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Home > Judgments > 2006 archive

Shaw v Hutton-Shaw [2006] EWCA Civ 1235

Appeal against an order in a case arising from loan agreements between cohabitants. Appeal allowed.

The case is of interest as it highlights the issues arising how to interpret agreements between cohabitants. The case was also complicated by the fact that the couple had lived in France and legal proceedings had also taken place there. The crucial issue was whether the second of two agreements overrode the first loan agreement and represented a final capital settlement.

____________________

B4/2006/1084

Neutral Citation Number: [2006] EWCA Civ 1235
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM COLCHESTER COUNTY COURT
(HIS HONOUR JUDGE THOMPSON)

Royal Courts of Justice
Strand
London, WC2

Friday, 24th November 2006

B E F O R E:
LORD JUSTICE MAY
LADY JUSTICE ARDEN
LORD JUSTICE WALL

SHAW
CLAIMANT/RESPONDENT

- v -

HUTTON-SHAW
DEFENDANT/APPELLANT

(DAR Transcript of WordWave International Limited
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Official Shorthand Writers to the Court)

MR G PARNELL (instructed by Messrs Marshall Legal LLP) appeared on behalf of the Appellant.

MR N ELCOMBE (instructed by Messrs Budd Martin Burrett) appeared on behalf of the Respondent.

J U D G M E N T
(As Approved by the Court)

Crown copyright©
1. LADY JUSTICE ARDEN: This appeal is about the interpretation of two documents made in a relatively informal way between two people who were then living together as man and wife, and the agreements arise out of their joint ownership or occupation of properties in which they had lived together.

2. This case is of some legal interest because of social change: cases raising the problem of managing the interests of parties who have lived together in properties in which they have co-resided are becoming more and more frequent. The Law Commission of England and Wales has performed some very valuable work in making proposals in its consultation paper Cohabitation: The Financial Consequences of Relationship Breakdown (Consultation Paper No 176) (May 2006), which analyses some of the problems which may arise when cohabitants separate. The Law Commission is consulting widely and hopes to publish its recommendations in August 2007. The facts under consideration in this case are of particular interest because they do not fall within the paradigms considered by the Law Commission. The facts of the present case demonstrate the complexity of human life and the possible difficulties of law reform and of adopting comprehensive legislative solutions.

3. There is a second area in which this case is also of general interest and that is because it is really a problem about the interpretation of agreements. It might be thought that everything that could be said about the interpretation of documents has already been said but the fact is that all interpretation requires the identification of correct approach, the application of that approach to the individual documents under consideration and the constant weighing of all the relevant evidence. The approach has been authoritatively laid down by the House of Lords in Investors Compensation Scheme v West Bromwich Building Society ("the ICS case") [1998] 1 WLR 896 at 912, per Lord Hoffmann, with whom the other members of the House agreed. Lord Hoffmann held:

"My Lords, I will say at once that I prefer the approach of the learned judge. But I think I should preface my explanation of my reasons with some general remarks about the principles by which contractual documents are nowadays construed. I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prenn v Simmonds [1971] 1 WLR 1381, 1384-1386 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989, is always sufficiently appreciated. The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of 'legal' interpretation has been discarded. The principles may be summarised as follows:

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the 'matrix of fact,' but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax.
(see Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 2 WLR 945)

(5) The 'rule' that words should be given their 'natural and ordinary meaning' reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in The Antaios Compania Neviera SA v Salen Rederierna AB 1981 AC 191, 201:

'…if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.'"

4. I would also like to quote at this point a passage from the speech of Lord Hoffmann in Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, at 774. Lord Hoffmann said:

"I propose to [examine] the way we interpret utterances in everyday life. It is a matter of constant experience that people can convey their meaning unambiguously although they have used the wrong words. We start with an assumption that people use words and grammar in a conventional way but quite often it becomes obvious that, for one reason or another, they are not doing so and we adjust our interpretation of what they are saying accordingly. We do so in order to make sense of their utterance: so that the different parts of the sentence fit together in a coherent way and also to enable the sentence to fit the background of the facts which plays an indispensable part in the way we interpret what anyone is saying. No-one, for example, has any difficulty in understanding Mrs Malaprop. When she says, 'she is as obstinate as an allegory on the banks of the Nile', we reject the conventional and literal meaning of allegory as making nonsense of the sentence and substitute 'alligator' by using our background knowledge of the things likely to be found on the banks of the Nile and choosing one which sounds rather like 'allegory'.

"Mrs Malaprop's problem was an imperfect understanding of conventional rule of English words. But the reason for the mistake does not really matter. We use the same process of adjustment when people [make] mistakes about names or descriptions or days or times because they have forgotten or become mixed up. If one meets an acquaintance and he says 'And how is Mary?' it may be obvious that he was referring to one's wife, even if she is in fact called Jane. One may even, to avoid an embarrassment, answer 'Very well, thank you' without drawing attention to his mistake. The message has been unambiguously received and understood."

