Real Assets (RA) Global Opportunity Fund Limited (in liquidation) v Floreat Real Estate Limited

These proceedings are concerned with the construction of a joint venture agreement between the parties (the “JVA”) that relates to a real property asset known as Springs Farm and Westbury Farms, a rural estate in Purley on Thames, Berkshire, registered under title numbers BK97533, BK308116 and BK303204 (“Springs Farm” or the “Property”).

Springs Farm is owned by Springs Farm Limited (“SFL”), a wholly-owned subsidiary of the Claimant (“RAGOF” / “the Fund”). RAGOF is an open-ended investment company incorporated in the British Virgin Islands on 9 March 2010. On 25 March 2024, the Eastern Caribbean Supreme Court of the British Virgin Islands appointed Mr Cosimo Borrelli and Mr Colin Wilson (both of Kroll) as Joint Liquidators (the “Joint Liquidators”) of RAGOF.

The Defendant, Floreat Real Estate Limited (“FRE”) is a company incorporated in Jersey. It is part of, using the parties’ agreed terminology, (Footnote: ¹) “the Floreat Group of companies”. FRE is 99% beneficially owned by Mr Mutaz Otaibi. Mr Hussam Otaibi, the brother of Mr Mutaz Otaibi, currently occupies Springs Farm. FRE holds all of the management shares in RAGOF but less than 1% of the non-management share capital which was owned by investors.

The parties to the JVA are RAGOF and FRE.

On 28 March 2014, RAGOF’s board approved the acquisition of Springs Farm from Claymore Group SA, a special purpose vehicle which had held it on behalf of Sheikh Ghassan Ibrahim Shaker.

On 7 April 2014, the day before RAGOF’s acquisition of Springs Farm, RAGOF, FRE and Mr Hussam Otaibi entered a Deed of Indemnity (“DOI”).

In summary, the DOI contained the following provisions:

On 8 April 2014, RAGOF purchased the entire issued share capital of Claymore Group SA for £15,000,000 worth of “Real Asset B Shares” issued by RAGOF.

In July 2014, Claymore Group SA transferred the legal title for Springs Farm to SFL.

The Terms of the JVA

As noted above, these proceedings revolve around the construction of the JVA. There is a dispute between the parties, raised in separate proceedings identified below, as to whether the JVA is valid and enforceable. In those proceedings, the Claimant’s position is that the JVA is invalid and unenforceable but the present proceedings have been brought seeking a ruling on the meaning of the JVA without prejudice to the Claimant’s contention in those other proceedings.

As explained in further detail below, I am content in principle to rule on the meaning of the JVA in these proceedings notwithstanding the dispute about its validity in other proceedings.

In the event that the JVA is valid and enforceable, it is unclear precisely when it was entered. On its face, the JVA says simply that it was “Effective 2014”. However, it appears to be common ground between the parties that the JVA had not been entered by the time that the DOI was executed and that, insofar as it was executed, this occurred subsequently to the DOI. I note that a minute, cited by both parties, of the board of RAGOF for a meeting on 27 November 2014 suggests that the JVA had not been entered by that date.

The JVA is a brief document running to seven pages (including a contents page and a signature page).

By way of introduction, the following points are noteworthy:

The JVA contains an introductory paragraph entitled “Background” on page 3 which states as follows:

“(A)

The Fund has been established to invest in any real property asset, including but not limited to residential, commercial development, real estate and the land from which water farms and solar and wind farms are, or will be, operated.

(B)

FRE have informally advised the Fund to acquire entire issued share capital of Claymore Group SA (Target) whose sole asset is Springs & Westbury Farms (the Property) and the Fund has agreed to do so subject to FRE agreeing to participate in the proposed exploitation of the Property and to indemnify the Fund on the terms set out in this deed.

(C)

The Property target sale price is to be no less than £15,000,000.00 (fifteen million Pounds) within a period of 5 years and FRE has agreed to indemnify the Fund in respect of its obligations to sell the Property on the terms set out in this deed.”

Clause 2 is entitled “FRE OBLIGATIONS”. It provides:

“2.

FRE OBLIGATIONS

2.1

FRE will have responsibility for and shall exclusively act as the Joint Venture Partner to the fund with a view to advise the Fund and execute the plans in relation to the Property including (but not limited to);

2.1.1

the redesign of the of the Property;

21.2

the marketing of the Property;

2.1.3

the sale of the Property;

2.1.4

Obtaining the right of way for a new access point to the property; and

2.1.5

Obtaining planning permission from the local authority to construct a new house.

2.2

Nothing in this clause or this deed generally shall grant to FRE any specific right or authority to act as agent for or on behalf of the Fund, and FRE undertakes not to incur any costs of liabilities or enter into any obligations on behalf of the Fund in relation to the Property or otherwise.”

Clause 3 is entitled “FRE RIGHTS” and reads:

“The Fund agree (sic) to grant FRE the following rights;

3.1

Full usage of the property which includes full occupancy for the period of the deed:

3.2

Exclusivity on marketing the property;

3.3

Exclusivity on leasing the land; and

3.4

Exclusivity on leasing parts of the property.”

