Generator Developments LLP v Lidl (UK) GmbH

This action concerns land, namely Wates Way Industrial Estate, Ongar Road, Brentwood, Essex ("the Property"), which was purchased by the Defendant ("Lidl") in circumstances which the Claimant ("Generator") alleges gave rise to what is known as a Pallant v Morgan equity.

Generator is a property development company. Paul Samuel Isaacs is the founder and managing director of Generator. Its directors include James Richard Barnes and Edward Paul Robert Orr MRICS. They are also directors of Generator's parent company, Generator Group LLP, as is Andrew John Pettit. Mr. Pettit is a founding partner of Real Estate Venture Capital Management LLP ("RevCap"), which owns an equity stake in Generator Group LLP. Messrs. Isaacs, Barnes, Orr and Pettit all gave evidence at trial.

Lidl is part of a group of companies who operate supermarkets. The individuals at Lidl who were particularly concerned with the purchase of the Property were Robert Beaumont, who was a property director with Lidl's Midland region, and Christian Barber, an acquisition manager, who worked with Mr. Beaumont. Ingo Fischer is a director of Lidl who had some involvement with the purchase of the Property. Mr. Beaumont was the only witness called by Lidl.

In 2014 the Property belonged to Sans Souci Enterprises Limited ("the Vendor"), a company incorporated under the laws of Anguilla. The Vendor had been formed by Paul Whight, who was both an experienced property developer and a friend of Mr. Isaacs. Generator called Paul Whight as a witness. In his statement, he described his children, Leigh and Barrie Whight, as directors of the Vendor, but he explained in Court that they (and he) were shadow directors of the Vendor. In any event, he said that his children took decisions on behalf of the Vendor, but that they respected, and frequently followed, his advice and representations.

I begin by outlining the chronology of the purchase of the Property from the Vendor and the negotiations between Generator and Lidl. It will be necessary for me to return to several issues in more detail, including in particular what was said at the various meetings between the parties' representatives.

The site was being used as an industrial estate but, following work by the Whights, it was included in July 2013 in Brentford Borough Council's draft local plan as a site which was proposed to be allocated for residential use. In October 2013 the Vendor appointed Glenny LLP to market the Property. By that time: (1) Mr. Barber had already identified the Property as "where we want to be" and instructed an agent, Malcolm Ward, to help Lidl acquire the Property; and (2) Generator had also identified the Property as one in which it was interested,

Keith Brelsford of Glenny LLP wrote to both Generator (on 8 October 2013) and (on 17 October 2013) Lidl's agent, as well as other interested buyers, inviting offers by 6 November 2013.

Mr. Isaacs spoke to Mr. Whight. Meanwhile, Mr. Brelsford suggested to Generator that they talk to Lidl, and Mr. Orr had a meeting with Mr. Barber on 29 October 2013. This was followed by a conference call on 4 November 2013 between Mr. Barnes and Mr. Orr for Generator and Mr. Beaumont and Mr. Barber for Lidl.

On 6 November 2013 Mr. Barnes on behalf of Generator wrote to Mr. Brelsford with an offer (subject to contract) to buy the Property for £5,010,000. The letter, whose terms had been agreed with Lidl, began as follows:

Thereafter, it was Mr. Isaacs and Generator, rather than Lidl, who communicated with the Vendor. This remained the case until some time after Generator's revised offer was accepted in December 2013.

On 13 November 2013 Mr. Brelsford sent an email to Mr Barnes (copied to Mr. Barber), telling him that Generator's offer had been short-listed and seeking clarification and any revised offer by 20 November 2013. On 20 November 2013 Mr. Barnes wrote to Mr. Brelsford, making a revised offer of £6,025,000 for the Property. Again the terms of this letter had been agreed with Lidl, as were the terms of a further letter dated 20 November 2013 (but sent on 21 November 2013) which made a revised offer of £6,510,000.

Following a meeting on 27 November 2013 between Messrs. Isaacs and Barnes of Generator and Paul and Leigh Whight of the Vendor, on 28 November 2013 Mr. Isaacs sent an email to Leigh and Barrie Whight with a revised offer for the Property of £6,510,000 plus one of the flats to be built at the Property. Following further discussions and email correspondence between Mr. Isaacs and the Whights, the Vendor indicated on 3 December 2013 that Generator's offer was accepted, subject to contract. On 6 December 2013 Mr. Brelsford produced draft Heads of Terms for the purchase of the Property, which named Generator as the purchaser.

On 6 December 2013 there was a meeting at Lidl's offices between Mr. Barnes and Mr. Orr for Generator and Mr. Beaumont and Mr. Barber for Lidl, who proposed that Lidl would be the sole purchaser of the Property. In telephone conversations on 11, 12 and 13 December 2013 there was discussion as to who should be named as purchaser in the Heads of Terms. The outcome of these discussions was that Heads of Terms which identified Lidl as the purchaser and Generator as the "Delivery Partner" were agreed by Generator and Lidl and sent to the Vendor on 13 December 2013.

In addition to the Heads of Terms, the Vendor had produced a draft Lockout Agreement, which named Generator as the Buyer and obliged the Vendor not to conduct any negotiations with any third party for the sale of the Property prior to 7 February 2014, which was then the anticipated date for exchange of contracts.

On 11 December 2013 Mr. Orr produced an amended draft, in which Lidl was added as a party. On 13 December 2013 Mr. Orr produced a further revised draft, in which Lidl was named as the Buyer and Generator as the "Delivery Partner". This is how the parties were identified in the executed version of the Lockout Agreement, dated 23 December 2013, in which the anticipated date for exchange of contracts had been amended to 14 February 2014.

At Generator's request, on 18 December 2013 Lidl produced a first draft of Heads of Terms for a proposed agreement between them ("the Joint Venture Heads of Terms"). A number of further drafts of this document were produced:

The Joint Venture Heads of Terms concerned a proposed transaction ("the Proposed Transaction") which was to be conditional on the grant of planning permission for a development of the Property including: (a) a retail store (with associated car parking spaces); and (b) a number of residential flats. The basic structure of the Proposed Transaction was that, if Generator succeeded in obtaining planning permission, Lidl would sell the freehold of the Property to Generator, Generator would build the store and the flats and Generator would then grant a 999-year lease of the store to Lidl.

The purchase price payable by Generator to Lidl was not specified in the first three drafts of the Joint Venture Heads of Terms and was the subject of negotiation thereafter, in the light of the considerable work done on refining and costing the proposed scheme for the development of the Property.

Each draft of the Joint Venture Heads of Terms contained the words "Subject to Contract" in a box on the first page and each contained the following provisions:

The section on exclusivity in the Joint Venture Heads of Terms contained provision for Lidl and Generator to enter into a separate Lockout Agreement ("the Joint Venture Lockout Agreement") which would prohibit Lidl from marketing the Property for a specified period of time. Generator produced the first (and, in the event, the only) draft of the Joint Venture Lockout Agreement on 7 February 2014. However, no such agreement was ever signed.

As I have said, the Lockout Agreement envisaged that contracts for the purchase of the Property from the Vendor would be exchanged by 14 February 2014 (after which the Lockout Agreement would expire). It had also been envisaged that there would be an exchange of contracts between Generator and Lidl at the same time as contracts were exchanged between Lidl and the Vendor. However, by 14 February 2014 the negotiations between Generator and Lidl on the terms of the Proposed Transaction were not sufficiently advanced for that to happen.