5. In fact, even before these two cases were decided, the problem had been considered by this court in the context of an agreement between married people as to the disposition of their assets on separation. The case is Sandford v Sandford [1986] 1 FLR 412, the decision of Purchas LJ and Oliver LJ. In this case there was an application for ancillary relief by way of a lump sum. The parties had previously made an agreement for division of their capital assets and that agreement had been embodied in a court order, but the court order did not say that the agreement was in full and final satisfaction of the parties' respective claims to capital. Those words were simply not used. Purchas LJ gave the leading judgment. He referred to the speech of Lord Scarman in Linton v Linton where Lord Scarmon refers to the legislative policy in ancillary relief, which includes a policy of clean break, namely that a comprehensive settlement of all financial property issues as between spouses. The court then went on to consider the agreement in question and approved the approach of the judge which was to look at the substance of the agreement to see whether in fact the parties had intended to come to a comprehensive settlement. Purchas LJ held as follows:

"However, the real question to be determined is: Was the order resulting from the agreement reached between the parties an overall capital settlement? The judge found that it was, and in order to disturb a finding of that kind it is necessary for counsel for the wife to go so far as to show that there was no evidence upon which the judge could properly have made it. Counsel for the wife, very properly as I understand his submissions, has not contended on this appeal that if he fails to disturb that finding the wife can still pursue her claim for a lump sum. In my judgment this was a proper concession to make. It is clearly established on the authorities, to which it is not necessary for me to refer, that once a claim for a lump sum has been dismissed as the result of a court order, then it is not open to the party to reinstate an application of that kind, even if it was originally in the petition. The judge drew a distinction from the point that the notice of application from which the matter stemmed asked for a transfer of property order but not a lump sum order. But, rightly in my view, he found that that technical distinction was of little or minimal weight. In my judgment matters of this kind must be dealt with upon the general merits and meaning of the agreement leading to the order which is finally made by the court; it is not an area in which there is much room for technical objection or technical considerations of form; it is a matter of substance."

6. It seems to me that the approach of this court in Sandford v Sandford dovetails with the approach on the interpretation of documents now authoritatively laid down in the ICS case. The present case does not concern a couple who were married, but I consider that the same result as in Sandford v Sandford would today be reached by the method laid down by the ICS case and, in my judgment, that is the proper approach for the court to apply to the interpretation of documents whether the agreement is between a married couple, or between a couple who have a civil partnership, or between a couple who are simply cohabiting as man and wife or as grandparent and grandchild, or in some other capacity.

7. The two agreements with which we are concerned in this case were in summary as follows. The first agreement was a loan agreement of November 2002 (the "loan agreement"). This is signed by the respondent, Ms Jane Hutton-Shaw, and it acknowledges receipt on the judge's findings of £50,991 and some pence, and states that:

"These funds were loaned to me to deal with the purchase of a property in France in my own name.

I acknowledge a debt in the said sum and further acknowledge that this sum is repayable on demand from Tony Shaw..." (the appellant)

8. A draft of this agreement is to be found at page 166 of the appeal bundle. The court does not have a copy of the agreement as executed, which appears to have been lost. It was not available in evidence before the judge, so the judge had to make findings as to the way in which the draft was completed, including making a finding by implication as to the amount of the loan.

9. The second agreement ("the second agreement") is an agreement which the parties made when their relationship broke down after a period of residence in France at the property referred to in the loan agreement. I will set out the terms of this agreement later in this judgment when I have said more about the background facts. Before I do that, I want to say a little about the action in this action. Mr Shaw sued to recover the whole of the loan recorded in the first agreement and in essence the question for the court was whether that agreement survived the second agreement, and it is on that question that Ms Hutton-Shaw has appealed to this court. In summary, in my judgment, on its true construction, the loan agreement did not survive the making of the second agreement. In this judgment I will set out the background to this case and then examine the admissible background for the purpose of interpretation of the agreements.

10. The order under appeal was made following a trial before HHJ Thompson sitting in the Colchester County Court. His order is dated 4 May 2006. Mr Shaw was successful before the judge and obtained judgment of £13,770.86, plus interest of £1,109.29. This sum represented the balance of one half of the loan of £50,991, after deduction of the sterling equivalent of €17,500, pursuant to the second agreement. Ms Hutton-Shaw had duly performed her obligation in that agreement to pay that particular sum to Mr Shaw. As I have said, the action was brought to recover the whole of the loan. In her defence, Ms Hutton-Shaw contended that there was no agreement for loan which she had signed and in any event the second agreement was in full and final satisfaction of the claims between the parties. The judge rejected both those arguments. Before looking at the judgment of the judge, I would like to deal with the factual background. I can take this largely from the summary of the relevant background from the skeleton argument of the appellant, which has been helpfully presented to the court with comments from the respondent's counsel. In 1993 the parties started living together. In 1995, Mr Shaw bought a property called Birchdale, in Tendring, Essex, in his own name, subject to a Midland Bank mortgage. In 1998, he transferred the property into the joint names of the parties, in order to provide Ms Hutton-Shaw with security. That was the finding of the judge.