Clause 4 contains an indemnity which says:

“4.1

In consideration of the Fund agreeing to the Acquisition, FRE agrees to indemnify and keep indemnified the Fund In full on demand from and against all and any losses, costs, claims, liabilities, damages, demands and expenses suffered or incurred by the Fund arising out of or in connection with or in respect of the Property. The amount of the indemnity shall be limited to £15,000,000 plus all cost associated with the Acquisition and subsequent maintenance and exploitation of the Property, including but not limited to:

4.1.1

establishing a new company;

4.1.2

transferring the Property to the new company;

4.1.3

winding up the Target:

4.1.4

settling all liabilities including tax liabilities of the Target and the Property;

4.1.5

securing, maintaining, insuring the Property;

4.1.6

developing the Property; and

4.1.7

marketing and selling the Property;”

Clause 5 is entitled “Conditions” and states:

“5.1

The Fund shall only be entitled to call upon the indemnity granted in this deed following the fifth anniversary of this deed.

5.

2 The Fund shall not prior to the fifth anniversary of this deed without the prior written consent of FRE. sell the Property for a price that would result in FRE incurring any liability under this indemnity.

5.3

At any time following the fifth anniversary of this deed FRE can require the Fund to transfer the Property to FRE or to whom FRE shall direct. at a price being no less than the Indemnified Amount.

5.4

If the Property is sold by the Fund to a third party for an amount greater than the Indemnified Amount then the excess over and above the Indemnified Amount, shall be shared between the Fund and FRE equally.

5.5

The Fund acting reasonably and in good faith shall when so required determine and certify the Indemnified Amount from time to time, and any certification shall include reasonable details of the basis of determination. Any amount so certified shall be final and binding on the parties to this deed, save in the case of manifest error.”

Clause 8 is entitled “Waiver” and reads:

“No failure by the Fund to exercise, or delay by the Fund in exercising, any right or remedy in respect of or arising out of this deed will operate as a waiver of that right or remedy nor will any single or partial exercise of any right or remedy prevent any other exercise of that right or remedy or the exercise of any other right or remedy. The Fund's rights and remedies contained in this deed are in addition to, and not exclusive of any other rights or remedies available at law.”

There is an entire agreement provision in clause 11. Clause 11.1 reads:

“This deed, constitutes the entire agreement and understanding between the parties relating to the subject matter of this deed and supersedes all previous negotiations, understandings and other agreements or arrangements between the parties relating to the said subject matter”.

Clause 16 is entitled “Contracts (Rights of Third Parties) Act 1999. It provides: “Save in respect of the rights accruing to the holder( s) of the Shares no person who is not a party to this deed will have any right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms, save for any person to whom rights or benefits are assigned under clause 9.1.”

Under clause 12, the governing law of contract is English law and there is an exclusive jurisdiction clause.

The Present Dispute and the Various Proceedings

The Joint Liquidators, following their appointment, indicated to FRE that they intended to cause SFL to sell the legal title to Springs Farm with vacant possession. In response FRE sought to invoke various terms of the JVA under which it contended that it is entitled to determine how best to market Springs Farm for sale.

That dispute between the parties as to the meaning of the JVA has prevented the sale of Springs Farm in a way which is satisfactory to both the Joint Liquidators and FRE.

By way of a Claim Form sealed on 12 December 2024 and brought under Part 8, RAGOF sought a declaration as to the “true meaning and effect of the provisions of the JVA” in the following terms:

The evidence refers to a number of other disputes involving the parties or connected entities or member of the Floreat Group of companies. These include the following proceedings:

The Chronology of these Proceedings

On 9 January 2025, FRE filed an acknowledgment of service of the proceedings but did not file any evidence at that stage.

On 3 April 2025, FRE applied to stay the proceedings pending the outcome of the Liquidator Proceedings referenced in paragraph 27.i) above. The stay application came before HHJ Pelling KC on 1 July 2025 and was dismissed by the Judge in a judgment with neutral citation number [2025] EWHC 2171.

The Judge’s view was that there was no issue with the Claimant maintaining in the Liquidator Proceedings that the JVA was invalid and unenforceable whilst seeking relief in the current proceedings. It appears that the Defendant’s counsel accepted that proposition. For my part, I concur with it.

The issues arising in these Proceedings

There are four central issues which arise in these Proceedings. These issues track the declarations sought by RAGOF. These are:

In addition, I note that the List of Issues records that there is a dispute between the parties as to whether RAGOF is entitled to the declarations sought given that its primary position is that the JVA is unenforceable as a deed. This issue appears to have been resolved by HHJ Pelling KC’s decision on the stay application but, in any event, my view is that there is no issue with RAGOF seeking a declaration in these proceedings as to the meaning of the JVA without prejudice to its case elsewhere that the JVA is unenforceable.

