Generator Developments LLP v Lidl (UK) GmbH [2016] EWHC 816 (Ch)

[2016] EWHC 816 (Ch)

Case No HC14D2690

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 13/04/2016

Before

Nicholas Lavender QC

Between

GENERATOR DEVELOPMENTS LLPClaimant

LIDL (UK) GMBHDefendant

Jonathan Gaunt QC and Adam Rosenthal (instructed by Stephenson Harwood LLP) for Claimant

Alan Johns QC and Paul Clarke (instructed by Clarke Willmott LLP) for Defendants

Hearing Hearing dates: 19, 20, 21, 22, 25 and 26 January 2016

Judgment

Nicholas Lavender QC, sitting as a High Court Judge:

[1]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. (1) The Parties

[2]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.

[3]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.

[4]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. (2) The Purchase of the Property and the Negotiations between the Parties

[5]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. (2)(a) The Marketing of the Property and the Parties' Initial Contact

[6]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,

[7]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.

[8]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.

(b) Generator's Offers to Purchase the Property

[9]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:

"Generator Group is pleased to confirm its keen interest in acquiring the above Property in conjunction with our joint venture partners Lidl."

[10]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.

[11]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.

[12]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.

(c) The Substitution of Lidl as Purchaser

[13]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.

(d) The Lockout Agreement with the Vendor

[14]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.

[15]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.

(e) The Joint Venture Heads of Terms

[16]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:(1) Generator produced the second draft on 5 January 2014.

(2) Lidl produced the third draft on 10 January 2014.

(3) Generator produced the fourth to seventh drafts on 5 and 17 February and 17 and 26 March 2014.

[17]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.

[18]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.

[19]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: (1) In the section on "Preliminary Matters":

"The proposed transaction (SALE AND LEASEBACK - 999 years) is subject to Lidl UK GmbH and Generator Developments board approval - to be applied for by the parties within 1 week following acceptance of the proposal." (2) Also in that section: "

The proposed transaction is subject to contract." (3) In the section on "Conditions for the Contract":

"This proposed transaction is subject to contract."

[20]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.

(f) The Exchange of Contracts

[21]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.

[22]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.

[23]On 17 February 2014 Lidl began approaching other developers (i.e.

(g) Completion of the Purchase of the Property by Lidl

[24]On 17 March 2014 the purchase of the Property by Lidl from the Vendor was completed. (2)(h) The Termination of Discussions between Lidl and Generator.

[25]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.

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

"I write to inform you that due to changes to our internal procedures I must fully market the site prior to moving forward."

[27]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:

"In fact, there are not any "internal procedures" as such. This is just a phrase that I and other colleagues commonly use to end any negotiations, which was the case here." "

Verbal discussion took place between Ingo Fischer and me, during which we decided to end negotiations with Generator, progress a planning application run by Lidl and take the site to the open market for a potential development partner in order to seek best value."

[28]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.

(i) The Commencement of Proceedings

[29]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. (3) The Law

[30]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:

"If two or more persons agree to embark on a joint venture which involves the acquisition of an identified piece of land and a subsequent exploitation of, or dealing with, the land for the purposes of the joint venture, and one of the joint venturers, with the agreement of the others who believe him to be acting for their joint purposes, makes the acquisition in his own name but subsequently seeks to retain the land for his own benefit, the court will regard him as holding the land on trust for the joint venturers."

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

"It seems to me that if A and B agree that A shall acquire some specific property for the joint benefit of A and B on terms yet to be agreed, and B, in reliance on A's agreement, is thereby induced to refrain from attempting to acquire the property, equity ought not to permit A, when he acquires the property, to insist on retaining the whole benefit for himself to the exclusion of B. If on the facts it would be inequitable for the quantum of B's interest to be a moiety, I do not doubt that equity could determine what justice required the quantum to be; but where the facts suggest no other basis, then there should be equality."

[32]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.

[33]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.

[34]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 is important, however, to identify the features which will give rise to a Pallant v Morgan equity and to define its scope; while keeping in mind that it is undesirable to attempt anything in the nature of an exhaustive classification. As Millett J. pointed out in Lonrho Plc v Fayed (No. 2) [1992] 1 W.L.R. 1, 9b, in a reference to the work of distinguished Australian commentators, equity must retain its "inherent flexibility and capacity to adjust to new situations by reference to mainsprings of the equitable jurisdiction."

Equity must never be deterred by the absence of a precise analogy, provided that the principle invoked is sound. Mindful of this caution, it is, nevertheless, possible to advance the following propositions. (1) A Pallant v Morgan equity may arise where the arrangement or understanding on which it is based precedes the acquisition of the relevant property by one party to that arrangement. It is the pre-acquisition arrangement which colours the subsequent acquisition by the defendant and leads to his being treated as a trustee if he seeks to act inconsistently with it. Where the arrangement or understanding is reached in relation to property already owned by one of the parties, he may (if the arrangement is of sufficient certainty to be enforced specifically) thereby constitute himself trustee on the basis that "equity looks on that as done which ought to be done;" or an equity may arise under the principles developed in the proprietary estoppel cases. As I have sought to point out, the concepts of constructive trust and proprietary estoppel have much in common in this area. Holiday Inns Inc v Broadhead, 232 E.G. 951 may, perhaps, best be regarded as a proprietary estoppel case; although it might be said that the arrangement or understanding, made at the time when only the five acre site was owned by the defendant, did, in fact, precede the defendant's acquisition of the option over the 15-acre site. (2) It is unnecessary that the arrangement or understanding should be contractually enforceable. Indeed, if there is an agreement which is enforceable as a contract, there is unlikely to be any need to invoke the Pallant v Morgan equity; equity can act through the remedy of specific performance and will recognise the existence of a corresponding trust. On its facts Chattock v Muller, 8 ChD 177 is, perhaps, best regarded as a specific performance case. In particular, it is no bar to a Pallant v Morgan equity that the pre-acquisition arrangement is too uncertain to be enforced as a contract-see Pallant v Morgan