Nevertheless, on 14 February 2014 Lidl went ahead and exchanged contracts with the Vendor for the purchase of the Property for £6.81million, having agreed to increase the purchase price by £300,000 instead of giving the Vendor a flat.

On 17 February 2014 Lidl began approaching other developers (i.e. Crest Nicholson, Persimmon, Bellway and Taylor Wimpey) "to see if they are interested in working with Lidl on a mixed use development."

On 17 March 2014 the purchase of the Property by Lidl from the Vendor was completed.

Discussions between Generator and Lidl continued after Lidl had completed the purchase of the Property. An exchange of emails on 27 and 28 March 2014 suggested that they were close to agreement.

However, on 28 April 2014 Mr. Beaumont sent an email to Messrs. Barnes and Isaacs which began:

In a statement dated 12 January 2015, made in response to an application for disclosure, Mr. Beaumont acknowledged that what he had said in this email about internal procedures was not true. He said:

The email of 28 April 2014 had the intended effect of terminating negotiations, following a telephone conversation on 28 April 2014 between Messrs. Isaacs and Barnes and Mr. Beaumont, in which Mr. Isaacs expressed strongly his negative view of Lidl's conduct.

Generator's solicitors, Stephenson Harwood, wrote a letter before action to Lidl on 22 May 2014, alleging that the circumstances had given rise to a Pallant v Morgan equity. Lidl denied liability and the Claim Form was issued on 10 July 2014.

The nature of a Pallant v Morgan equity was summarised as follows by Lord Scott in Cobbe v Yeomans Row Management Ltd [2008] 1 WLR 1752 ("Cobbe"), at paragraph 30:

Megarry J. put it as follows in Holiday Inns Inc v Broadhead (1974) 232 E.G. 951:

This passage was cited with approval by Chadwick L.J. in Banner Homes Plc v Luff Developments Ltd [2000] Ch 372, CA ("Banner Homes"), at 391D-E. Banner Homes provides Court of Appeal authority for the existence of the Pallant v Morgan equity.

The jurisprudential basis of the Pallant v Morgan equity has been the subject of debate, notably in the Court of Appeal in Crossco No. 4 Ltd v Jolan Ltd [2012] 1 P&CR 16 ("Crossco"). In Crossco Etherton L.J. expressed the view that the Pallant v Morgan equity was properly explained as arising out of breach of fiduciary duty, but McFarlane and Arden L.JJ. held that Banner Homes was binding authority for the proposition that the Pallant v Morgan equity was based on a common intention constructive trust.

In Banner Homes, Chadwick L.J. stated (at pp. 397E-399D) a number of propositions concerning the Pallant v Morgan equity. Although it is lengthy, it is appropriate to set out that passage of his judgment in full:

It was not disputed that I should take Chadwick L.J.'s propositions as the starting point for the law in this area. Mr. Johns contended that there had been subsequent developments in relation to the position where the parties had been conducting negotiations which were expressly made subject to contract. I will return to this subject.

The parties agreed that the case gave rise to the following issues in relation to liability:

I was not invited to deal, and I do not deal, in this Judgment with the nature of the relief which would flow from a finding that the Property was subject to a Pallant v Morgan equity.

The following summary of Generator's case is taken from paragraph 35 of Generator's Skeleton Argument:

Lidl's case was helpfully condensed by Mr. Johns in his closing submissions into 4 "limbs", as follows:

In the same helpful vein, Mr. Johns stated that, if Lidl did not succeed on his first limb, then he did not argue that Lidl should succeed on his second limb. I am grateful for this realistic and sensible concession, and will say no more about his second limb.

In the light of the way in which the parties have framed their respective cases, I propose to address the following issues:

However, I consider first the relevant events and the evidence relating thereto in more detail. I do so in relation to five stages:

I make it clear that I do not doubt the honesty of any of the witnesses who gave evidence at trial. I bear in mind, however, that they were giving evidence about things which were said two years ago and that there is inevitably a limit on what can reliably be recalled in those circumstances. For example:

Moreover, at least in the case of the witnesses who work for one of the parties, there is a natural tendency for one's recollection to be affected by the interests involved in the litigation. Each of these witnesses demonstrated, to a certain extent, a desire to argue their case from the witness box and a reluctance to address certain issues. This is understandable, but I must take it into account when assessing the weight which I can accord to their evidence, especially when it is not supported by contemporary documents.

Having said that, I should record that Generator's witnesses did acknowledge that, as one would expect of individuals experienced in the business of property development, they understood the significance of the expression "subject to contract" and that Generator never had a binding contract with Lidl. Indeed, when shown a passage in his own witness statement dealing with the "subject to contract" issue, Mr. Barnes candidly owned that he was "still struggling to get to the finer point of what's meant here."

For his part, Mr. Beaumont (understandably, for someone who had, by his own admission, kept Generator in the dark in February and March 2014 and then made an untrue statement to Generator on 28 April 2014) demonstrated some discomfort when questioned about the steps taken by Lidl to approach developers other than Generator, which suggested a feeling on his part that Generator had not been treated well by Lidl.

The first meeting between Lidl and Generator was on 29 October 2013. By the deadline of 6 November 2013, they had agreed that Generator would make a bid for the Property which was expressed to be made "in conjunction with our joint venture partners Lidl". As Mr. Beaumont accepted, Generator was making the offer for both parties with a view to a development for both parties.

There is no doubt that the possibility of Generator and Lidl developing the Property as a joint venture was discussed in the meeting on 29 October 2013 and in the telephone conference on 4 November 2013. It was not suggested that a contract was made on either of these occasions. Nor was it disputed that the discussions as to the proposed terms of any joint venture were impliedly subject to contract.

While there was clearly a discussion, both on 29 October and 4 November 2013, of the possibility of making a joint offer, it is not clear that there was any discussion as to who would be the purchaser of the Property from the Vendor. Neither the contemporary notes made by Mr. Barnes and Mr. Orr, nor their or Mr. Beaumont's witness statements clearly addressed this issue. Indeed, Mr. Barnes said in his witness statement that the first substantive discussions about the proposed joint venture took place at the meeting on 6 December 2013.

Mr. Orr said that he envisaged at this stage that the Property would be purchased by a joint venture company. However, while Mr. Orr may have envisaged the use of a joint venture company, the issue was not clearly addressed in discussions. Indeed, Mr. Orr's note of the meeting on 4 November 2013 suggests that a different arrangement may have been discussed, with Generator acquiring title to at least part of the Property:

However, I do not accept Lidl's submission that this note meant that the parties agreed at this stage that Lidl alone would purchase the Property. Mr. Beaumont did not give evidence to that effect.

I find that there was no understanding reached at this stage as to who would be the purchaser of the Property. In those circumstances, there was no reason for Mr. Barnes or Mr. Orr to concern themselves at this stage with the question of what would happen if Lidl alone acquired the Property, let alone to seek assurances or reach an understanding as to what would happen in that situation. I find that no such assurances were sought or given and that no such understanding was reached at this stage. The parties were discussing the idea that one, rather than two, of them would make an offer. How the purchase would proceed if that offer was accepted remained to be discussed.

