Case No: A3/2001/0720
Neutral Citation Number: [2002] EWCA Civ 355
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MR PETER SMITH QC
SITTING AS A DEPUTY JUDGE OF THE
CHANCERY DIVISION
Royal Courts of Justice
Strand, 
London, WC2A 2LL

Friday 22nd March 2002 

Before :

LORD JUSTICE MUMMERY
LORD JUSTICE DYSON
and 
MR JUSTICE DOUGLAS BROWN
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Between :

	LONDON & REGIONAL INVESTMENTS LIMITED	Appellant	
	- and -		
	(1) TBI PLC (2) BELFAST INTERNATIONAL AIRPORT LIMITED	Respondent	

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040,  Fax No:  020 7831 8838
Official Shorthand Writers to the Court)
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Mr Mark Howard QC & Mr Mark Warwick (instructed by McDermott Will & Emery) for the Appellant
Mr Michael Briggs QC (instructed by Norton Rose) for the Respondent
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Judgment
As Approved by the Court

Crown Copyright ©

Lord Justice Mummery : 
1.	This is an appeal from an order made by Mr Peter Smith QC, sitting as a Deputy Judge of the Chancery Division, on 9 March 2001. He dismissed the claims of London & Regional Investments Ltd (L&R). He also gave summary judgment for the defendants, TBI plc (TBI) and Belfast International Airport Ltd (BIA), on their counterclaim. The orders were made on the application of TBI and BIA pursuant to CPR Part 3.4(2)(a) and Part 24.2. The order also contained a consequential declaration and ancillary relief. Permission to appeal was refused by the Deputy Judge and by the single Lord Justice, but was granted on a renewed oral application in open court on 22 June 2001.   
Summary Judgment
2.	The parties agree that the correct approach to an application for summary judgment under the Civil Procedure Rules is stated by Lord Hope in Three Rivers District Council –v- Bank of England (No3) [2001] 2 All ER 513 at 541f to 543a: 
“94... I think that the question is whether the claim has no real prospect of succeeding at trial and it has to be answered having regard to the overriding objective of dealing with the case justly.
95... The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions.  For example, it may be clear  as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence.  As Lord Woolf MR said in Swain’s case [2001] 1 All ER 91 at 95, that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all. ”
3.	 Mr Mark Howard QC, who appeared for L&R, also cited the following passage from Lord Hutton’s speech at 562g:  
“143...But at this stage in the proceedings a court is not concerned to try to assess which side will probably succeed if there is a trial: the question is whether there is material which shows that there are issues which should be investigated at a trial....”
The Facts in Outline   
4.	Since its incorporation in December 1994 L&R has carried on the business of property investment and development. 
5.	TBI, a quoted company, carried on a substantial business embracing both property investment and development and the ownership and management of airports.  By September 1998, however, TBI had decided to focus its activities on its airport interests and to dispose of most of its property interests. The negotiations for the sale of TBI’s property portfolio to L&R began at a chance meeting in September 1998 at Palma Airport in Majorca between the Managing Director of L&R, Mr Ian Livingstone, and the Chief Executive of TBI, Mr Keith Brooks.
6.	The principal negotiations were concluded on 13 May 1999 when a written agreement (the Sale Agreement) was made between TBI and L&R for the sale and purchase of the issued share capital of TBI Investments Ltd and other companies holding properties in TBI’s property portfolio. This method of acquisition achieved a saving of stamp duty. A total purchase price of £190m was to be paid in accordance with the detailed provisions of the Sale Agreement. The payment of £20m was to be deferred and satisfied by the issue of Loan Notes. The balance was to be paid in cash.
7.	The Sale Agreement  also provided:
“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.”
“13.1This Agreement….sets out the entire agreement and understanding between the parties in connection with the Target Group and the sale and purchase and other matters described in it.”
8.	The “note in the agreed form” mentioned in clause 8.7 was one of a number of “Agreed form documents” listed in the “Contents” part of the Sale Agreement. The Sale Agreement, which was completed on 21 June 1999, did not dispose of any interests in land at either Cardiff or Belfast Airports: BIA, a wholly owned subsidiary of TBI, held about 188 acres of development land adjoining Belfast Airport; and TBI was entitled to an option to purchase development land adjacent to Cardiff Airport.
9.	A copy of “the note in the agreed form” is appended to this judgment. A manuscript document concerning “joint venture terms for Remus side deal” was sent to Mr Richard Livingstone, the Managing Director’s brother, by L&R’s solicitors, Lawrence Graham, for his comments on 2 May 1999.  It was faxed back to Lawrence Graham, who faxed a typed 1 page document “Heads of Terms for the proposed Joint Venture” marked “subject to contract” to TBI’s solicitors, Norton Rose, on 10 May 1999. Copies were also faxed to Mr Keith Brooks and to Mr Richard Livingstone. As can be seen from the re-typed amended agreed note appended to this judgment, it is headed

