Winton v Rosenthal & Anor

This is an action brought by Mr Paul Winton, the claimant, who says that he, a Mr Maurice Mann and Mr Marc Rosenthal, together with the latter’s company Millennium Developments Ltd (“Millennium”) acted together to purchase and develop some property in Barnet, north London, called The Marians, that the enterprise amounted to a joint venture and that Mr Rosenthal and Millennium were in breach of the joint-venture when, the land having been purchased, they declined to carry out the development and instead sold the land. Mr Winton claims damages in the sum that he would have received had the development being carried out and the property subsequently sold in its standard state. Mr Mann was a joint claimant in these proceedings, but he has settled with the defendants and was no longer a claimant by the time of the trial. The action raises questions as to the parties to the relevant agreements (and in particular as to whether Mr Rosenthal himself owed any duties to Mr Winton) and what the scope of the obligations was. Both Mr Rosenthal and Millennium are defendants. Mr Winton was represented by Mr Howard Smith of counsel; Mr Rosenthal acted for himself and Millennium. Millennium is no longer trading and Mr Rosenthal now lives and carries on business in Florida.

The trial of this action was to some extent adversely affected by an absence of relevant material. There are two reasons for this. The first is Mr Rosenthal’s failure to give proper disclosure. He seems to have thought that his disclosure obligations were limited to digital information that he currently has and to such relevant documents as he had with him in Florida. The latter category turned out to be very much less than all potentially relevant documents. It transpired at the trial that a lot of Millennium’s documents were either in a garage at the home of Mr Rosenthal’s in-laws or were with Millennium’s accountants. It is plain that relevant documents are likely to be in one or other of those locations, but Mr Rosenthal made absolutely no attempt to search them. Those documents were therefore not available. It has to be said that the claimant was surprisingly dilatory in compelling production of the documents. An application for disclosure was made, and the Master made an order, but it was done somewhat late in the day and what must have been an obvious failure to comply with it was not pursued. Of course, a claimant cannot be blamed for a defendant’s failure to give proper disclosure as such, but it is surprising to my eyes that the claimant did not press harder and earlier.

The other omission of relevant evidence is the absence of expert evidence on certain aspects of causation and loss. As will become apparent, issues arise in this case as to what would have happened had the development been carried out (in financial terms). That is plainly a matter for expert evidence. Apparently at a very late stage the claimant sought permission from the Master for the introduction of expert evidence, but the application was resisted and (I am told) refused by the Master on the grounds that it was too close to the trial.

Only two witnesses gave evidence before me – Mr Winton and Mr Rosenthal.

Mr Winton was painted by Mr Rosenthal as being someone who knew little about serious land development projects. Mr Winton would agree with that and certainly gave that impression in the witness box. It is indeed part of his case that he was at the commercial mercy of Mr Rosenthal. He came over as a completely straightforward witness who did his best to answer all the questions posed to him. His recollection of detail was understandably sparse, and he could give only a generalised account of events, in the main. Some of his timing of events may be a little off, but subject to that, and as far as it goes, I can generally accept his evidence.

Mr Rosenthal is an experienced developer of land. I think that he is very hard-nosed about his projects, and that included his attitude to Mr Winton and Mr Mann. That is not to say that he ignored them and their wishes in relation to the project, but he plainly thought that he was the commercial lead and, in commercial matters, Mr Winton and Mr Mann would have to do what they were told, especially when the going got tough. I find it hard to believe that he really thought that his disclosure process was adequate and in compliance with the rules. He must have known that he should have been looking for documents in this country even when he was elsewhere. I also found it hard to believe that he himself believed what he was saying about the nature of a couple of key documents which are relied on as being binding agreements in this case (and indeed which I find to be exactly that) – he maintained that he did not think they were binding, evidence which is frankly implausible. I think that in giving his evidence he to some degree demonstrated a tendency to give evidence that he thought would help his case. He seems to have adopted a surprisingly casual attitude to the conduct of these proceedings, bearing in mind he is a professional man who must know their importance and the importance of some detail of which he was in control but which he did not provide. I felt that I had to approach some of his evidence of primary fact with a degree of caution, though that is not to say he was guilty of constant fabrication.

In what follows, any recital of fact should be taken as a finding by me unless the contrary appears.

Mr Winton was not an experienced property investor or property developer. He had done a few small developments usually involving refurbishment, though he did develop one house which he turned into two maisonettes. He certainly had no experience of the kind of development which was ultimately proposed in this case. He did, however, have some money to invest. Mr Mann, similarly, was not an experienced developer, but he too had some money to invest.

Mr Rosenthal, on the other hand, was an experienced developer. He had a 51% shareholding in Millennium, which was a successful development company. It had a good reputation with its bank (National Westminster) and therefore was in a position to raise money from that bank for worthwhile developments.

The Marians was a property once used as a vet’s surgery with outbuildings. There was a house (or equivalent) on the site but it was not worth keeping. It came on the market and Mr Mann became aware of it. He spoke to Mr Winton about it in May 2007 and they met at the selling agent’s office where the agent showed plans for the site and an existing planning permission covering the demolition of the existing buildings and the building of three houses, one of which also incorporated a flat above two garages. The asking price was in the region of £3,000,000, and Mr Winton took an initial guess at the resale price which he put as being in excess of £7,000,000. He also took a stab at the building costs and came to the conclusion that this would be a good project to fund. Mr Mann suggested the introduction of Mr Rosenthal to assist in the development because it was too big in terms of its complexity for Mr Winton and Mr Mann to handle themselves. Mr Mann thought that it required an experienced developer.

A few days later they met Mr Rosenthal at the Holiday Inn at Elstree, which became the venue for a large number of future meetings. They told Mr Rosenthal about the project and he was very enthusiastic about it. He said that if he took on the scheme he would manage all aspects of the purchase, construction work and resales and take 50% of the profit. That was the way he operated.

A few days later they met again after Mr Winton and Mr Rosenthal had made enquiries of local agents to try and gauge re-sale values. Mr Rosenthal had prepared several “conservative appraisals” showing a healthy profit from resales. By the beginning of June 2007 all three had decided that they wished to go ahead with the project. Mr Mann and Mr Winton said that they wished their interest to be protected by a legal agreement, and at one subsequent stage Mr Winton indicated he would get his solicitors to deal with that. However, as will transpire, they never did, and such documents as were entered into were prepared by Mr Rosenthal. They discussed funding. It was agreed that Millennium’s bankers would be approached, and Mr Mann said that he would make other approaches to see if they would offer better terms.

One of the things that was discussed was the desirability of obtaining a better planning permission. Mr Rosenthal said he would instruct a planning consultant to advise on obtaining one. The new planning permission would be to increase the size and scope of the development on the land so far as to increase the resale figure. He produced figures showing that on the original plans a profit of just short of £1,000,000 might be obtained; on the basis of a better planning permission the profit could be as much as £1.7 million.

