Banner Homes Group plc v Luff Developments Ltd
Where parties agree to acquire property for a joint venture, and one party refrains from acting in reliance on the agreement, the other cannot keep the property for itself.
Facts
Banner Homes and Luff Developments agreed to form a joint venture to buy a development site, through a new company in which each would hold half the shares. Luff told Banner that it would go ahead with the joint venture, so Banner did not try to buy the site itself. However, Luff had secret doubts about the deal, and after buying the site through the company, it refused to let Banner participate. Banner argued that Luff held half the shares on trust for it.
Legal principle
The Court of Appeal held that Luff held half of the shares on trust for Banner. Chadwick LJ said that, where parties agree, before one of them acquires property, that it will be acquired for their joint benefit, and the non acquiring party acts or refrains from acting in reliance on that arrangement, a constructive trust may be imposed, even if the arrangement is not a binding contract. It is enough that the non acquiring party has given up an advantage, or the acquiring party has gained an advantage, as a result. Banner had refrained from bidding for the site, which was an advantage to Luff.
Related cases on constructive trusts
- Ashburn Anstalt v Arnold [1989] Ch 1
- Bannister v Bannister [1948] 2 All ER 133
- Binions v Evans [1972] Ch 359
- Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] Ch 105
- Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147
- Crossco No 4 Unlimited v Jolan Ltd [2011] EWCA Civ 1619
- Gissing v Gissing [1971] AC 886
- Jones v Kernott [2011] UKSC 53, [2012] 1 AC 776
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