David Sawtell success in landmark High Court judgment on legal relations in family loans - Barry and Barry v Barry [2024] EWHC 1661 (KB)

David Sawtell from 39 Essex Chambers appeared for the successful claimants in an important decision on the application of the doctrine of intention to create legal relations in a dispute between family members following a two-week trial in the High Court.

The claimants made two considerable loans to their adult son to allow him to purchase a house and an investment property. Before the start of the trial, the defendant amended his defence to plead that the parties did not have intention to create legal relations, with the result that the loans were unenforceable.

The trial judge observed that the doctrine of intention to create legal relations is “of great antiquity, succinctly put while the Napoleonic Wars were raging as contracts not being "mere matters of pleasantry and badinage" (Dalrymple v Dalrymple (1811) 161 ER 665”.

David Sawtell submitted that the court should adopt a multi-factorial analysis, as set out in Blue v Ashley [2017] EWHC 1928 and Johal v Johal [2021] EWHC 1315 (Ch). The court accepted that the question of whether or not there were intentions to create legal relations requires a context-specific multifactorial approach in order to assess whether the intention to be legally binding has been proved or not. While there was a presumption of fact, in familial arrangements, against there being an intention to create legal relations, this was rebutted on the facts of the case.

The court went on to hold that, in the absence of an express term as to repayment, the loans were repayable on demand. The court held that the loans had not been waived, and that the claimants had not intended to lend money to a limited company owned by the defendant.

David Sawtell from 39 Essex Chambers was instructed by CDS Mayfair. The judgment can be seen here.