The discussion then turned to investment. Mr Rosenthal produced an assessment of the sort of figures that he thought the bank would lend and identified the shortfall. He asked Mr Winton and Mr Mann what they wanted to contribute. Mr Winton could not remember the figures that were put forward by Mr Rosenthal. Mr Mann said he would invest £450,000 and Mr Winton said he would invest at the same level. One of the things that encouraged Mr Winton was Mr Rosenthal’s express intention to purchase one of the three houses (with its additional flat) for himself. That would mean that there was one fewer property to sell on the retail market at the end of the project.

Mr Rosenthal conducted the negotiations for the purchase, and agreed a purchase price of £2.75m. According to Mr Winton, Mr Rosenthal said that the property would be taken in the name of Millennium, using Millennium’s solicitors, Howard Kennedy. I accept that evidence. He agreed that Mr Mann and Mr Winton should have a charge over the property or some similar interest protecting their investment. There was no detailed discussion about the form of their investment. In fact the property was not taken directly into the name of Millennium. The vendors put the property into an SPV and it was the shares in that SPV that were sold and purchased by Millennium.

There are a handful of emails in this period passing between Mr Winton and Mr Mann on the one hand and Mr Rosenthal on the other. In the earlier emails Mr Rosenthal uses a non-corporate email address, but on 18^th July there is the first of various emails from Mr Rosenthal from his Millennium email address. In that email he passes on certain details about legal formalities.

On 20^th July 2007 Mr Mann wrote to Mr Winton saying:

“Paul, I have spoken to Marc and re the funding I will keep you posted as to when and what we are going for & will pass on any info to you. Re the agreement between you and Millennium, I will dig out my previous agreement and send it on to you.”

Since one of the issues in this case is the extent to which there was an agreement with Millennium, that email has a significance, albeit limited.

On 29^th July 2007 Mr Mann wrote to Mr Winton saying:

“I am seeing my solicitor in the morning re the investment and will get a simple agreement/pg out to Millennium.”

This does not seem to have happened. On 31^st July 2007 Mr Rosenthal alerted his solicitor to the fact that Mr Winton’s solicitor would be speaking to her “regarding this deal”. He was identified as Mr Gary Sanders. There is no evidence that this was pursued.

At the beginning of August 2007 Mr Rosenthal attended evening drinks at a local estate agents. At that meeting he picked up from conversation that another party was expressing a keen interest in The Marians and he decided that he and the two investors (as I shall call them, for the sake of convenience) needed to get on with the purchase. Accordingly, on 1^st August 2007 he wrote to them by email saying:

“Maurice, Paul,

Okay – bottom line as they say – we need to exchange Friday/Monday (latest) or else risk losing this deal. As well as hearing this from the lawyer, I was at Savills launch party tonight and they have been contacted a number of times this week by “Hadley Homes” regarding this site.

I am prepared to go ahead and if it makes us all feel more comfortable will put in 1/3 rd of the required deposit.

There are still things to be ironed out between exchange and completion, but with a ‘common goal’ between us, this can and will be done.

We must trust each other and be 100% committed to a deal that I believe will be a very good one.

I will have a facility offer in place prior to exchange, but this is subject to valuation – which I accept and am not too concerned about.

We will offer 5% –£137,500 (£45,883.33 each) and will try for a 3 months completion – may have to settle for less, but will not accept less than 2 months unless we all agree.

Please forward your respective parts of the deposit immediately (today (Thursday) please) to the attached account in readiness for exchange. Regards,”

The email contains a space where one would expect to find a signature if it were a paper letter. Below that there appears Mr Rosenthal’s name and below that the words “Millennium Developments, with Mr Rosenthal’s Millennium email account and Millennium’s website address appearing below that. The email itself comes from Mr Rosenthal’s Millennium email address.

This is a letter in which Mr Winton put some substantial importance. I will have to come back to its effect later.

On the same day Mr Rosenthal wrote a letter to Mr Winton on Millennium notepaper and bearing his signature with his typed name and “Director, Millennium Developments Ltd” below that. The letter reads

“Re: the Marians, Barnet Lane, Elstree, Herts

Please accept this letter as confirmation of receipt of funds in the amount of £137,500 into the account of Millennium Developments Limited.

These funds will be immediately transferred to the client account of Howard Kennedy’s solicitors to be used solely for the purposes of a 5% deposit on the exchange of contracts for the purchase of the company “Marians Ltd”, a single asset company, the assets being the property known as “the Marians”, Barnet Lane, Elstree, Herts.

Mr Paul Winton along with Mr Maurice Mann will act as investors in this project to be carried out by Marians Ltd, which upon completion of the purchase will be come a solely owned subsidiary of Millennium Developers Ltd.

The £137,500 deposit will form part of the equity requirement from Mr Paul Winton, being invested in this project in return for a share of profit.”

There was no debate at the trial about the effect of this document. Someone has written on it “not actioned”; I do not know what that means. It does not appear in Mr Rosenthal’s meagre disclosure, so it must have been received by Mr Winton. Its significance is that it describes the two individuals as being “investors”, and describes the project as being one carried out by the SPV, which would become a Millennium creature. It does not sit happily with the idea that this was a joint-venture in a contractual sense involving Mr Mann, Mr Winton and Mr Rosenthal.

Mr Winton and Mr Mann duly contributed their £45,833 towards the deposit. Exchange of contracts took place on 3^rd August. On the same date Mr Rosenthal received an offer of finance from his bank. The bank offered a “Land Loan” of £2.34m. This amount “includes an element of interest rollup, assumed 18 months and arrangement fee.” There was a development loan of £1.22m. By way of security the bank required a first legal charge over the property together with a personal guarantee from Mr Rosenthal limited to £115,000. The costs of various procedures were provided for and the bank required a commercial property valuation confirming the land value at £2.75 million and gross development value of £6.754 million. The bank anticipated the use of a Monitoring Surveyor and drawdown was to be against the surveyor’s certificates. This email was addressed to Mr Marc Rosenthal at a non-Millennium email address, but the reference to the need for his guarantee demonstrates (not surprisingly) that the bank clearly anticipated lending to a company. A letter from the bank some 10 days later (10^th August) made this clear. It set out the same sort of terms and this one is clearly addressed to Mr Rosenthal at Millennium and anticipated lending to Millennium.

Discussions between the parties took place on various occasions in August. By this time Mr Winton was also considering buying one of the houses, and Mr Mann raised questions as to how the price he and Mr Rosenthal would pay might fairly give him an increased share in the venture. This produced a slightly tetchy email response from Mr Rosenthal on 5^th August in which he set out some figures representing the potential returns to the investors. Those figures are not available now.

