ON APPEAL FROM THE BRISTOL COUNTY COURT
HIS HONOUR JUDGE DENYER QC
Strand, London, WC2A 2LL
B e f o r e :
SIR NICHOLAS WALL
LORD JUSTICE RIX
LORD JUSTICE MOORE BICK
| Christie Owen & Davies plc
|- and -
|RAOBGLE Trust Corporation
Mr George Branchflower (instructed by Ware & Kay Llp) for the Respondent
Hearing dates : Wednesday 15th June 2011
Crown Copyright ©
Lord Justice Rix :
"Purchaser shall include anyone acting on behalf of the eventual purchaser…
When and how does the liability for payment arise? You will be liable to pay an agency fee under this sole selling rights agreement in addition to any other costs or charges agreed, in each of the following circumstances:
(a) if contracts for the sale of the business are unconditionally exchanged in the period for which we have sole selling rights, even if the purchaser was not found by us but by another agent or by any other person, including yourself,
(b) if contracts for the sale of the business are unconditionally exchanged after the expiry of the period during which we had sole selling rights but to a purchaser who was introduced howsoever to a business by anyone, including yourself, during that period or to a purchaser with whom you had negotiations or with whom we had negotiations about the business or to whom we provided particulars of the business during that period."
The facts and the issue on this appeal
"28. So the evidence, if such it be, for Mr Kimitri being a purchaser within the ambit of clause 5(b) seems to me to be extremely exiguous. It is not supported by any documentation, and I have made the point that I allow for family arrangements, it is directly contrary to the official legal documentation which does exist. There is no formal evidence of the payment of money by him towards the purchase, and there is no evidence as such that the premises (a) constitute partnership property; or (b) what the partnership is."
"4. Back in about March or April 2008 I was contacted by my friend, Mr Chris Kimitri about an investment possibility. Chris also contacted John Tsaroullas. We are all members of the Greek Cypriot Community in Weston-Super-Mare, and we are in fact related. Chris explained that he had been trying to purchase The York, but needed partners to come in with him…
5. Each of us was to be a partner in the business and we would each raise one third of the purchase monies. We decided that we would create a new company to buy the property and through that company carry out the development required to convert The York from a convalescent home into a seafront bar and restaurant and hotel. John, Chris and I would be one third owners however, Chris is disqualified from being a Company Director so John and I would be appointed, and we would manage the business using Chris' experience to guide us. Chris Kimitri is the owner of the Weston-Super-Mare seafront restaurant, The Nook & Harbour.
6…Chris Kimitri and I attended [the auction] and proceeded to make bids up to £940,000 at which point we dropped out. I think that the bidding continued, but anyway, we could not go beyond £940,000. The York did not sell and was withdrawn. The auctioneers later explained that this was because it did not reach its reserve.
7. As Chris Kimitri and I were leaving the auction room we were stopped by a representative from Savills. He introduced us to the representatives from the Trustee company that owned The York, and invited us to discuss a private sale. We explained that we had gone to our financial limit, but negotiations continued and standing there in the Ballroom at Claridges we agreed to buy at £950,000."
"[Mr Kimitri] advised he has been made aware of the potential complications if he has any involvement in the transaction.
It would seem that he has approached the former agents and told them that whilst he is not currently involved in the transaction, he would very much like to be and would like to join in the purchase with Mr Pavlou and others."
The limited point
"I think that the majority of the Court of Appeal were guilty of nominalism. They thought that it was necessary, not merely to identify the joint venture into which the parties had agreed to enter, but to give it a particular description, and then to decide whether the parties had commenced to carry on a business of that description. They described the business which the parties agreed to carry on together as the business of a restaurant, meaning the preparation and serving of meals to customers, and asked themselves whether the restaurant had commenced trading by the relevant date. But this was an impossibly narrow view of the enterprise on which the parties agreed to embark. They did not intend to become partners in an existing business. They did not agree merely to take over and run a restaurant. They agreed to find suitable premises, fit them out as a restaurant and run the restaurant when they had set it up. The acquisition, conversion and fitting out of the premises and the purchase of furniture and equipment were all part of the joint venture, were undertaken with a view of ultimate profit, and formed part of the business which the parties agreed to carry on in partnership together.
There is no rule of law that the parties to a joint venture do not become partners until actual trading commences. The rule is that persons who agree to carry on a business activity as a joint venture do not become partners until they actually embark on the activity in question. It is necessary to identify the venture in order to decide whether the parties have actually embarked upon it, but it is not necessary to attach any particular name to it. Any commercial activity which is capable of being carried on by an individual is capable of being carried on in partnership. Many businesses require a great deal of expenditure to be incurred before trading commences. Films, for example, are commonly (for tax reasons) produced by limited partnerships. The making of a film is a business activity, at least if it is genuinely conducted with a view to profit. But the film rights have to be bought, the script commissioned, locations found, the director, actors and cameramen engaged, and the studio hired, long before the cameras start to roll.
The work of finding, acquiring and fitting out a shop or restaurant begins long before the premises are open for business and the first customers walk through the door. Such work is undertaken with a view to profit, and may be undertaken as well by partners as by a sole trader."
"The question in the present case is not whether the parties "had so far advanced towards the establishment of a restaurant as properly to be described as having entered upon the trade of running a restaurant," for it does not matter how the enterprise should properly be described. The question is whether they had actually embarked upon the venture on which they had agreed. The mutual rights and obligations of the parties do not depend on whether their relationship broke up the day before or after they actually transacted any business of the joint venture. The question is not whether the restaurant had commenced trading, but whether the parties had done enough to be found to have commenced the joint enterprise in which they had agreed to engage. Once the judge found that the assets had been acquired, the liabilities incurred and the expenditure laid out in the course of the joint venture and with the authority of the parties, the conclusion inevitably followed."
Lord Justice Moore Bick :
President of the Family Division :