Curley and another v Hollier

Contract – Construction – Joint venture agreement – Parties contracting to develop property as joint venture – Claimants providing loan facility to defendant secured by legal charge over defendant’s property – Heads of agreement providing for repayment of loan and execution of charge if joint venture not proceeding within specified time – Dispute arising as to meaning of “proceeding” – Whether joint venture proceeding by longstop date – Claim allowed – Counter-claim dismissedThe defendant owned an empty Grade II listed building that had outline planning permission, granted in 2000, for conversion into 16 apartments, subject to conditions. The defendant had acquired the property in 2002 and unless work was commenced in June 2005, the planning permission would expire and a fresh permission was unlikely to be given. The claimants were building and civil engineering contractors. In March 2005, they entered into a joint venture agreement to carry out the development in accordance with the planning permission. In consideration of the defendant introducing the property into the joint venture, the claimants agreed to grant the defendant an immediate loan of £500,000, which was repayable forthwith if the joint venture did not proceed by 30 June 2005 (the longstop date). The loan was to be secured by a legal charge over the property, to be held in escrow and registered only if it became clear that the joint venture would not proceed by the longstop date. Under the agreement, the claimants were guaranteed a profit-share of at least £250,000. A company was incorporated as the intended joint venture vehicle, but it remained dormant.When the claimants failed to reach agreement with the council regarding the conditions attached to the planning permission before the longstop date, they issued proceedings, seeking the repayment of the loan together with interest and execution of the legal charge. The defendant counterclaimed for breach of contract by the claimants in allegedly failing to progress the building works and dealing inappropriately with the council. The question was what was meant by “proceeding” in the heads of agreement. Held: The claim was allowed and the counter-claim was dismissed.The word “proceeding” was imprecise and its meaning depended upon the context in which it appeared. In the present case, once the joint venture had proceeded, with the result that the loan became part of its capital, the defendant’s personal guarantee, not only of its return but also of a share of profits of not less than £250,000, came into effect. The parties could not have intended that the defendant should be liable for an additional £250,000 if the development could not proceed, merely because a few steps had been taken to implement the heads of agreement.The test was whether the project was up and running by the longstop date. To that end, it was at least necessary that the conditions of the planning permission should have been fulfilled and that the joint venture vehicle had been put in place and was available to receive the capital as agreed. The position throughout was that the parties knew that all the conditions attached to the planning permission had to be satisfied in order for the planning permission to be effective. This had not happened. Although steps had been taken, pursuant to the terms of the heads of agreement, to try to get the development up and running, they had not succeeded.Timothy Morshead (instructed by Labrums, of St Albans) appeared for the claimants; the defendant did not appear and was not represented.Eileen O’Grady, barrister