[1953] Ch 43

itself, and Time Products Ltd v Combined English Stores Group Ltd., 2 December 1974 -nor that it is plainly not intended to have contractual effect-see Island Holdings Ltd v Birchington Engineering Co Ltd , 7 July 1981. (3) It is necessary that the pre-acquisition arrangement or understanding should contemplate that one party ("the acquiring party") will take steps to acquire the relevant property; and that, if he does so, the other party ("the non-acquiring party") will obtain some interest in that property. Further, it is necessary that (whatever private reservations the acquiring party may have) he has not informed the non-acquiring party before the acquisition (or, perhaps more accurately, before it is too late for the parties to be restored to a position of no advantage/no detriment) that he no longer intends to honour the arrangement or understanding. (4) It is necessary that, in reliance on the arrangement or understanding, the non-acquiring party should do (or omit to do) something which confers an advantage on the acquiring party in relation to the acquisition of the property; or is detrimental to the ability of the non-acquiring party to acquire the property on equal terms. It is the existence of the advantage to the one, or detriment to the other, gained or suffered as a consequence of the arrangement or understanding, which leads to the conclusion that it would be inequitable or unconscionable to allow the acquiring party to retain the property for himself, in a manner inconsistent with the arrangement or understanding which enabled him to acquire it. Pallant v Morgan

[1953] Ch 43

itself provides an illustration of this principle. There was nothing inequitable in allowing the defendant to retain for himself the lot (lot 15) in respect to which the plaintiff's agent had no instructions to bid. In many cases the advantage/detriment will be found in the agreement of the non-acquiring party to keep out of the market. That will usually be both to the advantage of the acquiring party-in that he can bid without competition from the non-acquiring party-and to the detriment of the non-acquiring party-in that he loses the opportunity to acquire the property for himself. But there may be advantage to the one without corresponding detriment to the other. Again, Pallant v Morgan provides an illustration. The plaintiff's agreement (through his agent) to keep out of the bidding gave an advantage to the defendant- in that he was able to obtain the property for a lower price than would otherwise have been possible; but the failure of the plaintiff's agent to bid did not, in fact, cause detriment to the plaintiff-because, on the facts, the agent's instructions would not have permitted him to outbid the defendant. Nevertheless, the equity was invoked. (5) That leads, I think, to the further conclusions: (i) that although, in many cases, the advantage/detriment will be found in the agreement of the non-acquiring party to keep out of the market, that is not a necessary feature; and (ii) that although there will usually be advantage to the one and correlative disadvantage to the other, the existence of both advantage and detriment is not essential-either will do. What is essential is that the circumstances make it inequitable for the acquiring party to retain the property for himself in a manner inconsistent with the arrangement or understanding on which the non-acquiring party has acted. Those circumstances may arise where the non-acquiring party was never "in the market" for the whole of the property to be acquired; but (on the faith of an arrangement or understanding that he shall have a part of that property) provides support in relation to the acquisition of the whole which is of advantage to the acquiring party. They may arise where the assistance provided to the acquiring party (in pursuance of the arrangement or understanding) involves no detriment to the non-acquiring party; or where the non-acquiring party acts to his detriment (in pursuance of the arrangement or understanding) without the acquiring party obtaining any advantage therefrom.

[35]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. (4) The Issues

[36]The parties agreed that the case gave rise to the following issues in relation to liability:(1) Did Generator agree to allow Lidl to purchase the Property (on the terms negotiated by Generator with the Vendor) on the basis of a continuing and mutual understanding between the parties that Generator and Lidl would pursue a joint venture for a mixed-use development of the Property and that Generator would obtain some interest in the Property once acquired?

(2) If so, when Lidl completed its purchase of the Property, did Lidl hold the Property subject to the Pallant v Morgan equity on which Generator relies? In particular: (a) Does the fact that the negotiations for the joint venture between Generator and Lidl were subject to contract prevent Generator from acquiring a Pallant v Morgan equity? (b) Does the fact that the negotiations for the joint venture between Generator and Lidl were expressly (in the draft heads of terms and/or other communications passing between the parties) or impliedly subject to the approval of the parties' respective boards prevent Generator from acquiring a Pallant v Morgan equity? (c) Does the fact that the parties had not finally agreed the core heads of terms (as Lidl contends) or alternatively the detailed heads of terms (as Generator contends) for any joint venture preclude Generator from acquiring a Pallant v Morgan equity? (d) Does the fact that the parties contemplated that they would enter into a 'lock-out' agreement limiting Lidl's ability to deal with the Property, following its acquisition, for a specific period prevent Generator from acquiring a Pallant v Morgan equity? (e) Did the understanding (if any) between the parties confer an advantage on Lidl and/or a disadvantage on Generator so as to make it inequitable to allow the Defendant to retain the Property for itself.

[37]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. (5) Generator's Case

[38]The following summary of Generator's case is taken from paragraph 35 of Generator's Skeleton Argument:(1) Before Lidl entered into the contract with the Vendor, there was a clear understanding between Generator and Lidl that Lidl would acquire the property for the purpose of a joint venture whereby Generator would apply for planning permission to build a Lidl store and a number of flats and would then build out that mixed use development with Lidl taking the store and Generator the flats; the parties had agreed that Lidl should be the purchaser rather than Generator but that was not intended to affect the essence of the joint venture and was certainly not intended to enable Lidl to cut Generator out.

(2) The arrangement between Lidl and Generator was not contractually enforceable; although it had been expected that they would agree Heads of Terms before Lidl signed the contract of purchase, the Heads of Terms were still in a state of negotiation (albeit that they had reached the third draft). That, however, does not prevent the equity arising.

(3) It was always intended that Generator should obtain an interest. What was contemplated from the time Lidl sent Generator the first draft of the Heads of Terms was a sale of the site to Generator and a lease back of the completed store to Lidl.

(4) Generator stepped aside and allowed Lidl to be the purchaser in reliance on the joint venture understanding, thus conferring a benefit on Lidl and involving a disadvantage to themselves. (6) Lidl's Defence

[39]Lidl's case was helpfully condensed by Mr. Johns in his closing submissions into 4 "limbs", as follows:(1) The fact that the negotiations between Generator and Lidl were subject to contract is fatal to the claim to a constructive trust.

(2) Generator and Lidl contemplated formal written contractual documentation and there was a mutual intention not to be bound until a binding written agreement. That is likewise fatal to the claim to a constructive trust.

(3) At the very least, the circumstances including the commercial context and the absence of agreement on crucial parts of the commercial deal between Generator and Lidl indicate that there was never a common intention to enter into any kind of legal commitment.

(4) Generator did not show on the evidence that it acted in reliance on an agreement that it will obtain some interest in the Site.