I note that in the formulation of the declarations in the Claimant’s Part 8 Claim Form, the Claimant sought a ruling on the “true meaning and effect” of the JVA. In light of the dispute over the validity of the JVA, I raised with the parties whether it was appropriate, in the event that the Court was minded to grant declarations based on its interpretation of the JVA, for an order to refer to the “effect” of the JVA. This was a point taken by the Defendant in its Skeleton Argument (para 20) and in oral argument. The Claimant put forward some revisions to its preamble in the draft order to address this point, which removed reference to the “effect” of the JVA, and I heard submissions from both parties on that revised formulation.

The Approach to Construction

The Court’s approach to construction has been set out authoritatively at the highest level in a series of decisions; in particular In re Sigma Finance Corpn [2009] UKSC 2 [2010] 1 All ER 571, Rainy Sky SA v Kookmin Bank [2011] UKSC 50 [2011] 1 WLR 2900, Arnold v Britton [2015] UKSC 36 [2015] AC 1619 and Wood v Capita Insurance Services Ltd [2017] UKSC 24 [2017] AC 1173.

The decision of the Court of Appeal in Songa Product and Chemical Tankers III AS v Kairos Shipping II LLC [2025] EWCA Civ 1227 was also cited to me by the Defendant. In the leading judgment of Phillips LJ (and endorsed by the whole Court), the Court of Appeal adopted at [25] the summary of the law on construction produced by the first instance judge, HHJ Pelling KC. I also adopt that summary.

“a.

The Court construes the relevant words of a contract in its documentary, factual and commercial context assessed in the light of, (i) the natural and ordinary meaning of the provision being construed; (ii) any other relevant provisions of the contract being construed; (iii) the overall purpose of the provision being construed and the contract in which it is contained; (iv) the facts and circumstances known or assumed by the parties at the time the document was executed and (v) commercial common sense but (vi) disregarding subjective evidence of any party’s intentions - see Arnold v Britton [2015] UKSC 36 [2015] AC 169 per Lord Neuberger PSC at [15]… and most recently Sara & Hossein Holdings Ltd v Blacks Outdoor Retail Ltd [2023] UKSC 2 [2023] 1 WLR 575 per Lord Hamblen at [29(1)];

b.

In carrying out this exercise it is necessary to consider the contract as a whole since it may be apparent from such a reading that the parties intended either a narrower or conceivably a wider meaning than the literal meaning of the words used might suggest when read in isolation - see Barclays Bank plc v Unicredit Bank AG [2014] EWCA Civ 302 [2014] 2 All ER (Comm) 115 per Longmore LJ at paragraph 14. In addition, Apache North Sea Limited v INEOS FPS Limited [2020] EWHC 2081 (Comm) per Foxton J at paragraph 21;

c.

A Court can only consider facts and circumstances known or reasonably available to both parties that existed at the time that the contract was made. See Arnold v Britton per Lord Neuberger PSC at paragraph 21. That which is known to one party alone is immaterial and what is reasonably available generally means what is readily available to all parties - see Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896 per Lord Hoffmann at 912 to 913…;

d.

In arriving at the true meaning and effect of a contract, the departure point in most cases will be the language used by the parties because (a) the parties have control over the language they use in the contract and (b) the parties must have been specifically focused on the issue covered by the disputed Clause or Clauses when agreeing the wording of that provision - see Arnold v Britton per Lord Neuberger PSC at paragraph 17;

e.

Where the parties have used unambiguous language, the Court must apply it - see Rainy Sky SA v Kookmin Bank [2011] UKSC 50 [2011] 1 WLR 2900 per Lord Clarke JSC at paragraph 23;

f.

Where the language used by the parties is unclear, the Court can properly depart from its natural meaning where the context suggests that an alternative meaning more accurately reflects what a reasonable person with the parties’ actual and presumed knowledge would conclude the parties had meant by the language they used. However, that does not justify the Court searching for, drafting infelicities in order to facilitate a departure from the natural meaning of the language used - see Arnold v Britton, ibid per Lord Neuberger PSC at paragraph 18;

g.

If there are two possible constructions, the Court is entitled to prefer the construction which is consistent with business common sense and to reject the others. See Rainy Sky SA v Kookmin Bank ibid per Lord Clarke JSC at paragraph 21. However, commercial common sense is relevant only to the extent of how matters would have been perceived by reasonable people in the position of the parties at the date when the contract was made - see Arnold v Britton ibid per Lord Neuberger PSC at paragraph 19.

h.

In striking a balance between the indications given by the language and those arising contextually, the Court should consider the quality of the drafting of the Clause and the agreement in which it appears – see Wood v Capita Insurance Services Ltd [2017] UKSC 24 per Lord Hodge JSC at paragraph 11. Sophisticated, complex agreements drafted by skilled professionals are likely to be interpreted principally by textual analysis unless a provision lacks clarity or is apparently illogical or incoherent - see Wood v Capita Insurance Services Ltd ibid per Lord Hodge JSC at paragraph 13 and National Bank of Kazakhstan v Bank of New York Mellon [2018] EWCA Civ 1390 per Hamblen LJ at paragraphs 39 to 40; and

i.

