Committed to a joint venture?

In Kilcarne Holdings Ltd v Targetfellow (Birmingham) Ltd ([2004] EWHC 2547 (Ch)) T had the benefit of an agreement for lease. It needed a substantial sum of money to allow it to complete the agreement. Otherwise, it ran the risk that the agreement would be terminated and it would forfeit substantial sums of money already paid under the agreement. It entered into negotiations with K. As a first stage, finance was provided by K under the terms of loan agreements. It had been envisaged that, in due course, the loan agreements would be replaced by a joint venture agreement and that this agreement would instead set out the commercial terms between the parties. The negotiations concerning the terms of the joint venture agreement were not concluded. K claimed that there was a contract binding the parties to enter into the joint venture agreement. Failing that, it claimed (inter alia) to be entitled to invoke the Pallant v Morgan equity, proprietary estoppel or to be entitled to payment on a quantum meruit basis. It failed in all of its claims.

The parties had envisaged a joint venture agreement, it was true, but also that this would be incorporated in a formal agreement. They had no intention to create a legal obligation to enter into a joint venture on the basis of the ‘agreeements’ reached in the course of negotiations. In any event, the agreement concerned land and it did not comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Cases that suggest an oral partnership agreeement concerning land is possible have been overtaken by section 2. Further, neither of the individuals negotiating for K and T had authority to conclude the contract (though K may be taken to have ratified any such agreement had it existed).

The Pallant v Morgan claim failed for a variety of reasons. The loan notes set out the terms of the agreement and equity’s help was being sought to vary the terms of a concluded legal contract (in respect of which there was no claim to rectification). The existence of a complex set of contracts made the intervention of equity unnecessary (para. 236). There was no arrangement or understanding for the purposes of the equity. There was a side letter to the legal agreements in which T made clear that its obligation went no further than to negotiate in good faith concerning the joint venture. That K had not read this could not be held against T. There was no advantage to T or detriment to K (which profited from the loan agreements in place) for the purposes of the equity. There was no causal link between any suggestion of a joint venture and T’s subsequent actions.

There was no proprietary estoppel because (like Pridean) expectations of a joint venture agreement were understood to be conditional on concluding negotiations and incorporating them into a formal contract.  The quantum meruit claim failed because T never asked K to provide any services.

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