[40]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. (7) Outline

[41]In the light of the way in which the parties have framed their respective cases, I propose to address the following issues:(1) Whether, as Lidl's contends, the fact that the negotiations between Generator and Lidl were subject to contract is fatal to Generator's claim.

(2) Whether there was, in all the circumstances, an "arrangement or understanding" sufficient to give rise to a Pallant v Morgan equity.

(3) Whether Generator acted in reliance on that arrangement or understanding to Lidl's advantage and/or Generator's disadvantage.

[42]However, I consider first the relevant events and the evidence relating thereto in more detail. I do so in relation to five stages:(1) The agreement to make a joint bid, i.e. the period down to 6 November 2013.

(2) The bidding stage, i.e. the period from 6 November 2013 until the Vendor accepted the joint offer and sent the draft Heads of Terms on 6 December 2013.

(3) The decision that Lidl should be the sole purchaser, i.e. the period from 6 to 18 December 2013.

(4) The path to exchange of contracts for the purchase of the Property on 14 February 2014.

(5) Events after exchange of contracts for the purchase of the Property.

[43]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:(1) Mr. Barnes and Mr. Orr were mistaken when they said in their statements that on 14 November 2013 they travelled to Lidl's offices in Lutterworth to attend a meeting, when in fact they took part in a telephone call on that day.

(2) Mr. Beaumont accepted, in effect, that his recollection of the meeting on 6 December 2013 could have been incomplete. He could not remember the discussion which Mr. Barnes and Mr. Orr remembered about Lidl providing funding, but when I asked him he confirmed that he was not saying that it didn't take place.

[44]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.

[45]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."

[46]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. (8) The Agreement to make a Joint Bid

[47]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.

[48]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.

(a) The Identity of the Purchaser

[49]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.

[50]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:

"LIDL UNCON - We buy RESIDENTIAL + deliver store"

[51]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.

[52]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.

(b) The Alleged Agreement on a 50:50 Split

[53]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."

[54]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.

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

"This was not going to be a "standard" joint venture where the parties split everything down the middle on exit because one party (Generator) was going to build the scheme and then sell the residential units whilst the other (Lidl) was going to be a retailer taking possession of the completed retail unit and then trade from the store. Lidl's investment interest was longer term whilst Generator's role was that of a developer and delivery partner (i.e. the party who would build out the scheme including the construction of the store and handing it over to Lidl on build completion)."

[56]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.

(c) The Need for Board Approval

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

"Please provide a proposed timeframe for exchange of contracts and completion and provide details of your own internal approval process including Main Board approval."

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

"5. Exchange 25 working days (7 day board approval) & 20 day completion timing."

[59]Mr. Orr's note of that meeting reads:

"* 7 DAYS FOR BOARD APPROVAL * FROM OFFER ACCEPTANCE"

[60]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:

"I think we are better served to confirm solicitors are ready to go, rather than highlight that there is a further Board approval process to go through. In reality it is likely to take the vendor at least seven days from offer acceptance to issue a full legal pack, and if necessary solicitors can soft pedal the other side until formal Board approval is secured in the background. …"

[61]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.

[62]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.

[63]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." (8)(d) Simultaneous Exchange

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

"EXCHANGE SIMULTANEOUSLY ON DEAL WITH GG."

[65]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.

(e) The Proposed Joint Venture with the Vendor

[66]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.

(f) Generator and Lidl as Partners

[67]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:

"We are looking to submit an unconditional offer with a residential development partner, …"

[68]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. (9) The Bidding Process

[69]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.

(a) Ongoing Discussions between Generator and Lidl

[70]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.

[71]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.

[72]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:

"We have also been giving some thought to a potential deal structure between us, and whilst I agree with you that we will not get anything agreed before we have secured our position on the site, perhaps we can run through our suggested structure with you on our call tomorrow?"

[73]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.

(b) Generator's Contribution to the Success of the Joint Bid

[74]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.

[75]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:(1) There were 3 bids in the initial round which were conditional on planning permission. The amount of these bids was from £8m to £9.25m. These bidders were not invited to submit a second bid.

(2) There were 6 bids which were unconditional. 4 of these bidders (including Generator) were invited to submit a second bid by 20 November 2013. The other 3 bidders offered from £6.1m to £6.86m, but in each case with 30% of the purchase price deferred for 2 years.

[76]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.

[77]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."

[78]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: "Generator have helped Lidl to obtain pole position and have a good relationship with the vendors." (10) The Decision that Lidl should be the Sole Purchaser

[79]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.

(a) The 6 December 2013 Meeting: Basis

[80]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).

[81]On the other hand:(1) 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.

(2) It was not suggested that Mr. Beaumont 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.

(b) 6 December Meeting: References to Joint Venture

[82]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.

[83]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:(1) Mr. Barnes said that Mr. Beaumont and Mr. Barber "confirmed that they needed us to work with them on the joint venture."

(2) Mr. Orr said that Mr. Beaumont said that "his board required us as an experienced partner in order to be comfortable with the deal."

[84]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.

[85]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.

(c) The 6 December 2013 Meeting: Deal Structure

[86]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:

"Structure 1. Lidl buy land. 2. GD run planning and costs. 3. GD build bldg. ◦ Shell & core ◦ M & E ◦ essentially pre-fit out NB: Surface car park without resi above is essential."

[87]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:

"In terms of the deal between us and Lidl, we need to sit down at some point on this tomorrow and agree what we are comfortable with ( … ). A number of potential structures were discussed on Friday that we need to bring you up to speed with. Christian has reiterated that they are not looking to "squeeze the commercial pips" from the deal and the cleaner the proposal the better. The issue is going to be our old friend the first charge, and keeping their store unfettered. I think there are ways around this, however it may involve us purchasing the residential standalone areas on planning, to allow us to charge these to finance the entire site."

[88]Mr. Orr also sent an email on 10 December 2013 to Mr.

(d) The 6 December 2013 Meeting: the Identity of the Purchaser

[89]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.

[90]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.

[91]Whatever reasons were given, Mr. Barnes and Mr. Orr accepted in the meeting that Lidl could be the sole purchaser. (10)(e) The 6 December 2013 Meeting: Simultaneous Exchange of Contracts

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

"It did not matter to us that Lidl, our selected joint venture partner, were the party initially acquiring the freehold provided that we incorporated a mechanism whereby our senior debt provider could take the security on part of the site when Generator borrowed funds for the construction costs to deliver the retail and residential aspects of the scheme."