On 23^rd August 2007 Millennium’s solicitors reported to Mr Rosenthal on the bank loan documentation. One of the things that was pointed out was that the bank was not obliged to provide any development finance until Mr Rosenthal had spent the sum of £378,985 on the development costs as the “customer contribution”.

On 26^th August 2007 Mr Rosenthal wrote further to Mr Mann making some proposals in relation to the latter’s share. In that email is a paragraph relied on by Mr Smith as going to the question of whether Mr Rosenthal was a contracting party in his personal capacity:

“I know that you will be thinking that this is your deal, however, a lot has happened since then, and that argument no longer washes and I can confidently say that I have since made this deal a reality. I most definitely appreciate you bringing it to the table, although let’s not forget that an acquisition fee of some £55,000 is being paid to the actual introducer of the deal and I was/am hoping that you, Paul and I would go forward to do many more deals, to include the Chigwell deal that I am now currently appraising, but following all the goings-on between you and Paul previously and now this, I feel like I am spending more time in dealing with our partnership than with the actual deal – and that is no good for anyone.”

This email apparently placated Mr Mann.

On 20^th August 2007 Savills produced a valuation of the property on a residual value basis, for the benefit of the bank. It put a residual value on the property of £2.75m. after construction costs, including contingency at 10%, of some £1.4m.

On 15^th September 2007 Mr Rosenthal sent an email to Mr Mann from his Millennium account and bearing Millennium’s name at the foot below Mr Rosenthal’s typed signature. It invited his attention to what was “attached”, and the subject matter is “JV Agreement”. The attachment did not appear in the trial bundles. However, it seems likely that it was a form of agreement proposed between Millennium and Mr Mann, because the email goes on:

“If acceptable, we will then commence to allow for the “sweetener” as discussed previously.”

When Mr Mann forwarded this email to himself in January 2009 the attachment is described as “jv-maurice.doc”.

Completion of the purchase was to be on 3^rd October. The two investors were to provide their further funds for that event. They were to provide £450,000 each. However, Mr Mann had difficulty in coming up with the full amount, and it was agreed that he would put in £400,000 and Mr Winton would put in £500,000, taking up the slack. On 25^th September Mr Rosenthal wrote to both of them on Millennium headed notepaper, signing himself as a director of Millennium stating:

“In preparation for the completion of the purchase of the above property, please arrange to transfer funds for arrival in the account of Millennium Developments Ltd for Monday 1^st October 2007.

The balance due is [£400,000/£500,000] (the investment), less £45,833 (share of deposit paid) = £354, 167.

On 26^th September Mr Rosenthal sent an email to Mr Winton with an attachment called “jv – paul.doc”. The attachment was an earlier draft of two documents, forms of which were both signed shortly thereafter by the parties. The next day Mr Rosenthal sent a similar email to Mr Mann with attachments “jv maurice.doc; Maurice Man.doc” Mr Mann received attachments corresponding to those received by Mr Winton. Both emails came from Mr Rosenthal’s Millennium email account and both of them bore his name by way of typed signature above the name “Millennium Developments”.

Shortly after that Mr Rosenthal sent out final forms of those documents to Mr Winton and Mr Mann. Unlike the previous attachments, these were on Millennium headed paper, and with details of Millennium’s registered office and company number at the foot. They bear Mr Rosenthal’s signature, dated by him 27^th September 2007, and the originals of these documents are still in the possession of Mr Winton (so far as his copies are concerned). I therefore infer that they left Mr Rosenthal having been signed by him. They also bear Mr Winton’s signature. The shorter of the two documents has the date 27^th October 2007 written under Mr Winton signature. Since copies of both documents, signed by both Mr Winton and Mr Rosenthal appear in Mr Rosenthal’s disclosure, in a signed form from which it is apparent that they were different signed versions from those retained by Mr Winton, it is an inevitable inference that Mr Winton signed separate copies and sent them back to Mr Rosenthal. Mr Rosenthal’s Defence denied receipt of signed documents from Mr Winton. That denial is plainly wrong.

Since a lot in this case turns on the terms of those documents, and the precise wording of one of them, it is necessary to set out that precise wording in this judgment. For ease of reference I set them out in a schedule. The longer of the two documents is 2 pages and describes itself as “This Agreement”. At the end it is said to be signed as a deed, and on Mr Winton’s copy that is how it has been executed. I shall therefore call this document “the Deed”. The other document is one page, and I shall call this the “short agreement”.

Mr Mann’s copy of the short agreement was slightly longer because it proposed terms covering what happened if two of the houses were bought by Mr Winton and Mr Rosenthal. In the disclosure there is a copy of that agreement signed by Mr Mann (apparently on 17^th October 2007) containing ticks by some paragraphs and comments by others. Against Mr Mann’s signature are the words “subject to the changes being made”. It would appear from subsequent email traffic that Mr Mann sent his copy back to Mr Rosenthal because on 1^st November Mr Rosenthal asked him to resend it because it was in “some of the items stolen with my laptop bag and included was your agreement with your notes on”. There is some further correspondence about Mr Mann’s form of this agreement but it does not appear from that traffic that that agreement was finalised. However, it is not possible to be confident about this. Mr Mann’s draft and the subsequent email traffic as it appears in the trial bundle does not appear in Mr Rosenthal’s disclosure, and I infer that that documentation came from Mr Mann. I do, however, think it likely that Mr Mann signed and returned the deed. It is quite clear that both Mr Rosenthal and Mr Winton executed a copy of that latter document as a deed.

Completion of the purchase of the SPV by Millennium took place on 3^rd, or perhaps on 5^th, October. Completion was certainly intended for the 3^rd, but a completion statement entitled “Marians Ltd: Monies Due to Seller on Completion” describes it as being "(For Completion as at 5^th October 2007)”. The date does not actually matter for present purposes. The completion statement shows the funds required for completion to have been provided as to just over £2m by the bank, leaving “Moneys required from buyer” at just over £650,000. Millennium did not keep a separate bank account for this development, so tracing the Winton/Mann money is not possible, but they had certainly paid into Millennium enough money to pay that latter sum. Mr Rosenthal claimed that Millennium had injected £315,000 of its own capital into the project. It is not easy to see how it can have contributed that sum by the end of the day, and in my view it certainly did not contribute anything at this stage of the venture.

On 17^th October 2007 NatWest wrote to Mr Rosenthal enclosing a facility letter for a development loan of £1.22m, of which £1,136,953 was to go towards build costs, the balance being in respect of the loan fee and anticipated interest accrual during the term of the loan. It is not apparent from the disclosure whether or not Mr Rosenthal signed and returned a copy of the facility letter as requested. The facility letter is not in the disclosure either. What I do find, however, is that that loan arrangement was in respect of the development as described in the then existing planning permission.