“Principles for Joint Venture
(referred to in clause 8.7)
SUBJECT TO CONTRACT”
10.	Clause 1 of the note, omitting the deletions, stated
“1 … The surplus land at the Airport will be … transferred at cost to...a joint venture company (“Newco”) for deferred consideration.  The consideration will be paid in tranches as parts are developed and sold (or if development retained) by reference to value(s) of developed parts.”
11.	 On 8 June 1999 Lawrence Graham prepared a draft Joint Venture Agreement to reflect the heads of terms attached to the Sale Agreement and sent it to Norton Rose to consider, requesting finalisation prior to completion on 21 June. Nothing was agreed or signed. Mr Brooks was away on business in Australia. Lawrence Graham were informed by Norton Rose on 10 June that it was unrealistic to plan on exchanging that agreement before completion on the 21st and that agreement of the terms of the joint venture was a post-completion matter. After the completion of the Sale Agreement on 21 June L&R took on TBI’s property manager, Mr Geoffrey Springer, and the TBI property team. There was further correspondence between the solicitors about the Joint Venture Agreement, but no final agreement was ever reached. On 1 October 1999 Norton Rose wrote to Lawrence Graham about
“ the proposals to enter into a joint venture arrangement relating to the commercial development of land at Cardiff and Belfast Airports.”
12.	The letter explained that, in the light of a report commissioned by TBI’s internal property committee, it had been decided not to pursue the joint venture with L&R. The letter concluded
“In the light of this very substantial change of TBI’s development plans the Board has concluded that it is not in TBI shareholders’ interests to proceed with the proposed joint venture and that they would not be able to recommend such a venture to shareholders in general meeting.  Consequently, TBI thinks it inappropriate to continue discussions relating to a joint venture.  TBI recognises that this will be a disappointment to London & Regional but against the background of the advice received the Board feels it must accept this advice in order to act in the best interests of TBI and its shareholders.”
13.	Lawrence Graham’s response on 15 December 1999 was that there was a breach of clause 8.7 of the Sale Agreement.
The Proceedings
14.	On 9 August 2000 L&R issued proceedings against TBI and BIA. In the Particulars of Claim dated 23 August 2000, as amended, L&R claimed declarations that (a) BIA holds the freehold land adjacent to Belfast International Airport (the Belfast Land) on trust for L&R and BIA in equal shares and (b) TBI holds its option in respect of land in the vicinity of Cardiff International Airport (the Cardiff Land) on trust for L&R and TBI in equal shares. An order is sought for the transfer of one half of the respective interests in the Belfast Land and Cardiff Land to L&R. There are other claims for misrepresentation of intentions regarding the making of a joint venture agreement with L&R, breach of the trust and/or breach of fiduciary duty and damages for breach of clause 8.7 of the Sale Agreement. As Mr Michael Briggs QC, counsel for TBI, pertinently observed no claim is made by L&R for rectification of the Sale Agreement on the basis that the contractual documents do not accurately record the true agreement of the parties regarding the joint venture.
15.	A defence and counterclaim dated 18 October 2000 was served. The details of the counterclaim are not relevant to the issues canvassed on this appeal. On 3 November 2000 an application was issued on behalf of TBI and BIA for summary judgment against L&R in respect of its claims and on TBI’s counter claim under CPR Part 24.
16.	The essential dispute between the parties, as amplified in the written evidence served on the application for summary judgment, is whether a joint venture between TBI and L&R for the development of the Belfast Land and the Cardiff Land through a joint venture company was an integral part of the deal between TBI and L&R. L&R contends that there was from the outset an oral agreement or understanding between Mr Livingstone and Mr Brooks for a joint venture for the development of the Belfast Land and the Cardiff Land and that L&R would not have purchased the property portfolio at the price of £190m without that agreement or understanding. It is strongly denied by TBI that the joint venture and the purchase of the property portfolio were a package or that any final and binding joint venture agreement was ever reached or that its interest in the Belfast Land and the Cardiff Land is subject to any trust or other obligation.
17.	It is necessary to review in some detail the conflicting evidence in the witness statements of Mr Ian Livingstone and Mr Keith Brooks, as it is submitted by L&R that there is an issue of credibility which makes the case unsuitable for summary judgment: it is impossible to decide who is telling the truth without having a trial.  All that can be said with confidence about their evidence of the oral negotiations for the joint venture between September 1998 and May 1999 is that, however much the negotiating parties may have convinced themselves of the correctness of their recollections, the contradictory accounts cannot both be true.