A Court should not reject the natural meaning of a provision as incorrect simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of the wisdom of hindsight, because it is not the function of a Court when interpreting an agreement to relieve a party from a bad bargain. See Arnold v Britton ibid per Lord Neuberger PSC at paragraph 20 and Wood v Capita Insurance Services Ltd ibid per Lord Hodge JSC at paragraph 11.

Applying these principles should enable a Court to answer what is ultimately the question that arises where there is an interpretation dispute - that is what a reasonable person with all the background knowledge which would have reasonably been available to the parties when they entered the contract, would have understood the language used by the parties to mean - see FCA v Arch Insurance (UK) Ltd [2021] UKSC 1 [2021] 2 WLR 123 per Lords Hamblen and Leggatt JJSC at paragraph 47.”

I note also that, as submitted by both parties, where several contractual documents are intended to form part of a single transaction or contractual scheme, the Court will strive to construe them together, so as to give effect to the parties’ intentions in a consistent and coherent manner: Durham v BAI (Run Off) Ltd [2012] UKSC 14 at [69]; Lord v Maven Wealth Group Ltd [2021] EWHC 2544 (Comm) at [44].

I note that, as contended for by the Defendant, whilst there is generally a presumption against redundant words, that presumption is much reduced in more modern cases (Lewison on the Interpretation of Contracts 8^th Edition, at §7.24).

As regards the law on implied terms, I note that in the Privy Council case BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283, Lord Simon of Glaisdale (speaking for the majority, which included Viscount Dilhorne and Lord Keith of Kinkel) said that:

“for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.”

That description was described by Bingham MR in Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472, 481, as a summary which “distil[led] the essence of much learning on implied terms” but whose “simplicity could be almost misleading”. Further elaboration on the approach was given in that decision and in the Supreme Court’s decision in Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] A.C. 742, per Lord Neuberger, at [16] to [21].

Issue 1: On the terms of the JVA, is RAGOF entitled to sell Springs Farm at any time?

The Claimant, represented by Mr Valentin KC, contends that SFL owns the freehold of Springs Farm, unencumbered, and that absent any restriction on sale, RAGOF is entitled to cause SFL to sell the Property at any time. It contends that nothing in the JVA restricts RAGOF’s entitlement to sell the Property. In particular:

The Defendant, represented by Mr Shaw and Mr Mitty, relies on five points. These are summarised below.

First, the Defendant contends that the JVA conferred on FRE exclusivity with respect to the matters listed in clause 2 and 3. The powers, rights and / or responsibilities conferred on FRE by clauses 2 and 3 were conferred to the exclusion of all others, including RAGOF, the Joint Liquidators and SFL. FRE’s rights included a right, exclusive to FRE and at the exclusion of all others, to market and sell the Property. As regards the exclusive right to sale, FRE says that this arises by reason of, or “alternatively as a necessary and implied corollary of”, clause 2 when read together with clause 3. FRE contends that if the JVA had intended to confer on RAGOF the right to market or sell Springs Farm under the JVA, it would have done so in express terms. FRE says that the JVA allocated as between RAGOF and FRE the powers / rights in relation to the marketing and sale of Springs Farm. It prays in aid of its case that FRE bears the downside risk under the indemnity in the DOI and the JVA.

Second, the Defendant argues that clauses 4 and 5 are consistent with its construction of the JVA. It says that clauses 2 and 3 give FRE the exclusive power or right to market and execute a sale of Springs Farm and that under clause 4, FRE must meet the costs of the same. It says that clause 5 functions to regulate the circumstances in which the indemnity under clause 4 can be called on together with related provisions and that is simply a prohibitory condition which, read as a whole and in context, does not take away from the parties’ allocation of responsibilities, powers and / or rights in clauses 2 and 3.

Third, the Defendant says that its construction is supported by the admissible background facts and context to the JVA, known to the parties at the time of the agreement. Based on Mr Mutaz Otaibi’s evidence, it says that maximising the value of the Property required a specialist development, marketing and sale strategy which was to be undertaken by FRE. It also says that the 5 year period before the indemnity was due to kick in was intended to coincide with a loan from Arbuthnot Latham & Co Limited (“Arbuthnot”).

Fourth, it says that RAGOF’s interpretation of the JVA is not supported by business common sense and that RAGOF has not advanced a reasonable commercial explanation for why (a) FRE would agree to indemnify RAGOF for the costs of a marketing and sale process or provide an indemnity in respect of any shortfall on the sale price when it had no control as to the process adopted or sale price achieved and approved for Springs Farm, (b) FRE would only want to protect its position in respect of the indemnity under clause 4 for five years. The Defendant asks why FRE would have agreed to indemnify RAGOF in respect of RAGOF’s failure to achieve a better price. It also says that RAGOF’s construction extinguishes the extent to which the joint venture was conducted jointly by putting “sole control” of the marketing and sale process in the hands of RAGOF.