Mr. Orr said in his witness statement that there was discussion on 29 October 2013 of "a 50:50 acquisition of the site" (by which he seems to have meant that each party would contribute 50% of the acquisition costs) and Mr. Barnes said in his witness statement in respect of the telephone conference on 4 November 2014 that "The principle was therefore agreed that Lidl and Generator would take the site forward on a joint 50:50 basis albeit the finer details were yet to be worked out."

I do not accept that an agreement was made at this stage, even in principle, and even subject to contract, as to the parties' shares in either the expenditure or the profits of any joint venture. The discussions were simply not that far advanced. Moreover, the proposed arrangements which were discussed at this stage did not lend themselves to a simple 50:50 split, since they involved Generator paying an amount (to be agreed) for the residential part of the Property and building a store for Lidl.

Indeed, Mr. Barnes himself acknowledged this later in his witness statement, when he said that:

Moreover, even if such an agreement had been made, it would have been overtaken at the meeting on 6 December 2013 and when the first draft of the Joint Venture Heads of Terms was produced on 18 December 2013. The Joint Venture Heads of Terms made no reference to a 50:50 split, and by then it had been agreed that Lidl would fund the entire purchase price, which was inconsistent with "a 50:50 acquisition of the site" in the sense of each party providing 50% of the purchase price.

Mr. Brelsford's emails soliciting offers had asked potential bidders to:

It is clear that there was discussion at the meeting on 4 November 2013 of the need for board approval. Mr. Barnes' note reads:

Mr. Orr's note of that meeting reads:

The issue of board approval was also referred to in the email dated 5 November 2013 from Mr. Orr to Mr. Barber which attached a draft of the offer letter which Generator was to send on 6 November 2013. Mr. Orr wrote:

It is clear, therefore, that Generator's representatives understood that the proposed purchase still required approval by both Generator's and Lidl's boards of directors and that it was not envisaged that that approval would be sought until after the joint offer had been accepted.

Generator argued that this understanding only applied to the proposed purchase, and not to the proposed joint venture. I do not accept that Mr. Barnes' or Mr. Orr's understanding about the need for approval from Lidl's board was limited in this way. There is nothing in the contemporary documents to support this, and the parties had no reason at this stage to separate out board approval of the proposed purchase and board approval of the proposed joint venture. In deciding to approve the purchase of the property by Generator, Lidl's board would be expected to consider all aspects of the proposed transaction, i.e. both the purchase of the Property and the proposed joint venture.

On the other hand, it is clear that no-one believed that board approval was needed for Lidl to agree to Generator making a bid in terms which described Lidl as "our joint venture partners."

Mr. Orr's note of the discussion on 4 November 2015 contains the following:

I find that the parties discussed and envisaged that there would be simultaneous exchange of contracts in respect of: (a) the contract for the purchase of the Property; and (b) the contract to be made between Generator and Lidl concerning the proposed development of the Property.

Mr. Johns suggested to Generator's witnesses that, at Mr. Barnes' suggestion, Mr. Isaacs sought, in his email of 4 November 2013 to Paul Whight, and in a meeting with Paul and Leigh Whight on 6 November 2014 (attended by Mr. Orr), to propose a joint venture in relation to the Property between the Vendor and Generator, to the exclusion of Lidl. It is clear that there was an attempt to interest the Vendor in a joint venture, but Mr. Barnes and Mr. Isaacs denied that this was intended to be to the exclusion of Lidl. While I do not disbelieve them, this suggestion (which did not find favour with the Vendor) shows how fluid people's thinking was at this stage.

Moreover, I do not accept Mr. Johns' submission that Generator, by proposing a joint venture to the Vendor, was demonstrating that it did not understand that it was in a joint venture with Lidl. In the offer letter of 6 November 2013 Generator described Lidl as "our joint venture partner". This language was approved by Lidl. Indeed, it reflected Lidl's own manner of speaking about the offer. In an email of 17 October 2013 to an architect, Mr. Barber wrote:

I find that Mr. Barber and Mr. Beaumont are likely to have described Lidl and Generator as "partners" throughout their discussions. I accept Mr. Orr's evidence that, at the meeting on 29 October 2013, Mr. Barber said that Lidl's Midlands region lacked the expertise to deliver a mixed-use scheme and would therefore need to work with a partner and that Lidl were looking for a partner to joint venture the Property.

It was not disputed that the revised bids made by Generator after 6 November 2013 were made jointly, i.e. on the same basis as set out in the first paragraph of Mr. Barnes' letter of 6 November 2013. Nor was it disputed that the negotiations with the Vendor during this period were conducted by Generator alone, but in support of a joint bid and in consultation with Lidl. The negotiations included a second round of competitive bidding (on 20 November 2013) and a period in which Generator persuaded the Vendor not to engage in a third round of competitive bidding.

In the month following 6 November 2013 there continued to be discussions between Generator and Lidl about the joint offer and the revisions thereto and about the evolving scheme for the redevelopment of the Property. The latter, of course, informed the parties' views as to the appropriate amount to offer to the Vendor. These discussions were conducted by telephone. They included a conference call on 14 November 2013 involving Messrs. Barnes and Orr, Messrs. Beaumont and Barber and two individuals from Calford Seaden. The subject of this call was the proposed scheme.

I find that, prior to 6 December 2013: it remained the case that there was no understanding as to who would be the purchaser of the Property; there remained no reason for Mr. Barnes or Mr. Orr to concern themselves at this stage with the question of what would happen if Lidl alone acquired the Property, let alone to seek assurances or reach an understanding as to what would happen in that situation; and that no such assurances were given and no such understanding was reached.

Indeed, there was very little discussion during the period from 6 November to 5 December 2013 of the terms of the proposed agreement between Generator and Lidl. Mr. Barnes and Mr. Orr did not refer to any such discussion in their witness statements, apart from an email which Mr. Orr sent to Mr. Barber on 19 November 2013. The email was primarily concerned with Generator's thoughts on bid strategy and, for that purpose, Generator's appraisal of the proposed scheme. The email concluded with the following paragraph:

Mr. Orr did not suggest that he did in fact run through his suggested structure with Mr. Barber on the following day, 20 November 2013.

I find that the involvement of Mr. Isaacs and Generator made a material contribution to the success of the joint bid. The evidence of Paul Whight and Mr. Isaacs was clear on this and was not shaken in cross-examination. Paul Whight and his children attached significance to the fact that they were dealing with Mr. Isaacs and Generator for a variety of reasons, including: Paul Whight's relationship with Mr. Isaacs; his confidence that Generator could be counted on to deliver; Generator's experience of mixed-use developments; the potential for future co-operation; and the Whight family's reputation in the local community in Brentwood (which Paul Whight considered would have been undermined by a sale to Lidl alone). These matters made the Vendor more likely to accept the joint bid than it would have been if Lidl alone had made it, and all the more so if Generator alone had made a competing bid.

Mr. Johns submitted that the deciding factor was that the joint bid was unconditional and (save for the flat) involved no deferred element. The best evidence of the competing bids came from an email dated 10 December 2013 from Mr. Orr recording what he had been told by Mr. Brelsford. In particular:

The fact that Generator made an unconditional bid with no deferred element (other than the flat) was significant. According to Mr. Barnes' statement, it was Mr. Isaacs who had identified that such an offer should be made, as a result of his meeting with Paul and Leigh Whight on 6 November 2013. Emails from Leigh Whight on 2 December 2013 indicate that part of Generator's negotiating strategy was to say that Lidl would retract the joint offer if the Vendor invited a further round of bids, but the reality of this threat was not addressed by any of the witnesses.

