Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd & Anor

An alleged oral joint venture agreement is not binding where the parties remain in negotiation about essential financial, management, funding and security terms, particularly while solicitors are preparing formal documentation. The court must assess the whole commercial transaction and its correspondence, rather than isolate an alleged cut-off date.

A Pallant v Morgan equity requires an arrangement or understanding before acquisition, reliance connected with the acquisition, and circumstances making it inequitable for the acquiring party to retain the property. It does not arise merely because a party hoped that a future joint venture agreement would be concluded, especially where detailed enforceable loan and security documents govern the transaction.

Kilcarne supplied finance to companies in the Targetfollow group to enable completion of the acquisition of a long lease of Baskerville House, Birmingham. Kilcarne alleged that the finance formed part of an oral joint venture under which it and Targetfollow would share development profits, contribute equally to future costs and enter into a formal joint venture agreement.

Targetfollow contended that negotiations remained incomplete, that the parties were bound only by the executed loan and security documents, and that no enforceable joint venture or equitable interest arose. The issues included contract formation, certainty, authority, statutory formalities, ratification, constructive trust, proprietary estoppel, duties to develop and remuneration for services.

1. Contract formation. The claim for a binding joint venture agreement failed. The court considered the whole correspondence and commercial transaction, including the secured loans needed to complete the acquisition. The loan terms and priority arrangements were not settled until completion, and the parties continued negotiating important terms.
2. The alleged agreement remained too incomplete and uncertain. Essential matters included the calculation of distributable profits, responsibility for future funding, management and decision-making, deadlock arrangements and security. The Birmingham Loan Notes did not establish that an earlier oral joint venture survived; if such an agreement had existed, it was discharged by the inconsistent executed arrangements.
3. Neither Mr Singh nor Mr Naghshineh had authority to bind the relevant companies to an open-ended joint venture obligation. Kilcarne’s later ratification would, if necessary, have operated retrospectively, since no unfair prejudice to Targetfollow was established.
4. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. The overall bargain, or alternatively the alleged joint venture, involved the transfer or charging of interests in the Baskerville House lease. It therefore required a signed written document incorporating all expressly agreed terms. The statutory requirement was not avoided by describing the arrangement as a partnership, by subsequent performance or by omitting the proposed lease transfer. No valid written contract or variation existed.
5. Equity. No Pallant v Morgan equity or proprietary estoppel arose. Targetfollow already held the contractual right to acquire the lease; Kilcarne was not kept out of the market; its finance was fully secured and commercially remunerated; and its decision to lend was not caused by reliance on a sufficiently defined joint venture. The post-completion assurances concerned negotiations on unspecified future terms.
6. Even on the assumed existence of a constructive trust, the trustee would not necessarily be obliged to undertake a speculative development, borrow tens of millions of pounds or procure a parent-company guarantee. No fiduciary or common-law duty required TBL to develop Baskerville House with due dispatch.
7. The claim for remuneration for Mr Singh’s services failed. The services were provided by Mr Singh or Sitac, not at Kilcarne’s request, and Kilcarne had its own financial interest in progressing the development.
8. The action was dismissed. The caution registered against Baskerville House was ordered to be vacated.