The words of Lewis Carroll’s ‘Jabberwocky’ might not usually be associated with talk of beginning a joint business venture, but one word of the famous poem should resonate with anybody considering such an enterprise: “beware”.
The term ‘joint venture’ tends to be bandied around by members of the business community to refer to any project on which they intend to collaborate with associates. In English law, though, it carries rather more commitment than a simple agreement to collaborate. A formal joint venture is an agreement between a number of parties to create a new entity and new assets by contributing equity (usually for a limited time period). In such situations, usual practice is to create a contractual agreement, signed by all parties, which explicitly details each of their duties in relation to the joint venture entity. So far, so good: under these circumstances you can contract for duties you know that you can fulfil, and when the time for performance comes, you’ll be aware of what is expected of you.
While this may become complicated, at least you all know where you stand. However, in a recent case it was found that parties to a joint venture might inadvertently acquire extra-contractual fiduciary duties in addition to the obligations written into their joint venture agreement. In Michael Donald Miller (2) Domestic Fire Appliances Limited (3) BFM Europe Limited (4) American Electric Fires LLC –v- (1) Christopher Simon Stonier (2) Hearth Products Limited (2015) the judge ruled that in certain circumstances, joint venture partners might be legally obliged to act in the best interests of their co-venturers rather than in their own best interests.
‘Beware’ indeed! So under what circumstances might a joint venture partner be burdened with additional legal obligations? In an earlier case, Murad v Al Saraj