While the fact that Generator made an unconditional bid with no deferred element (other than the flat) made Generator's bid more attractive, I do not accept Mr. Johns' submission that it was the deciding factor. Paul Whight denied that when it was put to him, and I accept his evidence on this point and when he said that "My relationship with Paul Isaacs got the Generator/Lidl joint bid over the line" and that "Had the final bid of £6.51 million come from Lidl only, I would have persuaded my children that it was worth pursuing the potential additional £2 million from those who put in the higher, conditional bids."

The very fact that Lidl left the conduct of the bidding process to Generator suggests that Lidl saw advantage in doing so, which tends to support the conclusion that Generator made a material contribution to the success of the joint bid. This was Mr. Beaumont's view at the time, as set out in an email of 17 December 2013 to Mr. Fischer:

It is not surprising that the acceptance of the joint offer should, for the first time, have caused the parties to focus on the question of which legal entity was to be the purchaser of the Property. As I have said, on 6 December 2013 Mr. Brelsford produced Heads of Terms which named Generator as the purchaser of the Property. Earlier that same day, Mr. Barnes and Mr. Orr had attended a meeting at Lidl's offices in Lutterworth with Mr. Beaumont and Mr. Barber, at which the identity of the purchaser had also been discussed.

It was not alleged that any contract was formed at the meeting on 6 December 2013, and it was not disputed that the meeting was impliedly conducted on a subject to contract basis. Moreover, Lidl's board had not yet given its approval to either the purchase of the Property or the Proposed Transaction with Generator (and I find that reference was made at the meeting to the need for board approval: Mr. Orr's email of 10 December 2013 to Mr. Barber shows that he was aware that there were to be discussions with Lidl's board).

On the other hand:

Mr. Barnes's evidence was that the words "our joint venture" were frequently used in Generator's discussions with Lidl, including at this meeting. I accept this evidence, which is supported by an email of 4 December 2013 to one of Lidl's architects, in which Mr. Barber referred to Generator as "our development partners". This reflects how Mr Barber at least thought and spoke of Generator at that time.

Moreover, it was common ground that Mr. Beaumont said that Lidl's Midland region had not done a mixed use scheme before and that reference was made to mixed use schemes which the London region had carried out with Crest Nicholson and the agreements with Crest Nicholson, which might form a template for the proposed agreement between Generator and Lidl. This was the context in which:

Mr. Beaumont denied referring to Lidl's board in this context, but accepted that he said that Lidl needed an experienced person to deliver the scheme.

I also accept Mr. Barnes' and Mr. Orr's evidence that there was discussion at the meeting of the potential for future projects on which Lidl and Generator might work together. Generator was no doubt encouraged by this, but it was merely potential for the future.

Mr. Barnes said in his witness statement that the first substantive discussion about funding and the potential structure of the joint venture took place at the meeting on 6 December 2013. His note of the meeting identified "Deal structure" as one of the issues which he wished to discuss and then stated, inter alia, as follows:

Mr. Beaumont accepted that this structure was agreed at the meeting. Much remained to be done, however, as Mr. Orr's email of Tuesday 10 December 2013 to Messrs. Barnes and Isaacs demonstrates. Mr. Orr wrote:

Mr. Orr also sent an email on 10 December 2013 to Mr. Beaumont, in which he said:

It was common ground that Mr. Beaumont proposed that Lidl should purchase the Property and that a reason which he gave was that this was what Lidl normally did.

Mr. Barnes and Mr. Orr said that Mr. Beaumont gave a second reason, namely that the overall cost would be less, because Lidl would be providing all the funding costs for the purchase and its funding costs were cheaper than Generator's. As I have said, Mr. Beaumont could not remember, but did not deny saying this, and I find that he did.

Whatever reasons were given, Mr. Barnes and Mr. Orr accepted in the meeting that Lidl could be the sole purchaser.

In dealing with the meeting on 6 December 2013, Mr. Barnes said in his witness statement that:

This part of Mr. Barnes' evidence was not challenged. It shows his response to the proposal that Lidl should be the sole purchaser of the Property, i.e. that he thought that it didn't matter, provided that an appropriate "mechanism" was in place. But the only mechanism of the kind to which he referred was the agreement envisaged by the Joint Venture Heads of Terms (the first draft of which was produced on 18 December 2013) whereby Lidl was to agree to sell the Property to Generator on the grant of planning permission.

I find that there was discussion at the meeting to the effect that the parties would work towards a simultaneous exchange of, on the one hand, the contracts between Lidl and the Vendor for the purchase of the Property and, on the other hand, the contracts between Lidl and Generator embodying the Proposed Transaction.

Since it was envisaged that the two exchanges would take place at the same time, it may be that little thought was given at the meeting to the possibility that Lidl's purchase of the Property would go ahead before Generator and Lidl had agreed the terms of the Proposed Transaction. Neither Mr. Barnes nor Mr. Orr referred in their witness statements to a discussion at the meeting specifically about what would happen in that eventuality, and I find that there was no such discussion.

On 10 December 2013 Mr. Orr spoke to Mr. Barber and then sent the email to Messrs. Barnes and Isaacs to which I have already referred. In that email, Mr. Orr also said as follows:

I asked Mr. Orr about this paragraph of his email. He explained that when he used the words "their", "they" and "their" in the third sentence he did not mean to refer to Lidl as an entity, but to Mr. Beaumont and Mr. Barber. Mr. Orr also explained in his statement that he got the impression from Mr Barber that Mr. Barber had "pushed back" quite recently, maybe even that same day.

Generator was thus aware from this stage onwards that there were different views within Lidl as to how the development of the Property should be taken forward and, in particular, whether or not Generator should be the developer.

There was a telephone conversation on 11 December 2013 between Mr. Barnes, Mr. Orr and Mr. Barber, in which Mr. Barber suggested that Lidl should be named as the purchaser in the Heads of Terms and the Lockout Agreement. In an email of 11 December 2013 Mr. Orr wrote as follows to Mr. Barber:

Mr. Orr explained in his statement that he was uncomfortable for two reasons. The first was presentational, but the second was "that we had not yet at this stage agreed terms for the joint venture with Lidl and we wanted to keep our foot in the door until Lidl was bound by a contract with us." That was what he was referring to in the second paragraph which I have quoted. He described himself in this email as gently putting a marker down.

Mr. Barnes said as follows in relation to this email:

Mr. Orr spoke to Mr. Beaumont on 12 December 2013. Mr. Beaumont was very insistent upon Generator's name being removed from the Heads of Terms and the Lockout Agreement. Mr. Orr said in his statement that he was very concerned about this and that it was "the first red flag for us".

