Understanding Joint Venture Disputes from a Corporate Perspective
Exploring the complexities of joint venture disputes, this article delves into the nature of joint ventures, the structures involved, obligations of parties, and the different types of remedies available, shedding light on the critical aspects from a corporate lens.
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Joint Venture Disputes - The Corporate Perspective Andrew Thompson QC www.erskinechambers.com
What is a joint venture? Not a legal term of art Huge variety a massive topic Working definition: an association of persons for the purposes of a particular undertaking with a view to mutual benefit with all the joint venturers contributing United Dominions Corporation v Brian (1985) 60 ALR 741
Joint venture disputes Huge range Our clients objectives Financial relief? The relationship? Our tools causes of action and procedures How are they affected by the JVA? And by the type of JV vehicle?
4 themes Structure - the vehicle matters Purely contractual JV / company / LLP A JV is a deal The starting point in all JV disputes the JVA What obligations are owed (and to whom)? The raw material for litigation Depends on the vehicle and the JVA Remedies and types of action Vehicle dependent
Basic roadmap Obligations compare contractual JVs and companies Remedies same comparison LLPs how are they different to companies?
Contractual JVs - obligations Purely contractual joint venture is the JVA the only source of obligations? Fiduciary duties? Bespoke fiduciary duties? Hospital Products v US Surgical Corp (1984) 156 CLR 41 Not likely touchstones are: assuming responsibility for another s affairs subordinating one s own interests to one s principal s But not impossible eg Ross River v Waverley [2013] EWCA Civ 910
Contractual obligations of good faith Express or implied Content of good faith Depends on precise words and commercial context - CPC v Qatari Diar [2010] EWHC 1535 (Ch) Generally not subordination of personal interests Observe reasonable commercial standards of fair dealing Faithfulness to agreed common purpose, consistent with other party s justified expectations Berkeley v Pullen [2007] EGLR 101; Macquarie International v Sydney SW [2010] NSWCA 268; Paciocco v ANZ [2015] ACFC 50; Al Nehayan v Kent [2018] EWHC 333 Other contractual provisions?
JV companies sources of obligations Between shareholders - contractual obligations Shareholders agreement Articles of association Fiduciary duties between shareholders? Murad v Al- Saraj [2005] EWCA Civ 959 Board of directors Fiduciary duties owed to company, not members Statutory - ss 171-178 CA 2006 Crucial in JV disputes
Why are directors duties crucial? If no contractual claim, complain about directors of JV vehicle Directors will owe duties to company Causes of action re JV companies arise from breach of directors duties Unfair prejudice s994 Companies Act 2006 Derivative claims others
Nominee directors duties Nominee director a commercial rather than a legal term Difficult and exposed position Duties to appointor? Not necessarily: Re Neath Rugby Ltd; Hawkes v Cuddy [2009] EWCA Civ 291 Content of duties to the company?