11. In 2002 they decided to sell Birchdale and to buy a property in France. Birchdale was sold for £90,500. The next proceeds of sale, amounting to £50,991.73, were paid into a Swiss bank account in the appellant's sole name. It is not necessary to investigate the reasons why this was done. The proceeds were used to purchase the French property. The French property was a property at 42 Rue Centrale, Galanchat, France 17470 ("the French property"). On 5 November 2002 Mr Shaw's solicitor, Mr Howe, wrote to both Mr Shaw and Ms Hutton-Shaw to point out that in the event that the appellant were to die, the property would, under French law, go to her daughter, Alana. Because this letter went to both of the parties, it forms part of the relevant and admissible evidence in the interpretation of the documents before the court. Mr Howe suggested that the parties sign a loan agreement under which Ms Hutton-Shaw was to accept £50,991.03, repayable on demand.

12. The judge set out the relevant parts of the agreement in his judgment and I can quote from the quotation which he gives. I need not read all of the letter. Mr Howe states:

"With regard to the property in France I understand that all the funds were provided by Tony, at one stage it was proposed the property went into joint names of Jane and Alana, but because of Alana's age this was not possible, and in the event the property went into Jane's name.

I had explained that although I am not an expert on French Law, it was my understanding that the French Law of inheritance is entirely different, and you cannot leave your property separately by Will, and it effectively passes through the family, and in this case since Alana is Jane's only child that it would pass to her.

This would leave Tony totally unprotected.

In the circumstances you obviously cannot interfere with the French property, but we only deal with the original loan, and for that reason the loan from Tony to Jane has to be acknowledged in writing, and confirmation given that the loan is repayable on demand.

Effectively this cannot alter matters relating to French property, but it would then be a debt of the estate if Jane were to die, again I do not deal with French law, and the property would appear to be that Jane would not have an estate within the UK where enforcement proceedings can be brought to collect the money back from the house, and if Jane were to die owning the property in France then undoubtedly you would have to go to lawyers in France to take advice."

13. The judge found that the parties took the draft agreement to another firm and completed the blanks and Ms Hutton-Shaw signed it, and so acknowledged that she owed Mr Shaw the whole of the proceeds of sale. The judge went on to hold that this document was signed so as to give Mr Shaw security, in the event of Ms Hutton-Shaw's early death. The judge accepted the evidence of Mr Shaw on the issue that a loan agreement was executed in preference to that of Ms Hutton-Shaw, who denied that the agreement had been executed, and the judge said at paragraph 13 that he (Mr Shaw) did need some security because of the events described in Mr Howe's letter.

14. It now turns out that Mr Howe may have been wrong about the position in French law. It may be that the loan agreement could have been set aside because of that mistake, and, in addition, it is to be noted that the loan was for the whole of the proceeds of sale of Birchdale, even though that was the property which Ms Hutton-Shaw jointly owned, according to the names under the register. There has been no application for rectification. It has been accepted by Mr Shaw that his claim was for a half share in the proceeds of sale and thus the amount in the loan agreement must have been wrong. That is, in essence, conceded. There has not been an issue about it before us.

15. It also means that, on the judge's findings, there is more to the loan agreement than meets the eye, according to its written terms which are as I have already set out. The parties lived together in the French property between 2002 and 2004. Then in 2004, their relationship broke down. Ms Hutton-Shaw brought proceedings to evict Mr Shaw from the property and she had also brought criminal charges for assault. Both parties consulted French lawyers at about this time, but on the judge's findings it was Ms Hutton-Shaw who prepared the second agreement. It was obviously negotiated between them directly and the judge says this about the circumstances leading up to the agreement. I now read from paragraphs 25 and 26 of the judgment:

"25. They both ran up debts. The claimant says that the defendant fell under the influence of Mrs Byrne and that, together, the women trumped up charges against him, and she reported him to the local police. She sought an order for his eviction [but] because they were not married and because the house was in her sole name and because they had both run out of money, he was left in a very vulnerable position. Furthermore, she, on her own evidence, speaks fluent French, [whereas] he speaks no French at all.

"26. Eventually, after some friction between them, which is described in the statements of the two male witnesses I have mentioned and in the witness statements of both of them and which I need not explore, the defendant drafted a document with the help of Vera Byrne, which is at p.99 [of] the court bundle. It begins as an English draft which the defendant said she had used Mrs Byrne to help with because Mrs Byrne was good [at] writing language, although it must be said, in my judgment, Ms Hutton-Shaw was perfectly capable herself but indeed she offered the evidence it was she and Mrs Byrne who drafted it together. That document was signed and witnesses on 29th September 2004. The English version [begins] with a blank at the last paragraph, which says: 'Jane Hutton Shaw agrees to pay Anthony Shaw the sum of €17,500,' followed by the same figure written in text. It is witnessed in French style, 'Fait a Galanchat le 29 Septembre 2004', and witnessed by some English neighbours."

16. I will now describe the agreement. It was originally made in manuscript and it is now typed up appearing at the bundle at page 127. It is headed, "Agreement between the following parties concerning the property at 42 Rue Centrale Galanchat France 17470" (the "French property"). The agreement names the parties, and describes Ms Hutton-Shaw of the French property and Mr Shaw as of Loughborough, United Kingdom. The agreement then goes on to provide that Mr Shaw agrees:

"- to vacate [the French property] on 14 October 2004 and never to set foot in it again

- to cease all legal actions whatsoever against Jane Hutton-Shaw in France or in England.

