Lyus v Prowsa Developments Ltd [1982] 1 W.L.R. 1044
Property law – Sale of land – Development plot
Facts
The plaintiffs contracted to purchase a plot of land which was part of an estate under the development of the defendant. The plaintiffs paid a deposit for the plot but before the completion of a house being built upon it, the developer became insolvent. The bank, who held a charge over the property sold the land on, but recognising the unique nature of the plaintiffs’ plot within the agreement. The land was again sold three months later, on the same basis with the plaintiffs’ plot being recognised in the process. However, when the transfer was registered, there was no mention of the plaintiffs’ contract. The plaintiffs claimed that the agreement was binding and that an order of specific performance should be granted.
Issue
It was important for the court to understand whether the final purchaser had taken the land, subject to the contract between themselves and the plaintiffs, or whether the plaintiffs had lost their position as a result of the subsequent sales of the property. Specifically, it was important for the court to weigh whether the plaintiffs could rely on their contract under the Law of Property Act 1925.
Held
The court held that the Law of Property Act 1925, section 56 did not apply to the circumstances and therefore the plaintiffs could not rely on their contract. However, the court held that there was a constructive trust between the defendant and the plaintiffs on the basis that having recognised the plaintiffs’ contract at the time of sale, it would be inequitable to deny the existence of it at a later time.
Updated 21 March 2026
This case summary remains broadly accurate as a description of the decision in Lyus v Prowsa Developments Ltd [1982] 1 WLR 1044. The use of constructive trusts to enforce contractual obligations over registered land in circumstances where a purchaser takes expressly subject to a prior contract continues to be recognised in English property law, and the case remains a standard authority cited in this context.
However, readers should be aware of several important qualifications. First, the article’s framing of the issue under the Law of Property Act 1925, section 56 is correct as far as it goes, but the wider registered land context is now governed by the Land Registration Act 2002, which replaced much of the earlier registered land regime and which students should consult alongside the 1925 Act. Second, the scope and reliability of the constructive trust reasoning in Lyus has attracted considerable academic criticism and judicial caution. Later cases, including Lloyd v Dugdale [2001] EWCA Civ 1754, made clear that a purchaser taking land expressly subject to a prior interest does not automatically become a constructive trustee; something more — such as a specific undertaking that goes beyond mere notice — is required to impose the trust. Students should therefore treat Lyus as a narrow authority and read it alongside Lloyd v Dugdale and subsequent commentary. The general principle that equity will not permit statute to be used as an instrument of fraud remains good law, but its application in registered land cases is treated cautiously by the courts.