18.	The dearth of documents, which is truly remarkable in a transaction on this scale, means that the credibility of the detailed recollections often cannot be tested against solid contemporaneous documentary evidence. There is virtually no correspondence or written evidence of meetings and telephone conversations by the parties or their legal advisers. In these circumstances L&R submits that justice requires that it should be allowed to present its evidence at trial and to test the evidence of TBI.
L&R’s Witness Evidence and the Documents
19.	In his witness statement Mr Ian Livingstone describes his first meeting with Mr Keith Brooks in the airport at Palma and on the plane back to London.  They talked about TBI selling its investment property to L&R and entering into a partnership to develop land at Belfast and Cardiff Airports. They agreed that, if such a deal went ahead, L&R should take on, as part of the deal, TBI’s property team managed by Mr Geoffrey Springer.
20.	Mr Ian Livingstone had further conversations with Mr Brooks at the end of October and beginning of November 1998 and meetings with him in late January or early February 1999 at which, in the presence of Mr Richard Livingstone and Mrs Caroline Price (TBI’s Finance Director), they discussed L&R purchasing TBI’s property division and entering into a joint venture with TBI for the development of the Belfast and Cardiff Land.  At a meeting on 16 February 1999 Mr Brooks warned him that TBI would have to sell the property division for book value, which was around £190m. According to Mr Livingstone he would normally expect, in accordance with an alleged practice in the property trading and investment industry, a reduction of the book values by 10 to 15% on the purchase of a large property portfolio like TBI’s. But he was prepared to pay book value in this particular case because he believed that L&R would potentially make significant long term profits on the joint venture: 
“I would stress that at all times the deal included the purchase of the property division and the joint venture in respect of the Belfast and Cardiff land. (paragraph 14)”
21.	Referring to a schedule of TBI investment and development properties dated 13 April 1999 and produced by Mrs Caroline Price, Mr Livingstone points out that it included the Belfast Land and the Cardiff Land, and adds
“Upon this information we made our initial offer to purchase at around book value with us acquiring the rights to develop the Belfast and Cardiff land as part of the deal.”
22.	On 4 March 1999 L&R made a formal written offer signed by Mr Richard Livingstone to purchase the property portfolio (by acquiring shares in the relevant TBI subsidiaries owning the properties) for £190m subject to contract. The offer did not refer to any joint venture proposal. L&R was given sole negotiating rights until 4 May 1999, as evidenced by letters of 24 and 25 March 1999. There were further meetings relating to L&R taking on Mr Geoffrey Springer and his team, because of their knowledge of the property portfolio and, in particular, his expertise and knowledge of the development plans for the Belfast and Cardiff Land.  Solicitors were instructed to prepare the paper work. The draft agreements prepared by Norton Rose and sent to Lawrence Graham did not include the Belfast and Cardiff Land or refer to any joint venture. The separate joint venture note was produced in the circumstances already described.  
23.	Mr Livingstone claims that in further conversations with Mr Brooks in early May he was assured that, although Mr Brooks would not have time to complete a detailed joint venture agreement, he regarded it as “an intrinsic part of the deal.” Without that assurance L&R would not have entered into the Sale Agreement at a price well in excess of that which would have been paid otherwise. Mr Livingstone told Mr Brooks that, in reliance on this, L&R would wait. It was for this reason that the document setting out the principles for the joint venture was drafted:
“I believed ( and I believed that KB believed) that KB and I had reached a binding agreement.”
24.	The meeting to finalise the terms of the Sale Agreement took place at Norton Rose’s offices on 11 and 12 May 1999. Agreement was reached on 13 May. The final purchase price had not been agreed prior to that. The book value asked for by TBI was £190m.  L&R’s valuation was £189m. Mr Brooks insisted on book value. L&R was only prepared to pay approximate book value, because the deal included the joint venture. Mr Brooks suggested that L&R pay the extra £1m on the purchase price on the basis that TBI agreed to contribute the first £1m towards the cost of the joint venture of the land:
“This was reflected in the document recording the Principles for the Joint Venture attached to the Sale Agreement.  The sale agreement was only entered into on the basis that L&R had an agreement to TBI for the joint development of the Belfast and Cardiff land.”
25.	Almost immediately following the deal a press report appeared in the Estates Gazette (15 May 1999) that L&R had bought the entire property portfolio of TBI and that the parties were jointly to develop the Belfast and the Cardiff Land.
