Lloyds Bank plc v Carrick

Lloyds Bank plc v Carrick (1996) 28 H.L.R. 707

UNREGISTERED CONVEYANCING – CONSTRUCTIVE TRUSTS – ESTATE CONTRACTS – INFORMAL AGREEMENT

Facts

The first defendant (D1) was the legal owner of a long lease, title to which was unregistered. D1 and his sister-in-law (D2) agreed that D2 would sell her home and pay the purchase monies over to D1 in exchange for title to the lease. This transaction occurred, though D1 later executed a charge over the property in favour of the claimants (C). The loan monies were not repaid by D1 and C brought an action seeking possession. The judge at first instance found on favour of D2, on the grounds that a bare trust, which was not registrable as a land charge and of which C had constructive notice, had arisen in her favour when she had paid over the purchase monies to D1.  C appealed the decision.

Issues

The Court of Appeal were called upon to determine the nature of the right conferred by an estate contract, namely whether it could be said that a bare or constructive trust would arise as a natural consequence of entering into a specifically enforceable contract to convey a legal estate. Such rights are not registrable as land charges and so would bind C if they were found to have notice, actual or constructive.

Decision/Outcome

In allowing the appeal, the Court of Appeal found that, although no agreement had been made in writing, the contract became enforceable when D2 paid the purchase price, which removed any beneficial interest D1 had in the property. A bare trust could not be established simply as an equitable consequence of that contract; once a specifically enforceable contract had been made it was not possible to establish a constructive trust in addition to the rights conferred by the contract.