Parties entering agreement to purchase and develop land – Various properties purchased but not developed – Agreement terminated – Whether properties within agreement – High Court finding properties outside agreement – Appeal allowed
The first defendant proposed to invest in land through the medium of a development company, the second defendant, funded by a large self-administered pension fund. The plaintiff was an experienced property developer. On March 15 1993 the plaintiff and the first defendant signed an overall agreement (the agreement) confirming their general intention to share relevant development profits; 40% to the plaintiff and 60% to the first defendant. Clause 5 of the agreement stated: “In the event that development land is purchased by . . . [the first defendant’s] pension fund so as to provide land for the joint venture, it is agreed that profit thereon shall be deemed to be included with the agreement”. Clause 7 stated: “It is agreed that, notwithstanding the purchase of development land by [the first defendant’s] pension fund, there is no obligation on either [the plaintiff] or [the first defendant] to form a joint venture to develop such land simply by reason of the purchase of the land”.
In 1993 the first defendant purchased, inter alia, three sites known as Baker’s Lane, Barrington, for £145,000; the Plume of Feathers, Ottery St Mary, for £130,000; and Ham Lane, Marnshull. None of the sites were developed. A disagreement arose, and on July 7 1994 the first defendant wrote to the plaintiff giving notice of his intention to terminate the agreement with effect from August 31 1994. Subsequently, the Ham Lane site was sold for £270,000 and the Plume of Feathers site was sold for £155,000. The Baker’s Lane site remained in the ownership of the company. The first defendant denied that the plaintiff was entitled to any of the profits generated by the sale of the Ham Lane site and the Plume of Feathers site and any profits that might be made by the sale of the Baker’s Lane site.
At a hearing of preliminary issues it was held that the parties had had in mind, in clause 5, land that was developed after an interval not land that was never developed, and, therefore, since the three sites were not developed they did not fall within the agreement. It was concluded, accordingly, that the defendants were not liable to the plaintiff in respect of the three sites. The plaintiff appealed and sought an order that the three sites were covered by the agreement and that the defendants were liable in respect of them.
Held The appeal was allowed.
The parties had contemplated, and provided for, the distribution of profit in relation to the acquisition and development of land for the purposes of their overall joint venture. Although the agreement had emphasised that the anticipated business of the venture was the development of land with view to profit, the agreement, in clauses 5 and 7, had also provided for the situation in which development land purchased was not subsequently developed by the parties. Therefore, the judge had been incorrect in his conclusion that the possibility of no development had not been present in the parties’ minds and was not covered in the agreement. Accordingly, it should have been found that the plaintiff was entitled to a 40% share of the profit made upon the disposition of each of the three sites.
Charles Purle QC and Margaret McCabe (instructed by Battens with Poole & Co, of Crewkerne) appeared for the plaintiff; Philomena Harrison (instructed by Clarks, of Reading) appeared for the defendants.
Thomas Elliott, barrister
