Inexperienced Property Developer Lost £450,000

A businessman who hoped to make a multi-million pound profit from a residential development – but instead lost his £450,000 investment – has won what may turn out to be a Pyrrhic victory over his corporate partner in the joint venture. His success may be of little or no value to him because he failed to persuade the High Court that the principal of that company should be held personally liable for his loss.

The claimant, who was not an experienced property developer, had invested in the purchase of land which it was intended would be developed for residential purposes. The defendant developer with whom he undertook the joint venture had a great deal more experience of the property market. As the recession began to bite and property prices fell, the land was sold, undeveloped, at a price which resulted in the claimant losing the entirety of his investment.

The claimant argued that both the defendant and his company, which was also a party to the joint venture, were in breach of the joint venture agreement by arranging the sale of the land in an undeveloped state and sought damages to reflect the loss of very substantial profits that he claimed he would have received had the development been brought to fruition.

The Court upheld the claimant’s plea that the defendant’s company had been a party to the joint venture agreement and had breached its binding obligation to carry out the development. However, because the legal agreements were made with the developer’s company only, the Court went on to absolve the defendant himself of liability.

The defendant argued that the price achieved for the undeveloped land was the best that could be attained in the circumstances. However, the Court ordered an inquiry into the quantum of damages, if any, due to the claimant. The Court noted that the claimant could be left with a judgment against a company that had ceased trading and which might be put into liquidation if ordered to pay a substantial sum.

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