Article / 1 Jun 2025
In this month’s update we:
The High Court has held that an exchange of messages on WhatsApp led to the formation of a legally binding contract.
Under English law, a contract is formed when there is an offer, acceptance, consideration (an exchange of value) and an intention to create legal relations. In addition, the terms of the contract must also be sufficiently certain. While contracts are often formal written documents, they can also arise by more informal means, including orally or through conduct.
The recent case of Jaevee Homes Ltd v Fincham (t/a Fincham Demolition) [2025] EWHC 942 (TCC) concerned a dispute between a property developer (the Developer) and a demolition contractor (the Contractor) approached by the Developer to carry out demolition works at a site in Norwich.
The Contractor initially provided a written quote of £256,000. Discussions continued between the parties, including via email and WhatsApp, leading to a reduced price of £248,000. A key exchange occurred on 17 May 2023 via WhatsApp when the Contractor asked if the job was his. The Developer replied “Yes” and also mentioned “Monthly applications”. The Contractor responded saying “Are you saying every 28 or 30 days from invoice that’s a yes not on draw downs then good”. The Developer replied “Ok” and “Chat in the am”.
The Contractor maintained that the contract was formed by this exchange of messages on 17 May 2023. On that basis, the Contractor’s invoices would be valid as long as they were submitted and detailed the work done.
But the Developer argued that the contract was not formed until the demolition works began on 30 May 2023 and, crucially, that the contract was based on formal terms emailed by the Developer to the Contractor on 26 May 2023. Those formal terms required the Contractor to submit applications for payment on a monthly basis, with detailed documentation to substantiate the amounts claimed. But the Contractor never acknowledged or replied to the Developer’s email, either agreeing to or rejecting the subcontract terms.
After the demolition work had begun, the Contractor issued several invoices which the Developer contested on the basis that they did not comply with the formal subcontract terms.
The Judge agreed with the Contractor, finding that the WhatsApp messages exchanged on 17 May constituted a binding contract. He said that the essential elements of contract formation were present at that stage: there was an agreed price, scope of work, and payment terms, and no indication that final terms depended on the agreement of the parties. The Judge rejected the Developer’s argument that the contract required formal written terms and found that the WhatsApp messages sufficiently indicated an intention to create legal relations and agreement on the contract’s essential terms.
Having found that the contract was formed by the WhatsApp messages, the subcontract sent by email was not relevant. Payment terms had been agreed via WhatsApp: the Contractor was entitled to make monthly applications for payment, and would be paid 28 to 30 days after submitting an invoice.
The formal subcontract terms sent by the Developer on 26 May 2023 did not form part of the contract because the contract had already been concluded on 17 May 2023, before the terms were sent.
This case confirms that informal electronic communications can constitute binding agreements if all the essential elements of contract formation are present. Parties need to be careful about the language they use during negotiations in emails, text messages, and WhatsApp chats – simply saying “Yes” to a proposal, particularly after price and scope have been discussed, can be interpreted as acceptance forming a contract.
Businesses need to establish clear protocols for contract formation, ideally confirming that no contract will arise until a formal document is signed, and then ensuring that all contract terms are captured in a written agreement.
The High Court has confirmed that an appointment as a director carries responsibilities that cannot be delegated. Directors are under a duty to inform themselves about the company’s business and affairs and a director’s complete inactivity was, by definition, unreasonable.
In Stacks Living Ltd and others v Shergill and another [2025] EWHC 9 (Ch), applications were brought by the joint liquidators of two companies, Stacks Living Limited (Stacks) and Staffs Furnishing Limited (Staffs).
Both companies were wholly owned, controlled and managed by Mr Shergill. He had also been the sole director of the companies except for a period of three months in 2018 when his partner, Miss Smith, was the sole appointed director of Staffs. Miss Smith was employed elsewhere and admitted that she had no involvement at all in the affairs and business of Staffs during her directorship. Throughout that period, Mr Shergill had continued to manage and operate the company’s business and was, therefore, a de facto director.
Both companies had traded as furniture retailers but entered compulsory liquidation following petitions brought by Stafford Borough Council due to their failure to pay business rates on their trading premises. The liquidators’ applications included claims for fraudulent trading, wrongful trading, and misfeasance under the Insolvency Act 1986.
One question for the Court was the extent of Miss Smith’s liability, given her complete lack of involvement in the companies’ affairs.
The Court found both Mr Shergill and Miss Smith liable for wrongful trading. While Mr Shergill actually knew Staffs was doomed to fail from the outset, the case against Miss Smith was based on the fact that she ought to have concluded there was no reasonable prospect of the company avoiding insolvent liquidation. The Judge accepted that Miss Smith did not actually know this and knew nothing about the company’s affairs, taking no part in the business. But he said that a director is under a duty to inform themself about the company’s business and affairs, at least to some extent. Miss Smith was the company’s only appointed director during the three-month period and should have taken rudimentary steps to learn about Staffs’ business. Had she done so, she would or ought to have discovered its significant liability for business rates, its inability to pay, and its continuation of a failed business. So, she ought to have concluded that insolvent liquidation was unavoidable.