Mr. Orr then sent Mr. Beaumont an email which said:

Also on 12 December 2013 Mr. Isaacs, who had been kept informed by Mr. Barnes and Mr. Orr, sent an email to Will Killick of RevCap, in which he said as follows (emphasis added):

When asked about this, Mr. Isaacs said that he was relying on the assurances that he was being given by his team, whom he was challenging on this to make sure they were entirely comfortable. However, I do not accept that Mr. Barnes and Mr. Orr were "entirely comfortable":

In the circumstances, I find that the three of them discussed the possibility that Lidl would push Generator out of the deal. They no doubt also discussed the things which had been said to Mr. Barnes and Mr. Orr by Mr. Beaumont and Mr. Barber, to which I have already referred. But the upshot was that Mr. Isaacs, as stated in his email, was not happy and considered that Generator was exposed.

This accords with what Mr. Isaacs said in his email of 12 December 2013 to Mr. Barnes and Mr. Orr:

It is implicit that, at the time Mr. Isaacs wrote this email, Generator was not "happy that our position is secure."

There was a further discussion on 13 December 2013 between Mr. Barnes, Mr. Orr, Mr. Beaumont and Mr. Barber. They discussed and agreed that the Heads of Terms and the Lockout Agreement should name Lidl as the purchaser and Generator as the delivery partner.

As with the meeting on 6 December 2013, it was not suggested that Mr. Beaumont or Mr. Barber said anything in the telephone conversation on 13 December 2013 to indicate that Lidl regarded itself as free to exploit for itself the benefit of the opportunity to acquire the Property, to the exclusion of Generator.

On the other hand, I do not accept that they gave anything which could properly be described as assurances. Mr. Barnes did not claim in his statement that any assurances were given in the telephone conversation on 13 December 2013. Mr. Orr claimed that there were assurances "that there was nothing untoward going on", but he did not record anything to this effect in either his notes of the conversations or any subsequent email (unlike 10 December 2013, when something "of note" was said and he recorded it in an email).

The form of Lockout Agreement agreed by Generator and Lidl was sent on 16 December 2013 by Lidl's solicitors to the Vendor's solicitors and was in substantially the same terms as the Lockout Agreement which was executed by the parties and dated 23 December 2013 (Mr. Fischer having signed it for Lidl on 17 December 2013). In particular:

In addition to Lidl's solicitors contacting the Vendor's solicitors, Lidl began at this time to have direct contact with the Vendor. This prompted Mr. Isaacs to write as follows in an email to Mr. Barnes and Mr. Orr on 18 December 2013:

In his reply, Mr. Barnes said as follows:

It was put to Mr. Barnes, and I accept, that it was a factor in his dealings with Lidl at this time that he did not want to "rock the boat".

On 18 December 2013 Mr. Beaumont sent to Neil Morrison, a contracts manager at Lidl, a "Briefing Pack" which was to be discussed at board level, according to Mr. Beaumont in connection with a request for authority to spend £20,000 as the fee for the Lockout Agreement. This contained a "Briefing Pack Memo" in which Mr. Beaumont wrote, in the box marked "Deal Structure":

It is surprising that Mr. Beaumont should have written in these terms only the day after Mr. Fischer had signed the Lockout Agreement in which Generator was named as the Delivery Partner. When asked about this document, Mr. Beaumont said that he was describing the worst-case scenario if Lidl couldn't agree a back-to-back deal with Generator. I do not accept this. Mr. Beaumont could not explain why, if he was discussing a worst-case scenario, he wrote in terms of what he was proposing to do.

However, Mr. Beaumont had sent an email on the previous day to Mr. Fischer, who was the director of Lidl most concerned with the acquisition of the Property, in which he referred to "Generator who we are trying to complete a development agreement with like the Crest deals in London." I do not accept, therefore, the suggestion made by Mr. Gaunt that the wording of the Briefing Pack Memo indicates that Mr. Beaumont was already preparing to exchange contracts with the Vendor and then go to the market.

Although the wording is perhaps not ideal, the difference between Mr. Beaumont's email of 17 December 2013 and the Briefing Pack Memo reflects the distinction which had been explained to Mr. Orr on 10 December 2013 between the views of Mr. Beaumont and Mr. Barber on the one hand and the as yet undecided position of Lidl's board on the other. Mr. Beaumont and Mr. Barber were indeed trying to complete a development agreement with Generator, but Lidl's board had yet to decide on the developer with whom Lidl would contract for the development of the Property.

18 December 2013 was also the day on which Lidl sent to Generator the first draft of the Joint Venture Heads of Terms. I have already referred to the fact that the Joint Venture Heads of Terms were expressed to be subject to contract and that Generator's witnesses knew what this meant. In clause 12(1) of this first draft of the Joint Venture Head of Terms, Generator and Lidl were referred to by Lidl as "the Development Partners".

As I have also said, the Proposed Transaction was a sale of the Property by Lidl to Generator, conditional on the grant of planning permission. Generator was confident that planning permission would be obtained, but it is worth noting that clause 12(6) of the first draft of the Joint Venture Heads of Terms provided that Lidl could rescind the Proposed Transaction if planning permission was not obtained within 24 months. In that event, Lidl would have been left as the owner of the Property.

During the period from 18 December 2013 to 14 February 2014, Lidl and its solicitors continued to deal directly with the Vendor and its solicitors. On the other hand, Generator remained involved and helped to prevent problems developing or becoming insuperable.

Lidl continued to refer to Generator as its Delivery Partner (in a "Licence to Carry Out Works" with the Vendor signed by Lidl on 3 January 2014) or Development Partner (in Mr Barber's email of 9 January 2014). Mr. Barber's view of the situation was illustrated by an email of 24 January 2014 to a consultant, in which he wrote "We are buying this site with Generator."

Generator and Lidl spent much time during this period on the scheme for the development of the Property. Generator spent about £30,000 on architects, mechanical and engineering consultants and structural engineers. Mr. Johns suggested that Generator was struggling to find a way of making the scheme economic from their point of view. Mr. Barnes contended that the real problem was that Lidl's requirements kept changing. I do not need to resolve this issue. Either way, it took time for Generator to propose, and for the parties to agree, terms as to the price for the Proposed Transaction.

Having taken advice from DAC Beachcroft LLP, Generator produced the second draft of the Joint Venture Heads of Terms on 5 January 2014. Lidl responded with the third draft on 10 January 2014. Generator did not include a price in the second draft, but did include a number of matters to which Lidl did not agree, such as:

The third draft of the Joint Venture Heads of Terms was a "track changes" version of the second draft, with comments added by Lidl's solicitor, Iain Harrison of Clarke Willmott, who was also the one who had amended the document. In addition to deleting the proposals by Generator to which I have just referred, Mr. Harrison amended the exclusivity section so that the lockout period as between Generator and Lidl would run until 28 February 2014, i.e. two weeks after the expiry of the Lockout Agreement with the Vendor.

While it does not appear that either of the parties paid particular attention to this provision, it was becoming increasingly apparent at about this time that the parties might not be in a position to exchange contracts between themselves at the same time as Lidl exchanged contracts with the Vendor. Mr. Beaumont expressed this in an email of 13 January 2014 to Mr. Barber, in which, having referred to the aim to exchange contracts with the Vendor as soon as possible, he added, "Generator contract can follow."

This was the context in which Mr. Barnes and Mr. Orr went to Lidl's offices in Lutterworth on 10 January 2014 to meet Mr. Beaumont and Mr. Barber and discuss the purchase contract and the Joint Venture Heads of Terms.