[93]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.

[94]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.

[95]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.

(f) 10 December 2013

[96]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:

"Of note, Christian shared with me that he had sounded out their London region on the structure of the deals they have done with Crest. He is awaiting this detail, however, did share with me that London's suggestion was that this scheme was taken forward with Crest! To their credit, they pushed back on this and confirmed their commitment to Generator, however it does highlight that we cannot hang around or be complacent in getting our deal with Lidl agreed."

[97]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.

[98]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.

(g) 11 December 2013

[99]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:

"As just discussed on the phone, I have been giving further thought to the entity that should be referred to as the Purchaser and I am uncomfortable with removing our name from the HoT's/contract at this stage and have therefore listed us as joint purchasers. … At the appropriate stage as we approach exchange, we will of course remove ourselves from the contract. By this point we will hopefully have agreed the contract between us as well."

[100]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.

[101]Mr. Barnes said as follows in relation to this email: "I think it important that our presence continued to be noted.

(h) 12 December 2013

[102]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".

[103]Mr. Orr then sent Mr. Beaumont an email which said:

"Obviously things have moved on following our discussion this morning and on reflection, one solution might be refer to us in the HoTs/Lock Out as the Delivery Partner, rather than purchaser?"

[104]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):

"Lidl are seeking to take control of matters going forward and are insisting on us being removed from HoT's, the Lockout and want a meeting with the Whight's next week. I am not happy about this at all given that we have not finalised the deal between us and Lidl yet so we are exposed and could be pushed out of the deal once they have a direct relationship with the vendor. I am particularly concerned by this as we know the London team of Lidl have already said internally why are they doing a deal with Generator when they are currently doing 3 deals with Crest and the site is in Crest's backyard! The Board Director [i.e. Mr. Fischer] was over from Germany yesterday and visited the site and loves it and wants the deal done quickly and by no later than 31st January. To secure our position, if Lidl keep throwing their wait (sic) around, I want the ability to enter into the Lockout solely in Generators name which will then buy me the time to sort Lidl out. This will cost us £20k and I would like you authority to proceed on this basis please?"

[105]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":(1) Mr. Orr had said in his email of 11 December 2013 that he was uncomfortable with Mr. Barber's suggestion, and Mr. Barnes' evidence was that he wasn't comfortable with it either.

(2) Mr. Barnes said that he was made "more comfortable" by the suggestion that Generator was named as the delivery partner, but neither of them claimed to have been "entirely comfortable".

(3) On the contrary, Mr. Orr's evidence was that he was very concerned and Mr. Barnes agreed with the statement which was put to him that Mr. Isaacs realised that they weren't safe until they had got their concluded agreement with Lidl.

[106]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.

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

"We stay in control of "

OUR" deal until we have agreed terms between us and Lidl and there is to be no meeting between Lidl and the Whight's until this is done and we are happy that our position is secure."

[108]It is implicit that, at the time Mr.

(i) 13 December 2013

[109]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.

[110]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.

[111]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).

(j) The Lockout Agreement

[112]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:(1) Lidl and Generator were both parties to the Lockout Agreement. Lidl was described as the Buyer and Generator as the Delivery Partner.

(2) The lockout period was until 14 February 2014.

(3) The obligations normally imposed on the buyer in such an agreement were imposed on the Buyer and Delivery Partner.

(4) Generally, the Buyer and Delivery Partner were referred to together throughout the Lockout Agreement.

(k) Direct Contact between Lidl and the Vendor

[113]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:

"Why are Lidl in direct contact? I thought we are leading the acquisition and they are just being copied in for information."

[114]In his reply, Mr. Barnes said as follows:

"… [Lidl] have also started engaging direct on access for SI as they want to use their engineer. Not ideal and we are monitoring things very closely. "

Rocking the boat" would not bode well for a joint venture partnership although we are making our voice heard with all parties. I do not believe there is anything suspect about Lidl's actions, it's just that they are rushing to get things organised before Xmas shutdown."

[115]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".

(l) Lidl's Briefing Pack

[116]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":

"Proposal is to find a Developer Partner to complete the development in return for a completed Lidl foodstore on a 999 year lease term with a Total Investment of circa £6,300,000. The Region would be purchasing the site prior to entering into legal contracts with a Developer Partner."

[117]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.

[118]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.

[119]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.

(m) The First Draft of the Joint Venture Heads of Terms

[120]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".

[121]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. (11) The Path to Exchange of Contracts

[122]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.

[123]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."

[124]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. (11)(a) The Second and Third Drafts of the Joint Venture Heads of Terms

[125]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:(1) the proposed deferral of part of the price for 12 months;

(2) a proposed obligation on Lidl not to vary its contract with the Vendor without Generator's approval; and

(3) a proposal that, if planning permission was not obtained within 24 months, then: (a) Generator would have the option to purchase the Property outright (if planning permission could be obtained for a 100% residential development); and (b) if Generator did not exercise that option, the Property should be sold and any profit divided equally between Generator and Lidl.

[126]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.

[127]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.

(b) The Meeting on 10 January 2014

[128]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.

[129]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.

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

"James [Barnes] said that we were concerned about Lidl's intentions, particularly as by this stage they had taken some time to come back on our JV HoTs. We said that we were feeling a bit vulnerable and exposed. On seeking these assurances, Christian and Robert said words to the effect that nothing untoward was going on and that they were still going to develop the site with us, hence the agreement that all due diligence would be in joint names. …"

[131]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.