In contrast, it says that FRE’s case does accord with business common sense. It says that under clause 2, it is tasked with furthering the objectives of the joint venture including redesigning, marketing and selling Springs Farm. Under clause 3, it is granted further supplemental rights, which it reasonably needs, to carry out the matters in clause 2. Under clause 4 and 5, it bore the downside risk of a sale and the costs of developing, marketing and selling the Property reflecting that it had exclusive control over the marketing and sale process. It says that the joint profit share reflected the fact that RAGOF put up the funds to acquire Springs Farm but that FRE took the burden of executing the joint venture.

Fifth, the Defendant contends that if it is wrong in its construction of the express terms of the JVA, there should be an implied term into the JVA that RAGOF does not have the right to sell Springs Farm independently of FRE because that would not protect FRE’s position under the indemnity. It says that FRE only entered into the indemnity and the JVA on the basis of its anticipated control over the sale process. It is said that the implied term is necessary to give business efficacy to the JVA to imply a term preventing RAGOF from selling Springs Farm independently of FRE.

It is convenient at this stage to set out my analysis of the material terms of the JVA. Before doing so, it is appropriate to consider the matrix of fact and context (insofar as it is admissible) in which the JVA was entered.

The parties have referred me to the DOI, the Investment Memorandum dated 13 March 2014 (the “Investment Memorandum”) and the witness evidence (in particular the Third Witness Statement of Mr Mutaz Otaibi). Whilst I accept that the Court could potentially have regard to the DOI and the Investment Memorandum in considering the construction issues, the key parts of Mr Otaibi’s evidence on the contentious issues in these proceedings seemed to be evidence about his subjective views of the meaning of the JVA which are not admissible on the construction issues. Further, insofar as Mr Mutaz Otaibi sought to set out the views of other people on the JVA, there was no adequate explanation of the source of that information and no suggestion that such information reflected the common factual basis on which the parties to the JVA had proceeded. I note that Mr Otaibi also sought to tie the terms of the JVA to a loan from Arbuthnot and to suggest that the Property required specialist marketing although again this appeared to be subjective evidence on the terms of the JVA and not admissible. Even taking the widest view on admissibility, I did not consider that Mr Otaibi’s evidence assisted the court on the construction issues.

As regards the DOI, I think that it is of limited utility in relation to the issues before the Court. As noted above, I must proceed on the basis that, insofar as the JVA was entered, that occurred after the DOI. The JVA contained an entire agreement provision (clause 11) and so was intended on its face to be a complete agreement.

I note that some of the contentious clauses in the JVA (in particular clauses 2 and 3) do not appear in the DOI. One can draw from this that, at the point that the DOI was entered (shortly before the acquisition), FRE was content to give RAGOF an indemnity without the additional obligations and rights that appear in clauses 2 and 3 of the JVA.

However, the DOI provides no real illumination on how to interpret the contentious clauses in the JVA, which did not appear in the DOI, or how they were intended to operate.

I also consider that the Investment Memorandum is of limited utility in the construction exercise faced by the Court. Ultimately the JVA needs to be construed according to its terms, and the admissible background context does not shed any material light on that exercise.

Turning then to the terms of the JVA, I note that it is recorded in paragraph B of the section entitled “BACKGROUND” that FRE advised RAGOF to acquire Springs Farm and that RAGOF had agreed to do so subject to “FRE agreeing to participate in the proposed exploitation of the Property and to indemnify the Fund on the terms set out in this deed”. In the circumstances, the indemnity was a central component of the JVA.

As is evident from the summary of the parties’ positions above, much of the dispute between the parties revolves around clause 2 and 3 of the JVA. Clause 2 is headed “FRE OBLIGATIONS” and clause 3 is headed “FRE RIGHTS”.

As a matter of contractual interpretation, I note (Lewison on the Interpretation of Contracts 8^th Edition, Chapter 5, Section 13) that headings may be taken into account in construing a clause save where (which does not apply in this case) the contract provides that they should not be. I consider that the substance of clauses 2 and 3 are consistent with these headings.

Clauses 2 and 3 are set out in full above. For ease of reference, I set out here the parts that attracted particular discussion during the trial:

I reach the following conclusions as to clause 2:

Clause 3 is admittedly difficult to interpret. It expressly grants FRE a number of rights. The central right for present purposes is that at clause 3.2: “Exclusivity on marketing the property”. The Defendant argued that the effect of this clause when coupled with clause 2 is that it conferred on FRE the “exclusive responsibility and / or exclusive right to market and sell Springs Farm”. (Footnote: ⁴) It said that this was the “crux of the joint venture”. Although FRE said in its written submissions that the powers, rights and / or responsibilities in clause 3 were conferred to “the exclusion of all others” including RAGOF and SFL, (Footnote: ⁵) FRE admitted in oral submissions that this did not exclude third parties. It said: “Everybody agrees in practical terms that third parties must be involved in the process of marketing and selling this property. … It is obviously right that that is the case. Estate agents will, at minimum, need to be instructed, and we say specialist ones but certainly agents of some sort or another”. The critical question for present purposes is whether the effect of clause 3, or clause 3 when coupled with clause 2, is to exclude RAGOF and SFL from the marketing and sale of the Property. In my view, the clauses cannot sustain that meaning.

