Pallant v Morgan
Where one party agreed not to bid at an auction in return for a promise to share the property, the successful bidder held it on trust for both.
Facts
Two neighbours, Mr Pallant and Mr Morgan, were both interested in buying a property that was to be sold at auction. Before the auction, their agents agreed that Mr Pallant's agent would not bid, and that Mr Morgan's agent would buy the property and then divide it between them, on terms to be agreed. Mr Morgan's agent bought the property, but Mr Morgan then refused to transfer any part of it to Mr Pallant.
Legal principle
Harman J held that Mr Morgan held the property on trust for himself and Mr Pallant. He said that, since Mr Pallant had refrained from bidding in reliance on the agreement, it would be inequitable for Mr Morgan to keep the whole property for himself. Because the parties had not agreed on the terms of the division, he ordered that, unless they could agree, the property should be sold and the proceeds divided, with Mr Pallant paying half the price. The principle in this case has been applied in later cases on joint ventures.
Related cases on constructive trusts
- Ashburn Anstalt v Arnold [1989] Ch 1
- Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372
- 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
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