26.	In addition to the witness statement of Mr Ian Livingstone L&R relies on witness statements made by its Finance Director, Mr Richard Luck, by Mr Richard Livingstone, who deals with L&R’s acquisitions and financing matters, and by Mr Geoffrey Springer, former manager of TBI’s Property Division and a director of L&R since 21 June 1999 with responsibility for management of the investment and development properties. Mr Springer supports Mr Ian Livingstone’s account of how the final purchase price came to be agreed at £190m.  Mr Brooks told him that the extra £1m paid by L&R was to be used by TBI as its first £1m payment into the joint venture. 
TBI’s Evidence
27.	In their witness statements on behalf of TBI Mr Keith Brooks and Miss Caroline Price dispute L&R’s evidence on significant points. Mr Brooks agrees that he met Mr Livingstone at Palma Airport on about 21 September 1998 and that they discussed on a very informal basis the possible disposal of TBI’s property portfolio at book value.  He cannot recall any mention of development of the Cardiff and Belfast Land or of any potential joint venture between them. He denies that there were discussions at meetings with Mr Livingstone in February 1999 about the Belfast and Cardiff Land. L&R’s offer letter of 4 March 1999 was expressly stated to be “subject to contract” and made no mention at all of any possible joint venture.  It simply stated that L&R was willing to purchase TBI’s property portfolio for £190m. It was not until about the end of April 1999 that Mr Richard Livingstone asked him whether TBI might be interested in L&R’s involvement in developing TBI’s surplus airport land. No previous mention of any such joint venture had to his knowledge been made.  It had already been agreed that TBI’s property team would go to L&R with the property portfolio. The idea of a joint venture made good sense given L&R’s expertise in mixed use business related developments. But it was a “very preliminary discussion.” It did not deal with such matters as the profits that might be made from any development, the value of the Belfast Land or how much the Cardiff Land, on the exercise of the option, would cost. He asked Mr Livingstone to give him a more detailed proposal in writing to enable him to consider the joint venture proposal properly. The matter of the joint venture was left simply as set out in clause 8.7 of the Sale Agreement and in the agreed note appended to this judgment.
28.	It is pointed out that not a single document passing between L&R and TBI or between their legal advisers mentioned the possibility of a joint venture until late April 1999.  The joint venture was only raised at a very late stage in the transaction. L&R’s suggestion that it waived a 10 to 15% discount on the strength of an undertaking by TBI to use its reasonable endeavours to agree a joint venture, which undertaking was not even documented in the Sale Agreement until the effective date of signing, is described by Mr Brooks as “ludicrous”.  The alleged practice of the industry regarding a discount in the price was disputed.
The Judgment          
29.	On the basis of that evidence the Deputy Judge, reached the following conclusions in his careful and detailed reserved judgment:- 
The claims for misrepresentation respecting TBI’s intention to proceed with the joint development had no realistic prospect of success.  (There is no appeal against that ruling).
The contractual claims were bound to fail, as it was impossible to construe clause 8.7 of the Sale Agreement and the joint venture note as  being of “immediate contractual nature.” There was merely a declaration of intent, which was not intended to be contractually binding. The so-called joint venture contract relied upon by L&R was “too vague to be capable of being enforced with any certainty.” In any event, TBI used reasonable endeavours and did everything it was obliged to do under clause 8.7. 
As for the contention that a constructive trust should be imposed on TBI’s interest in the Belfast Land and the Cardiff Land on the ground that its conscience was affected by an understanding or assurance of a joint venture agreement, there was no realistic prospect of that claim succeeding. He distinguished the principal authority relied upon by L&R, Banner Homes Group PLC –v- Luff Development Ltd [2000] Ch 372. He concluded that TBI and BIA had done precisely what they were required to do in accordance with the signed agreement. To impose a constructive trust on them in all the circumstances did not appear to be a reflection of unconscionable conduct on their part.  For similar reasons he also rejected the submission that TBI and BIA were estopped from disputing the joint venture understanding, pointing out that the principal difficulty on this claim was the fact that the joint venture note was marked  “subject to contract” at the instigation of L&R’s solicitors. The presence of that expression was fatal to the estoppel and constructive trust claims. Neither had any realistic prospects of success and were bound to fail. 
It was accepted by L& R that, in the light of those conclusions, judgment should be given for TBI on its counterclaim.
