Eden v Parker

A claimant alleging contractual representations or misrepresentations must prove both the representation and material reliance upon it. A rough estimate does not become a binding cost cap merely because the recipient later understands it as a guarantee. Reliance is assessed in light of the surrounding negotiations, contemporaneous documents and subsequent conduct.

Where a joint venture member manages partnership property, poor management or accounting does not alone establish dishonest misapplication of funds or liability for losses that are not proved. The member remains liable to account for admitted rents, unsupported payments and other sums properly shown to be due.

Mr Eden and Mr Parker entered into a property joint venture through Castle Hall Properties LLP. Mr Eden supplied finance for the purchase and renovation of properties in Howe Street, Salford, and separately advanced money towards the purchase of Mount Pleasant.

Mr Eden claimed damages for breach of contract, misrepresentation and negligent misstatement. He alleged that Mr Parker had represented or warranted that the Howe Street properties could be renovated for no more than £560,000, and that Mr Parker had inspected their interiors. He also presented an unfair prejudice petition concerning the LLP’s management and accounting.

1. Part 7 claim. The claim based on an alleged internal inspection representation failed. The physical condition and security of the properties made prior internal access improbable. The allegation was also absent from the pre-action correspondence and original pleading, and no material reliance upon it was established.
2. The alleged £80,000-per-house or £560,000 overall limit was not proved as a representation or warranty. The evidence showed, at most, a broad and rough estimate. The contemporaneous memorandum of 16 December 2009 omitted any guarantee or cost cap, and Mr Eden’s conduct when expenditure exceeded £560,000 was inconsistent with reliance on a binding cap.
3. The court accepted that Mr Parker was unreliable in giving evidence, but nevertheless found that Mr Eden and his son had mistakenly elevated an estimate into a guarantee. The claim for the excess renovation expenditure therefore failed. Had the alleged firm cost representation been proved, it would have been unreasonable and reckless because Mr Parker had not inspected the interiors, had no works specification, and lacked a proper basis for a maximum cost opinion.
4. Mr Eden was entitled to interest on his advances at 2.5% above RBS base rate, compounded quarterly. Mr Parker accepted liability for the outstanding Mount Pleasant balance.
5. The allegation that Mr Parker had deliberately misapplied substantial renovation funds was not made out. Errors in allocating invoices and deficiencies in management did not establish dishonesty or liability merely because the management could have been better.
6. The petition required further accounting. Mr Parker was required to account for admitted or unsupported sums, including outstanding rent, rent-free occupation by his son, certain maintenance and casual wage payments, specified management losses and insurance charges. Future management of the Howe Street properties was to be undertaken by an independent agent. Further argument on the precise order and costs was deferred.

First-instance judgment. The judgment records no earlier appellate decision.