Stolkin v Cave

An appellate challenge cannot succeed by relying on a contractual distinction that was not an issue on the pleadings or between the parties. Where the pleadings admit one agreement covering development in two phases, without distinguishing the parties’ obligations, the judge is not required to determine an unraised distinction. The position is reinforced where the parties accepted the practical consequences of the judgment on the basis that the same profit-sharing obligations applied to both phases.

The claimant, a chartered surveyor, agreed to finance the defendant builder’s development of land in return for an equal share of the profits. The land was acquired in two tranches, and the development proceeded in two phases. The relationship ended after disputes about increased building costs and the defendant’s financial difficulties.

The Newport County Court held that the contract entitled the defendant to one half of the development profits. Its order required an account for phase 1 and an assessment of the claimant’s lost chance in relation to phase 2. The claimant appealed only against the phase 2 element, arguing that the judge’s findings showed that he was not obliged to develop that tranche or employ the defendant. The central issue was whether the parties’ obligations differed between the two phases.

1. Application dismissed. Lord Justice Latham held, with Lord Justice Buxton agreeing, that there was no prospect of a successful appeal against the order concerning the second tranche.
2. The judge’s observations showed that the claimant had initially wished to retain an option over the second tranche and to decide later whether to proceed. They did not, however, establish a contractual distinction between the parties’ obligations concerning the first and second tranches.
3. The pleadings identified the contract as one for the construction of 23 houses in two phases. That assertion was admitted in the re-amended defence and counterclaim. Accordingly, the distinction relied on by the claimant was not an issue for determination at trial, and the judge could not be criticised for failing expressly to decide it.
4. The parties’ conduct after judgment was consistent with that understanding. They accepted that the defendant was entitled to an account of phase 1 profits and to damages, assessed by a joint expert, for the future development of phase 2.
5. The application was dismissed with costs.

• Court of Appeal (Civil Division): [2002] EWCA Civ 320. The application against the phase 2 part of the Newport County Court order was dismissed with costs.
• Newport County Court: On 15 November 2001, His Honour Judge Anthony Thompson QC held that the contract entitled the defendant to one half of the development profits and ordered an account for phase 1 and an assessment of the lost chance relating to phase 2.