As noted above, clause 2 carefully confines FRE’s role as joint venture partner to giving advice and executing the plans in relation to the Property. I do not consider that clause 3 serves to expand FRE’s role as joint venture partner. Clause 2 does not operate to exclude RAGOF from the marketing and sale of the Property in favour of FRE. Clause 2 expressly defines the scope of FRE’s role as joint venture partner as being to advise on and execute the plans in relation to the Property (including on sale and marketing). It is clear from the clause that FRE is not the decision-maker in relation to the plans for the Property (including the plans on marketing and sale). The decision-maker must be RAGOF, which is the party tasked with acquiring and holding the Property and incurring the costs of development and a sale, and which receives FRE’s advice.

In those circumstances, it would be illogical for clause 3 to operate to exclude wholly RAGOF from the marketing and sale of the Property (which is the construction that FRE argues for).

Further clause 3 does not refer at all to the sale of the Property. Nevertheless it is a central part of FRE’s case that it has the exclusive right both to market and sell the Property and to exclude RAGOF and SFL from the process. It is unsurprising that FRE has chosen to put its case in this way because if it accepted that the sale of the property was a matter for RAGOF and / or SFL, it would be difficult to see why FRE would have the right to exclude RAGOF and SFL from marketing.

As regards FRE’s construction, I have already found that the word “exclusively” in clause 2 does not mean that FRE was entitled to exclude RAGOF from the sale and marketing of the Property. FRE’s case therefore requires it to stretch the phrase “exclusivity on marketing” in clause 3 to exclude RAGOF and SFL from both the sale and marketing of the Property. I do not consider that the language of clause 3 can achieve that objective. Such a construction would be inconsistent with clause 2 as noted in paragraph 60 above. Further it would be surprising in a joint venture for the parties to agree to exclude one of the joint ventures from a central part of the enterprise.

I also note that it is RAGOF which is the 100% shareholder of SFL which in turn is the legal owner of Spring Farm. It has the power, through its influence over its wholly owned subsidiary, to cause it to sell. In contrast, FRE has no such power. SFL is not a party to the JVA and it is difficult to see how the JVA could operate to exclude SFL from selling its own property.

FRE’s construction is also inconsistent with other parts of the JVA. It is clear, in my view, from the other terms of the JVA that the right to compel a sale of Spring Farm rests with RAGOF not FRE.

My construction of clauses 2 and 3 also accords with business common sense. RAGOF held the Property through SFL its subsidiary. RAGOF paid for the acquisition of the Property and its development. RAGOF’s aim was to generate a profit from the transaction, and it was only able to call on the indemnity following the fifth anniversary of the JVA. It is understandable in those circumstances that it would not relinquish the decision-making for the sale and marketing of the Property to FRE. On my construction of the JVA, FRE’s rights and obligations also accord with business common sense; the Property had been purchased at FRE’s instigation and it was to enjoy any uplift in the Property value without having to deploy its own money for the acquisition of the Property or the costs of its development. It is unsurprising that FRE would have been willing in those circumstances to give an indemnity without needing to have exclusive control of the marketing and sale process. In that respect, the JVA operated similarly to the DOI.

In contrast, I do not consider that FRE’s construction is consistent with business common sense. FRE was forced to accept at trial that on its construction it had complete control over the timing and price of any sale of the Property. In the circumstances, FRE could conceivably hold on to the Property for years, holding out for a higher price. In the interim, on its case, FRE had full usage and occupancy of the Property without having to pay anything at all to RAGOF or SFL. Where a current sale might crystallise a loss and thus a payment from FRE under the indemnity, on FRE’s construction, FRE could simply hold off selling, possibly for years, in order to avoid a liability under the indemnity and waiting for the market to improve. All the while, the cost of financing the Property would fall on RAGOF. In my view, that is a commercially unrealistic construction.

In order to meet this difficulty in its case, FRE tentatively suggested at trial that it might be possible to read some constraint into FRE’s rights in such a situation, such as a Braganza type duty (referring to the decision of the Supreme Court in Braganza v BP Shipping Ltd [2015] UKSC 17). FRE was careful not to go as far as to suggest that such a duty did arise and expressly made no concession in that regard but merely posited that it might do. In reply, RAGOF pointed out that on FRE’s case, it was relying on a contractual right, not a discretion and so there was no scope for qualification of a discretion.

I was unpersuaded by FRE’s efforts to suggest that the insertion of a Braganza duty might operate as a sensible fetter to its alleged right to control the sale and marketing of the Property. To my mind, the fact that FRE was forced to posit such an explanation simply highlighted the commercially unreal outcome of its construction of the JVA.