As with the meeting on 6 December 2013: it was not alleged that any contract was formed at the meeting on 10 January 2014: it was not disputed that the meeting was impliedly conducted on a subject to contract basis; it was the case that Lidl's board had not yet given its approval to either the purchase of the Property or the Proposed Transaction with Generator; the purpose of the meeting was to consider how to pursue the opportunity to acquire the Property, which had been secured as a result of the joint bid; and it was not suggested that Mr. Beaumont or Mr. Barber said anything at the meeting to indicate that Lidl regarded itself as free to exploit the benefit of that opportunity for itself, to the exclusion of Generator.

Mr. Orr said as follows about this meeting in his witness statement:

However, Mr. Orr's recollection was plainly faulty on an important point, as Lidl had in fact taken only 5 days to respond to the second draft of the Joint Venture Heads of Terms.

Mr. Barnes said as follows in his witness statement:

Mr. Beaumont denied this account of the meeting. He argued that there was no need for Mr. Barnes to seek assurances, although it is entirely understandable that Mr. Barnes should have raised the concerns which Generator had at what was their first meeting after the discussions on 11-13 December 2013. Mr. Beaumont said that he would not speak of trust in a business meeting, but Mr. Barber had clearly spoken of "commitment" to Mr. Orr on 10 December 2013.

It is likely, and I find, that Mr. Beaumont and Mr. Barber continued, as at previous meetings, to refer to the proposed joint venture and to Generator and Lidl as partners. It was also agreed at this meeting that the consultants retained in connection with the scheme would be asked to address their reports to both Generator and Lidl. However, it was put to Mr. Barnes that what he described as assurances were simply positive expressions of hoping to get a deal done.

In this context, it is significant that, when asked what words he remembered Mr. Beaumont using by way of assurances, the only actual words which Mr. Barnes could recall were "Trust us" and "This is the start of something, we have been looking to find a propco company to take forward mixed-use developments with. This is the first site we have got, there are many more to come." Obviously, references to potential future deals were merely potential for the future. "Trust us" is rather vague, as its meaning depends on the context: if those words were used, did "us" us mean Lidl, or merely Mr. Beaumont and Mr. Barber? And what were Generator to trust them to do?

Both Mr. Barnes and Mr. Orr made notes of the meeting, and neither of them recorded in their notes that they were given an important assurance by Lidl. Nor did they send an email to Mr. Isaacs reporting that they had received an important assurance. Some months later, they produced for Mr. Isaacs a note of their various meetings and conversations with Lidl. Mr. Barnes also set out the chronology at some length in an email of 4 April 2014 to Mr. Isaacs. Neither of these documents recorded that any important assurance was given at the meeting on 10 January 2014. Nor did Generator include any reference to the meeting on 10 January 2014 in its Particulars of Claim. All of this would be surprising if Mr. Beaumont and Mr. Barber had given a significant assurance at the meeting.

Accordingly, I am not satisfied that anything was said by Mr. Beaumont or Mr. Barber which could properly be characterised as an assurance that Generator would acquire an interest in the Property if Lidl bought it.

Indeed, it appears from his subsequent email of 1 February 2014 that Mr. Barnes himself did not regard it as inevitable that Generator would be acquiring an interest in the property. Mr. Rafter of Generator asked why detailed work was needed "if we are flipping", and Mr. Barnes replied:

Mr. Barnes wasn't sure whether, when he wrote "if we do fall out of the deal over the next few days," the word "we" was referring to Generator alone or to Generator and Lidl. However, "the deal" in this paragraph plainly meant the proposed deal between Generator and Lidl. I find that Mr. Barnes considered that it was a real possibility that Generator might fall out of the proposed deal with Lidl.

Generator produced the fourth draft of the Joint Venture Heads of Terms on 5 February 2014. This was a marked-up copy of the third draft. Mr. Orr had added comments to the effect that Generator's proposal as to what was to happen if planning permission was not obtained was still a matter of debate between Generator and Lidl.

Generator inserted a price (£2,500,000) into the Joint Venture Heads of Terms for the first time. Generator knew that this amount was less than Lidl were looking for. The parties approached the price on the basis that it would cost Generator about £2million to build the store and that Lidl wanted to receive the cost of building the store plus £1million, i.e. a total of £3million.

Mr. Beaumont's reaction to the price offered by Generator can be seen in a memo dated 6 February 2014 which was among the pack of papers prepared for Lidl's board. It read:

A further version of this memo, dated 7 February 2014, reads as follows:

By 10 February 2014 this had been amended to say that the Region believed that at least £1,000,000 could be obtained by actively marketing the site.

Lidl's board approved the purchase of the Property.

Meanwhile, on 7 February 2014 Generator produced what was to be the only draft of the Joint Venture Lockout Agreement, which had been prepared by DAC Beachcroft LLP. This draft agreement provided for a lockout period to run until 12 May 2014. It recited (in clause 1.1) that the parties were in negotiations with a view to agreeing the Proposed Transaction, but provided (in clause 8.1) that it did not commit the parties to the Proposed Transaction. The draft agreement also provided as follows in clauses 5.2 and 5.3:

On 10 February 2014 Mr. Barnes produced a report for Generator's board, which was based on a draft prepared by Mr. Orr on 27 January 2014. The report stated, inter alia, as follows:

Mr. Pettit was one of the Generator board members who received this report. He confirmed that:

It appears that the board approved the expenditure, although I was not shown a resolution to this effect and it does not appear that there was a board meeting until 26 February 2014. Mr. Isaacs suggested that approval was given informally in advance of the production of the board paper.

Lidl exchanged contracts with the Vendor on Friday 14 February 2014. That is the point at which any Pallant v, Morgan equity arose. It follows that subsequent events are of less significance (if any) to the question whether such an equity arose.

On Monday 17 February 2014 Mr. Beaumont approached a number of house builders. He said that this was just a price-checking exercise, but what he said to Crest Nicholson at the time was as follows:

I do not doubt that Mr. Beaumont wanted Lidl to enter into the Proposed Transaction with Generator. However, he also had to deal with Lidl's board, and the approach to house builders was considered appropriate in that context. An important question was whether the right price had been achieved. This might well have come from Generator increasing its offer, and Lidl might have been better able to secure an increase from Generator, or to appreciate the value of Generator's existing offer, as a result of approaching other house builders. In that case, the approach to other house builders would have served simply as a price-checking exercise. But, ultimately Lidl was prepared to approach others because it was concerned to achieve the right price.

Mr. Beaumont and Mr. Barber continued to negotiate with Generator, including at a meeting on 21 February 2014, but they did not tell Generator that they had approached other house builders. Generator was aware, however, that Lidl had exchanged contracts to acquire the Property and that the Joint Venture Lockout Agreement had not been signed. In an email of 11 March 2014 to Mr. Isaacs, Mr. Barnes discussed the price to be offered to Lidl and said:

It was not until 17 March 2014 that Mr. Barnes learnt (from Mr. Brelsford) that Lidl had approached other house builders. He sent an email to Mr. Orr in which he said:

Mr. Barnes and Mr. Orr raised the approaches to other house builders in a meeting on 25 March 2014 with Mr. Beaumont and Mr. Barber. Mr. Beaumont told them that it was just a price-checking exercise. He apologised for not telling them about it.