L&R’s Submissions in Summary
30.	In his excellent submissions in support of the appeal by L&R Mr Mark Howard QC contended that the Deputy Judge was wrong in holding that this was “plainly a case for summary judgment at the behest of the defendants” under CPR Part 24.  He pointed, in particular, to the sharp and significant conflict of evidence in the witness statements of Mr Livingstone and Mr Brooks and contended that it was impermissible at this early stage in the proceedings, ahead of disclosure of documents and the testing of oral evidence by cross examination, to reject the evidence of Mr Livingstone and Mr Springer and to assess which side would succeed.
31.	He concentrated on the constructive trust claim based on the concern of equity to prevent unconscionable conduct. He contended that the appropriate time for such conduct to be judged was not on an application for summary judgment, but at a trial after a proper examination of all the evidence. 
32.	On the contract claim he argued that the judge was wrong to regard that claim as doomed to failure. He  criticised the deputy judge’s conclusion that the joint venture document was too uncertain to be capable of forming a binding contract. As for clause 8.7 of the Sale Agreement he submitted that the judge was wrong in holding that it was not reasonably arguable that an agreement to use reasonable endeavours to agree was enforceable at least where, as here, the parties have themselves defined the objective criteria by reference to which they were to agree. In the light of the joint venture document it was reasonably arguable that clause 8.7 was legally binding. Further, the Deputy Judge was wrong to conclude, without hearing all the evidence, that TBI had done all that it was obliged to do under the Sale Agreement. 
33.	The arguments on the constructive trust and estoppel claims, to which most of L&R’s arguments were directed, need to be described in more detail. Mr Howard invoked what was described in Banner Homes as the “Pallant –v- Morgan equity.”  Mr Howard criticised the deputy judge’s conclusion that L&R was, by this claim, seeking to get round the effect of the agreement being “subject to contract.” He emphasised that L&R was not using the constructive trust or estoppel claim as a means of enforcing the terms of a joint venture that might be held to be contractually unenforceable for want of a final and binding agreement. Equitable relief may be available by way of constructive trust or estoppel, even though the arrangement or understanding between the parties was not sufficiently certain to be enforceable as a contract. So, the fact that the agreed joint venture note was “ subject to contract” did not prevent a constructive trust or estoppel from arising. The basis of L&R’s claim was the existence of an arrangement or understanding at the time of the Sale Agreement that TBI would transfer the Belfast land to a new jointly owned company and that TBI’s option to purchase the Cardiff land would be used for the joint benefit of TBI and L&R. Clause 8.7 of the Sale Agreement was only a step taken pursuant to that arrangement or understanding. It was not an obstacle to the success of L&R’s claim in equity.  The essence of L&R’s claim was that, in the light of the arrangement or understanding between Mr Livingstone and Mr Brooks, it was unconscionable for TBI to decline to transfer the Belfast Land into the new jointly owned company and to deny holding the option over the Cardiff Land for their joint benefit.  The only relevance of the joint venture document was that, if a joint venture agreement had in fact been entered into L&R would not have needed to rely on the Pallant –v- Morgan equity, which was now the principal plank of their case.
34.	Mr Howard pointed out that on its evidence L&R had given up a claim to any discount for the bulk purchase of the property portfolio and had also paid an extra £1m for the portfolio on the basis that TBI would pay it into the joint venture.  There was no question, as the judge suggested, of the constructive trust claim giving “ a huge uncovenanted bonus” to L&R. It would give them no bonus, since it was an integral part of the parties understanding and arrangement regarding the joint venture that had caused L&R to deal with TBI and sign the agreement. TBI would in fact benefit if it were allowed to reject the joint venture, as it would have obtained a bigger price for its property portfolio than L&R was willing to pay for it without the added benefits of the joint venture.
