London & Regional Investments Ltd v TBI Plc & Anor

A subject to contract provision ordinarily reserves each party’s right to withdraw until a final agreement is made. An undertaking to use reasonable or best endeavours to agree is generally too uncertain to be enforceable where the essential terms and objective criteria remain unresolved. A constructive trust or estoppel cannot ordinarily be used to reverse that express contractual reservation. The Pallant v Morgan equity concerns an informal pre-acquisition understanding which induces one party not to compete for property. It does not convert formal commercial negotiations expressly left subject to contract into an unqualified obligation. Summary judgment is proper where, even assuming the claimant’s evidence to be true, the claim has no real prospect of legal success.

London & Regional Investments Ltd bought TBI plc’s property portfolio under a sale agreement. Clause 8.7 required the parties to use reasonable endeavours to agree a joint venture concerning land connected with Cardiff and Belfast Airports. The appended joint-venture principles were expressly marked subject to contract.

When TBI declined to continue the proposed joint venture, London & Regional claimed contractual breach, constructive trust, estoppel and related relief. A Deputy Judge of the Chancery Division dismissed the claims and granted summary judgment for TBI and Belfast International Airport Ltd. London & Regional appealed, principally contending that disputed evidence about oral assurances required a trial.

1. Appeal dismissed unanimously. Mummery LJ, with Douglas Brown J and Dyson LJ agreeing, held that the Deputy Judge was entitled to give summary judgment. The proper question under Civil Procedure Rules Part 24 was whether the claims had a real prospect of success. A trial was unnecessary because, even if London & Regional’s factual evidence were accepted, it could not establish an enforceable contract, constructive trust or estoppel.

2. The joint-venture note was expressly subject to contract. Its clear effect was to negative an intention immediately to conclude a binding joint-venture agreement, which remained dependent on a formal contract. Clause 8.7 was no more than an agreement to agree. It contained no sufficiently objective criteria for enforcement: the relevant land, transferee, payment timing and venture terms were unresolved.

3. The constructive-trust and estoppel claims also had no real prospect of success. Parties who negotiate expressly subject to contract generally reserve the right to withdraw before final agreement. TBI’s later refusal to proceed was therefore not unconscionable. There was no evidence that TBI subsequently surrendered that reserved right or converted the negotiations into a binding arrangement.

4. Banner Homes Group Plc v Luff Development Ltd and the Pallant v Morgan equity were distinguishable. Those authorities concerned a pre-acquisition understanding which induced one party not to bid or compete, followed by the other’s acquisition of the property. They did not apply where legally represented commercial parties had expressly agreed that the proposed venture remained subject to contract. Equity could not be used to undo that express agreement and impose equal beneficial ownership of land when no joint development agreement had been concluded.

5. The court dismissed the appeal, made no order on the cross-appeal, ordered costs in the terms of the signed consent order, and refused permission to appeal to the House of Lords.

• Court of Appeal (Civil Division): Appeal dismissed in [2002] EWCA Civ 355.

• Chancery Division: Mr Peter Smith QC, sitting as a Deputy Judge, dismissed London & Regional’s claims and granted summary judgment for TBI and Belfast International Airport Ltd on their counterclaim.