Members of 3VB in the Court of Appeal

Members of 3VB were on both sides in McCarthy v Jones and Ludlow Street Investment Corp [2023] EWCA Civ 589, judgment in which was handed down by the Court of Appeal (Lewison, Baker and Laing LJJ) on 25 May 2023.  Richard Salter KC led for the successful Respondents instructed by Michael Ward at Burges Salmon.  George McPherson was junior counsel for the Appellant, instructed by Lee Fisher at Blake Morgan.

The case involved a villa in Spain.  The Appellant Defendant had transferred beneficial ownership of the villa to the Respondent Claimant as part of an asset-swap, but had retained the legal ownership (to save tax) pending an intended sale to a third party.   Unfortunately, the Claimant and the Defendant had then fallen out, and the Defendant had sold the property without the Claimant’s consent, using the proceeds of sale to pay sums claimed by himself and another of the Claimant’s creditors.

The judge at first instance found that the sale was a breach of contact, and had awarded the Claimant the market value (assessed at the sale price) of the villa as damages.  The Court of Appeal dismissed the Defendant’s appeal.

Most of the issues on appeal were fact-specific.  However, one of the grounds of appeal was that, having regard to the decisions of the Supreme Court in Swynson v Lowick Rose llp [2017] UKSC 32, [2018] AC 313 and Tiuta International Ltd v De Villiers Surveyors Ltd [2017] UKSC 77, [2017] 1 WLR 4627, the judge should have given credit against the damages awarded for the alleged debts which the Defendant had purported to pay on the Claimant’s behalf.

The Court of Appeal rejected this argument, holding that those cases were concerned with the issue of whether any benefit received is or is not collateral.  However, the principle established by the line of authorities applied in Crantrave Ltd v Lloyds Bank plc [2000] QB 917 (that, if a person makes a voluntary payment intending to discharge another’s debt, he will only discharge the debt if he acts with that person’s authority or the latter subsequently ratifies the payment) meant that no benefit was in fact received by the Claimant, so that the question of giving credit did not arise.

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