Contract – Joint venture – Parties agreeing to collaborate to achieve joint venture with development company for development of new student accommodation – Joint venture set up by which parties’ partnership having 50% share in development company – Claimant withdrawing from joint venture – Whether repudiatory breach of agreement between parties entitling claimant to seek quantum meruit for performance so far – Permission granted to serve proceedings on defendants out of jurisdiction – Defendants applying to set aside permission – Application allowed In 2009, the claimant reached agreement with the two defendants 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. The claimant was also to receive an unspecified priority payment for his active role in overseeing the interests of the partnership and the investors. He undertook to negotiate the best possible deal with the development company and to do whatever needed to be done to enable the joint venture to go ahead. However, the agreement did not provide for him to receive any additional payment for his role in negotiating the deal; he agreed to work at his own risk to establish the business in return for his one-third share and his priority payment if and when the joint venture was established. 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 development company. He withdrew from the joint venture and requested that all references to him be removed from the documentation. Thereafter, the claimant brought a claim against the defendants for a quantum meruit payment for his work to date. He submitted that a partnership at will had been created, giving rise to an implied obligation of good faith, and that, having terminated the agreement on the grounds of the defendants’ breach of that obligation, he was entitled to recover the market value of the services that he had provided to the defendants and from which they had benefited. He claimed entitlement to a one-third share in the partnership’s 50% interest in the development company or, alternatively, compensation for 471 hours of work. A master made an order giving leave to serve the proceedings on the defendants out of the jurisdiction in the United States. The defendants applied to set that order aside. Held: The application was allowed. It was established law that, where an agreement was terminated prematurely for repudiatory breach by one party, the other party could, instead of suing for damages, elect to recover the value of its performance to date by way of quantum meruit. That rule was conceptually unsound and could have unattractive consequences, resting as it did on the now heretical view that termination for repudiatory breach amounted to a complete rescission of the contract, leaving the claimant free to recover simply on the basis that it had provided its services at the request of the defendant: Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; [2009] BLR 468 considered. However, the rule could claim the support of a significant, if mainly elderly, body of English case law: Planche v Colburn (1831) 5 C&P 58, De Bernardy v Harding (1853) 8 Exch 822, Lodder v Slowey [1904] AC 442 and Lusty v Finsbury Securities Ltd (1991) 58 BLR 66 considered. Doctrinal purity and logic did not always win out in the common law and, if the rule were now to be rejected, that would have to occur at a much higher level in the judicial hierarchy and after greater and more intense adversarial debate that had occurred in the instant case. It was none the less important to observe the limits of the rule. It was solely addressed to a situation in which, as a result of the wrongful termination or repudiation of the agreement, the claimant had failed to complete its contractual performance and had, in consequence, not reached a point where counter-performance by the defendant had become due. It did not apply where the claimant had performed and therefore had an entitlement under the contract to payment or a remedy in damages: Taylor v Motability Finance Ltd [2004] EWHC 2619 (Comm) applied. Still less did it apply where the claimant had not only performed but had also received the counter-performance. In the instant case, the claimant had provided his services, pursuant to the agreement between the parties, on the basis that he would receive no compensation if the joint venture with the development company did not materialise as a result of those efforts. The form of the joint venture envisaged by the parties was that the partnership would take a 50% nominee shareholding in the development company, as nominee for each of the three parties in equal shares. The joint venture had been established in that form. The claimant had then withdrawn from the joint venture and thus renounced the benefit that he had received, and been entitled to receive, in return for his services in negotiating and bringing into being the joint venture. The agreement between the claimant and the defendants had been fully consummated and performed when the joint venture came into being. If, as the claimant contended, the agreement between the parties had created only a partnership at will, then the notion of premature termination by the accepted repudiation of future obligations could have no application and a claim for quantum meruit in lieu of damages for repudiation was equally devoid of foundation. The claimant’s claim had no reasonable prospect of success and permission to serve out of the jurisdiction was refused accordingly. Sally Dobson, barrister