- All furniture and contents of the house and the Land Rover 4x4 to go to Jane Hutton-Shaw.

- To have no contact with Jane Hutton Shaw or her daughter either in England or France.

- To retract any accusations made about Jane Hutton-Shaw or Mrs Vera Byrne whomsoever it may be and to cease making any verbal vindictive remarks."

17. The agreement then provided that if Mr Shaw agrees to the above terms and conditions, Jane Hutton-Shaw agrees to undertake the following:

"Jane Hutton-Shaw agrees to pay all the outstanding debts in France and in England out of the proceeds of sale of the house in Galanchat.

In return for Mr Anthony Shaw accepting the overpage terms and conditions Jane Hutton-Shaw agrees to pay Anthony Shaw the sum of 17,500 euros (seventeen thousand five hundred euros)."

18. The agreement was then signed by the parties on 29 September. At a subsequent date, a further agreement was attached to it of 29 September about the couple's dogs, but we are not concerned with that agreement, although it is important to point out that it was agreed and signed separately on the 4 October 2004. After signature of the first document, the agreement was clearly placed by the parties before their lawyers for submission to the French court, where Ms Hutton-Shaw had started proceedings. The French court made an order which set out the parties' agreement -- and the parties' agreement is right -- and at the bottom, it was stated to be signed by the parties and dated 29 September 2004, and it was witnessed by their respective lawyers. The French court approved the order and that can be seen from page 178 of the bundle:

" The Court of First Instance of Saintes
SUMMARY ORDER

Emergency Interim Procedures Judge: Mrs Jeanpierre-Cleva, President
Clerk of Court: Mrs Soumagnac

The Parties
Plaintiff: Mrs Jane Hutton
Born on 2 December 1951 in London, resident at 32 Rue Centrale,
Galanchat, 1 7170 Loire-Sur-Nie
Represented by Maitre Laurence Germain, Lawyer at the Bar of Saintes.

Defendant: Mr Anthony Shaw
Born on 5 March 1915 in Loughborough, resident at 42 Rue Centrale, Galanchat, 17470 Loire-Sur-Nie
Represented by Maitre Laurence Leblond, Lawyer at the Bar of Saintes.

Debate held at hearing on: 26 October 2004
Date of deliberations indicated by President: 9 November 2004
Order issued at hearing held on: 9 November 2004

Further to an emergency interim summons issued on 24 September 2004 by Mrs Jane Hutton against Mr Anthony Shaw, the Parties appeared at the hearing on 12 October 2004 and the case was adjourned to the hearing on 26 October 2006, where a joint request was made for approval of the agreement signed on 29 September 2004.

This request should therefore be granted.

FOR THIS REASON
Ruling publicly and in an emergency procedure, in a joint order and as a first resort.

WE APPROVE the draft agreement signed by Mrs Jane Hutton and Mr Anthony Shaw on 29 September 2004, which provides, among other things, for:
- The liberation of the premises at 32 Rue Centrale, Galanchat, 17470 Loire-Sur-Nie, by Mr Shaw on 14 October 3004.
- Payment by Mrs Hutton to Mr Shaw of a total of €17,500 (that is, Fr114.793.18) in return for Mr Shaw's share in the acquisition by Mrs Hutton of the property mentioned above.

In accordance with the Parties' agreement, WE STATE that each party shall retain their expenses not included in the costs, and that the costs of the proceedings shall be borne in equal portions."

19. That order was then executed by the judge and signed by the clerk of the court as well. It will be noted that the parties in this order are described as both resident at the French property. It will be noted that, critically, in giving its approval, the court had explained that the agreement provided for "the liberation of the premises" (that is the French property) on 14 October 2004 and the payment by Ms Hutton-Shaw to Mr Shaw of the sum of €17,500, in return for Mr Shaw's share in the acquisition by Ms Hutton-Shaw of the French property.

20. Now the issue before this court is, as I have described it, whether the loan agreement survived the execution of this second agreement. After the second agreement was executed, the French property was sold and Ms Hutton-Shaw paid Mr Shaw the sum of €17,500. However, on 20 April 2005, Mr Shaw commenced proceedings in the Colchester County Court for payment of the sum of £50,991.70. The defendant's case, as will be seen from the defence, was that Mr Shaw signed the second agreement and, by signing the second agreement and submitting to the French court order, had deprived himself of any further claim. For his part, Mr Shaw said that he had only signed the agreement subject to duress, and that he was pressurised into signing it because he was desperate and had never abandoned his original claim.

21. This claim to duress, which was run at the trial rather than pleaded, was rejected by the judge and has not been relied upon before us. Counsel for Mr Shaw relied on the fact that the agreement required him to cease all legal actions in France or England, and submitted that those words only applied to actions which had already been commenced and, accordingly, the French order did not amount to a full and final settlement of all claims, and that, accordingly, Mr Shaw had a right to claim the balance of his entitlement, under the resulting trust of the property, Birchdale, represented by the proceeds of sale.