35.	Mr Howard criticised the grounds on which the Deputy Judge attempted to distinguish Banner Homes. He emphasised that it was a case in which the Pallant v. Morgan equity was successfully established in the context of there being no final and concluded agreement. The Deputy Judge had adopted a too restrictive approach to the intervention of equity to prevent unconscionable conduct by confining the doctrine to a case where the understanding or arrangement giving rise to it was in respect of the acquisition of property. It was equally unconscionable for a party, who had entered into such an arrangement or understanding, to deny that arrangement or understanding in the circumstances of this case. The grounds of distinction relied on by the judge were wrong and without legal significance. The fact that TBI already owned the Belfast Land and had an option over the Cardiff Land did not exclude the application of the equity. The unconscionability was in the refusal of TBI to transfer the Belfast Land to the new company and to deny an interest in the Cardiff Land, which caused equity to intervene and the trust to arise. He pointed out that in Banner Homes there was a pre-sale understanding running in parallel with negotiations for a detailed joint venture agreement.  After the purchase the defendant had declined to enter into the joint venture agreement and sought to keep the land for itself. That was the position in this case. The Deputy Judge wrongly concluded that L&R was seeking to use the trust or estoppel argument “to paper over the cracks of the agreement.”  That comment failed to appreciate the true relationship between the contract claim and the constructive trust claim.
36.	For all these reasons L&R contends that it was inappropriate and unjust to deal with the case by summary determination. There was a realistic prospect of success on the trust claim. Even though it was accepted that there were difficulties in the way of the contract claims, they should also be allowed to proceed to trial, since the pursuit of that claim would not involve any additional oral or documentary evidence.  The proper course was to dismiss the Part 24 application.
Conclusions
37.	In my judgment this appeal should be dismissed. The Deputy Judge was right to give summary judgment to TBI and BIA in respect of the constructive trust and estoppel claims, as well as in respect of the contract claims and the counterclaim
A.	Contract Claims
38.	The contract claims have no real prospects of success. The clear effect of the expression “subject to contract” in the agreed note of joint venture is that the parties negatived any intention at that stage to conclude a binding contract in respect of the joint venture; it remained subject to and dependent upon the preparation of a formal contract: Winn v. Bull (1887) 7 Ch D 29 at p. 32.   
39.	A claim for breach of clause 8.7 of the Sale Agreement has no real prospect of success. It was no more than an agreement to agree. As Millett LJ stated in Little v. Courage Limited (1994) 70 P. &C.R. 469 at 476
“….an undertaking to use one’s best endeavours to agree…is no different from an undertaking to agree, to try to agree, or to negotiate with a view to reaching an agreement; all are equally uncertain and incapable of giving rise to an enforceable obligation.” [cf  “Use  best endeavours to obtain planning permission”: IBM United Kingdom Limited v. Rockware Glass Limited [1980] FSR 335]  
40.	In the absence of objective criteria in the Sale Agreement and related documents, the clause is too vague and uncertain to be enforced. The relevant “airport” land to be transferred to an unidentified transferee is not precisely ascertained; there is no agreement as to when TBI is to be paid; and the terms of the venture are not agreed.  In the context of the appended “subject to contract” joint venture note, to which regard must be had, the parties clearly did not intend at that stage to enter into a legally binding agreement for a joint venture.
B. Constructive Trust and Estoppel Claims 
41.	I agree with the Deputy Judge that these claims have no real prospect of success. They are based on the supposed unconscionability of TBI’s conduct in refusing to implement oral assurances leading to an understanding that the joint venture was from the outset part of the package for the disposal of the property portfolio of TBI to L&R. It is true that the claim that the Belfast Land and the Cardiff Land are held on a constructive trust for L&R and TBI in equal shares rests on L&R’s witness evidence which is disputed by TBI. This does not, however, mean that it is necessary to resolve the conflict of evidence by having a trial. Even if all L&R’s witness evidence about the course of the joint venture negotiations were accepted, there is no real prospect of establishing a constructive trust or an estoppel affecting the Belfast Land and the Cardiff Land.
42.	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.” 
43.	Furthermore, there is no evidence that TBI indicated after 13 May 1999 that it surrendered its right under the Sale Agreement to change its mind about the joint venture and to withdraw from the negotiations. As stated by Lord Templeman in giving the judgment of the Judicial Committee of the Privy Council in A.-G. of Hong Kong v. Humphreys Estate [1987] AC 114 at p. 127, 128 (a case concerning an agreement in principle reached “subject to contract” by the Hong Kong government with a group of companies for the exchange of property):
“It is possible but unlikely that in circumstances at present unforeseeable a party to negotiations set out in a document expressed to be “subject to contract” would be able to satisfy the court that the parties had subsequently agreed to convert the document into a contract or that some form of estoppel had arisen to prevent both parties from refusing to proceed with the transaction envisaged by the document. But in the present case the government chose to begin and elected to continue on terms that either party might suffer a change of mind and withdraw.”[see also J T Developments Limited v. Quinn (1990) 62 P.& C.R. 33 at p. 47; Regalian Plc v. LDDC [1995] 1 WLR 212 at p. 231A-F]  
