Craig Lloyd v Richard Hayward & Anor

A contractual joint venture does not become a partnership merely because one party receives a share of profits. The court must determine whether the parties carried on a business in common, having regard to the whole relationship and their dealings with third parties. A party’s substantial failure to perform personal obligations under a joint venture may justify termination. An agreement to vary the allocation of expenses may be upheld where the pressure relied on was not illegitimate, did not leave the claimant without a practical choice, and was not avoided within a reasonable time. A claim for an account remains subject to limitation.

The claimant alleged that he had entered into a long-term joint venture concerning the development and letting of units at a business park with the first defendant personally, or alternatively with the second defendant company. The defendants contended that the second defendant was the contracting party, that the arrangement was contractual rather than a partnership, that mortgage interest was deductible from joint venture income, and that the arrangement had been terminated while the claimant was in custody.

The trial was limited to liability. The central issues were the identity of the joint venture parties, its terms, whether it was a partnership, whether mortgage interest was properly deductible, when and how the arrangement was terminated, and whether the claims were statute-barred.

1. Parties and terms. The joint venture was between the claimant and Sirocco, not the first defendant personally. The claimant knew that Sirocco owned the site and that the first defendant acted as its managing agent. The claimant was to carry out construction and management work, receive £20,000 per annum, and share the remaining net profits equally with Sirocco. He also agreed to produce documentary evidence substantiating his prior expenditure.
2. Mortgage interest. Mortgage interest was not included in the original agreement merely because the parties had agreed that expenses would be deducted. It was a substantial liability distinct from ordinary site expenses. The claimant later agreed, probably in late 2012, that mortgage interest attributable to the joint venture site would be deducted. That agreement was not voidable for economic duress. The case was unpleaded; no illegitimate threat was established; the claimant retained practical alternatives; and, in any event, he had waited too long to avoid the agreement. The approach in Morley v Royal Bank of Scotland [2021] EWCA Civ 338 was applied.
3. Partnership. The arrangement was a contractual joint venture, not a partnership. Sirocco alone invoiced tenants, received rent, and had the contractual relationships with them. The claimant acted as Sirocco’s agent for rent collection, site management and construction. The parties did not conduct business in common so as to impose joint and several liability on both of them. The court applied the fact-sensitive approach described in Worbey v Campbell [2017] CSIH 49.
4. Termination and limitation. The claimant’s personal obligations were substantial and were not satisfactorily performed while he was in custody. His father did not take over the full management role. The first defendant validly terminated the joint venture on Sirocco’s behalf in about December 2013. The later work performed by the claimant’s companies was under separate engagements with Alymere. The claim for an account was therefore barred by limitation, and the counterclaims were dismissed or, insofar as relating to the joint venture, statute-barred.