Miss Smith was also found liable for misfeasance in respect of unexplained payments made during her directorship. These included payments to Mr Shergill, cash withdrawals, and payments to retailers. The Judge found that Miss Smith had abdicated her duties entirely, breaching her duty by failing to inform herself, safeguard company property, ensure records were maintained, and prevent the improper use of assets.
Miss Smith attempted to rely on section 1157 Companies Act 2006 to argue that she had acted honestly and reasonably and ought to be excused due to the circumstances of her appointment and non-involvement. But the Judge refused this, stating that complete inactivity by a director is, by definition, unreasonable and precludes reliance on this defence. A director cannot discharge their duty by simply leaving management to others without question; delegation requires a parallel obligation to supervise.
As Miss Smith discovered in this case, directors must take steps to inform themselves about the company’s business, particularly its financial health and ability to meet its obligations. Failure to do so, especially when the company is or is becoming insolvent, can lead to personal liability for resulting losses to creditors.
Individuals who are asked to become directors should be acutely aware that they must understand the company’s situation and actively engage with their duties, or decline the appointment. Inaction or ignorance due to lack of involvement is not a shield against liability.
In the case of Persons Identified in Schedule 1 v Standard Chartered PLC [2025] EWHC 698, the High Court rejected Standard Chartered’s application to strike out various section 90A FSMA claims that were based on “Price/ Market Reliance” and dishonest delay.
In refusing the strike-out application, the Judge expressed doubts about the restrictive approach on reliance taken by the Court in Allianz Funds Multi-Strategy Trust & Ors v Barclays Plc [2024] EWHC 2710 (Ch), where similar investor claims had been struck out.
Although only a preliminary ruling, this decision keeps open the route for passive investors who rely on share price (rather than specific disclosures), to have their day in court.
Section 90A (and schedule 10A) of the Financial Services and Markets Act 2000 (FSMA) establishes a statutory liability regime under which issuers may be liable in respect of misleading information published to the market (for example, in periodic financial reports).
To establish a section 90A/ schedule 10A claim, an investor needs to show that:
For section 90A misstatement or omission claims (but not for dishonest delay), the investor will have to prove that they relied on the issuer’s published information when deciding what to do with their shares.
Some passive investors, who have not read a company’s published information themselves, have instead based their claims on “Price/ Market Reliance” (also known as “Common Reliance” or “fraud on the market”). This is where a company’s share price – as set by the wider market – is assumed to reflect the contents of all published information. In making investment decisions based on price, the investors claim that they are still placing reliance on the accuracy of the published information.
It was this category of Price/ Market Reliance claims that was struck out by the Court in the Allianz v Barclays case, on the basis that they did not meet the statutory requirement for reliance.
This case involved a shareholder class action against Standard Chartered brought under section 90A/ schedule 10A FSMA.
The 217 claimants (representing some 1,391 funds) alleged that they had suffered loss as a result of Standard Chartered having made false or misleading statements in, and/ or omissions from its published information. They also alleged that the publication of information had been dishonestly delayed.
Following the Allianz v Barclays decision, Standard Chartered brought an action to strike out the Price/ Market Reliance claims of the passive investors on the basis that this type of reliance did not meet statutory requirements. Standard Chartered also applied to strike out the dishonest delay claims.
The Court declined to follow the approach taken in the Allianz v Barclays case and refused to strike out both the Price/ Market Reliance and the dishonest delay claims.
In relation to Price/ Market Reliance, the Judge noted that reliance in the context of section 90A claims is a developing area of law and that complex legal questions of this nature should be resolved at trial in light of the actual (and not hypothetical) facts.
Although he was “not convinced” that the decision in Barclays v Allianz had been wrong, the Judge thought that it was at least arguable that the test for reliance is broader than was concluded in that case (particularly to allow the test to accommodate omissions from published information).
As for the dishonest delay claims, the Judge again concluded that this was a novel point of law and would be better decided on the basis of actual facts at trial. He also expressed doubts about the conclusion reached in the Barclays case on this point – i.e. that there could not be a “delay” in publishing information unless that information was actually published at a later point in time.
As acknowledged by the Judge in this case, the issue of reliance in section 90A claims is a relatively novel and developing area of law.
Although the concept of “Price/ Market Reliance” will undoubtedly be difficult to prove at trial, the fact that it has not been conclusively ruled out at this preliminary stage will be a great relief to passive investors. If they are unable to show the necessary level of reliance due to the very nature of their trading practices, then passive investors may well be left without redress when an issuer misleads the market.
We must now wait and see whether the case reaches trial, and whether the complex questions on reliance raised by both this and the Allianz v Barclays litigation, will be answered.
First published in Accountancy Daily.
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