22. The judge was not satisfied that the compromise agreement was a full and final settlement of all claims. The settlement did not say that and did not bar future claims. It simply addressed the immediate problem that Ms Hutton-Shaw wanted Mr Shaw out of the house and wanted him to cease to have contact with her or her daughter. Ms Hutton-Shaw also wanted to sell the house and she needed possession before 15 October, because, under French law, anyone who is living in a house on 15 October in any year could not be evicted for six months. So Ms Hutton-Shaw had pressing needs. So did Mr Shaw, because he had no money at all and needed money desperately.

23. The judge held that he was satisfied on the balance of probabilities that both parties knew that this was not the end of the matter, and the judge held that Mr Shaw had a claim under the resulting trust which survived. In a supplementary judgment, the judge qualified his reference to a resulting trust and said it was simply a matter of Mr Shaw retaining the half share of the proceeds on the basis that he had given the defendant the other half some time before, by putting her on the title as joint tenant. The judge in his supplementary judgment went on to say that Mr Shaw did not agree to accept €17,500 in respect of all matters and retained his share in the house, despite him saying that he was accepting the sum for his share in the property in his witness statement and despite the terms of the order of the French court in its reasons for approving the order.

24. The passage in the witness statement to which the judge was referring is paragraph 60 of the witness statement of Mr Shaw of 16 December 2005, where Mr Shaw said this:

"The defendant then presented me with a document, a copy of which I exhibit as 'AJS3'. I was told that if I did not agree to what was set out in that document I would get nothing and the Defendant would continue to prosecute me for the alleged assault and attempted murder. However, if I did agree to what was set out in the agreement she would drop the charges and pay me €17,500.00 in respect of my share of the house, the contents and the motor cars. I was clearly being blackmailed by the Defendant. However I had no option in those circumstances but to sign the agreement."

25. I need not read further from the paragraph. The judge held that Mr Shaw retained his right to claim back one half of the proceeds of the Birchdale property but that he had to give credit to the €17,500 which he had received under the second agreement. The judge held that the money was available from the proceeds of sale of the French property. He referred to the fact that bills from the property had been paid. These may have been bills which Ms Hutton-Shaw agreed to pay. He held that the balance was £25,099.86 but this was subsequently corrected in an exchange with counsel after the judgment to £25,495. The judge then deducted the sterling equivalent of the €17,500 and gave judgment in the sum of £13,074.

26. I now turn to the appellant's submissions. Mr Graham Parnell for Ms Hutton-Shaw in his written submissions submitted that the judge placed too much weight on the findings of Ms Hutton-Shaw's lack of credibility and too little weight on the attack on Mr Shaw's credibility and submits that the judge should have held that Mr Shaw had no established the existence of the loan agreement. However, Mr Parnell has properly accepted before us at the outset of the submissions that the judge was entitled to make his findings of fact and that argument has not been pursued before us. Mr Parnell then submits that the question as to how the judge found that one half of the debt stated in the agreement belonged to Ms Hutton-Shaw is a matter of law. He submits the judge ought to have found that the document was simply a device to protect the claimant in the event of Ms Hutton-Shaw's death. Mr Parnell submits that the judge should have found that the second agreement was in full and final satisfaction of Mr Shaw's claim for an interest in the French property. In this regard the appellant relies on Mr Shaw's witness statement, the evidence which Mr Shaw gave in court and the fact that he had written to Ms Hutton-Shaw on 14 September 2004 asking for a settlement involving his share of the house.

27. That document is in the bundle at page 169, which opens with the words:

"With respect to the sale of our house I would like the following settlement. I feel that my share to be €30,000. You keep all the furniture, the Land Rover and the remainder of the money from the house sale. House being sold for approximately €115,000."

28. The letter continues but I am not concerned with the balance of the letter. Mr Parnell submits that in the end that figure was agreed at €17,500. He further submits that Mr Shaw did not contend that that sum was not in respect of his entire interest in the French property nor did he contend that the second agreement was not intended to be in satisfaction of all claims. His defence was that it was executed under duress. Mr Parnell also relies on the French court's order and Mr Parnell submits that it was not open to the judge to conclude that Mr Shaw had not understood that the payment of €17,500 was in satisfaction of his interest in the French property when he had stated explicitly that it was meant to be the case. Mr Parnell also submits the judge was wrong to find that the parties did not intend the agreement to be in full and final satisfaction of the claim. He refers to paragraph 44 of the judge's judgment in which the judge held:

"That Mr Shaw did not in fact agree to accept €17,500 in respect of all those matters. He knew, and indeed she knew, that he had his half-share in the house, which was still preserved, and, in my judgment, despite him saying so in his witness statement and despite the French court order reciting that matter, that was not what he agreed."

29. On Mr Parnell's submission Mr Shaw never said otherwise than that the amount was in full satisfaction of that share. He contends the judge ignored the fact that Mr Shaw's solicitors had made no assertions that the second agreement was not in full and final satisfaction. The defence as I have said was duress, which failed. Moreover the letter before action had stated that the compromise agreement purported to be in full and final satisfaction. The appellant therefore contends that the judge ought to have found that the second agreement was in full and final satisfaction or all claims between the parties arising out of the property and should have dismissed the claim. In any event, Mr Parnell contends that the judge should have given judgment for the purchase price of the French property, that is, £44,000 divided by two after deduction of the €17,500. This is because of expenditure by the parties jointly out of the proceeds of sale as I shall explain below.

