Generator Developments Ltd v LIDL UK GmbH, Court of Appeal - Civil Division, March 08, 2018, [2018] EWCA Civ 396

Resolution Date:March 08, 2018
Issuing Organization:Civil Division
Actores:Generator Developments Ltd v LIDL UK GmbH

Case No: A3/2016/1799

Neutral Citation Number: [2018] EWCA Civ 396



Mr Nicholas Lavender QC, sitting as a Deputy High Court Judge


Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 08/03/2018

Before :





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Between :

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Mr Jonathan Gaunt QC & Mr Adam Rosenthal (instructed by Stephenson Hardwood LLP) for the Appellant

Mr John McGhee QC & Mr Paul Clarke (instructed by Clarke Willmott LLP) for the Respondent

Hearing date : 21 February 2018

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JudgmentLord Justice Lewison:


  1. The issue on this appeal from the judgment of Mr Nicholas Lavender QC is whether Generator Developments LLP (``Generator'') is entitled to an equitable interest in land acquired for development by Lidl UK GmbH (``Lidl''). Mr Lavender decided that it was not. His judgment is at [2016] EWHC 814 (Ch). With the permission of Henderson LJ, Generator appeals. For the reasons that follow, I would dismiss the appeal.

  2. The essence of Generator's case is that it had reached an understanding with Lidl that Lidl would acquire the property in question for the joint benefit of both Generator and Lidl in furtherance of a joint venture development between them. Generator stood aside and allowed Lidl to buy the property on that basis. Those facts give rise to the creation of an equitable interest in the property under the principles known as the Pallant v Morgan equity. The judge rejected that case, largely on the ground that Generator had not established the necessary understanding to bring the principle into play. That was a conclusion of fact.

  3. It is not suggested by Generator that the judge mis-stated the applicable principles of law. Rather, it is said that he did not apply them correctly to the facts that he found. The difficulty for an appellant in successfully appealing on that ground is formidable. This court is very reluctant to interfere with trial judges' findings of fact. The recent cases on that subject are legion. In Henderson v Foxworth Investments Ltd [2014] UKSC 41, [2014] 1 WLR 2600, Lord Reed said [62] that ``[w]hat matters is whether the decision under appeal is one that no reasonable judge could have reached''. At [67] Lord Reed said:

    ``It follows that, in the absence of some other identifiable error, such as (without attempting an exhaustive account) a material error of law, or the making of a critical finding of fact which has no basis in the evidence, or a demonstrable misunderstanding of relevant evidence, or a demonstrable failure to consider relevant evidence, an appellate court will interfere with the findings of fact made by a trial judge only if it is satisfied that his decision cannot reasonably be explained or justified.''

  4. This approach applies equally in cases in which it is not said that the judge has applied the wrong legal test, but has applied the right legal test incorrectly to the facts: see Okotoks Ltd (formerly Spicerhaart Ltd) v Fine & Country Ltd [2013] EWCA Civ 672; [2014] F.S.R. 11 at [50] to [53].

    The facts

  5. I can take the primary facts largely from the judge's careful judgment.

  6. The property in question is Wates Way Industrial Estate, Ongar Road, Brentwood, Essex. At the material time it was owned by Sans Souci Enterprises Ltd, a company controlled by the Whight family. Mr Paul Whight was a friend of Mr Isaacs, the founder and managing director of Generator. Generator is a property development company with expertise in residential and mixed use development. The property was in use as an industrial estate, but the draft local plan allocated it for residential use.

  7. Lidl was interested in establishing a presence on the property and instructed agents to help it acquire the site for use as a supermarket. Generator was also interested in the potential of the property for residential development. Both expressed interest to Mr Brelsford, Sans Souci's agent. Mr Brelsford suggested to Generator that it should speak to Lidl. As a result there was a meeting between representatives of both on 29 October 2013, followed by a conference call on 4 November.

  8. The judge also found that Generator's representatives understood that the proposed purchase 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.

  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 Sans Souci. This remained the case until some time after Generator's revised offer was accepted in December 2013. Generator's offer was shortlisted by Sans Souci, but revised offers were requested. Generator made revised offers on 20 and 21 November (in terms agreed with Lidl) and a further offer on 28 November which Sans Souci accepted, subject to contract. The involvement of Mr. Isaacs and Generator made a material contribution to the success of the joint bid. The Whight family attached significance to the fact that they were dealing with Mr. Isaacs and Generator for a variety of reasons, including: Mr 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 Mr Whight considered would have been undermined by a sale to Lidl alone). These matters made Sans Souci 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.

  11. 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 relating to the transaction with Sans Souci. 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 Sans Souci on 13 December 2013.

  12. At Generator's request, on 18 December 2013 Lidl produced a first draft of Heads of Terms for a proposed agreement between them. This draft agreement went through a number of iterations. Further drafts were prepared on 5 and 10 January 2014, 5 and 17 February 2014 and 17 March and 26 March 2014. The basic structure, common to each draft, was the proposed transaction 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 Lidl would buy the property and, if Generator succeeded in obtaining planning permission, Lidl would then 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. At [18] the judge noted a number of important features of the drafts.

    ``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."''

  13. At [62] the judge held, contrary to Generator's case, that the requirement of board approval applied both to the proposed joint venture agreement and also to the proposed land transaction. The judge found that Mr Orr of Generator had been told of the need for Lidl's board approval at the earlier meeting on 6 December; and he made no finding that any contrary information had been given to him or to any other representative of Generator.

  14. On 23 December 2013 Sans Souci, Lidl and Generator entered into a lock-out agreement relating to the proposed land purchase. Lidl was described as ``the Buyer'' and Generator as ``the Delivery Partner''. The lockout period was until 14 February 2014. The obligations normally imposed on the buyer in such an agreement were imposed on the Buyer and Delivery Partner. Generally, the Buyer and Delivery Partner were referred to together throughout the lockout agreement. Clause 6.1 of the Lockout Agreement provided as follows:

    ``The Seller and the Buyer and the Delivery Partner agree that the purpose of this Agreement is to secure to the Buyer and Delivery Partner the exclusive opportunity to negotiate and exchange an agreement for sale and purchase of the Property and to relieve the Seller of the need to market the Property.''

  15. The date for exchange of contracts for the acquisition of the property was set for 14 February 2014, the date when the lockout period expired. It had been expected that there would be a simultaneous exchange of agreements between Generator and Lidl; but their negotiations were not advanced enough for...

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