Contract – Joint venture – Parties agreeing to collaborate to achieve joint venture with development company for development of new student accommodation – Joint venture set up under which parties’ partnership having 50% share in development company – Appellant withdrawing from joint venture – Whether respondents in repudiatory breach of collaboration agreement so as to entitle appellant to damages or quantum meruit – Court setting aside permission to serve proceedings on respondents out of jurisdiction – Whether claim having real prospect of success – Appeal dismissed
In 2009, the appellant reached agreement with the two respondents to collaborate on an investment in new student accommodation in the United Kingdom by a joint venture with a development company that was already involved in that area. To that end, the parties agreed to form a limited liability partnership in which each was to have a one-third interest, with any profits to be divided equally between the three. It was agreed that the appellant would not be paid for his work in negotiating a deal with the development company and establishing the joint venture; he undertook to work at his own risk in return for receiving his one-third share.
Thereafter, the claimant worked to achieve the desired result. As finally implemented, the joint venture involved the partnership acquiring a direct 50% equity interest in the development company at a nominal cost. However, by November 2009, the claimant had serious concerns about the integrity of the development company’s management. He withdrew from the joint venture and requested that all references to him be removed from the documentation. He later claimed that he had done so merely as a tactical measure to induce the respondents to address his concerns but the respondents maintained that, having quit and renounced his entitlement under the collaboration agreement, he was not entitled to any shares or payment.
The appellant contended that the respondents were in repudiatory breach of contract and brought a claim against them for a quantum meruit payment for his work to date, in the form of a one-third share of the partnership’s equity in the development company or payment for 471 hours of work. A master granted leave to serve the proceedings on the respondents out of the jurisdiction in the United States. However, the respondents’ application to set aside that order was allowed by a deputy judge; he held that the appellant’s claim had no real prospect of success since the appellant was not entitled to a quantum meruit where the relevant contract had been fully performed by the implementation of the joint venture and the appellant had renounced the only benefit to which he was entitled under that agreement. The deputy judge proceeded to dismiss the claim: see [2013] EWHC 207(Ch); [2013] PLSCS 47.
The appellant appealed. He also sought to amend his particulars of claim to raise an alternative claim for damages for breach of contract and to allege that the collaboration agreement had continued in force after November 2009 notwithstanding his purported withdrawal at that date.
Held: The appeal was dismissed.
In order to obtain permission to serve the proceedings out of the jurisdiction, the appellant had to satisfy the requirement of showing that there was a serious issue to be tried on the merits; that was the same test as on an application for summary judgment, namely whether the claim had a real, as opposed to fanciful, prospect of success, The appellant’s claim did not meet that requirement. That conclusion did not turn on any issues of law but was instead based on a conclusion that the appellant had no realistic prospect of establishing any of the factual scenarios on which it relied. Based on the correspondence between the parties, the evidence before the courts and the appellant’s own assertions in his pleaded case, the appellant had voluntarily withdrawn from the collaboration agreement with the respondents in November 2009, so bringing the contractual arrangements to an end and renouncing the only benefit to which he was entitled under those arrangements, namely his one-third share in the equity. The respondents had accepted the appellant’s withdrawal. The communications between the parties had to be construed objectively in the contest of the surrounding circumstances, by reference to what a reasonable reader would understand them to mean. Even if the appellant had in fact withdrawn only as a tactical measure or to obtain leverage, there was nothing in the material to show that his wish to terminate the arrangements was only to take effect in the future, conditional on the respondents failing to address his concerns, or that the respondents had understood it as mere posturing on the appellant’s part. Nor was there any indication that the appellant’s withdrawal was based on any repudiatory breach of contract by the respondents in failing to address the appellant’s concerns by November 2009; neither before or after that date was there any suggestion that the appellant’s decision to pull out was motivated by a repudiatory breach by the respondents, rather than concerns about the conduct of the development company’s principals.
Accordingly, the appellant had no real prospect of establishing anything other than that the contract came to an end in November 2009. The parties had no contractual relationship thereafter and the appellant could not establish that there was any continuing contract of which the respondents were in repudiatory breach by refusing to recognise any entitlement of the appellant to payment. The appellant had withdrawn from the arrangements, and renounced his own entitlement, for his own reasons and at his own risk. Although he might have thought that he could negotiate his way back in, when he failed to do so that did not give rise to any claim against the respondents.
The judge had therefore been correct in setting aside the order permitting service of the proceedings out of the jurisdiction. However, he should properly have left matters there rather than going on to dismiss the claim.
Michael Watkins (instructed by NC Morris & Co LLP) appeared for the appellant; Simon Johnson (instructed by Richard Slade & Co) appeared for the respondent.
Sally Dobson, barrister
