Achom & Ors v Lalic & Ors

A binding commercial agreement depends on the parties’ objective intentions, assessed from what they said and did. No contract arises while essential terms remain unsettled or the parties objectively indicate that they will not be bound until further agreement or documentation. A joint venture does not necessarily constitute a partnership, which depends on agreement and a binding contractual relationship. Proprietary estoppel requires a sufficiently clear assurance, reasonable reliance and detriment. In commercial negotiations, courts should be cautious about using equitable doctrines to impose an arrangement that the parties did not objectively agree. Restitution may nevertheless be available for payments and services supplied in the mistaken belief that rights had been acquired, including where an anticipated contract never materialises.

The claimants asserted that they were entitled to interests in a nightclub venture operated through Great Club Ltd and related companies. They relied on contract, partnership, a Pallant v Morgan equity, proprietary estoppel, economic torts and restitution.

The defendants denied that any binding agreement had been concluded. The central issues were whether the parties had agreed essential terms, whether a partnership or equitable interest arose, whether the defendants were liable in conspiracy or for procuring breach of contract, and whether the claimants were entitled to recover money paid and services provided.

1. Contract. Applying the objective approach in Pagnan SpA v Feed Products Ltd, the court held that no binding contract was concluded either in September 2011 or at the meeting on 28 November 2011. Important matters remained unresolved, including the nature and extent of the proposed “sweat equity”, funding obligations, charges for services, and the relationship between the Scotch, Gaslight and Jalouse proposals.
2. Partnership and economic torts. Partnership is a consensual arrangement based on agreement and requires a binding contractual relationship. The proposed corporate structure also pointed away from partnership. Since no contract existed, there was no procuring of breach of contract. The conspiracy claims failed because no equitable obligation had been established and the defendants had not acted with the predominant purpose of injuring the claimants.
3. Equitable claims. The claimants failed to establish the detriment required for a Pallant v Morgan equity. They also failed to prove a clear assurance that they already held specified interests. The defendants had represented, at most, that interests might arise once terms were finally settled and recorded. The court cautioned against readily imposing proprietary estoppel in commercial negotiations.
4. Restitution. The claimants had made payments and provided services in the mistaken belief that they had acquired rights in the venture. Restitutionary relief can be available where an anticipated contract fails to materialise. The claimants were therefore entitled in principle to restitution for payments and services connected with the venture. Quantification was left for agreement or an inquiry.