Category Archives: Joint Venture Agreements

No prospects of planning so negligence did not cause application expense losses

Where a claim for breach of contract is successful, the first set of principles concerns the date of assessment of damages:

1. The overriding principle is that contractual damages are compensatory. The damages should represent the value of the contractual benefit the claimant has been deprived of by the breach of contract.

2. Prima facie damages are to be assessed as at the date of breach without regard to later events.

3. You can depart from that rule where it is necessary to ensure that the claimant is not over-compensated or under-compensated having regard to events which have occurred since the date of breach, in particular where matters which were contingencies at the date of breach have become faits accomplis later.

4. Where this is necessary, one way of departing from the rule is to assess the damages as at a later date. Another approach is to assess damages as at the date of breach, but in the light of later events.

In claims for professional negligence against solicitors and barristers where the lawyer’s negligence has resulted in their client losing the chance to bring a claim against a third party, a second set of principles apply to the quantification of damages. Here, the court must value the chance which has been lost. That means the court must assess the client’s prospects of success. If the underlying claim was certain to fail anyway, it will have had no value and the claimant will have no loss as a result of the lawyer’s negligence.

In Ridgewood Properties Group Ltd & Anor v Kilpatrick Stockton Llp & Ors [2014] the First Claimant (“RPG”) entered into a series of 9 contracts with Texaco Ltd (in its then and later names) (“Texaco”), known as the Airspace Agreements. Here RPG acquired conditional options to buy sites used by Texaco that were or included petrol filling station shops. RPG would apply for planning permission for redevelopment to become a shop with flats above. On planning permission, RPG would take a building lease of the site and carry out the development, and then, RPG would either acquire the freehold or a long lease of the site, subject to Texaco retaining the shop.

In apparent repudiatory breach of the options Texaco sold the 9 sites, to Somerfield Stores Ltd (“Somerfield”) and Azure Properties LLP (“Azure”), without reserving to RPG the power to compel Somerfield or Azure to perform Texaco’s obligations to RPG under the Airspace Agreements.

RPG claimed that their solicitors had negligently failed to advise RPG about their right to terminate the Airspace Agreements prior to March 2006. RPG said that, if the solicitors had advised that Texaco’s apparent repudiatory breach of the Airspace Agreements enabled RPG to terminate the Agreements and claim damages for loss of opportunity to perform them, RPG would have done so, and would not have continued to seek planning permissions.

The court concluded that irrespective of any repudiation of the Agreements by Texaco, RPG had never had a real prospect of successfully obtaining the planning permissions anyway, so any claim for wasted costs would fail. Going ahead with something which (independently of any Texaco breach or solicitor’s negligence) they had no chance of getting had broken the causal link between any Texaco breach of contract/solicitor’s negligence and their loss incurred in wasting expenditure on planning applications: as that loss was always bound to occur if they went ahead with applications which had no prospects of success – regardless of the status of the Airspace Agreements.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Non payout highlights need for lawyer negotiated provision for payout deadline extensions in property Joint Venture Agreements

If there are circumstances that might justify the extension of a Joint Venture, Option or Conditional Contract Period it is very important that they be spelt out in the Agreement and that these be backed up by appropriate dispute resolution mechanisms.

Nordic Insulated Doors Ltd v Land Resources Ltd [2014] was a dispute between the parties under a Joint Venture Agreement (“the JVA”) of 31st August 2011 for the development of a property at St Lukes Court Willerby Hull (the “Property”). the Claimant wanted £160,000 damages for the Defendant’s failure to pay the amount due under the JVA.

The Claimant’s Mr Finn provided the expertise to renovate and/or improve properties and the Defendant’s Mr Maguire would put in the finance.

The JVA had been drawn up by the parties without legal advice.

Initially there was an dispute about the split of any profits on the sale of the Property with the Defendant claiming the first £600,000 of profit i.e. after repayment of the considerable sums that it had put in to JVA’s expenses.

The Claimant’s case was that the Defendant was entitled to a fixed sum of £600,000 on account of its expenditure after which the profits were to be split 50/50. Thus the Claimant was entitled to £150,000 plus a modest figure in respect of rental income.

clause 6 of the JVA was the major reason for non payment:-

“6. This agreement will finish on 01/08/2012 and after that date [the Claimant] will have no vested interest in the site.”

This passed a high risk to the Claimant. As this case illustrated, it could do a lot towards a sale only then to be denied any entitlement because the £900,000 sale only completed after 1st August 2012. Nevertheless, the Claimant’s Mr Finn had worded this clause and had conceded he knew and understood that, without any extension, the JVA came to an end after 1st August 2012 and that the Claimant would have no claim in respect of the JVA after that.

The sale did not take place until after 1st August 2012. So the Defendant contended that the Claimant was not entitled to anything.

The court found that there had been no point agreeing another 3 months extension in the hope that something might turn up. Neither Mr Finn nor Mr Maguire were willing to put any more money into the project. The Defendant had reached or exceeded the £600,000 allowed for deduction of expenditure. Nor would 3 months have been anything like long enough to obtain necessary planning permissions and building regulation approval.

Although the Defendant’s relationship with the Claimant had broken down, the Defendant was willing to stand by the letter of the JVA but nothing more. It did so.

Completion was 2 days too late for the Claimant to get a share for reasons that were not the Defendant’s fault. Had the Defendant wanted to block the Claimant getting the monies there were any number of things it could have done to slow the progress of exchange and completion whilst avoiding appearing to be thwarting the completion. In fact the sale would have exchanged and completed within the JVA time limit but for the fact that the buyer did not have sufficient funds.

The Claimant’s misfortune here arose from the freely agreed penal nature of clause 6 of the JVA and not from any default on the part of the Defendant.

This blog has been posted as a matter of general interest. It does not remove the need to get bespoke legal advice in individual cases.