Case: Blue -v- Ashley [2017] EWHC 1928, 26 July 2017

The High Court has found that Mr. Mike Ashley (the founder of 'Sports Direct') did not agree during a meeting in a pub to pay Mr. Jeffrey Blue (an investment banker) the sum of £15m if he managed to double Sports Direct's share price.

Whilst the case proves to be an interesting read with many colourful characters and observations, it does also provide a useful reminder of how a Court approaches the question of whether or not a contract has been formed and illustrates the modern approach to evidence in cases where an agreement has not been recorded in writing.

The Facts

Mr. Blue was engaged by Sports Direct to provide consultancy services.

In January 2013, Mr. Blue, Mr. Ashley and three representatives from a firm of corporate brokers (who were hoping to win Mr. Ashley's business) started their meeting in the Horse & Groom pub in London. Everyone (save for Mr. Blue) then moved on to a variety of other watering holes before finishing at around midnight.

By the end of the evening Mr. Ashley had consumed around 8 pints of beer (according to one witness) and Mr. Blue, around three - apparently the pints kept coming "like machine guns".

The alleged agreement arose out of a discussion about the value of Mr. Ashley's shareholding during which Mr. Ashley allegedly agreed that should Mr. Blue get Sports Direct's share price up to £8 per share within three years, he would pay Mr. Blue £15m.

After the share price did in fact reach £8 per share, Mr. Ashley paid Mr. Blue £1m. Mr. Blue argued that this was evidence in support / in recognition of their agreement, whereas Mr. Ashley claimed that it was a bonus payment for other work undertaken by Mr. Blue.

After failing to persuade Mr. Ashley to pay the balance of £14m, Mr. Blue issued proceedings.

The Decision

The Court's decision begins by setting out the basic requirements for a contract (which will be familiar to any law student) i.e. that an agreement has been reached which the parties:

  1. intended to be legally binding;
  2. is supported by consideration (i.e. each party gets something in return for entering into the agreement); and
  3. is sufficiently certain and complete to be enforceable.

It then goes on to apply this test to the facts and concludes that Mr. Blue fell short in relation to (1) and (3) above, for eight main reasons, namely:-

  1. Although there was evidence that Mr. Ashley liked to conduct business in an informal setting where alcohol is consumed, there was no evidence that he negotiated or concluded contracts at these kinds of meetings.
  2. The purpose of the occasion was to introduce Mr. Ashley to potential new corporate brokers, not to discuss Mr. Blue's remuneration.
  3. The witness evidence showed that the nature and tone of the conversation was jocular. No one could reasonably have understood the conversation to be a serious business discussion - it was "banter" / a joke.
  4. It would not have made any commercial sense for Mr. Ashley to have made such an offer and it would have been out of character for him to do so.
  5. It was fanciful to suggest that it was within Mr. Blue's power to move the share price to £8 per share and "inherently absurd" that a reasonable person would have understood Mr. Ashley to be making a serious offer;
  6. The offer was too vague. For example, there was no consideration of exactly what work Mr. Blue was going to do to earn this "bonanza" and how his work would be measured, nor had a deadline been agreed for when Mr. Blue had to double the share price.
  7. The witnesses (including the one witness who did not drink during the meeting) thought the conversation was "banter";
  8. There was further evidence that Mr. Blue himself had not considered the offer to be serious until the share price began to rise. It was further improbable that a man with as much business experience as Mr. Blue thought it unnecessary to make any written record of what had been agreed and "wholly incredible" that Mr. Blue waited nearly a year before ever mentioning again what was said in the pub.

The Judge concluded by noting that the fact Mr. Blue had convinced himself that a legally binding agreement was made "shows only that the human capacity for wishful thinking knows few bounds".

Comment

Given our tendency these days to record any significant interaction in a text, email or a post on social media, the Court highlighted the peculiarity of the case in that there was no contemporaneous written record of any kind to support the alleged agreement. Mr. Blue relied instead entirely on the recollection of witnesses and inferences which he claimed could be drawn from what was said and done after the meeting.

Although it has long been possible under English law to make a contract without a written agreement, simply by word of mouth, the Court emphasised in this case that such an agreement is harder to prove especially when considering the fallibility of human / witness memory.

This has led the modern Court largely to disregard oral evidence entirely, preferring instead to draw inferences from the documentary evidence and known or probable facts. Clearly therefore, the lack of any documentary evidence did not help Mr. Blue's claim.

One point to take away from the case is that If you want to maximise your chances of relying on an agreement, make sure that you have it recorded in writing. A follow up email or text is better than nothing at all. However, an agreement drafted and agreed through lawyers where there can be no doubt that the parties intended the terms to be legally binding is the ideal.