44.	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. The principle is stated by Chadwick LJ  at p.400E-F:
“The equity is invoked where the defendant has acquired property in circumstances where it would be inequitable to allow him to treat the property as his own; and where, because it would be inequitable to allow him to treat the property as his own, it is necessary to impose on him the obligations of a trustee in relation to it. It is invoked because there is no bargain which is capable of being enforced; if there were an enforceable bargain there would have been no need for equity to intervene in the way that it has done in the cases to which I have referred.” 
45.	Thus, in Pallant v. Morgan [1953] Ch 43 the agents of two neighbouring landowners orally agreed in the auction room that the plaintiff’s agent would refrain from bidding at auction and that the defendant, if his agent’s bid was successful, would divide the land according to an agreed formula, the details of which were to be agreed later. The defendant’s agent was successful, but when the parties failed to agree on the details of division the defendant retained the whole of the land for himself. Harman J held at pp.48-50 that, although the agreement was incomplete in its detail and too uncertain to be specifically enforceable, the defendant held the land on trust for himself and the plaintiff jointly, since his agent had made the bid on behalf of himself and the plaintiff’s agent on the basis of an agreement for division and it would amount to sanctioning a fraud on the defendant’s part to allow him to retain it.
46.	In Banner Homes itself two potential purchasers of a site proposed to acquire and develop it through a joint venture company. The defendant proceeded to purchase it through a wholly owned subsidiary. Blackburne J rejected the plaintiff’s claim that there was a concluded contract for a joint venture, but found as a fact that the defendant had led the plaintiff to understand that it intended to enter into a joint venture, but subsequently had second thoughts, which it kept to itself for fear that, if alerted, the plaintiff might make a rival bid. 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 is denied any such right.”    
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.   
49.	Some time was spent in argument on the unreported decision of Goulding J in Island Holdings Limited v. Birchington Engineering Co Limited (7 July 1981). The case was discussed by Chadwick LJ in Banner Homes at p. 396A-G as an instance of the application of the familiar equitable principle of Pallant v. Morgan (although that case is not cited in the judgment), to a joint venture where the contractual claim for specific performance failed on the basis that the original agreement and a new agreement between the parties were unenforceable, the new agreement being “subject to contract.” The decision was cited by Mr Howard as the closest authority to the present case. It is, however, distinguishable. There were two agreements between the parties. The original agreement regarding a tender for a lease of the land from the local authority was not “subject to contract.” The defendant in fact then acquired the freehold of part of the land from the local authority and offered it to the plaintiff “subject to contract” and he accepted. But the defendant later withdrew from negotiations.  The judge held that the original agreement could not be enforced, as it had been discharged, and that the new agreement could not be enforced, as it was subject to contract. In that case the defendant was, however, bound to hold the land on trust for himself and the plaintiff having regard to the terms of the original agreement in existence at the time he  acquired the land. The equity arose prior to the discharge of the original agreement and prior to the new subject to contract agreement and its existence was  unaffected by either event.
50.	Mr Howard  cited Gillett v. Holt [2001] Ch 210 (a proprietary estoppel case) on the necessity for a broad inquiry into all the circumstances in a case of unconscionable conduct and for the proposition that  the inherent revocability of a non-contractual promise or statement is irrelevant to a promise or assurance which is intended to be relied upon and becomes binding by reason of the promisee’s subsequent detrimental reliance on it. In my view, the valuable judgment of Robert Walker LJ does not assist in this case, as he expressly recognised at p. 228A the difference between detrimental reliance in that case and reliance in a case, such as this and the A.-G. for Hong Kong,  where the transaction remains expressly subject to contract.            
51.	I would dismiss the appeal. 
Mr Justice Douglas Brown - I agree.
Lord Justice Dyson – I also agree.
Order:	appeal dismissed; no order on cross-appeal; order for costs made in terms of signed consent order presented to court; permission to appeal to the House of Lords refused.