Mr Rosenthal then set about getting what the parties regarded as an improved planning permission. What was sought was an increase of about 5000 ft.² on the development, mainly by adding basement and roof space and increasing the development footprint into other parts of the site. According to the email traffic, Mr Mann also raised the question of whether the development could not better take place with a number of luxury flats instead of the 3 house plus one flat development that was proposed. Apparently nothing came of that idea and Millennium continued to seek the expanded permission which they originally talked about.

On 8^th April 2008 Mr Rosenthal sent an appraisal of the project to Mr Mann and to a Mr Darlow of “nildram.co.uk” which the covering email described as showing “a requirement of equity of circa £1,713,000 and hence a return on equity to investors of circa 33% – a very healthy return. Will update you as soon as I hear on committee dates, however in the meantime, we are cracking on and soon to commence [sic] drainage and hard landscaping works.” There was no evidence that those particular works were started, but during 2008 certainly there was demolition of the existing buildings. Meetings continued to take place between Mr Rosenthal, Mr Winton and Mr Mann.

During those meetings in May or June 2008 Mr Rosenthal began to express concern. The recession was beginning to bite and he was concerned about the retail selling price of the houses that were to be constructed. Mr Winton was concerned that Mr Rosenthal was over-extending himself, and that a new project that he had of his own would take away finance and effort which Mr Rosenthal should otherwise have been directing towards the Marians development. Mr Rosenthal sought to allay those fears.

Mr Rosenthal’s concerns increased during the course of 2008 and his enthusiasm for carrying out the development diminished. The precise pattern of this is not clear from the evidence, but I accept that at some point during the course of the first two or three quarters he described the development as being a noose round his neck, or some similar metaphor. In July 2008 he told the other two that he would not be proceeding with his intended purchase of one of the houses. According to Mr Winton, Mr Mann and he were shocked by this development. I accept that they were, but it is not easy to see why. Mr Rosenthal had not committed himself to buying one of them any more than Mr Winton had. However, this revelation led to a further meeting in about August at which Mr Rosenthal said that since the economy was now in trouble they should look for other options – either sell the site or look for another investor. Since the loan was due to be repaid in February 2009 they might need to find another lender because site values were changing.

On 14^th August 2008 a decision was made by the planning authority to grant planning permission under the new application (for larger houses). However, a draft decision notice was not issued until 4^th September and it appears from other documentation that the final notice may not have been issued until 4^th November.

At some stage in October 2008 Mr Rosenthal announced that he was not interested in staying in the project, which incensed Mr Winton and Mr Mann. The thrust of Mr Rosenthal’s evidence, which I accept, is that he did not want to proceed with a project which was loss-making, which he feared this one would be. Mr Winton actually suggested that part of the site be sold to reduce their exposure. Mr Rosenthal subsequently reported on his attempts to sell the site, which had not produced any positive results. During the course of this he produced a spreadsheet suggesting that Millennium had spent £223,000 on the project, a figure which was challenged but never substantiated.

Two estate agents were asked to produce predictions of selling prices of the houses. Statons produced one showing an aggregate of between £6,550,000 and £7,300,000 and Savills produced one showing an aggregate of guide prices £7,600,000. Both agents referred to difficulties in the market, and the tone of Statons’ valuation suggests that their lower figure would be the appropriately cautious one. The figures were (according to an email from Mr Rosenthal) the result of his talking them up from their original thoughts. Mr Winton’s evidence was that these valuations were prepared for the purposes of trying to get a sale of the site.

Apparently various options for selling the site, or finding alternative finance, were being investigated in the autumn of 2008, but the detail is not clear. The only detailed information is snippets of email traffic. It is not clear why a financier other than the bank was being sought, but Mr Rosenthal’s evidence was that National Westminster would not lend without a new application for development finance because the increased size of the development would increase the cost. His view was that National Westminster would not have funded it because a project could not be demonstrated to produce enough developer’s profit to make it fall within their criteria, but he did not substantiate that with admissible evidence. Mr Winton was making his own efforts to sell, and approached his own contact suggesting a sale of the land at £3.25m.

On 23^rd October Mr Rosenthal emailed the other two participants with a schedule of costs incurred to date. They showed total costs of £3.332m. The bank loan, Mr Winton’s contribution and Mr Mann’s contribution totalled £2,962,000, and the document suggested that “Marc” had contributed £200,000. That left a shortfall of £222,000 allegedly spent. Mr Mann commented on the high level of some of the items.

On 16^th December National Westminster sent a letter to Mr Rosenthal following a recent meeting. What Mr Rosenthal said was not in evidence, but in relation to the Marians development the letter said:

“The Marians Land & Development Loans – I confirm continuation of these loans to 27^th February 2009, with December quarter interest to be accrued to the Land Loan. I understand that you may not now develop at the site and with this in mind I can not commit at this stage to accrue any further interest to the loan. Again, I will look to discuss this further with you in the new year.”

I think that Mr Rosenthal would rely on this expression of view as indicating that the bank would not have been interested in advancing the development loan. I do not think that that is a proper interpretation of what the bank was saying. The bank had obviously been told that a decision had been taken not to develop the land, and in those circumstances there would be no question of an extended development loan.

In the last quarter of 2008 and the first quarter of 2009 the parties were trying to interest various people (purchasers and financiers) in the site. In November 2008 Mr Rosenthal had stated clearly at a meeting that he had no intention of making any further investment. Mr Mann expressed the same intention. In December Mr Rosenthal handed over a list of interested parties (running to a page and a half of A4 paper) but no-one was really biting then.

On 30^th January 2009 Mr Winton and Mr Rosenthal attended a meeting with the manager of Mr Rosenthal’s bank. The full content of that meeting is uncertain, and in particular it is not clear whether there was any, and if so what, discussion about the overall viability of the project. According to Mr Winton, it was preceded by a meeting between the 3 individual participants at which Mr Mann and Mr Winton asked Mr Rosenthal to arrange a meeting with the manager “to see whether he would be prepared to extend the loan that was due for repayment in February 2009” (according to Mr Winton’s witness statement). Mr Rosenthal is said to have said that there was no way that the manager would support the two of them in the project without Mr Rosenthal. Mr Winton did not say that that was what was going to be proposed, but presumably Mr Rosenthal would only have said that had the point been raised.