I note that FRE has also suggested in correspondence that, on its case that it has exclusive right to market and sell the Property, the effect of the JVA is that RAGOF is not legally entitled to any information about the sales process and whether the Property is being actively marketed (see Willkie Farr & Gallagher (UK) LLP’s letter of 8 July 2024 and Herbert Smith Freehills LLP’s response of 15 July 2024). FRE’s solicitors stated that in that correspondence: “Had RAGOF or SFL wished to receive information about the sale and marketing, they could have bargained for information rights in the contractual documentation”. In my view, this is another reason why FRE’s interpretation does not accord with business common sense. On its construction, RAGOF and SFL would be both excluded from and have no visibility of the marketing and sale process. In my view, that is wholly inconsistent with the terms of the joint venture.

FRE also argues that the Claimant’s case does not accord with business common sense because “it cannot be sensibly concluded that it was the intention of the parties for [FRE] to agree to significant financial exposure on the sale in circumstances where it had no control over the selling process or price achieved”. However, that is precisely what FRE agreed to do under the DOI which FRE appears to have willingly entered. In the circumstances, there is nothing commercially unreal in concluding that FRE had no control over the selling process under the JVA as well.

In light of my view that clause 3 does not exclude RAGOF and SFL from the sale and marketing of the Property and that clauses 2 and 3 do not confer on FRE the right, exclusive or otherwise, to be the decision-maker in respect of the sale and marketing of the Property, FRE’s case on the construction of those clauses must fail.

Although it is sufficient for present purposes to reach the conclusion that clause 3 does not sustain FRE’s case, I heard argument from the parties as to what clause 3.2 was intended to achieve and accordingly I set out my views on that matter.

As to FRE’s argument that its interpretation arises as an “implied corollary” of clause 2 when read with clause 3 or as a result of an implied term, I consider that this argument also fails. Its interpretation is inconsistent with the express terms of the contract. There is no need for an implied term and the proposed implied terms would not be reasonable and equitable.

In the circumstances, I am content to grant the declaration sought on this issue. I address the form of that declaration at the end of this Judgment.

Issue 2: On the terms of the JVA, is RAGOF now (more than five years after the JVA was allegedly executed) entitled to sell Springs Farm at a price that would result in FRE incurring a liability under the indemnity in clause 4 of the JVA?

The Claimant argues that the declaration follows from the plain language of clause 5.2 of the JVA. It says that prior to the fifth anniversary (i.e. prior to 2019), the “prior written consent of [FRE]” was required if (a) RAGOF were to sell the Property, and (b) the sale price were such that FRE would incur a liability under clause 4 of the JVA. It says that this did not inhibit RAGOF selling the Property in the first five years after the JVA was executed, even if at a price that might engage the indemnity; but in that situation, RAGOF would not have been entitled to call on the indemnity: it would have to bear the loss itself. It says that, from year six onwards, the clear meaning of clause 5.2 is that RAGOF was free to sell the Property, without the prior written consent of FRE and even if the sale price was such that RAGOF had a claim against FRE under the indemnity.

It contended that (a) this was the bargain the parties had struck (b) the opening words of clause 4.1 of the JVA state that the indemnity was the quid pro quo for RAGOF agreeing to acquire Springs Farm, and (c) FRE was fully protected against a situation in which RAGOF sold the Property at a discounted price because under clause 5.3 FRE had the option to acquire the Property itself at a price being no less than the Indemnified Amount.

The Defendant contends that, in light of its construction of clause 2, RAGOF seeks to derive from clause 5.2 a derogation from the exclusivity granted by clause 2. It contends that this places “too much weight on Clause 5.2 and the selected words within it” which it contends must be read in their proper context and in light of clause 2 itself. FRE argues that (a) in the Background section of the JVA, “the five-year period is expressed to be a “target” sale price only” (sic) (b) clause 5.2 is expressed as a prohibition during the first period of 5 years, not a grant of rights to RAGOF (c) based on Mr Mutaz Otaibi’s evidence, clause 5.2 should be seen as an avoidance of doubt type provision inserted to give Arbuthnot comfort in respect of a loan from Arbuthnot.

There is no dispute between the parties that insofar as the JVA was entered more than 5 years have elapsed since that point. The face of the JVA itself says that it was “effective” in 2014. Further, the terms of the JVA, in particular, clause 5 are clear that after 5 years, there is no restriction on RAGOF selling the Property (which would occur through SFL), albeit that FRE has the right to acquire the Property if it chooses to do so under clause 5.3. FRE has not sought to exercise that right.

As explained in my analysis above in relation to the first declaration, FRE is not the decision-maker in relation to any sale and so cannot determine the price. The mechanics of the JVA are such that the Property can be sold at a price where liability is incurred under the indemnity in clause 4. FRE’s consent is not required.

The evidence adduced by Mr Mutaz Otaibi about a loan from Arbuthnot appears to be based on discussions with Mr Hussam Otaibi. I do not consider that evidence to be admissible on the construction issues and even if it were, I do not consider that it provides any assistance to the Court in resolving the meaning of the JVA.