Agreed attenuation of directors duties? Traditional view: undiluted duties See eg Kuwait Asia Bank v National Mutual Life [1991] 1 AC 187 Or contractual attenuation? New Zealand and Australian authorities - eg Levin v Clark [1962] NSWR 686 Diluted or reduced duties: so can take into account or follow appointer s instructions UK judicial thinking has been moving too
Attenuation of directors duties - caselaw Re Neath Rugby Ltd; Hawkes v Cuddy [2009] EWCA Civ 291: CA expressly acknowledged possibility of attenuation of duty. Re Southern Counties Fresh Foods Ltd [2008] EWHC 2810 (Ch): Nominee owes same duties as any other director, and to company alone Duties capable of being qualified Except perhaps for certain core duties Doubtful whether can release from duty to act in company s best interests Unanimous shareholder agreement may be necessary
Attenuation of directors duties - statute Statutory construction S172 CA 2006 S173 S180(4)(a) General duties are subject to any rule of law enabling the company to give authority specifically or generally, for anything done by the directors that would otherwise be a breach of duty
Attenuation of directors duties - conclusions If the s172 duty cannot be excluded Work-arounds? Reserved matters Agreements not to sue
Remedies - contractual JVs Remedies generally depend on vehicle chosen Contractual JVs - no corporate remedies Enforce the contract Exit clauses and penalties Makdessi v Cavendish Square Holdings BV [2015] UKSC 67 More commercial approach (?) But still some risk, depending on terms
Remedies - Joint Venture Companies 1 Unfair prejudice petition under s 994 CA 2006 eg Meyer v Scottish Co-operative Wholesale Society Ltd [1959] A.C. 324 (HL) Wide power to grant relief under s 996 Normal remedy: compulsory share purchase order Derivative Claims (s 260 CA 2006) Single derivative claim CA 2006 Multiple derivative claim common law Just and equitable winding up
Remedies - Joint Venture Companies 2 Shareholders - personal actions to enforce personal constitutional rights, or JVA Shareholders may wish to establish invalidity of action taken by board: Eg Eclairs Group Ltd v JKX Oil & Gas Plc [2015] UKSC 71 (see also Tipp Investments PCC v Chagala Group Ltd BVIHC (Com) 2016/102) Injunctive relief to prevent company acting by its board in breach of duties Note: directors duties the basis for many claims
Remedies international JVs 1 Choice of English jurisdiction contractual claims For non-contractual claims? Unfair prejudice claims probably not unless the JVCo is English Derivative claims re foreign companies may be heard in England and Wales But permission of the court in the place of incorporation might be required - Novatrust v Kea [2014] EWHC 4061 (Ch) Top Jet Enterprises Ltd v Sino Jet Holdings Ltd (Cayman Islands: Justice Segal, January 2018)
Remedies international JVs 2 Dispute re foreign JVCo in English court Impact on remedies? Many similarities throughout common law world But may be differences, e.g. availability of multiple derivative claims (BVI) scope of derivative claims not just breach of directors duties (Mauritius)
Arbitration English arbitration Claims re foreign JVCos may be arbitrated here Unfair prejudice claims are arbitrable Fulham v Richards [2012] Ch 333 Derivative claims are probably arbitrable But will the defendants be party to the arbitration clause?
LLPs as JV vehicles New corporate entity - companies in disguise Statutory - Limited Liability Partnerships Act 2000 LLP agreement between all members Flexibility and diverse structures Duties owed by members / members of quasi-boards to the LLP to members F&C v Barthelemy (2) [2012] Ch 612
Fiduciary duties within LLPs LLP MANCOM MEMBER 1 MEMBER 2
Joint Venture LLP - remedies Breach of LLP agreement / JVA Unfair prejudice under s 994 Applies to LLPs with modifications eg F&C v Barthelemy Members of LLP can unanimously agree to exclude right (for specified period or indefinitely)
Joint Venture LLP - remedies Termination of LLP agreement for repudiatory breach? Doctrine of repudiatory breach does not apply to a multiparty LLP agreement Flanagan v Liontrust Investment Partners LLP [2015] EWHC 2171 (Ch) Left open if two-member LLP Compare with multi-party shareholders agreement in company vehicle
LLPs as JV vehicles 3 general advantages over companies Flexibility more freedom to contract Potential exclusion of s994 Privacy LLP agreements not public
Conclusion JV agreement often critical in determining parties rights and obligations But the form of the JV matters corporate or purely contractual Particularly for remedies
Andrew Thompson QC Andrew is a sought-after, specialist commercial litigator, with particular expertise in: corporate litigation and arbitration (including shareholders disputes, joint venture disputes, claims against directors and constructive trust claims); LLP and partnership disputes; corporate insolvency; commercial litigation (including large-scale contractual disputes, fraud and breach of warranty claims); and professional negligence claims (including lawyers, accountants, valuers and management consultants). Andrew has been involved in many leading cases in these areas. He has specific expertise in litigation in the fund management industry. He has extensive trial experience in the Chancery Division and the Commercial Court and extensive appeal experience in the Court of Appeal. Andrew also undertakes advisory work in the same fields. Email: athompson@erskinechambers.com