30. Mr Nicholas Elcombe for the respondent, Mr Shaw, submits that the judgment of the judge should be upheld. He submits that the judge properly took into account that the appellant was owed one half of the sum of £50,991.70. Mr Elcombe submits that the judge was correct in his approach to the second agreement. This did not use the words "full and final settlement". The judge properly took into account the vulnerable position of Mr Shaw, who was facing both civil and criminal proceedings and who could not speak French. The original document was drafted by Ms Hutton-Shaw and was not expressed to be in final satisfaction. The additional words added by the French court in its order, which is where those words first appear, were not in the contemplation of the parties at the time the document was drafted. The appellant submits that the judge made correct findings and had done justice between the parties and that accordingly the appeal should be dismissed.

31. I would add that the French court also added a term to the agreement between the parties to which I have not previously referred in relation to the criminal proceedings. It appears on page 128 of the bundle, "Additif Mademoiselle Hutton-Shaw cessera ses poursuites judiciaries pour agression à l'égard de Monsieur", by which I understand that Ms Hutton-Shaw was to cease her legal proceedings for assault which she had brought against Mr Shaw.

32. I now turn to my conclusions. Logically, I must start with the loan agreement. In view of the judge's findings as to the reasons for executing the loan agreement, the loan agreement could not in my judgment evidence a loan repayable on demand but rather a loan repayable in certain events. Those events obviously included the death of Ms Hutton-Shaw while the parties were living together in the French property. There could be other implied terms as to repayment and other events, too. The judge did not go into this and it is not necessary for me to do so, save to say that Mr Shaw could not both have an unqualified right to a share of the proceeds of Birchdale by virtue of the loan agreement and an unqualified right to a share in the proceeds of sale of the French property into which the proceeds of Birchdale had been invested.

33. The parties later assumed that he had a claim to the proceeds of sale of the French property. If he had simply been paid his share of the proceeds of sale and the parties had then separated, then the question might have arisen whether or not he would have had a claim under the loan agreement. In this case that question does not have to be answered because what happened was that the parties separated but executed the second agreement, and the question is the effect if any of that second agreement on the loan agreement and that depends on the interpretation of the second agreement to which I now turn.

34. To interpret the second agreement the court has examine the terms of the second agreement in their factual matrix. The factual matrix includes a number of matters. The parties were in dispute with each other. It seems to have been quite an acrimonious dispute. They both were under economic pressure to sell. Ms Hutton-Shaw wanted to sell the property and for that purpose she wanted vacant possession. Mr Shaw needed money. In fact they both needed money. In addition Mr Shaw was subject to criminal proceedings for assault or at least there had been a report by Ms Hutton-Shaw to the police and no doubt there would be anxiety on that also.

35. Turning to the terms of the agreement I note that at its head the agreement is described as concerning the property at 42 Rue Centrale Galenga France 17470. So the parties thought that they were entering into an agreement concerning the French property. Going into the terms Mr Elcombe has placed reliance on the words "to cease" all legal actions. He has taken a very technical approach that that particular agreement was simply an agreement that any action already commenced should be brought to an end.

36. On the basis of that clause Mr Elcombe mounted an argument before the judge, which is repeated in this court, that that meant that the agreement contemplated that Mr Shaw should be able to bring subsequent legal actions whether in France or in England against Ms Hutton-Shaw and those legal actions would obviously include an action on the loan agreement. In my judgment if the agreement had said that Mr Shaw should cease to have contact with Ms Hutton-Shaw that use of the word "cease" would clearly have been perceived to be prospective in its effect. It would be useless if he was simply to cease to have contact for an immediate and short period of time. Mr Parnell's submission is that this interpretation of the word "cease" is unrealistic. I agree with that. Lord Hoffmann's reference to the allegory on the Nile assists in this context. The parties may have said "cease" but they knew that they meant "neither institute nor maintain". That would be the only sensible interpretation of those words. Any other result would not be productive of a lasting agreement between the parties.

37. I now turn to the French court ruling. Mr Parnell relies upon this as supporting his case and it is correct that the making of the application to the French court was part of the sequence of events surrounding the making of the agreement. There is no evidence before us as to French law or as to the discussion before the judge in the French court. There is no evidence as to whether as a matter of French law the agreement took effect as soon as it was signed or only when it was approved by the court. The parties have proceeded on the basis that the making of the agreement and its coming into force was not dependent upon the prior approval of the French judge, though if that had not been obtained, if the judge had refused to approve the agreement, the agreement may have ceased to have had effect. But in these proceedings it has been assumed that the agreement had immediate effect and was subsequently placed before the French court for approval. So on this basis the French court's order actually post dates the making by the parties of their agreement.

38. The words on which reliance is placed in the order of the French court are words which are derived from the judge in the court, the Tribunale de Grande Instance. If the court could be satisfied for example that the parties had made an agreed statement to the court and that the judgment accurately reflected what the parties had said and their agreed statement was as to their agreed object in entering into the agreement this court, this might have been one of those exceptional cases where evidence of the parties' subsequent conduct would have been admissible for the purposes of interpretation and evidence from which the court could infer what the objective aim of the agreement was.

