Donovan & Anor v Grainmarket Asset Management LLP

Whether a contractual right to a share of performance fees is conditional on performance depends on construction at the date of contracting. In a joint venture, no general presumption makes obligations dependent or independent. A term requiring substantial performance should not be implied where the agreement works without it and the term would create uncertainty. If the venture continues until a profitable sale, the agreed fee share is unconditional. Renunciation requires a clear and unequivocal intention not to perform. An agreed withdrawal from day-to-day work is not repudiation. A new case of consensual termination will not ordinarily be entertained on appeal where it was not advanced or explored at trial. Statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 runs when fees become payable; its advance-payment provisions do not apply where the supplier has done everything necessary to earn payment.

Daniel Donovan and Naled Ltd brought claims against Grainmarket Asset Management LLP arising from a joint venture to acquire, redevelop and sell properties. Donovan claimed a share of performance fees and outstanding administration fees. Naled claimed sums withheld from distributions under a fee exemption agreement. Grainmarket denied liability, alleging that Donovan had repudiated the joint venture before the fees accrued and that termination ended the fee exemption.

HHJ Pearce held that Donovan’s right to performance fees was independent of his obligations, rejected the repudiation case, awarded Donovan £705,450 in performance fees and £12,500 in administration fees, and awarded Naled £510,438. He also awarded Donovan statutory interest but rejected Naled’s claim under the 1998 Act. Grainmarket appealed on conditionality, repudiation, termination, interest and the fee exemption. The central issues were whether Donovan’s right to payment was conditional, whether the joint venture had ended before the fees accrued, and when statutory interest began.

1. Appeal dismissed. The Court of Appeal upheld the liability judgment and the award of statutory interest. Grainmarket was ordered to pay the respondents’ appeal costs.
2. The question whether payment was conditional on performance depended on construction at the date of contracting. The agreement was assembled from written and oral communications and conduct. The court declined to derive a presumption from the authorities that obligations in a joint venture were dependent or independent. The cited cases were fact-sensitive and the present agreement fell within no recognised category carrying such a presumption.
3. The express terms provided for performance fees received from investors to be divided between the parties. No term made Donovan’s right conditional on substantial performance. Such a term was unnecessary and would generate disputes about relatively minor failings. The proper construction was that, provided the joint venture continued until a property was sold at a profit, the right to the agreed share was unconditional. If the venture terminated for repudiation before sale, no right to later fees would accrue because the sale would not be a sale by the joint venture. If the relationship broke down but the agreement continued, the right remained, subject to damages for any loss caused by breach.
4. Renunciation required a clear and unequivocal intention not to perform. Donovan’s email of 26 January 2015 formed part of an ongoing discussion about which party should leave and how York Capital should be informed. It did not amount to renunciation. His later withdrawal from day-to-day involvement was agreed with Crader and Grainmarket identified no requested work that Donovan refused to perform. That conduct was therefore not repudiatory breach.
5. The first-instance judgment contained inconsistent observations about whether the venture continued or ended consensually. Grainmarket had relied below only on termination by accepted repudiation. It could not introduce consensual termination on appeal because the timing and terms of any such termination had not been explored in evidence or submissions, and allowing it would prejudice Donovan. Once the repudiation case failed, termination had not been shown and Donovan retained his entitlement.
6. The fee exemption issue followed the performance-fee issue and required no further determination. The interest appeal also failed. The performance-fee obligation arose when Grainmarket received the fees, which was the relevant event under section 4(3) of the Late Payment of Commercial Debts (Interest) Act 1998. The advance-payment provisions did not apply because Donovan had done everything necessary to become entitled to payment.

• Court of Appeal (Civil Division): In [2021] EWCA Civ 686, the appeal from HHJ Pearce was dismissed. The liability judgment and statutory-interest award were upheld, and Grainmarket was ordered to pay the respondents’ appeal costs.
• High Court Business and Property Courts, Queen’s Bench Division, London Circuit Commercial Court: HHJ Pearce decided the claims in [2020] EWHC 17 (Comm) and the interest issue in [2020] EWHC 1882 (Comm).