- April 25, 2016
- Posted by: Josiah Hincks Solicitors
- Category: Business Law Updates
The trouble with making oral contracts is that the absence of a paper trail makes it extremely difficult to decipher exactly what has been agreed after the event. That was certainly so in one case in which a judge had to decide whether a payment of more than £700,000 between former friends and business associates was a return on an investment or merely a loan.
There was no dispute that businessman A had paid £718,232 to a British Virgin Islands-registered company controlled by businessman B. The former claimed that it was a loan, repayable on demand. However, the latter insisted that it represented his share of the profits from a property development venture in Dubai.
Businessman A launched High Court proceedings to recover the alleged loan. In the absence of any formal documentation, the judge was required to consider oral and circumstantial evidence. In the end, he preferred the evidence of businessman B and found that the money was not a loan but rather payment for his role in the development. Businessman A’s claim was thus unsustainable.