[132]Mr. Barnes said as follows in his witness statement:

"70. … Given the events of December, at the start of the meeting I raised concerns over the issue surrounding our name being removed from the acquisition HoTs as purchaser and instead having ourselves named as delivery partner. It was made clear that this was a joint venture between the parties and that notwithstanding the assurances that had been given to me by Robert, I obviously needed to satisfy fellow members of my Board that Generator was not left exposed now that we were following the alternative approach of Lidl initially acquiring the site and Generator being the delivery partner rather than the originally envisaged straight 50:50 split. 71. I remember in particular that Robert [Beaumont] did get a little frustrated at me doubting him and provided full assurances to me in this regard that again, to paraphrase, "we are all gentlemen and there has to be trust between us" … 72. I got the impression that Robert thought I was questioning his integrity and he said that if there wasn't trust between us then we shouldn't go forward and we should stop now. I assured him that there was trust between us but he must appreciate that I was just one member of the Generator Board and the other Generator Board Members, who were not directly involved in discussion and did not have the benefit of the face to face assurances that I had been given, were therefore a little nervous about timing. I was given the reassurance that I was seeking. 73. This sort of comment from me was never met with anything other than assurance from Robert that there was nothing to be concerned about: he said that we could trust them and that this should be the start of "something wonderful". … I explained to Robert and Christian that we needed to voice our opinion about securing our position because it was now Lidl's name on the contract and that they would surely understand my fellow Generator Board members' concerns about our potential exposure. This was acknowledged by them on each occasion that we discussed and, on each occasion, neither Robert nor Christian made any comment to the contrary."

[133]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.

[134]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.

[135]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?

[136]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.

[137]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.

[138]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:

"We are keeping our options open and I am still struggling with the build costs estimates at present. In any event, we are 1, potentially going to still deliver the Lidl store and 2. Need to know that the abnormal build aspects are properly investigated. … Next week is essentially the week that we agree the deal or not with Lidl. I had open financial discussions with Lidl yesterday and this has placed pressure on the deal as the numbers are obviously not where they want them to be. I suspect we will actually know by mid-week whether the deal can still go forward. Whilst I remain positive, if we do fall out of the deal over the next few days, we will have limited our abortives accordingly."

[139]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.

(c) The Fourth Draft of the Joint Venture Heads of Terms

[140]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.

[141]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.

(d) Lidl's Board Pack

[142]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:

"An offer from Generator of £500,000 to build out the scheme in line with the terms above has been received. However the Region believes that this offer can be increased by actively marketing the site following exchange of contracts."

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

"Lidl to actively market the site to source development partner to run planning and build out the site including a Lidl foodstore and associated car parking. The Region already have an opening offer from Generator of £500,000 to build out the scheme in line with the terms above has been received. However the Region believes that this offer can be increased by actively marketing the site following exchange of contracts. The major house builders (ie Crest Nicholson) have not been approached at this stage as they were competing with Lidl to acquire the site."

[144]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.

[145]Lidl's board approved the purchase of the Property.

(e) The Joint Venture Lockout Agreement

[146]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: "5.2 If Generator decides not to proceed with the Transaction [Generator] shall immediately give notice to [Lidl] and this Agreement then will lapse.

(f) Generator's Board Paper

[147]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:

"In order to progress to exchange of contracts with LIDL, and the confirmation of the correct price our consultant team will have to undertake a significant amount of pre-contract work on our behalf. We anticipate the following potentially abortive expenditure:" [Legal and design team costs totalling £80,000 were then listed.] "

Should the deal go abortive we will of course seek to restrict the above costs to a minimum." "Given the amount of pre-contract due diligence required, we anticipate that LIDL will exchange on the Site purchase before we are in a position to enter into a joint venture contract. However, we are working towards confirming HoT's and hope to have these agreed and in place between the parties prior to site exchange no later than 14th February. A copy of the HoT's will be circulated to the Board once agreed. In addition, and in order to further protect our position, we will be entering into an exclusivity agreement with LIDL for 3 months, which we expect to be executed in the next few days ( … )." "… With LIDL embarking on a significant expansion programme over the next 5 years, there exists the opportunity to form a long term partnership with the company, should we be able to structure this first opportunity successfully."

[148]Mr. Pettit was one of the Generator board members who received this report. He confirmed that:(1) He understood that the purchase of the Property was to go ahead before Generator was in a position to contract with Lidl.

(2) The board was being asked to make money available for costs which might prove to be abortive because the Lidl deal might not go through.

(3) The board was not asked to rely on any assurances which Lidl had given. (In saying this, Mr. Pettit contradicted Mr. Isaacs' evidence, which I do not accept, that he relayed to the board assurances which he claimed were relayed to him by Mr. Barnes.)

(4) It wasn't made clear to him that Lidl and Generator were already bound to proceed in joint venture with one another.

[149]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. (12) Events after the Exchange of Contracts

[150]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.

(a) Lidl's Marketing of the Property

[151]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:

"Now that we have secured the site, we are going out to three/four National house builders who were competing for the site to see if they are interested in working with Lidl on a mixed use development."

[152]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.

[153]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:

"Similarly, at £3m the site still works at this build cost and as discussed, it is this sum that I believe is required to get us into the lockout with Lidl."

[154]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:

"We need to secure this site right now as a priority over everything else."

[155]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.

(b) Further Drafts of the Joint Venture Heads of Terms

[156]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:(1) if the parties agreed, Generator would seek planning permission for a 100% residential scheme and, if that was granted, Lidl would have the option either: (a) to retain the property, on payment of Generator's planning costs; or (b) to sell the Property, with 30% of any profit going to Generator; or

(2) if the parties did not agree to Generator seeking planning permission for a 100% residential scheme, then Lidl would retain the Property, on payment of Generator's planning costs.

[157]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.

[158]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:

"Clause rejected by Lidl's Board. Generator Board to confirm acceptance to this point in principle."

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

"… We do however accept that since it was agreed that you acquire the site rather than us acquiring it jointly, the risk profile has changed for us. We are therefore prepared to recommend to our Board the removal of these clauses from our contract with you, subject to a new clause being inserted whereby if Lidl were to sell the site for residential use in the future, Generator will be refunded all planning costs incurred. …"

[160]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. (13) Did the Agreement to Negotiate Subject to Contract Preclude the Equity?

[161]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.

(a) Banner Homes

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

"(2) It is unnecessary that the arrangement or understanding should be contractually enforceable. … In particular, it is no bar to a Pallant v Morgan equity that the pre-acquisition arrangement is too uncertain to be enforced as a contract - … - nor that it is plainly not intended to have contractual effect - see Island Holdings Ltd v Birchington Engineering Co Ltd 7 July 1981."

[163]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".

[164]This reading of Chadwick L.J.'s second proposition is reinforced by consideration of:(1) the fact that Banner Homes was itself a case where the parties had been negotiating on a "subject to contract" basis; and

(2) the authority to which Chadwick L.J. referred, i.e. the judgment of Goulding J. in Island Holdings Ltd v Birchington Engineering Co Ltd (1981) unreported, 7 July ("Island Holdings").

