The importance of documenting agreements has been underlined in Lucas and another v Gilbert and another, Central London County Court, claim no. H10CL093.
The claimant, a commercial property solicitor, had advanced more than £400,000 to the first defendant, an experienced property businessman, in December 2011 to purchase a freehold property in east London. The property was acquired in the name of the second defendant, Eurohomes, of which the first defendant was sole director and shareholder. The first claimant’s firm acted in the conveyancing. Between 2011 and 2020, improvement works to the property were carried out and it was divided into several parts including residential accommodation and two business units. It was sold in February 2020 for £1.3m.
Since there was no written contract or contemporaneous documentation between the parties, the questions for the court were: i) was there a settled agreement on certain terms between the parties before the property was acquired?; ii) if so, was the agreement for a capital investment in Eurohomes by the claimants as part of a joint venture to purchase and develop the property or were the purchase monies provided to the defendants as a loan?; and iii) was the agreement vitiated by breach of fiduciary duty or undue influence?
Faced with documentary lacunae a judge has little choice but to consider the overall plausibility of the evidence, and any supporting or adverse inferences to be drawn from documents, and to assess the witness’s credibility: NatWest Markets plc v Bilta (UK) Ltd (in liquidation) [2021] EWCA Civ 680.
The judge decided that the parties had orally agreed in November 2011 that they would engage in a joint venture to purchase, maintain, manage and develop the property. They would share equally in the project: the first claimant would source the purchase funds and in due course the first defendant would reimburse half of it; each would be entitled to 50% of the income and profit generated by the property; and the first claimant would be allocated an equal shareholding in Eurohomes.
An email from the first defendant to the first claimant in January 2012 which referred to the agreement and its terms supported this, as did a witness statement he made in legal proceedings which stated that he had a half-share in Eurohomes. It was inherently improbable that the claimants would have advanced the sums by way of unsecured loan to Eurohomes, particularly with no provision for interest or terms as to repayment.
The court was also satisfied that fiduciary duties did not arise in respect of the 2011 agreement, which was a separate joint venture commercial investment agreement that the parties were in together for mutual financial advantage. The allegation of undue influence was just as unconvincing. Without the first claimant’s capital contribution the property would not have been secured when it was: it could not have been acquired at all without additional financing costs. No undue influence was actively or subliminally at work. The joint venture had every appearance of affording all protagonists value for money and discernible mutual benefits.
Louise Clark is a property law consultant and mediator