39. However, that is not this case. As it was Mr Shaw was not personally present in the court. He was represented by his advocate. Ms Hutton-Shaw was represented by her advocate but we do not know what if anything the advocates told the court and it must follow from this that the order of the French court is not admissible for the purposes of interpreting the second agreement. It is therefore unnecessary for us to consider whether we can draw any inferences from what the court was told. It is certainly not an order of the court as to the true interpretation of the agreement, and Mr Parnell in making his submissions has made it clear that he does not rely on the order of the French court as a declaration binding the parties as to the true interpretation of the second agreement. However, the French order is of importance and it shows, as indeed the second agreement does, that despite the loan agreement having been executed on the basis that Mr Shaw had no interest in the property, the parties proceeded on a different basis.

40. However, it is unnecessary to go into that. That is not a crucial part of my reasoning but I would make the point because it needs to be made for the purposes of understanding the argument. Neither does the French order go on to say that the payment of €17,500 is either on account of that share or in full and final settlement of that share. So neither side can write any words. Neither side, as I see it, can rely on the additional words stated in the French court's understanding as to the provisions of the agreement.

41. I next turn to the communications between the parties, and these include the letter of 14 September 2004 written by Mr Shaw and containing his demand for €30,000 as his share in the property. That is a communication between the parties. It falls to be excluded as it represents part of the negotiations between the parties. Other aspects of a factual matrix include the fact that only £44,000 was actually spent in the acquisition of the French property. The parties apparently spent the difference between £50,000 and £44,000 jointly on items such as expenditure on furniture and the 4x4 motor car. Mr Shaw had obviously got some benefit from this expenditure, although he would not get any further benefit after the agreement because those items were to remain with Ms Hutton-Shaw. But it does mean that it would be artificial to claim back the whole of one half of the proceeds of sale of the Birchdale property.

42. Mr Parnell submits that the agreement was in full and final satisfaction. Mr Elcombe of course submits that it was purely about occupation and had the French court's order been relevant, then it might have been necessary to examine the meaning of the word "liberation" which may mean "a release of ownership". But in my judgment the French order is inadmissible. It is moreover unnecessary to go to that order because the agreement itself uses words which make it clear that the parties were reaching a final settlement in their claims relating to the property.

43. This may be seen from the fact that the parties agreed that Mr Shaw should cease all contact with Ms Hutton-Shaw or her daughter. The parties were reaching a stage where they would no longer have to have any communication with each other. Those words in my judgment make it clear that they must have intended the second agreement on its true interpretation to be in final satisfaction of their claims one against another. I say "intended". I am not referring to their subjective intentions but to their intention objectively obtained from the terms of the agreement. I recognise that in so holding I have come to a different conclusion from the judge. The judge was much struck by the fact that the agreement did not use those particular words "in full and final satisfaction". But they are words that would be used by a lawyer. This was an agreement drawn up by Ms Hutton-Shaw with some assistance, it appears, from Mrs Byrne.

44. The court can in my judgment deduce the effect of the agreement by looking at the whole of it; and by considering it as a holistic whole and, as the court put it in Sandford, looking at the substance. It is not possible to say why the loan agreement was not dealt with at the same time. There is no finding by the judge as to that. It is possible that the parties did not think of it because it was really meant to apply in a situation which has not occurred, namely that Ms Hutton-Shaw died when still in possession of the French property. But that is speculation. At the end of the day the court must bear in mind that, as one of the counsel put it, this second agreement was a horse trade. Both parties were negotiating under different pressures, and under pressure of time one or other party may have done less well than the other, but the court simply cannot say which and in all events the court cannot rewrite the agreement between the parties.

45. In my judgment it is clear that the parties meant this agreement to be in satisfaction of all their claims in respect of the property, including claims arising in respect of what had been the proceeds of sale of Birchdale, and that means that the loan agreement would no longer be enforceable if an event occurred in which it was to be enforced.

46. I must deal with one final thing. Mr Elcombe submits that the judge's order was fair and proportionate. This may be the case. I cannot say. But it was in fact not the judge's function to reach a re-allocation of the property between the parties. It was the function of the court to interpret the agreement according to well-established principles applying to agreements generally and accordingly, although Mr Elcombe submits that that was the effect of the judge's orders not the words actually used by the judge, in my judgment that submission is not well founded.

47. For all the reasons that I have given, I would allow the appeal. I would set aside the judge's order and dismiss the claim.

48. LORD JUSTICE WALL: I agree. My Lady has covered the ground fully and I therefore add a short judgment of my own merely by way of emphasis. In my judgment the critical document in the case is undoubtedly the agreement dated 29 September 2004, and I am in no doubt at all this agreement was intended as the full and final settlement of all financial issues between the parties to these proceedings. In my judgment, and for the reasons Lady Justice Arden has given, all the evidence -- or what Lord Wilberforce called "the factual matrix" -- points conclusively in that direction. The document is headed: "Agreement between the following parties concerning the property at 42 Rue Centrale Galanchat". It includes a provision that Mr Shaw would "have no contact with Jane Hutton-Shaw in France and in England" and furthermore Mr Shaw was "to cease all legal actions whatsoever against Jane Hutton-Shaw in France or in England".