[165]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):

"(a) that the site should be purchased from M.L.H. at a price of £3.4m. with a sub-sale to Hewland at £1.2m., leaving a balance of £2.2m. to be funded by Luff and Banner as joint venturers; (b) that up to £100,000 would be spent on initial work, to include demolition, marketing, roads and any requirement imposed by the local authority; (c) that the purchase and initial work would be effected through a new single enterprise company to be acquired for the purpose and to be owned 50:50 by Luff and Banner; (d) that, at the end of nine months from the acquisition, unless Luff and Banner had reached agreement as to the development of that part of the site remaining after the sub-sale to Hewland, that remaining part of the site would be the subject of a "

Texas shoot-out" or disposed of on the open market at the best price that could be obtained. A "Texas shoot-out" was understood to mean an arrangement under which either party could offer put and call options at a specified price or prices which the other could accept or refuse."

[166]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):

"It is clear, therefore, that, to Banner's knowledge, exchange of contracts was to occur, and did occur, before the parties were signed up to any formal written agreement. It is equally clear that Luff had given Banner to understand that it was content to exchange contracts without requiring any form of separate guarantee committing Banner to contribute one half of the costs of the net site and that the reason for this was that the mutual rights and obligations of the parties would be set out in the shareholder agreement. It is also clear that both sides intended to enter into the shareholder agreement as soon as possible, the only reason for the delay being Mr. Vass's absence on holiday. At no stage was any indication given that reasons existed why the agreement should not be entered into. Specifically nothing was said on either side to indicate that any difference of principle existed which would prevent the parties from agreeing terms."

[167]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):

"First, although from 14 July until 16 November (if not later) Luff gave Banner to understand that there would be a joint venture and that it intended to enter into a shareholder agreement to regulate their relationship and although, for its part, Banner continued throughout to have every intention of entering into a joint venture with Luff and of agreeing and signing a shareholder agreement, the communications between them proceeded on the footing, as I have mentioned, that, unless and until a shareholder agreement was entered into, neither side was legally committed. Implicit in this was that either side had the right to withdraw… That being the position, I do not see how Banner's hope and expectation, however much Luff may have encouraged it, that a formal agreement would be entered into, following which Banner would discharge the obligations and take the benefits arising under the joint venture, can give rise to the common arrangement or understanding which is a necessary foundation for the establishment of the equity. I do not see how equity can turn a common arrangement or understanding, which is implicitly qualified by the right of either side to withdraw, into an unqualified arrangement or undertaking which denied any such right. It is equity's function, where it can, to give effect to the parties' bargain, but not to make or alter it for them."

[168]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.

[169]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.

[170]This submission is inherently unattractive:(1) As Etherton L.J. said in Crossco (at paragraph 79 of his judgment), the decision in Banner Homes cannot be doubted at the level of the Court of Appeal.

(2) Where negotiations are subject to contract, the nature and effect of their "subject to contract" status is usually unaffected by the question whether they are expressly or impliedly subject to contract.

(b) Island Holdings

[171]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.

[172]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.

[173]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.

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

"I look at the matter in this way. The plaintiff and the defendant were once in a position of equal opportunity to obtain a leasehold interest in the site by tender. They agreed that instead of competing the plaintiff should leave it to the defendant alone to exploit the opportunity with a view to the subsequent benefit of both parties according to a particular agreed proceeding. Later, as a direct result of their arrangement, the defendant obtained an opportunity to purchase the site in fee simple. I think it clear on the evidence that the original business relationship was carried forward into this new situation. It must be very doubtful whether the county council, after going so far, and spending so much time in negotiation with the defendant, would have responded to a fresh offer from the plaintiff unless made at a greatly enhanced price. Moreover, the defendant by inviting the plaintiff to buy the front part of the site freehold for £3,030 subject to contract was plainly proposing or assuming that the plaintiff would not make any such rival approach. The agreement was discharged and a fresh negotiation began, but nevertheless the defendant's final acquisition of the site arose out of its original tender coupled with the plaintiff's willingness to put in a lower tender. …"

[175]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.

[176]However, it is right to acknowledge that Island Holdings is not an easy decision to follow:(1) Chadwick L.J. treated it as a case of a Pallant v Morgan equity, but Goulding J. did not refer to Pallant v Morgan in his judgment.

(2) Moreover, the case was pleaded as one of breach of fiduciary duty, and that was the basis on which Goulding J. decided it, but, as I have already pointed out, the Court of Appeal has decided in Crossco that the Pallant v Morgan equity is not based on breach of fiduciary duty, but on a common intention constructive trust.

(3) It is perhaps open to question whether Goulding J. would have reached the same decision if there had never been a binding agreement between the parties and if the agreement of 18 August 1976 had been expressly made subject to contract.

(c) London & Regional

[177]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):

"A Pallant v Morgan equity may arise where the arrangement or understanding on which it is based precedes the acquisition of the relevant property by one party to that arrangement. It is the preacquisition arrangement which colours the subsequent acquisition by the defendant and leads to his being treated as a trustee if he seeks to act inconsistently with it."

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

"If the property that is to be the subject of the joint venture is owned by one of the parties before the joint venture has been embarked upon (as opposed to being acquired as part of the joint venture itself), on what basis, short of a contractually complete agreement for the joint venture, can it be right to regard the owner as having subjected the property to a trust and granted a beneficial interest to the other joint venturers?"

[179]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:

"8.7 The Vendor and the Purchaser shall use reasonable endeavours to agree the terms of a joint venture regarding Cardiff and Belfast Airports having regard to the principles set out in the note in the agreed form, each party recognising that the Vendor's Agreement to the final terms of the joint venture will be subject to governmental and regulatory approvals, share holders' consent, if relevant, and to operational constraints."

[180]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.

[181]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.

