Lediaev v Vallen

A party to a joint venture cannot charge the venture with interest on borrowing undertaken personally to fund that party’s capital contribution, absent agreement to the contrary. A co-owner, trustee or joint-venture participant who personally benefits from occupying joint property may be required to account for an occupation rent unless the circumstances show consent to rent-free occupation.

Contractual terms are implied only where necessary to make the contract work or so obvious as to go without saying. A clause stating that a later agreement supersedes earlier agreements normally replaces future obligations but does not discharge accrued liabilities without clearer language. A success fee remains a personal contractual liability where the agreement so provides.

Lediaev v Vallen concerned two transactions between the parties. The first was a joint venture to purchase, renovate and sell a London property. The second comprised agreements under which the defendant assisted in recovering funds for companies beneficially owned by the claimant.

The claimant sought his share of the property proceeds and an occupation rent, and sought payment of recovered litigation proceeds. The defendant counterclaimed for a success fee, compensation and expenses. The court also considered whether the litigation agreements were champertous and whether mutual liquidated debts could be set off.

1. Property transaction. The mortgage loan was taken out by the defendant personally to fund his contribution, not on behalf of the joint venture. He could not charge the venture with the interest. The claimant’s share was consequently 13.87%, producing judgment for £107,741.94, subject to legal set-off, with interest at one per cent above base rate from three working days after completion.
2. A person occupying joint property for personal benefit may be required to account for an occupation rent. The principle applied whether the relationship was characterised as co-ownership, trusteeship, partnership or a joint venture. The claimant had not consented to rent-free occupation. An inquiry was ordered into the fair rent from completion until 10 July 2004, with the claimant entitled to 13.87% and interest.
3. Construction of the litigation agreements. The agreements required recovery of the funds for Landor EU, later Landor UK, rather than payment to the claimant personally. No term requiring personal payment to the claimant could be implied. The strict test of necessity or obviousness was not satisfied, and the proposed term would be inconsistent with the contractual structure.
4. The 2006 agreement’s provision that it superseded earlier agreements discharged future performance but did not discharge accrued liabilities. It did not, however, trigger compensation under the 2004 agreement because termination was by mutual replacement, not unilateral cancellation by the claimant, and no compensation right had accrued.
5. The claimant personally owed the agreed success fee of £48,300. Expenses under the 2006 agreement were recoverable only from recovered proceeds, not personally. Earlier contractual expenses remained personally recoverable under the 2004 agreement, subject to production of receipts. General office overheads were excluded, save for expenditure directly referable to the services.
6. Champerty. The court had power to refuse enforcement of a champertous agreement even though the issue was not pleaded. Applying the fact-sensitive approach in Factortame Ltd & Others v The Secretary of State for the Environment, Transport and Regions No 2 [2002] EWCA Civ 932, the court could not clearly conclude that the agreement was champertous. The agreement was therefore not refused enforcement on that ground. The court indicated that the net judgment would depend on the parties’ further submissions concerning legal set-off and interest.

First-instance judgment. No appellate history is stated in the judgment.