In his witness statement Mr Winton said that the manager confirmed that if Mr Rosenthal was not to be part of the project then the bank would not support Mr Mann and Mr Winton. The bank would not provide funding to people who had no experience of conducting a development of that size. Presumably, therefore, finding that out was the purpose of the meeting. Mr Rosenthal is also recorded as having reflected on the naiveté of Mr Mann and Mr Winton, and because they did not get a better legal agreement he was now able to organise a sale of The Marians without reference to them and without giving them any information regarding the negotiations. The important point which emerges from this is that it appears to be clear by now that Mr Rosenthal had decided that, come what may, he was not going to pursue the development. Mr Rosenthal’s witness statement stated that the manager had said that funding would not be available at all because of the market downturn, or would require additional investment from the investors which Mr Winton had made clear would not be available. Other than accepting that Mr Winton (and Mr Mann) had indicated that they would not be able or willing to inject new funds, I find that the bank manager was not that categorical. Apart from anything else, such a categorical statement is not consistent with an exchange of emails that Mr Rosenthal had with the bank in 2010 in order to clarify what the bank’s attitude would have been to increased funding.

Mr Rosenthal went on and arranged a sale of the property. Mr Mann and Mr Winton lodged a unilateral notice at HM Land Registry, but it was removed when Mr Rosenthal protested. A Mr Sachdev was interested but made an offer which was not high enough. During the course of his negotiations he produced a valuation that his valuers had prepared for his bank (Savills and National Westminster again). Savills had certain dealings with Mr Rosenthal over this in which he obviously sought to convince them that they had valued too low. They resisted that suggestion. Their resistance referred to an increased build cost per square foot, which decreased profitability, and to a “considerable fall in value since August 2007, which was peak in the market”. The Savills valuation was a residual valuation of the site, which gave a gross development value of £5.9 million (the aggregate sale value of houses), from which development costs were deducted and from which a residual site value of £1.17 million was derived. That led Mr Sachdev to make an offer little above that. However, Mr Rosenthal managed to get a better price out of another party, and it was sold to them on 30^th April 2009 for £2.25 million. That amount was sufficient to repay the bank but not much more. The effect of a sale at that price was that Mr Winton and Mr Mann have not recouped any of the money that they injected.

Oddly, within a few months Mr Sachdev bought from those purchasers at £5m (the figure was asserted by the claimant and not disputed by Mr Rosenthal). Mr Rosenthal says that he falls to be treated as a special purchaser.

Those are the principal facts relevant to this case, although I will have to develop some of them in due course in considering questions of breach and causation. They give rise to the following questions:

Mr Smith’s primary case is that the two written documents were binding documents and contained obligations which bound both Millennium and (in the case of the short agreement) Mr Rosenthal as well. Since Mr Rosenthal challenges the character of these agreements as being binding, it is necessary to determine their binding nature first.

Mr Rosenthal claims that those agreements were merely indicative terms and were not intended to be binding. The parties had not got as far as a binding arrangement at that time. He does not really advance an argued case about that; his case is little more than an assertion. In my view his case fails. Those two documents were clearly intended to be binding, at least so far as Mr Winton’s documents are concerned.

The documents have to be put in their context. The two investors had provided not insignificant sums for the deposit, and had done that under time pressure. At the end of September they were going to have to come up with very much more than their contributions to the deposit. They were going to provide, in aggregate, £900,000. There had been talk of providing formal agreements, but none had hitherto been forthcoming. It is highly likely that each side would have realised that the advance of such sums required some form of formal agreement, and where documents such as the signed documents are produced by one side the almost inevitable inference is that that side is proposing that those documents should have that character. The documents dealt with the sort of things that the parties would have anticipated would have to be dealt with. That seems to me to be a very important circumstance.

Next is the terms of the documents. They are each, in their own way, formal. The deed described itself as an “agreement”; it does not describe itself as heads of terms, or anything like that. Furthermore, the end of the document indicates that it was intended to be a deed, and it was executed by both parties as such. Both parties, and particularly an experienced developer like Mr Rosenthal, would have appreciated that a deed is a serious legal document which has, or is capable of having, serious legal effects. It is quite antithetical to the notion that this document is non-binding that it should be proposed, and accepted, that it will be executed as a deed. The short agreement, although not described as a deed, has aspects of formality about it which demonstrate clearly that it was intended to be binding.

Furthermore, so far as Mr Rosenthal is concerned, he admitted in evidence that he knew what “subject to contract” meant in a document – it meant that the terms in that document were not binding pending a further formal contract. One would have expected an experienced developer like Mr Rosenthal to know that. Accordingly, when he sent out documents apparently recording a bargain and did not use that rubric, the only sensible inference is that he intended them to be binding.

In short, there is absolutely no case for saying that those two documents were not intended to be binding, and I find that they were, at least in the case of Mr Winton.

Another point arises, however, out of the circumstances of the execution by Mr Mann. The point was not taken or addressed by either of the parties before me, but it seems to me that it is a point which needs to be considered and dealt with. It does not appear that his form of the short agreement was ever finalised as between him and Mr Rosenthal/Millennium, though I think it likely that the deed was. In those circumstances one does not have a matching set of agreements to which both investors were a party. It is pertinent to ask whether the agreement with Mr Winton was, in substance, conditional on there also being a corresponding agreement with Mr Mann so as to ensure that the joint venture (using those words loosely for the moment) was governed by a set of documents which covered the ground which it seemed had to be covered. Putting the matter another way, could Millennium/Mr Rosenthal say that until there was a complete agreement with both investors there was an agreement with neither?

Having posed that question, I think that the answer is in the negative. When he sent out the agreements for signature, Mr Rosenthal in no way reserved his position pending the return of all signed copies. In sending out what he sent out, he was indicating that he/Millennium were content with each of the forms of agreement so far as they pertained to the investor to whom they were sent. It was not necessary for all of them to be signed before some of them could be commercially effective. Furthermore, it would be very much in Mr Winton’s interests to have a binding agreement even if Mr Mann was still quibbling about his. In that way at least Mr Winton had a degree of protection in relation to the considerable sum of money which he had invested.

I reformulate the second question in this particular form because it encapsulates the question which Mr Smith argued on behalf of Mr Winton. He did not submit that Mr Rosenthal was a party to the deed. He accepted that the deed was between Mr Winton on the one hand and Millennium on the other. However, he did submit that Mr Rosenthal was a party to the short agreement (along with Millennium). Having submitted that the question of whether he was a party was a question of construction, Mr Smith relied on the following points:

These are significant points and there is a real question as to whether or not Mr Rosenthal was a party to this document. However, in the end I have come to conclusion that he was not. The agreement starts by referring to “The parties”. The parties are not identified at that point on the page, but there is an important indication as to who they are at the foot of the page immediately above the signature block. The persons who “confirmed their agreement to the above by signature below” are “Millennium Developments (Marc Rosenthal) and Paul Winton (The Investor). So the question at this stage of the document is whether that form of wording is intended to connote that only Millennium is a party on that side of the transaction or whether Mr Rosenthal is a party as well. It seems to me to be impossible to construe the agreement as though Mr Rosenthal were a party to the exclusion of Millennium. If he is a party he must be an additional party. The fact that the document is on Millennium headed paper, like the Deed; the description in the passage just cited, and the obligations apparently undertaken by Millennium in clauses 1, 2 and 4, all point to Millennium being a party. The obligation in clause 4 provides what is missing from the Deed, namely Mr Winton’s profit share or share in the equity. Accordingly, Millennium must be a party to this document. The question becomes whether it is the only party on that side of the agreement.