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

"The "subject to contract" state of the joint venture negotiations at the date of the Sale Agreement indicates that there is nothing unconscionable in TBI's subsequent refusal to proceed with the joint venture after the Sale Agreement was completed. The validity of this conclusion can be tested by asking this question: when did the trust and the estoppel take effect? It is accepted that no constructive trust or estoppel could have arisen after 13 May 1999 when the parties expressly agreed in the Sale Agreement that the joint venture was "subject to contract"

. In general, it is not unconscionable for a party to negotiations, which are expressly stated to be "subject to contract," to exercise a reserved right to withdraw from the negotiations before a final agreement has been concluded. If that was the effect of the agreement between the parties on 13 May 1999 I do not see how the conduct of TBI before that date can now be relied on to establish unconscionable conduct giving rise to a constructive trust or an estoppel. For the court to hold that a constructive trust existed in those circumstances would be contrary to what the parties had expressly agreed was to be subject to the making of a future agreement. In Derby & Co Limited v ITC Pension Trust Limited

[1977] 2 All ER 850

at p 896 (a case concerning "subject to contract" negotiations for a new business tenancy) Oliver J said:

"… where parties negotiate on a basis "subject to contract" everybody knows that there is a risk that, at the end of the day, either side may back out of the negotiations, up to the point where leases are exchanged. I do not think that a party who relies on the other side not to back out can be said to have estopped that party from backing out simply because he has not done something which he might have done in the intervening period.""

[183]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:

"The cases on constructive trusts cited by Mr Howard were not concerned with "subject to contract" negotiations for the disposal of land, such as existed in this case. The cases reviewed in detail by the Court of Appeal in Banner Homes involved a pre-acquisition understanding between the parties enabling one party to acquire land without competition from the other party. The other party is induced not to bid by an understanding that he will be permitted to share in the property acquired. In those circumstances he is entitled to invoke a constructive trust."

[184]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:

"The joint venture related to a property which had been owned by TBI before the joint venture had been embarked upon."

[185]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:

"The Court of Appeal reversed Blackburne J's decision to reject the plaintiff's claim in equity on the ground that the equity was invoked to turn an understanding "implicitly qualified by the right of either side to withdraw," into an unqualified arrangement or undertaking which denied any such right.""

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

"47. It is true that Banner Homes was a "no contract" case in which the equity was invoked; but it was not, as Mr Howard attempted to argue, the same as a "subject to contract" case in which it is part of the bargain between the parties that specific matters remain in a state of negotiation until a future agreement is made. Banner Homes is distinguishable from a case such as this, in which the two large legally represented commercial organisations have negatived an intention to create obligations in respect of the relevant joint venture land (the Belfast Land and the Cardiff Land) and have done so explicitly in a legally drafted, formal agreement (the Sale Agreement). The recorded intentions as to the joint venture implicitly proceeded on the basis that no concluded agreement had been reached and contemplated that such an agreement might never be reached. 48. Nor was Banner Homes a case, such as this, in which the person sought to be held liable as a constructive trustee has an existing entitlement to the land in question and the claimed agreement to dispose of it, in this case to a joint venture, is too uncertain and vague to be enforced. The effect of accepting L&R's submissions would be that the Belfast Land and Cardiff Land would be held on a constructive trust for L&R and TBI in equal shares, even though the parties have expressly agreed that the joint venture in respect of that land was still in negotiation. L&R seeks to invoke equity not to counter unconscionable conduct by one party which would defeat the informal understanding of both parties, but to reverse the effect of the express agreement they have made and replace it with state of affairs (joint ownership of the land with no joint development) which was never contemplated."

[187]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:(1) As he acknowledged in paragraph 44, and in the first sentence of paragraph 48, of his judgment, Mummery LJ was speaking in the context of a case which was significantly different on its facts from those cases in which a Pallant v Morgan equity has been found, in that it did not involve a proposed joint venture for the acquisition of property. Mummery L.J.'s dicta have to be read in that context.

(2) Moreover, Mummery L.J.'s description of Banner Homes as a "no contract" case has to be read in the context that at least one of the reasons why there was no contract in Banner Homes was that the negotiations between the parties over the proposed joint venture were (impliedly) subject to contract.

(3) Thus, when he described London & Regional as a "subject to contract" case, Mummery LJ cannot have meant (and Mr. Johns did not contend that he meant) that it was distinguishable from Banner Homes simply because the negotiations between the parties were subject to contract.

(4) Instead, Mr. Johns submitted that the distinguishing factor to which Mummery L.J. was referring was that the negotiations over the proposed joint venture in London & Regional were expressly subject to contract. In effect, therefore, Mr. Johns submitted that Mummery L.J. decided 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.

(5) However, I am not persuaded that Mummery L.J. was even addressing this question. Rather, he was identifying the differences between Banner Homes and London & Regional, and one of those differences was that, whereas there was no contract between the parties in Banner Homes (because their agreement was impliedly subject to contract), there was a contract between the parties in London & Regional, i.e. the Sale and Purchase Agreement, and it was that contract which expressly provided that their discussions concerning a potential joint venture for the development of the Defendant's land at Belfast and Cardiff airports were subject to contract.

(6) As Mr. Gaunt pointed out, Mummery L.J. did not simply describe London & Regional as a "subject to contract" case, but as a "subject to contract" case in which "it is part of the bargain between the parties that specific matters remain in a state of negotiation until a future agreement is made." The bargain referred to was the Sale and Purchase Agreement. Mummery L.J. described London & Regional as a case "in which the two large legally represented commercial organisations have negatived an intention to create obligations in respect of the relevant joint venture land (the Belfast Land and the Cardiff Land) and have done so explicitly in a legally drafted, formal agreement." Again, this was a reference to the Sale and Purchase Agreement.

(e) Kilcarne Holdings

[188]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."

[189]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:(1) The Court of Appeal disposed of the appeal against Lewison J.'s judgment on this point alone: see paragraph 22 of Sir Martin Nourse's judgment (

[2005] EWCA Civ 1355

; [2006] 1 P&CR DG20).

(2) This was the only aspect of Kilcarne Holdings which Lord Scott considered worthy of mention in Cobbe (at paragraph 35). (Cobbe itself was also a case in which, as Lord Scott said at paragraph 36, "The circumstances of the present case are that the property in question was owned by the defendant company before any negotiations for a joint venture agreement had commenced.")

[190]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.

(f) Crossco

[191]Mr Johns also relied on two passages from Etherton L.J.'s judgment in Crossco:, i.e.:(1) From paragraph 107 "While it is true that the absence of a concluded agreement on all terms is not necessarily a bar to a Banner Homes constructive trust, the commercial context and the absence of agreement on critical parts of the commercial deal may indicate that there was never a common intention to enter into any kind of legal commitment: Herbert v Doyle

[2010] EWCA Civ 1095

at [57] (Arden L.J.)."

