had transferred or surrendered the beneficial interest in the villa to a third party by way of a concluded agreement or otherwise.
2. Whether the Plaintiff was estopped from denying the transfer or loss of beneficial interest due to estoppel by convention arising from dealings between the parties and a third party.
3. Whether the Plaintiff should receive credit for payments made by the Defendant to the third party in diminution of the Plaintiff's debt.
4. The correct assessment of damages for breach of contract regarding the villa's value and any deductions.
5. The appropriateness of the costs order requiring the Defendant to pay costs related to a document preservation application involving a third party.

Arguments of the Parties

Defendant's Arguments

• The Defendant alleged a series of oral agreements between 2010 and 2016 whereby the Plaintiff transferred or surrendered his beneficial interest in the villa to a third party as security for a debt.
• In closing submissions, the Defendant focused on an alleged December 2010 agreement recorded in an email, contending it showed a concluded transfer of beneficial interest to the third party.
• The Defendant argued that the Plaintiff should be estopped from denying the transfer based on a shared assumption and conduct in 2016.
• Regarding quantum, the Defendant contended the Plaintiff should receive credit for payments made to the third party that reduced the Plaintiff’s debt, thus reducing damages.
• The Defendant challenged the damages calculation, arguing for deductions related to refurbishment costs and stamp duty, and a lower market value based on the Plaintiff’s intended intra-family transfer.
• The Defendant contested the costs order requiring him to pay for a document preservation application involving a third party, arguing it was unfair as he was not a party to that application.

Plaintiff's Arguments

• The Plaintiff denied that any concluded agreement transferring beneficial interest to the third party existed, asserting the relevant email was merely a proposal under discussion.
• The Plaintiff argued that he retained the beneficial interest and that no voluntary surrender or agreement to transfer occurred.
• The Plaintiff disputed the estoppel claim, emphasizing the absence of express shared assumptions, reliance, or unjust detriment.
• On quantum, the Plaintiff contended that no credit should be given for payments made by the Defendant to the third party as the Defendant’s payment was unauthorised and the debt amount was disputed and unresolved.
• The Plaintiff supported the damages calculation based on market value at the time of breach without deductions for refurbishment or stamp duty, and rejected the suggestion that the villa’s value should be based on an intra-family transfer price.
• Regarding costs, the Plaintiff argued that the Defendant should bear the costs of the document preservation application as it brought forth documents relevant to the proceedings and was triggered by the Defendant’s conduct.

Table of Precedents Cited

Court's Reasoning and Analysis

The court carefully analysed the factual matrix and the parties' pleadings and submissions. It accepted the trial judge's findings that the 9 December 2010 email did not evidence a concluded agreement transferring the beneficial interest in the villa to the third party, but rather recorded a proposal under discussion. The court emphasised the high threshold for appellate interference with trial judge’s factual findings, especially regarding oral agreements and parties' intentions.

The court rejected the Defendant’s estoppel by convention claim, finding no express shared assumption, no clear reliance, and no unjust detriment established on the facts. The communications and conduct between the Plaintiff and the third party did not support an estoppel against the Plaintiff.

On quantum, the court held that the Defendant was not entitled to credit for payments made to the third party because such payments were unauthorised and did not discharge the Plaintiff’s debt absent ratification. The Defendant failed to prove the precise amount of the debt, and the third party was not a party to the proceedings, limiting the court's ability to assess credit.

The court upheld the damages assessment based on market value at the time of breach, rejecting arguments based on the Plaintiff’s intended intra-family transfer price and unsupported deductions for refurbishment costs or stamp duty. The court found the trial judge’s valuation approach reasonable in the absence of expert evidence.

Regarding costs, the court found the trial judge acted within his broad discretion in ordering the Defendant to pay costs related to a document preservation application, reasoning that such costs were properly part of the underlying proceedings and that the Defendant’s conduct triggered the application. The court noted relevant authorities supporting the principle that costs of disclosure applications should be borne by the wrongdoer rather than an innocent party.

Holding and Implications

The court DISMISSED the Defendant’s appeal in its entirety.

The decision confirms the following:

• The appellate court will not lightly overturn a trial judge’s findings of fact, especially on oral agreements and parties’ intentions.
• Estoppel by convention requires clear express shared assumptions, reliance, and detriment, which were not present here.
• Payments made by a third party without debtor’s authority do not discharge the debtor’s obligations unless ratified.
• Damages for breach of contract involving land are to be assessed by market value at the time of breach, not by hypothetical intra-family transfer prices without expert evidence.
• Costs related to document preservation applications triggered by a party’s conduct may be properly ordered against that party as part of the underlying proceedings.

No new precedent was established; the judgment applies and reinforces established principles in contract law, equitable interests, estoppel, damages, and costs.