In my view the more natural construction of this part of the agreement (the apparent description of the parties) is that only Millennium is a party. Words in brackets are likely to be subsidiary to the preceding words, or illustrative of them in some way, rather than adding material which is just as important as the words preceding the brackets. That is how the words “The Investor” are used against Mr Winton’s name. It is another way of describing Mr Winton. That is actually how the expression is used in the document. Mr Rosenthal’s name is not used in the document in the same way, but putting his name in brackets in my view means he has the same sort of subsidiary quality for the purposes of this agreement. The draftsman apparently intended Mr Rosenthal to be treated as the equivalent of Millennium, but not in such a way as to suggest that he was, in some additional way, an additional party. I also do not ignore use of the word “Both”. That word suggests two parties, not three. The first party is Millennium and the second is Mr Winton.

Of course it has to be acknowledged that the signature block does treat the two sides in a different way. There is a forward slash character between the names of Millennium and Mr Rosenthal, whereas the word “Investor” appears in brackets after Mr Winton’s name. This point has some force but is not in my view enough to counterbalance what appears from the apparent identification of the parties immediately above it. In my view Mr Rosenthal’s name is in the signature block to reflect the fact that Millennium was the party that carried his interest, in a loose sense. It is right to read all this in conjunction with the terms of the Deed and under the Deed (clause 5) the capital described there is Millennium’s, not Mr Rosenthal’s.

Clause 5, far from supporting Mr Smith’s case is actually inconsistent with it. Mr Rosenthal is ostensibly not contracting on his own behalf there; he is contracting on behalf of Millennium. That is what it says. Were it the case that there were other strong indicators that he, and not Millennium, was the counterparty to this document, then it might be possible to treat that clause as an inelegant way of Mr Rosenthal indicating that he would be acting through Millennium so as to preserve his personal liability. However, there are no such indicia, or at least none strong enough, so there is no reason not to give this clause the meaning that it seems to bear on its face.

Clause 7 is a clause which is for the benefit of Mr Rosenthal. However, it is not necessary to make him a party to the other provisions of this agreement to allow him to have the benefit of it. He can either have the benefit of it as a third party intended to have the benefit, or the company can sue for him. Its existence does not justify the conclusion that he was to be a party to this agreement in any other respect.

The reference to the joint venture does not really take the debate very far. Reliance on that reference is likely to beg the question. One first has to identify what is meant by the “joint venture”. There was, in my view, no prior binding agreement amounting to a joint venture agreement. There were discussions in which three individuals talked about embarking on an enterprise, but one still has to ask in what right they should be taken to have been acting. Mr Mann and Mr Winton were clearly acting in their own right, but Mr Rosenthal was known to operate through his successful company (with a track record that the other two wished to rely on) and he sent quite a lot of his emails as from that company. A fair reading of what was going on does not suggest that Mr Rosenthal was engaging in any form of liability in his own name. Discussion of a project between three individuals does not mean that they ultimately undertake an enterprise in their respective individual names, and that did not happen in this case either. There was no legally significant joint venture in this case other than the venture which would be constituted by the relationships undertaken with Millennium (the original provision of deposit moneys to Millennium, the provision of the balance of the contributions to Millennium, and the entry into the deed by Millennium). The words “joint venture” are a loose way of describing that arrangement. They are not apt to describe any arrangement involving Mr Rosenthal in a personal capacity because there was no such arrangement.

Transcontinental does not assist Mr Smith. That case, on its facts, involved a person not only signing in its own name; it involved a document which described that person as the actual party. That is nothing like this case. On the facts of this case and on the true construction of this document there is no presumption because it is clear enough that the relevant party is Millennium (I repeat, the document is on Millennium’s letterhead), and the exercise of construing the document overall leads to a clear enough conclusion (and one which would be capable of rebutting the presumption if there was one).

It is, I accept, pertinent to take into account the fact that Mr Rosenthal chose to generate a separate document, and that that is capable of indicating that there are different parties to this document. It would be a good reason for a separate document that some of the parties to the first document are not to be parties to the second, so it would make some sense to have the second. However, that is not the case here. As I have indicated, Millennium are plainly parties to this document, and in clause 4 it contains a term which is necessary to complete the obligations in the Deed. So the non-correspondence of parties cannot be assumed to be a reason for the second document. This deprives the point of most of its weight.

In the circumstances I find that Mr Rosenthal was not personally a party to this document. The only two parties were Millennium and Mr Winton.

I would also add that even if he were a party, it is not clear that that would be enough to get Mr Winton what he seeks as against Mr Rosenthal. What Mr Winton has sought to enforce is an obligation to carry out the development. This agreement does not contain such an obligation – if anything does, it is the deed (see below). The farthest this agreement goes is clause 5, which is not the same thing as Mr Winton seeks. Mr Winton would probably need to imply a term that Mr Rosenthal would personally procure the completion of the development, but such an implication would be far from straightforward in my view. However, I do not need to develop this further.

Mr Winton’s alternative case was that if Mr Rosenthal was not personally liable to carry out the development under the short agreement, there was a separate implied and/or collateral agreement to the same effect. He says that such an agreement falls to be implied from the agreement to pursue the joint venture by developing the site via Millennium, the payment of the moneys and, in particular, the email of 1^st August 2007 and its reference to the need to “trust each other and be 100% committed to a deal that I believe will be a very good one.” That is said to be a contractual promise that Mr Rosenthal would personally be 100% committed. Further or alternatively, there was an implied agreement that the parties would give effect to the reasonable assumptions arising from the initiation to contribute funds, and Mr Smith relied on Blackpool Aero Club v Blackpool BC [1990] 1 SLR 1195.

On the facts, I do not think that any relevant legal relationship was created prior to the provision of the deposit moneys. There was a planned joint venture to which the parties were working, but it was not binding. It is impossible to conclude that no party could walk away from the venture prior to that event – any person could have had second thoughts without being liable for doing so.

That position changed on the provision of the deposit moneys, but the question is to what degree? There was, at the very least, an arrangement between the two investors and the company which governed the application of the money. There was probably a loan, and the company was not entitled to apply the money for any purpose other than its application towards the deposit. There may well have been obligations which would have prevented the company from diverting the development opportunity away from Mr Mann and Mr Winton. However, the agreement at that stage would have been very rudimentary, because there were too many unknowns. It was not known at that stage whether a 5% deposit would have been acceptable. There was discussion about Mr Winton’s solicitor participating in the drawing of a formal agreement. I do not consider that Mr Winton and Mr Mann had, at that stage, bound themselves to provide further funds. The moneys were provided under some pressure to procure an exchange of contracts, and the parties (whoever they were) were obviously planning to work out other matters in the near future.