(Order does not form part of the approved judgment)

Principles for Joint Venture
(referred to in clause 8.7)

SUBJECT TO CONTRACT

Set out below are the terms for Remus side deal:

1.	Property The surplus land at the Airport will be is “sold” or transferred at cost to Newco a joint 	venture company (“Newco”) for deferred consideration.  The consideration will be paid in 	tranches as parts are-developed and sold (or if development retained) by reference to value(s) of 	developed parts.

2. 	The economic benefits from the joint venture through Newco can be 50:50 but will be divided 	between  TBI and London & Regional equally but to keep gearing off Remus TBI balance sheet 	can also actual ownership of Newco can be 	100% L&R, with Remus TBI having convertible or 	warrants for up to 50%.

3.	Each party agrees to lend equally “SEED CORN Seedcorn Finance” but- TBI to lend the first 	£1 million of any such SEED CORN Seedcorn Finance.

4.	Property to be developed under direction of L&R; L &R to have right to mortgage land for 	purpose of carrying out developments.
	
5.	“Exit” to be by way of sale(s) of completed developments and then dividends.  If no sales then 	on completion of each development, relevant part of property is transferred into subsidiary in 	which Remus have warrantie equal to 50% and L&R buy in their 50%.  This can be cross 	option economic benefits are 50:50.

6. 	 Usual Exit rights (“draft along “etc) on sale of shares in Newco to be as follows:

(a)	if one party wants to sell its shares in Newco it must first offer these shares to 		other party at same price;
(b)	if one party receives an offer for its shares at price it wishes to accept and other 		party does not want to buy these shares, that party can require offeree party to 		procure identical offer for second party’s shares.

7. 	Remus TBI to have board representation on Newco and usual minority protection provisions to 	apply.