Banner Homes Group Plc v Luff Development Ltd

Banner Homes Group Plc v Luff Development Ltd [2000] Ch. 372

Constructive Trust – Oral Agreement – Joint Venture – Equity

Facts

The defendants, Luff Development Ltd, acquired a site that would be suitable for developing property on. Before this acquisition, the defendants made an agreement with the complainants, Banner Homes Group Plc, that they could develop this site as a joint venture. While there were many conversations and proposals between the companies, no written agreement was concluded. However, the defendants changed their mind about the agreement they had made with the complainants, but did not tell them in case they made a rival offer before they acquired the site.

Issues

The trial judge had dismissed the constructive trust claim based on the fact that there was no signed and written agreement between the parties. Banner Homes Group Plc appealed this decision and the issue in the case was whether this agreement amounted to a constructive trust.

Decision/Outcome

The appeal was allowed and the constructive trust claim was successful. Under equity it would not be right for the defendants to be the sole beneficial owner for the joint venture. The fact that the Luff Development Ltd did not want to inform the complainants indicates a prior agreement. Lord Justice Chadwick affirmed Pallant v Morgan and explained the elements where equity would come into play; when there is a pre-acquisition agreement although not always contractually enforceable, the non-acquiring party has some interest in the property, the acquiring party has not informed the other beforehand or has not honoured the arrangement and that the prior understanding gave the acquiring party an advantage to the detriment of the other.