The expression “joint venture” is not a term of art with a fixed meaning and is a convenient shorthand to cover a variety of possible arrangements. In a loose sense, there was a joint venture at that stage between the 3 individuals, in that they were all three of them negotiating with each other to a common end. However, that loose sense is not enough for Mr Winton’s case. He needs a contractual arrangement which (a) bound Mr Rosenthal, and (b) bound him to procure the purchase of the land and the completion of the development (at least if provided with funding). I do not consider such a thing arose out of the arrangements at that stage. What happened was limited, as referred to above, and, crucially, I do not consider that Mr Rosenthal was personally a party. He was operating through a company, as the other parties knew, and the purchase was to be through that company. The relevant email was written by him as director of Millennium, as was the letter of the same day. In my view it is clear from those documents that the arrangements at that stage were between Mr Winton, Mr Mann and the company. The reference to “I” and “we” in the email does not affect that conclusion; nor does the reference to trust. The language is loose language, and does not connote the acceptance of what would be a very significant personal liability on the part of Mr Rosenthal. When he said “I will have a facility offer in place prior to exchange …” he was not saying that there would be one in his favour. I do not believe that anyone thought he would be borrowing large sums in his own name. He is obviously talking on behalf of his company. The reference to “trust” and commitment was not intended to indicate that Mr Rosenthal was a personal party to the transaction. It was intended to be an encouragement to contribute necessary funds in circumstances in which it had become urgent and the final arrangements between the parties had not yet been sorted out.

The email of 26^th August 2007 does not affect this conclusion. It reflects the fact that individuals (as they had to – a company cannot negotiate without use of an individual) but it does not follow that they were legally engaged in their individual capacities.

However, if there is some degree of uncertainty about that, it is removed by what happened at the end of September, at least so far as Mr Winton is concerned. At that point, and knowing that completion was coming up, it seems that Mr Rosenthal sought to bring some legal clarity by making formal proposals as to how the matter would be taken forward. He produced the deed and short agreement which deal with the sort of matters which needed to be agreed to take the project forward. Mr Winton accepted that and signed. Insofar as there was a prior arrangement arising out of the circumstances of the provision of the deposit moneys, I do not consider that that arrangement survived the signature of the deed and short agreement. Those were the arrangements which governed the matter from then on, and Mr Rosenthal was not a party to those. An over-arching agreement involving Mr Rosenthal personally would not survive that.

Blackpool Aero Club does not assist Mr Smith. It was, in the end, a decision on its facts. If it helps anyone it helps Mr Rosenthal, because there are dicta in it which refer to the need for great caution before implying contracts.

Accordingly, I find that there was no over-arching joint venture agreement under which Mr Rosenthal undertook a personal obligation to carry out the development.

This issue lies at the heart of the case. Mr Winton says that under the two agreements to which Millennium was a party (and principally under the Deed) there was an obligation on Millennium to carry out and complete the development. Mr Rosenthal disputes that and says that any obligation was qualified by an implied term that related to the commercialities. His case was that by the second half of 2008 it had become uncommercial to develop the site, so there was no requirement to develop it. He did not formulate his implied term, but I think it would be a fair analysis of his case to say that he sought to imply a term that there was no obligation to carry out the development if it had become commercially unviable. His case on the facts was that it was commercially unviable.

Mr Smith’s case is based simply on the provisions of clause 4 of the Deed. In essence (though he did not put it this way), his case was that that provision means what it says, and there is no scope for an implication. That is reinforced by clause 2 of the short agreement. There is no room for an implication of the kind relied on by Mr Rosenthal, both because of the nature of the relationship and because the second sentence of clause 4 of the short agreement anticipates one element of uncommerciality (the making of a loss) without detracting from the obligation in clause 4 of the deed.

In my view Mr Rosenthal’s implication fails for two reasons. The first is that the implication that he proposes (a qualification in the event that the development is not commercially viable) is too vague to allow it to be taken to be the intention of the parties. There are various possible views of commercial non-viability. One is that it does not present a sufficient possibility of profit to make the risk worthwhile even though some profit seems possible. Another is that it will make losses greater than the capital contributed. Another (which would be consistent with what Mr Rosenthal said when talking about commercial viability) is that the sort of mainstream lender to whom he would wish to look would not view the profitability as sufficiently great to make it a project it would wish to support. There are other variations. The fact is that the notion is too vague to justify the implication. To take one of the tests, if the officious bystander had proposed the term, he would not have been suppressed testily – one or other of the parties would probably have said: “It all depends on what you mean by commercially viable”. Mr Rosenthal clearly had one view of what it meant, but it does not follow that his counterparties would share it. They had already made a serious investment, and might well take a different view of commercial viability if they wanted to try to get some of their money back. For that reason alone Mr Rosenthal’s implication does not work.

The second is that it is really inimical to the nature and purpose of the bargain that is struck in the two documents. At first blush it might be thought to be strange that Millennium should be obliged to pursue a development for which, for example, a funder would charge interest, or require terms, which make the project unattractive as a profit-making project. For that reason at one stage I wondered whether, in lieu of Mr Rosenthal’s implication based on commercial viability, there would be a term which qualified the apparent absolute obligation with a requirement of reasonableness – Millennium would be required to pursue the development provided it was reasonable to do so. However, further reflection has led me to conclude that that suffers from the same first vice as Mr Rosenthal’s implication, and is also inimical to the structure. It is not necessary in order to make the bargain work. The investors have put in their funds. They have no direct participation in the carrying out of the project, and, having put a lot of money into Millennium. They expect Millennium to do something with it. They cannot be expected to be at the mercy of the judgment of Millennium as to what is reasonable, with the risk that they will not only not get their profit, they will not get all their money back. In exchange for their money they have acquired a promise that the development will be carried out. That makes sense. In order to carry it out Millennium is obliged to raise the balance of the money – see clause 2 of the short agreement. That, too, makes sense. Thus the funding is provided for. The investors have not bought a promise that Millennium will carry out the development if it is reasonable – they would not have agreed to that at the outset.

This yields commercial results. It does not inevitably mean that a foolish development has to be carried out. Specific performance of the two agreements at the behest of the investors would never have been available. If the project looked unattractive commercially Millennium would have a choice. It could go ahead and do it anyway, with the lower returns that would come from it; or it could refuse to do so and pay damages to the investors. The investors would get the sum that they would have got had the unattractive development been carried out (whatever that might be). If the development would have been so bad a commercial proposition that it would have been conducted at a loss, they will get back less than the whole of the capital (to reflect the loss that would otherwise have been made). If it were proved that the development would have lost the whole of their money, then they would get nothing back. All that makes commercial sense of the agreement. The investors get what they paid for – such profits, or losses, as they would have got had the development been carried out. They did not buy Millennium’s view as to whether it was reasonable to carry out the development (whether in terms of commercial viability or otherwise). This also deals with the situation where the investors may view the prospects of the development differently as between themselves. Unless they both agree otherwise, Millennium has to continue with the development as originally agreed, on pain of paying damages based on that development if it does not do so.