49. For Mr Shaw, Mr Elcombe sought to argue that the use of the word "cease" in the latter context was designed to leave open to Mr Shaw the prospect of taking further proceedings in England on the loan agreement. He makes that submission on the basis that there were at the time no proceedings brought by Mr Shaw pending in England and that, accordingly, there were no proceedings which could cease.

50. Like my Lady, I cannot accept that argument. This is not a document drafted by a lawyer. In its context I am satisfied that the word "cease" reflects the parties' mutual intention that there will be no further proceedings between them either in France or in England. They were plainly negotiating over the prospective proceeds of sale of the French property in which as a matter of law it seems to me that each had an equal interest. Miss Hutton-Shaw agreed to pay Mr Shaw €17,500 for his interest in the property and she also agreed to pay her outstanding debts in France and in England out of the proceeds of sale of the house. It may well be that Mr Shaw got less than his 50% share, but in return Miss Hutton-Shaw discontinued her French proceedings and Mr Shaw gained relief from any claim that he should pay her debts in France or in England. The judge specifically rejected Mr Shaw's evidence that he entered into the agreement under duress. Both parties were adult. Neither was under a disability. It was in my judgment accordingly a lawful agreement which effectively prevents Mr Shaw from making any claim against Miss Hutton-Shaw.

51. I would therefore like my Lady, Lady Justice Arden, allow the appeal, set aside the judge's order and dismiss the claim.

52. LORD JUSTICE MAY: I agree that this appeal should be allowed for the reasons which Arden LJ has given.

53. The proceedings before the judge took a structurally informal shape. This was because the claim form and the particulars of claim, never subsequently amended, simply claimed repayment of a loan of £50,991.73. But as Mr Elcombe explained, this was not the claim which was advanced before the judge nor, I think, the claim which the judge decided.

54. A formalist would say that the pleading should have been amended. I have some sympathy with the predicament of parties and the judge in a county court who want to get on with the real case, but formal definition really is sometimes more than a merely formal need. I rather think that it was so in this case.

55. In a loose sense Mr Elcombe explained his understanding that the judge's decision was an attempt to achieve substantial justice, having regard to his assessment of the evidence given by and on behalf of each party. Mr Elcombe struggled to sustain the judge's result on a broad basis such as this. I do not think that this is a fair description of what the judge decided, but it would certainly not be a principled basis for deciding the case.

56. Arden LJ has explained the facts. In brief, £50,991.73 was the proceeds of sale of Birchdale Cottage which the parties had jointly owned. A substantial part of this sum was used to purchase the French property whose beneficial interests they also jointly held. The parties fell out and were in personal and financial difficulties. The appellant brought proceedings against the respondent in France. In these circumstances, they made a written agreement dated 29 September 2004 whose terms Arden LJ has set out. The appellant's case is that this agreement on its proper construction was in compromise of all their respective financial and property claims. The respondent's case is that it did not compromise all their claims, but left it open to him to bring a further claim for the balance of his financial contribution to the purchase of the French property, after taking account of €17,500 which was provided for by the agreement.

57. Mathematically at least, the judge accepted the respondent's case, awarding him the difference between one half of £50,991.73 and €17,500 converted into sterling. The respondent did not advance a case, as he might perhaps have done, to be entitled to one half of the contemporary value of the French property less the €17,500, but that is incidental.

58. Thus the issue was and I think only was: what was the proper meaning of the written agreement? There are well-known limits to the extent to which oral evidence can be used to reach the meaning of a written document. I do not consider that either the parties or the judge kept entirely within those limits. As to the subsequent order of the French court, this in substance gave effect to the parties' compromise agreement whatever that was. It did not by judgment decide anything in contested proceedings nor, I think, do more than describe its understanding of the agreement. If we had had secure evidence of what the French court was told and by whom, it is theoretically possible that what was said or the terms of the order might have been relevant to the construction of the antecedent compromise agreement. But we do not have secure evidence of this kind. In these circumstances, I do not think that the terms of the French court order affect the construction of the agreement.

59. In my judgment, the meaning of the written agreement in its factual context clearly embraces a full compromise of the parties' respective money and property claims against each other. It is expressed in its heading to be an agreement concerning the French property. It was expressly agreed that the respondent would vacate the property and never set foot in it again. He was to have no contact with the appellant or her daughter either in England or in France. The appellant was to have all furniture and contents of the house and the Land Rover. She was to pay all her outstanding debts in France and England out of the proceeds of sale of the house. So the agreement was that the house was to be sold. She was to pay him €17,500. There was no suggestion that this was to be a payment on account. Mr Elcombe submits that the respondent's agreement "to cease all legal actions whatsoever against the appellant in France or in England" could only apply to proceedings in existence at the time, and that neither it nor the agreement as a whole is to be construed as precluding all possible future claims. I do not agree.

60. In agreement with both Arden and Ward LJJ, for the reasons they have given, this was plainly an agreement which compromised all presently available money and property claims between the parties, but in particular any claim deriving from their joint beneficial ownership of the property in France. That property was where their joint assets resided at the time of the agreement.

61. For these reasons also I would allow the appeal.


Order: Appeal allowed