Nordic Insulated Doors Ltd v Land Resources Ltd

Building contract — Joint venture agreement (JVA) – Time limit — Parties making joint venture agreement to develop property – Parties placing time limit on agreement after which claimant having no vested interest in property – Work on development being delayed — Claimant assuming oral agreement to extend JVA — Property being sold after original termination date — Whether parties agreeing to extend contract — Whether claimant entitled to share of proceeds of sale — Claim dismissed The parties entered into a joint venture agreement (JVA) to develop a property in Willerby, on the outskirts of Hull. The property was sheltered accommodation purchased by the parties with a view to renovating and selling/renting it. The claimant company was to provide the expertise to renovate and/or improve the property and the defendant was to provide the finance. The agreement was to end on 1 August 2012, after which the claimant would have no vested interest in the site. As the work progressed, the termination date of the JVA was fast approaching without a sale having been made. The claimant proposed that the JVA be extended for three months to enable a better offer to be obtained which it claimed the defendant had agreed to verbally. As well as further renovation, planning permissions and building regulation approval were required to carry out the works. The parties fell out over the sale of the property. The claimant was unable to obtain confirmation from the defendant that an extension had been agreed but proceeded on the assumption that it had. In the event, the development was not completed within the terms of the original JVA and the property was sold on 2 August 2012 for a gross price of £900,000. A dispute arose whether the claimant was entitled to any of profits on the sale of the property. Under the JVA, the first £600,000 of profit after legal costs was to go to the defendant, with the remaining income being split 50–50, including an additional sum for rental income. The claimant argued that it was entitled to £160,000 from the £900,000 sale price. The claimant submitted, among other things, that there had been an agreement to extend the contract for three months. The defendant denied any such agreement with the result that the claimant no longer had any claim under the JVA. The claimant also made a larger claim for damages for the alleged loss of profits on an option to purchase another property due to the lack of payment. Held: The claim was dismissed.The claimant had failed to make out a claim to be entitled to a share in the proceeds of the property. On the evidence, the relationship between the parties had broken down and the defendant wished to stand by the terms of the JVA and nothing more. There would have been no point in him extending the JVA for three months and hoping that something would turn up. Further, the claimant’s emails and letters were self-serving. The claimant had never received the confirmation that it had hoped to receive, and had not acted on its communications to create any estoppel. It was not the defendant’s fault that the matter had not proceeded to completion within the time limit. Furthermore, an extension would have achieved very little. The work remaining had been considerable, and three months would not have been anything like enough time to obtain the necessary planning permissions and building regulation approval. Therefore, there had been no breach by the defendant in failing to pay the £160,000 and it was not necessary to make a determination on the larger claim for damages. Per Curiam: Even if the court had concluded that there had been an extension, it would not have awarded the substantial damages claimed. The claim had been invented to try and terrify the defendant into paying up the half share of the profits. There was no evidence to show that the claimant needed the proceeds to enter into the option. The option agreement produced by the claimant was personal to the owner of the claimant company with an absolute prohibition on any assignment so that the benefit of it could not have been assigned to the claimant. Furthermore, there was no evidence to show that the possibility of such a large profit-making scheme had been known to the defendant at the time of the JVA. The claimant had failed to satisfy the requirements of Hadley v Baxendale (1854) 9 Exch 341 in that it was neither something that was expressly contemplated when the contract was made out, nor the kind of loss that would arise in the usual course of events due to the failure to pay £160,000. Had it been necessary to decide the point, the court would have rejected the defendant’s contention that the extension agreement, if made orally, was not enforceable because it failed to satisfy section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 which required such an agreement to be made in writing. The JVA was not a contract for sale or other disposition of an interest in land; it was a contractual agreement between two parties as to how they collectively might organise the renovation and disposal of a property. The fact that an option was governed by the provisions of the 1989 Act and that the extension of the term of the JVA would also be an extension of the option, did not invalidate the extension as regards the JVA generally which was not subject to the rigours of the 1989 Act. Robert Deacon (instructed by Alexander JLO Solicitors) appeared for the claimant; Caley Wright (instructed by Square One Law) appeared for the defendant. Eileen O’Grady, barrister