Accordingly, there was a binding obligation on Millennium to carry out the development. Of course, one has to construe what is meant by the “development”, but there is no problem about that. At the date of the agreement it was the development described in the then existing planning permission. There was a tripartite agreement to try to get a better planning agreement, and it was obtained. That gave rise to an implied variation of the deed (and short agreement) by substituting the development comprised in the new permission for that within the old.

This question does not really arise. It is unnecessary for present purposes to investigate the implication of such a duty on the part of Millennium because it was under a more absolute obligation. So far as Mr Rosenthal is concerned, there was no relevant relationship with him personally into which such a duty could be implied – see above. There is no free-standing duty of good faith imposed on him.

It is probable (though not wholly clear) that this is a point taken in the Defence. Mr Rosenthal was at pains in advancing his case to say that he pursued all options proposed by Mr Winton and Mr Mann for getting finance for the development, for retaining the land or for selling it to someone else, and said that in the end they agreed that the land had to be sold. If he were right on the facts then they would have consented to Millennium abandoning the development.

If Mr Rosenthal had proved that the investors freely agreed (however reluctantly) with Mr Rosenthal’s view that the development was non-viable, that the land had to be sold, and to the sale that ultimately took place, then there would be a case for finding an agreed variation or discharge of the contract between the parties. However, that does not represent the facts. What happened was that Mr Rosenthal decided that the agreement was, in his terms, not commercially viable. He decided that Millennium did not want to carry it out. He was the expert, and he simply expected his view to be carried out (and he was in a position to carry it out, since for these purposes he controlled Millennium, which controlled the land). What then happened was that the investors kicked against the pricks for a while, and wanted various alternatives investigated. To be fair to him, Mr Rosenthal assisted in that exercise. When the investors came round to the idea of a sale it was not because they were agreeing that that had to happen, and that they would simply take whatever losses that brought about. It was in reality because they had no choice, because Millennium was not going to carry out the development. That they did not ultimately agree to a sale as a discharge of the obligations under the agreements is demonstrated by the fact that at one stage they caused a unilateral notice to be registered against the land. By the time of the actual sale Mr Rosenthal was in sole charge of the sale and not consulting the investors any more. The investors certainly did not consent to that particular sale at that price. One cannot spell an agreed discharge out of that.

Accordingly, there was no such consent as would prevent the failure to carry out the development being a breach.

It is here that one comes up against the poverty of the evidence in this case. Mr Winton is entitled to be put in the same position he would have been in had the development been carried out. In order to demonstrate this he has to show how the development would have been funded (the whole of the development costs would have to be raised), to show that it could have been funded, to demonstrate what the cost would have been, and to demonstrate the likely net selling price of the houses.

All that requires expert evidence. Unfortunately Mr Winton did not have any, because he applied too late to be able to get it in (though it does not appear that it would have addressed a lot of those questions, or that computation, anyway). Faced with that difficulty, Mr Smith sought to rely on figures appearing in the Savills valuation prepared for the bank in 2009 (referred to above) because it contained a number of the relevant figures. Being a residual valuation, it projected sales values and development costs. It also predicted finance costs, albeit on different figures because the figures presupposed a buyer buying the site at that time and needing finance for that. All this was done because it was the best that Mr Smith could do in the circumstances. His exercise came up with a range of figures, the lowest of which would have given Mr Winton something over £100,000 (leaving him with a loss of less than £400,000 rather than his current £500,000). Some of his figures were more optimistic.

There are obvious problems with that way of going about things. It is based on untested hearsay, evidence of opinion nature, contained in a document addressed to a bank for the purposes of a different exercise. His task was eased somewhat because Mr Rosenthal did not take issue with all the figures. However, it is a seriously unsatisfactory way of going about the assessment of damages.

Mr Rosenthal’s case was that the eventual outcome was the best that could have been done in the circumstances. By the end of 2008 this was not a project on which anyone other than a last resort lender would lend the development cost (and query even that); the downturn made it too unattractive a proposition for sensible lenders at sensible rates (they required to see a developer’s profit of 15% to 20%); a sensible proposition could not have been put to his bank; and Millennium was not prepared to fund, or seek bank funds for, the development. Millennium simply could not carry out the development. He then did the best deal that he could, which (as it happened) did not produce any money for the investors at all once the bank and other necessary expenses had been paid. He did not really contemplate the possibility of Millennium’s getting funding to finish the development because it was not commercially sensible, by which he meant it could not be done or could not be done at a price which he regarded as commercially sensible. It never occurred to him to work out what return of capital would be available to the investors if that had actually been made to happen.

All Mr Rosenthal’s views on the topic therefore amounted to unprovided for expert evidence too, though he did not address the crucial question which has to be asked in assessing loss.

Faced with that situation, I do not think it would be right for me to determine the loss, if any, that flowed from the breach of the development obligation. There is insufficient admissible evidence to allow me to do so. On one view I might therefore come to the conclusion that the claimant has not proved its case. However, that would not be fair. Were I do to that it might be said that Mr Winton was the author of his own resulting misfortune, because he should have appreciated earlier the need to get expert evidence, but that would be too harsh. It would also be unfair on Mr Rosenthal to find some loss on the basis of the do-it-yourself sort of quasi-expert exercise conducted by Mr Smith. The fair course is to order an inquiry. I do so reluctantly, because it will incur additional expense, and there is a real chance that it will come up with figures that will demonstrate that redevelopment really was not a realistic possibility so that what Mr Rosenthal did was inevitable anyway, but that is nothing like clear on the evidence. It is also the case that the inquiry, if successful, would result in a judgment against a company which is no longer trading and the result of the judgment may be to put it into liquidation. However, whether the risk of that is worth running will be a matter for Mr Winton, who will have to decide whether he wants to pursue the inquiry in those circumstances.

I therefore make no decision as to the loss which flows from the breach of obligation and will order that that loss, if any, be determined on a separate inquiry.

Millennium Developments Ltd of 27 Mortimer Street, London W1T 3BL (hereinafter called “Millennium”)

Heath Lodge Properties (Paul Winton) of Heath Lodge, 2A Gleed Avenue, Bushey, Hertfordshire, WD23 (hereinafter called “the Investor”)

Recitals

Interpretation

All acquisition costs.

All development and building costs

All professional and agents fees and commissions

The repayment of all capital and loans incurred with the knowledge of the Investor and all bank interest charges.