(2) From paragraph 108:

"Even if the negotiations over the Building were not formally or expressly made "subject to contract" the mutual intention of the parties not to be bound until a binding written agreement had been made is fatal to the claim to a constructive trust: London & Regional Investments Ltd."

[192]However:(1) These statements were made in the context of a case where the Pallant v Morgan equity was obviously inapplicable.

(2) Etherton L.J. cannot have meant to say that Banner Homes was wrongly decided, and the Court of Appeal in Banner Homes decided that it was not fatal to a Pallant v Morgan equity that the negotiations between the parties had been impliedly subject to contract.

(3) Etherton L.J.'s dicta do not support Mr. Johns' argument, since (a) The dictum from paragraph 107 merely sets out what may be the position on the facts of a particular case, and does not support the argument that it is necessarily fatal to a Pallant v Morgan equity that the parties expressed their negotiations to be subject to contract. (b) Mr. Johns contended that there is a significant distinction to be drawn between cases in which negotiations are expressly subject to contract, and cases (such as Banner Homes) in which negotiations are impliedly subject to contract. (c) But underlying Etherton L.J.'s dictum in paragraph 108 of his judgment is the notion that (as one would expect) it makes no difference whether negotiations are expressly or impliedly subject to contract. (14) Was there an Arrangement or Understanding?

[193]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:(1) It must precede the acquisition of the relevant property: proposition 1.

(2) It need not be contractually enforceable: proposition 2.

(3) It must contemplate that: (a) one party will take steps to acquire the relevant property; and (b) if he does so, the other party will obtain some interest in that property: proposition 3, 1st sentence.

(4) The acquiring party must not have informed the non-acquiring party before the acquisition that he no longer intends to honour it: proposition 3, 2nd sentence.

[194]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.

[195]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.

[196]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):(1) What happened before 6 December 2013 established the context for what happened during that period. This included, in particular, the following: (a) The bids were expressly made jointly and in terms which described Lidl and Generator as joint venture partners. (b) Generator made a significant contribution to the success of the joint bids.

(2) What happened after 14 February 2014 is only relevant insofar as it sheds light on whether an arrangement or understanding was made before that date.

(3) But the crucial period is that from 6 December 2013 to 14 February 2014. It was only in that period that the parties had to address their minds to the question of what might happen if Lidl alone bought the Property.

[197]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.

[198]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:(1) the mechanism which was proposed and (subject to contract) agreed in Banner Homes, i.e. that if the parties could not agree on the terms of the Proposed Transaction, then they would either hold a "Texas shootout" or split the profits (or losses) of the acquisition equally; or

(2) another mechanism which confirmed (and embodied in a contract, or at least an agreement made subject to contract) that if Lidl acquired the Property, Generator would obtain some interest in it.

[199]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:(1) Lidl's proposal, in the first draft of the Joint Venture Heads of Terms, was simply that the Property would remain Lidl's.

(2) Generator responded with a proposal (in the second draft of the Joint Venture Heads of Terms) that, if an alternative 100% residential scheme did not proceed, the Property would be sold and the profits divided equally between Generator and Lidl. (This was not dissimilar from the fall-back position agreed in Banner Homes.)

(3) However, Lidl did not agree to this. In the fourth draft of the Joint Venture Heads of Terms (which was the last draft produced before Lidl exchanged contracts for the purchase of the Property) Generator merely noted (in Mr. Orr's comment) that this was still a matter of debate.

(4) On 7 February 2014 Generator produced the draft Joint Venture Lockout Agreement. This acknowledged (in clause 8.1) that the parties were not committed to the Proposed Transaction and (in clause 5.2) that Generator could decide not to proceed with the Proposed Transaction.

(5) In the fifth and sixth drafts of the Joint Venture Heads of Terms, Generator made different proposals as to what would happen if planning permission was not forthcoming for the proposed mixed use scheme. Each of these allowed for the possibility that: (a) Generator would obtain planning permission for a 100% residential scheme; but (b) Lidl, at its election, would retain the Property, on payment of Generator's planning costs.

(6) All of these provisions were deleted from the seventh draft of the Joint Venture Heads of Terms. Mr. Orr's comment recorded that they had been rejected by Lidl's board. In his email of 28 March 2014 Mr. Orr proposed instead a provision that if Lidl were to sell the site in future for residential use, Generator would be reimbursed its planning costs.

[200]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.

[201]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.

[202]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.

[203]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:(1) It was initially intended that there would be a simultaneous exchange of contracts as between Lidl and the Vendor and as between Lidl and Generator, but it became clear with time that this was not going to happen.

(2) Generator was named as the "Delivery Partner" in the Heads of Terms, but the meaning of this expression was not spelt out.

(3) The Lockout Agreement provided, in clause 6.1, that its purpose was to secure to Lidl and Generator the exclusive opportunity to negotiate and exchange an agreement for sale and purchase of the Property, but as between Lidl and Generator it was intended that Lidl would be the only party to the agreement with the Vendor for the sale and purchase of the Property.

(4) In the draft Joint Venture Lockout Agreement, Generator proposed (in clause 5.2) that it should have the right to choose not to proceed with the Proposed Transaction. This proposal is difficult to square with Generator's claim that Generator and Lidl were, in effect, already bound to one another.

[204]Ninthly, Generator was concerned and recognised that it might be "pushed out of the deal:"(1) Mr. Orr noted on 10 December 2013 that "we cannot hang around or be complacent in getting our deal with Lidl agreed."

(2) Mr. Orr perceived what he called a "red flag" on 12 December 2013.

(3) Mr. Isaacs wrote on that day that he was not happy and that Generator was exposed and could be pushed out of the deal. Mr. Barnes agreed that they weren't safe until they had got their concluded agreement with Lidl.

(4) On 1 February 2014 Mr. Barnes regarded it as a possibility that Generator would "fall out of the deal."

(5) On 10 February 2014 Mr. Barnes wrote in his report to the board that the deal could "go abortive" and Mr. Pettit, one of the recipients of this report, understood that costs were being incurred which might prove to be abortive because the deal with Lidl might not go through.

[205]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. (15) Reliance and Lidl's Advantage/Generator's Disadvantage

[206]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.

[207]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.

[208]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.

[209]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. (16) Summary

[210]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.

[211]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.