In the circumstances, I am content to grant the declaration sought on this issue. I address the form of that declaration at the end of this Judgment.

Issue 3: If RAGOF does not accept any advice provided to it by FRE (under clause 2.1 of the JVA) with respect to the marketing of Springs Farm, is RAGOF (acting by its Liquidators) entitled to market Springs Farm in whichever way RAGOF considers appropriate?

The Claimant says that this declaration reflects the proper interpretation of Clauses 2.1.2, 2.2 and 3.2 of the JVA because: (a) it is FRE’s obligation to advise RAGOF and execute the plans in relation to the Property, including in relation to “the marketing of the Property” (Clause 2.1.2), but there is no corresponding obligation on RAGOF in the JVA that it must accept FRE’s advice; (b) any such obligation on RAGOF would be inconsistent with its right to sell the Property at any time; (c) the grant to FRE of the right to “exclusivity on marketing the property” (Clause 3.2) does not involve the grant to FRE of “any specific right or authority to act as agent for or on behalf of [RAGOF]” (Clause 2.2); (d) if RAGOF does not accept FRE’s advice with respect to the marketing of the Property, RAGOF is free to market the Property in whichever way RAGOF considers appropriate.

The Defendant contends that this declaration falls away for the same reasons as declarations 1 and 2. It says that the declaration should be refused on the basis of the clear terms of the JVA, in particular clauses 3.2 and 2.1.2.

As noted above, I reject the Defendant’s interpretation of clauses 2 and 3. I have considered that question in detail in the analysis above under Issue 1. I consider that RAGOF is not bound to accept FRE’s advice.

There was some discussion during the course of submissions as to the form of the proposed declaration on this issue. In particular, FRE expressed the concern that it could be excluded entirely from the process of marketing the Property. In response to those submissions, the Claimant suggested revised wording which referred to RAGOF being entitled to “decide the method of marketing (including price)” for the Property. I am content to grant a declaration in those terms in light of my finding that RAGOF was entitled to be the decision-maker on such matters.

I address the form of the declaration at the end of this Judgment.

Issue 4: Is FRE entitled to occupy the Property, or permit its agents to occupy the Property, after the sale of the Property?

Clause 3.1 of the JVA provides that FRE is granted the right to “full usage of the property which includes full occupancy for the period of the deed” [10/94].

The Claimant says that this is the only provision on which FRE has relied in order to assert any right to occupy the Property (including through its agent, i.e. Mr. Hussam Otaibi). The Claimant contends that although clause 3.1 of the JVA contemplates that the JVA will not stay in effect indefinitely (i.e. there is a “period of the deed”), the JVA does not contain any express provision as to its term or duration. However, it did not need to contain any such express term because the only purpose of the JVA was to give effect to the “Joint Venture”, which was the venture described in clause (A) to (C) to the JVA: i.e. (a) RAGOF’s acquisition of the Property, and (b) following development of the Property, its subsequent sale of the Property within a period of five years. It says that it is obvious that, upon the sale of the Property, the “Joint Venture”, the purpose of the JVA, and any and all rights that FRE may have enjoyed pursuant to the JVA, will be at an end.

The Defendant relies on two points:

The scheme of the JVA is that RAGOF would acquire, develop and sell the Property. This is apparent from the analysis set out above and from clause 4 which envisages that RAGOF will incur the costs of each of those steps (albeit that in certain circumstances FRE will be obliged to indemnify RAGOF). I note that clause 3.1 grants FRE the right to “full usage of the property which includes full occupancy for the period of the deed”. That clause governs the position as between RAGOF and FRE. As noted above, SFL is not a party to the JVA.

I note that there are no terms of the JVA which explain how the deed can be brought to an end. Clause 3.1 does not address the position of whether the right of occupancy survives the sale. However, it is clear in my view from construing the JVA as a whole that the right of occupancy cannot survive a sale.

My construction also accords with business common sense. It would not accord with business common sense for FRE to have a right to occupy the Property without temporal limitation; a fortiori where it was not paying rent.

I do not consider that the existence of the other litigation is a reason not to grant the declaration sought. The declaration relates to the interpretation of the JVA. All of the parties to the JVA are present in these proceedings and FRE has not been able to point to other proceedings with the same parties where the issue would be more suitably resolved. The Court heard full argument on the issue and is in a position to decide the point.

In the circumstances, I am content to grant the declaration sought on this issue. I address the form of that declaration at the end of this Judgment.

Conclusion

For the reasons set out above, I consider that the Claimant is entitled to relief in the form of a declaration as to the meaning of the JVA.

I propose to grant a declaration in the following terms, subject to any points that the parties may have which arise out of the terms of this Judgment.

“IT IS DECLARED THAT:

Noting the terms of this Judgment, I ask the parties to draw up a final form of order. If needed, I will hear submissions on the form of the final order (including costs).

I am grateful to Mr Valentin KC, Mr Shaw and Mr Mitty for the care and clarity in which they presented their cases. Both sides argued their cases forcefully and effectively.