Faris Al-Rawi v Sami Wadi Sidawi & Ors.

Informal dealings and expectations of a discretionary bonus do not, without more, establish a binding profit-sharing contract. The court assesses intention objectively, having regard to the parties’ relationship, contemporaneous documents and commercial context.

Where contractual entitlement is absent, a quantum meruit requires proof of enrichment, enrichment at the claimant’s expense, an unjust factor and the absence of defences. Services already remunerated do not support recovery. For limitation purposes, an unjust-enrichment cause of action generally accrues when the benefit is conferred, not when payment is later expected. Relief under section 32(1)(c) of the Limitation Act 1980 requires mistake to be an essential ingredient of the cause of action.

The claimant alleged contractual entitlements to shares of profits from four property projects introduced to the first defendant, with a quantum meruit claim in the alternative. The court tried liability issues concerning the existence and terms of alleged oral profit-sharing agreements, the deduction of capital interest from the KHN calculation, and the alternative unjust-enrichment claim.

The court found no binding profit-sharing agreements for Draycott, Thurloe or Cromwell. A 12.5% profit share for KHN was agreed, but the court held that the contractual documents provided for calculation by reference to the LLP’s profits after deduction of the loan and contractual interest. The final KHN order was left for a consequentials hearing after an issue arose on the parties’ common ground.

1. Draycott, Thurloe and Cromwell. The alleged oral agreements were not binding contracts. The parties’ dealings were substantially founded on trust and honourable dealing rather than an intention to create legal relations. Manuscript notes, informal discussions and expectations of a bonus did not establish contractual entitlement. The court rejected the claimant’s changing evidence and found the contemporaneous documents inconsistent with the alleged agreements.
2. KHN. The parties agreed that the claimant would receive a 12.5% profit share. The executed structure placed that interest in the LLP’s profits. Under the Member’s Loan Instrument, the loan and 5% interest were payable before calculation of the LLP’s profits. The claimant signed the instrument as attorney and no rectification, setting aside, waiver or estoppel claim was established. The 12.5% share was therefore calculated after those deductions. The court also concluded that the second defendant was personally liable as a party to the agreement and, alternatively, as an agent with an undisclosed principal, although no liability arose because no profit was shown on the assumed calculation.
3. Quantum meruit. Applying the unjust-enrichment framework, the claimant failed to prove any distinct services not already remunerated by fees, commissions and other payments to the Waterbridge companies. The Thurloe claim had also been relinquished, and contractual arrangements governing KHN and the claimant’s expected benefit from the Draycott partnership excluded a further recovery.
4. Limitation and set-off. Any unjust-enrichment cause of action accrued when services were provided. Section 5 of the Limitation Act 1980 therefore barred claims accruing before 9 December 2014. Section 32(1)(c) did not assist because no mistake formed an essential ingredient of the claim. The proposed negligence set-off was inadequately pleaded and unsupported by evidence.
5. The claims concerning Draycott, Thurloe and Cromwell were dismissed. Costs, permission to appeal and the appropriate order concerning KHN were reserved to a further hearing.