On 17 February 2014 Generator sent the fifth draft of the Joint Venture Heads of Terms to Lidl. The price offered was £2.5million, with £2m to be deferred for 15 months, but with the addition of a residential sales overage. There was also a proposal that, if planning permission was not obtained within 24 months, then either:

On 17 March 2014 Generator produced the sixth draft of the Joint Venture Heads of Terms. The price offered was now increased to £3m, but with £2m deferred for 15 months, plus the overage. The proposal as to what would happen if planning permission for the proposed mixed use development of the Property was not obtained remained the same.

Following the meeting on 25 March 2014, Generator produced the seventh draft of the Joint Venture Heads of Terms on 26 March 2014. The price remained the same, but Generator removed the proposed section dealing with what was to happen if planning permission was not granted. Mr. Orr added a comment which stated:

Mr. Orr returned to this issue in an email of 28 March 2014, in which he said:

On 3 April 2014 Mr. Beaumont sent an email in which, having spoken to Lidl's solicitors, he raised for the first time a fundamental concern regarding Lidl's protection once the contract went unconditional. He suggested either that Lidl had a first charge on the Property or that Generator paid £8m into an escrow account. It is not surprising that Generator viewed this as a device to bring the negotiations to an end. Whether it was or not, Lidl brought the negotiations to an end on 28 April 2014.

I turn now to the question whether, as Lidl contends, the fact that the negotiations between Generator and Lidl were expressly made subject to contract is fatal to Generator's claim. Mr. Johns argued that this was the effect of the Court of Appeal's decision in London & Regional Investments Limited v TBI Plc [2002] EWCA Civ 355 ("London & Regional"), as explained by Lewison J. in Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd [2004] EWHC 2547 Ch; [2005] P&CR 8, by Lord Scott in Cobbe [2008], and by Etherton L.J. in Crossco. Before considering those cases, however, it is necessary to begin with Banner Homes.

I have already set out Chadwick L.J.'s second proposition in Banner Homes, which included the following (at p. 398B-C):

On its face, this suggests that, contrary to Mr. Johns' argument, if the parties have made an arrangement or understanding which would otherwise give rise to a Pallant v Morgan equity, then it would not be a bar to the creation of such an equity that the arrangement or understanding was expressed to be subject to contract, that being a common method of signifying, in Chadwick L.J.'s words, "that it is plainly not intended to have contractual effect".

This reading of Chadwick L.J.'s second proposition is reinforced by consideration of:

The parties in Banner Homes had reached a non-binding "agreement in principle" in the following terms (set out in Chadwick L.J.'s judgment at p. 378B-D):

The trial judge, Blackburne J., made the following findings as to the circumstances in which the Defendant exchanged contracts to purchase the site (set out in Chadwick L.J.'s judgment at p. 380D-E):

Blackburne J. concluded that there was no Pallant v Morgan equity for, inter alia, the following reason (as set out in Chadwick L.J.'s judgment at p. 382B-D: emphasis added):

Thus, Blackburne J. found that the negotiations between the Plaintiff and the Defendant were implicitly subject to contract and held, in effect, that this was fatal to the claimed Pallant v Morgan equity. But the Court of Appeal allowed the Plaintiff's appeal against Blackburne J.'s decision.

The Court of Appeal thus held that it is not fatal to a claim to a Pallant v Morgan equity that the negotiations between the parties were impliedly subject to contract. Mr. Johns' submission, however, was that subsequent decisions have established that the position is different where those negotiations were expressly subject to contract.

This submission is inherently unattractive:

The facts of Island Holdings were as follows. Kent County Council invited the Plaintiff and the Defendant to bid for a 99-year lease of certain land at Birchington in Kent ("the Land"). The Plaintiff was interested in the front of the Land and the Defendant in the rear of the Land. On 18 August 1976 they entered into a contract, whereby they agreed that the Defendant would sell the front of the Land to the Defendant for £3,000. On 19 August 1976 they submitted bids, with the Plaintiff's bid being, by agreement, lower than the Defendant's bid of £5,000, which was accepted.

In January 1978, however, the Council offered to sell the freehold of the Land instead of granting a lease. The Defendant offered £5,050 for the freehold, and this was accepted. In February 1978 the parties, through an exchange of "subject to contract" letters by their solicitors, made an agreement which was expressly subject to contract, whereby the Defendant was to sell the front of the Land to the Plaintiff for £3,030. Goulding J. found that the contract of 18 August 1976 was discharged.

The Defendant exchanged contracts with the Council in May 1979 and the purchase was completed on 4 June 1979. The Defendant then refused to sell the front of the Land to the Plaintiff, having received an offer of £5,500 from a third party for the front of the Land. The Plaintiff sued and Goulding J. held that the Defendant held the land on trust for sale.

In giving his reasons, Goulding J. said, inter alia, as follows (at pp. 18H-19E):

It appears from this passage that one of the matters which Goulding J. relied on as giving rise to the equity was the Defendant's solicitor's letter inviting the Plaintiff to agree to buy the freehold of the front of the Land and that Goulding J. relied on that letter despite the fact that it was expressly written subject to contract. To that extent, therefore, Island Holdings supports the reading of Chadwick L.J.'s second proposition to which I have referred.

However, it is right to acknowledge that Island Holdings is not an easy decision to follow:

London & Regional was not a case of two parties reaching an arrangement or understanding concerning the acquisition of property belonging to another. In those circumstances, it is perhaps surprising that Pallant v Morgan was relied on at all by the Claimant, and it is not surprising that the Court of Appeal upheld the summary dismissal of the Claimant's claims. As Chadwick L.J. said in his first proposition in Banner Homes (at p. 397G-H):

In Cobbe, Lord Scott said as follows (in paragraph 33):

In London & Regional, the Claimant and the Defendant entered into a written Sale and Purchase Agreement (which contained an entire agreement clause) for the sale of the Defendant's property portfolio to the Claimant for £190million. The Defendant also owned land adjacent to Belfast airport and had an option to acquire land adjacent to Cardiff airport. However, that land was not included in the sale. Instead, the Sale and Purchase Agreement contained the following provision:

The "note in the agreed form" referred to in clause 8.7 of the Sale and Purchase Agreement was headed "SUBJECT TO CONTRACT". It set out terms for a possible joint venture development of the Defendant's land at Belfast and Cardiff airports.

Relying on alleged oral assurances, the Claimant contended that the Defendant held its interests in the land at Belfast and Cardiff airports on trust for the Claimant and the Defendant. Mr. Peter Smith gave summary judgment for the Defendant, and the Claimant's appeal was dismissed.