Contract – Joint venture – Parties agreeing to collaborate to achieve joint venture with development company for development of new student accommodation – Joint venture set up by which parties’ partnership having 50% share in development company – Claimant withdrawing from joint venture – Whether repudiatory breach of agreement between parties entitling claimant to seek quantum meruit for performance so far – Permission granted to serve proceedings on defendants out of jurisdiction – Defendants applying to set aside permission – Application allowed In 2009, the claimant reached agreement with the two defendants 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. The claimant was also to receive an unspecified priority payment for his active role in overseeing the interests of the partnership and the investors. He undertook to negotiate the best possible deal with the development company and to do whatever needed to be done to enable the joint venture to go ahead. However, the agreement did not provide for him to receive any additional payment for his role in negotiating the deal; he agreed to work at his own risk to establish the business in return for his one-third share and his priority payment if and when the joint venture was established. 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 development company. He withdrew from the joint venture and requested that all references to him be removed from the documentation. Thereafter, the claimant brought a claim against the defendants for a quantum meruit payment for his work to date. He submitted that a partnership at will had been created, giving rise to an implied obligation of good faith, and that, having terminated the agreement on the grounds of the defendants’ breach of that obligation, he was entitled to recover the market value of the services that he had provided to the defendants and from which they had benefited. He claimed entitlement to a one-third share in the partnership’s 50% interest in the development company or, alternatively, compensation for 471 hours of work. A master made an order giving leave to serve the proceedings on the defendants out of the jurisdiction in the United States. The defendants applied to set that order aside. Held: The application was allowed. It was established law that, where an agreement was terminated prematurely for repudiatory breach by one party, the other party could, instead of suing for damages, elect to recover the value of its performance to date by way of quantum meruit. That rule was conceptually unsound and could have unattractive consequences, resting as it did on the now heretical view that termination for repudiatory breach amounted to a complete rescission of the contract, leaving the claimant free to recover simply on the basis that it had provided its services at the request of the defendant: Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; [2009] BLR 468 considered. However, the rule could claim the support of a significant, if mainly elderly, body of English case law: Planche v Colburn (1831) 5 C&P 58, De Bernardy v Harding (1853) 8 Exch 822, Lodder v Slowey [1904] AC 442 and Lusty v Finsbury Securities Ltd (1991) 58 BLR 66 considered. Doctrinal purity and logic did not always win out in the common law and, if the rule were now to be rejected, that would have to occur at a much higher level in the judicial hierarchy and after greater and more intense adversarial debate that had occurred in the instant case. It was none the less important to observe the limits of the rule. It was solely addressed to a situation in which, as a result of the wrongful termination or repudiation of the agreement, the claimant had failed to complete its contractual performance and had, in consequence, not reached a point where counter-performance by the defendant had become due. It did not apply where the claimant had performed and therefore had an entitlement under the contract to payment or a remedy in damages: Taylor v Motability Finance Ltd [2004] EWHC 2619 (Comm) applied. Still less did it apply where the claimant had not only performed but had also received the counter-performance. In the instant case, the claimant had provided his services, pursuant to the agreement between the parties, on the basis that he would receive no compensation if the joint venture with the development company did not materialise as a result of those efforts. The form of the joint venture envisaged by the parties was that the partnership would take a 50% nominee shareholding in the development company, as nominee for each of the three parties in equal shares. The joint venture had been established in that form. The claimant had then withdrawn from the joint venture and thus renounced the benefit that he had received, and been entitled to receive, in return for his services in negotiating and bringing into being the joint venture. The agreement between the claimant and the defendants had been fully consummated and performed when the joint venture came into being. If, as the claimant contended, the agreement between the parties had created only a partnership at will, then the notion of premature termination by the accepted repudiation of future obligations could have no application and a claim for quantum meruit in lieu of damages for repudiation was equally devoid of foundation. The claimant’s claim had no reasonable prospect of success and permission to serve out of the jurisdiction was refused accordingly. Sally Dobson, barrister
