Sheikh Tahnoon v Ioannis Kent [2018] EWHC 333 (Comm)

(BAILII entry available here)

Last year a joint venture between friends was held to be subject to an implied duty of good faith. This duty, said the High Court, required the parties to work with greater mutual trust than would be the case for an ordinary contractual bargain. The parties were entitled to expect greater candour and co-operation than would be the case when contracting at arm's length.

The parties had entered into a joint venture to develop and run luxury hotels in Greece. One, a member of the Royal Family of Abu Dhabi, provided the majority of the investment. The other, a Greek businessman, provided the rest of the financing and ran the business. The two men became great friends. However, the business ran into financial difficulties and the parties entered into a demerger agreement and a promissory note.

This action saw the investor claim for money allegedly owed under these two documents. By way of counterclaim, the businessman argued (amongst other things) that the investor's behaviour had breached a fiduciary duty which was owed to him and/or had breached an implied contractual duty of good faith.

The court held that the joint venture contract was a classicrelational contract giving rise to a duty of good faith and that it satisfied thebusiness necessity test needed in order to imply this term into a contract. It is important to appreciate that not all joint ventures would be deemedrelational contracts. In this case the parties were friends...