Mummery LJ said as follows in paragraph 42 of his judgment:

Mummery LJ then turned to consider the cases relied on by the Claimant, namely Pallant v Morgan and Banner Homes. He began by noting that the factual situation in London & Regional was very different from those cases. He said (in paragraph 44) that:

That was in itself a sufficient basis to decide that no Pallant v Morgan equity arose on the facts of London & Regional. As Lord Scott said in paragraph 34 of his speech in Cobbe in relation to London & Regional:

However, Mr. Johns relied on the fact that Mummery L.J. went on to set out a further, and alternative, ratio for the Court of Appeal's decision in London & Regional. Mummery L.J. summarised the Court of Appeal's decision in Banner Homes (in paragraph 46) in terms which made it clear that he had in mind Blackburne J.'s finding that the negotiations between the Plaintiff and the Defendant in that case were implicitly subject to contract:

Mummery L.J. then went on to say as follows:

Mr. Johns relied on the first sentence of paragraph 47 of Mummery L.J.'s judgment in support of his contention that there can never be a Pallant v Morgan equity if the negotiations between the parties over the term of their proposed joint venture are expressly (rather than impliedly) subject to contract. However, I am not persuaded that this sentence will bear the weight which Mr. Johns sought to place on it. I say this for a number of reasons:

I have dealt with London & Regional at some length both in deference to the arguments which were so skilfully presented before me and because I appreciate that it may be said that I am differing from what Lewison J. said about London & Regional in paragraph 229 of his judgment in Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd [2004] EWHC 2547 Ch; [2005] 2 P. & C.R. 8 ("Kilcarne Holdings"). However, as Lewison J. acknowledged in paragraph 237 of his judgment, Kilcarne Holdings was a case in which "The "subject to contract" label was not, .. , part of the express bargain."

Moreover, as Lewison J. acknowledged in paragraph 242 of his judgment, Kilcarne Holdings was another case which did not concern an understanding or arrangement preceding the acquisition of property. Indeed:

In particular, Lewison J. was not asked to consider, as I am, what amounts to a submission that Mummery L.J. decided in London & Regional that Banner Homes would have been decided differently if the parties had made express that which was already implicit, i.e. that their negotiations were subject to contract.

Mr Johns also relied on two passages from Etherton L.J.'s judgment in Crossco:, i.e.:

However:

The nature of the arrangement or understanding which is necessary to support a Pallant v Morgan equity appears from Chadwick L.J.'s first three propositions:

On the facts of the present case, the central question is whether there was an arrangement or understanding that, if Lidl acquired the Property, Generator would obtain some interest in it. Since the alleged arrangement or understanding was not a contract, it is not a question of looking for the acceptance of an offer, but rather of assessing all the relevant evidence as to what the parties said and did. Having carried out that exercise, I find that there was no such arrangement or understanding, having regard, in particular, to the following considerations.

First, I bear in mind that the context was that these were two experienced, commercial parties and that they were each legally represented. Each party had lawyers who looked at the Joint Venture Heads of Terms. Each party well understood both: (a) that they had not made a contract (other than the Lockout Agreement, to which I will return) and; (b) the meaning and effect of the words "subject to contract," which appeared in the Joint Venture Heads of Terms.

Secondly, the arrangement or understanding (if any) must have been formed between 6 December 2013 (when Lidl proposed that it purchase the Property) and 14 February 2014 (when Lidl acquired the Property by exchanging contracts with the Vendor):

Thirdly, as Mr. Orr said in his email of 28 March 2014, the proposal that Lidl acquire the Property changed the risk profile for Generator. Generator would not be providing any cash to fund the purchase price of over £6.5m. Moreover, Generator did not expressly assume any obligation to contribute any share of any loss which might be suffered if, for any unforeseen reason, the development did not proceed and Lidl had to sell the Property.

Fourthly, once it was proposed that Lidl alone would buy the Property, it was possible for Generator or its lawyers to propose (and, if that was proposed, for Lidl to agree) either:

Fifthly, it is instructive to consider the proposals which the parties made as to what would happen if, for whatever reason, the anticipated mixed use development did not proceed:

These varying proposals suggest an absence of agreement, rather than a common understanding, as to what was to be the default position if the proposed development did not go ahead. Lidl's stance was that the default position should be that, if the proposed development did not go ahead because planning permission could not be obtained, the Property would belong to Lidl. Generator did not agree. This does not augur well for Generator's contention that there was a common understanding as to the default position if the proposed development did not go ahead because Lidl and Generator did not agree terms.

Sixthly, as I have already found, no assurances were given by Lidl to Generator to the effect that Generator would definitely acquire an interest in the property if Lidl purchased it. There was talk of Lidl and Generator as partners in a joint venture, which was perhaps natural in a context where the parties were negotiating (subject to contract) with a view to concluding a joint venture agreement and making what Mr. Johns termed positive expressions with a view to getting a deal done. There was also talk of potential future deals, but that was merely potential for the future. Lidl did not expressly state that it regarded itself as free to exploit the Property for itself, to the exclusion of Generator, but it was not necessary for Lidl to spell this out in order to be able to contend that there was in fact no arrangement or understanding of the kind necessary to support a Pallant v Morgan equity. And if there was no such arrangement or understanding, then Lidl was at liberty, as it did, to approach other potential developers.

Seventhly, Generator was made aware on 10 December 2013 that there were different voices within Lidl advocating different courses of action in relation to the development of the Property, with some (i.e. the London region) advocating Crest Nicholson rather than Generator as the developer. Although Mr. Beaumont and Mr. Barber favoured Generator, Generator knew that they were not the decision-makers and that Lidl's board had not decided to enter into an agreement with Generator.

Eighthly, the steps which Generator took to protect its position fell short of requesting, let alone obtaining, a written commitment from Lidl that Generator would have an interest in the Property if Lidl bought it, whatever the outcome of their attempts to agree the terms of the Proposed Transaction. Instead:

Ninthly, Generator was concerned and recognised that it might be "pushed out of the deal:"

This evidence suggests that it was not even Generator's own understanding, let alone the mutual understanding of the parties, that if Lidl bought the Property, Generator would necessarily have an interest in it.

In the light of my finding that there was no arrangement or understanding sufficient to give rise to a Pallant v Morgan equity, the question whether Generator acted in reliance on such an arrangement or understanding does not arise. It may be helpful, however, to record my finding that a number of Generator's actions (which it contended were done in reliance on the alleged arrangement or understanding) were to Lidl's advantage and/or to Generator's disadvantage.

I have already set out my finding that the involvement of Mr. Isaacs and Generator made a material contribution to the success of the joint bid. This contribution continued after 6 December 2013, as Generator assisted Lidl to progress from acceptance of the bid to exchange of contracts. It was also to Lidl's advantage that Generator did not either: (a) seek to make its own bid; or (b) at least seek to discourage the Vendor from selling to Lidl.

There is no doubt that, even until shortly before exchange of contracts, and even without making its own bid, Generator could have made things very difficult for Lidl with the Vendor. Mr. Whight said, and I accept, that he would have agreed if Mr. Isaacs had asked that contracts be exchanged with Generator rather than Lidl because Lidl was not going to honour the joint venture. I have already mentioned his evidence that a bid from Lidl alone would not have been accepted.

There was an issue as to whether Generator could or would have raised the money to make a competing bid. I find that, if Mr. Isaacs had felt that he had been let down or betrayed by Lidl, then he would have tried hard both to prevent Lidl acquiring the Property and to make a rival bid. He might or might not have succeeded in acquiring the Property for Generator, but, on the balance of probabilities, I find that he would have prevented Lidl from acquiring the Property if he had set out to do so.

For the reasons which I have given, I find that no Pallant v Morgan equity arose in the present case and I dismiss Generator's claim.

Finally, I repeat what I said at the end of the trial. I am grateful to the solicitors and counsel on both sides for the hard work and efficiency which resulted in both parties' cases being presented so clearly and effectively.