A property development and building company has won a share of the profits on a Surrey property, after its joint venture partner elected to sell rather than redevelop.
Deputy Judge Edward Bartley Jones QC found that Kearns Brothers was entitled to a 40 per cent share of the profits from the £1.1million sale of the property at 41 Bluehouse Lane, Oxted, Surrey, under a Pallant v Morgan trust. He ordered joint venture partner Hova Developments to pay the company £20,520.
However, one of the brothers behind the company, property developer Peter Kearns, missed out on an additional payment of £27,609 in respect of a second joint venture on a Maidenhead property, after he issued the claim in the company’s name, rather than personally. The judge ruled that Kearns Brothers had no cause of action in respect of the redevelopment of The Golden Harp Pub, Furze Platt Road, Maidenhead, as Mr Kearns acted solely for his personal benefit, rather than as an agent for the company, when he entered into that joint venture with Hova director Geoffrey Finlay.
Although finding that Finlay had not paid the agreed 40% profit share in respect of the Maidenhead property, he ruled: “The cause of action lies with Mr Kearns.”
The judge said that “intense acrimony” between Kearns and Finlay underlies the litigation, adding: “Mr Kearns and Mr Finlay were once firm friends but have fallen out appallingly over these two development sites.”
After Kearns Brothers agreed to carry out a redevelopment of the Oxted property – at a fixed cost of £120 per sq ft plus a £60,000 payment for demolition of the existing property and a 40% share of any profits – and Hova purchased it in March 2010 for £950,000, Finlay decided to sell it instead, for £1,048,687, in August of that year.
The judge said that the net profit after other expenses was £51,300, and ruled that Kearns Brothers was entitled to a 40% share under the Pallant v Morgan equity.
He rejected a claim advanced on behalf of Hova that Pallant v Morgan did not apply because Kearns Brothers was not intended to obtain a specific proprietorial interest in the property, the purchase of which was financed exclusively by Hova.
He said: “It is sufficient that the property be acquired for the joint benefit of A and B and that there is no requirement, whatsoever, that B should have been intended to obtain some specific proprietorial interest, be it legal or equitable, in the property.”
He added that the Pallant v Morgan equity seems to have had its genesis as a specific form of constructive trust designed to apply in failed joint ventures for the purchase of land, and that to import a requirement that it should operate only in the circumstances advanced on behalf of Hova would “negate the purpose underlying its genesis”.
Kearns Brothers Ltd v Hova Developments Ltd and anr Chancery (Deputy Judge Edward Bartley Jones QC) 26 October 2012
Stuart Hornett (instructed by Jeffrey Green Russell Ltd) for the claimant
David Head (instructed by Edwin Coe LLB) for the defendants
