• In the case of Generator Developments v Lidl UK GmbH [2018] EWCA Civ 396, it is established that the principle of Pallant v Morgan Equity cannot arise where parties are still in the process of discussion on their joint venture

Facts of the Case

  • The claimant (C), Generator Developments, and the defendant (D), Lidl’s, entered into negotiations, with their sites set on acquiring the property as joint venture partners.
  • It was decided that Lidl’s would acquire the property in question for the joint benefit of both Lidl’s and Generator Developments. As Generator Developments stood aside, The vendor of said property, agreed to the offer presented by Lidl to buy the property. Parties C and D had already agreed that Lidl would be named as the sole purchaser.
  • Draft terms of this joint venture were given to both parties, but no agreement was ever finalised even by the time the defendant, Lidl, completed the purchase of the property.

Issues in Generator Developments v Lidl UK GmbH [2018] EWCA Civ 396

  • The issue here was that Generator Development believed the way in which they and Lidl conducted business would under the latter facts, would give rise to the creation of an equitable interest in the property under the principles referred to as Pallant v Morgan equity.
  • Thus it was bought into question whether Generator Development was entitled to an equitable interest in land acquired for development by Lidl.

Held by the Court of Appeal

  • The property was declared not to be held on constructive trust, no Pallant v Morgan equity arose here.

Lord Justice Lewison

  • This verdict was given because the joint venture was made ‘subject to contract’. This entailed that neither of the two parties intended to be bound either in law or in equity until a formal contract is made.
  • Elaborated on by Lord Walker in Yeoman’s Row Management Limited v Cobbe [2008] UKHL 55, equity will not intervene in a case where the parties expressly agree that a private agreement is binding in honour only.