Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372

Facts

• Banner Homes Group plc and Luff Developments Ltd agreed to collaborate on acquiring and developing a property.
• No formal written agreement existed setting out their respective rights and obligations.
• Banner Homes alleged Luff Developments excluded it from the project after the property was acquired.
• Banner Homes claimed a constructive trust had arisen, asserting a beneficial interest in the property based on the common intention to share and Banner Homes’ detrimental reliance.
• Luff Developments denied the existence of a constructive trust, arguing absence of a formal agreement and sufficient evidence of common intention.

Issues

1. Whether a constructive trust could arise in the context of a joint venture without a formal written agreement.
2. Whether there was sufficient evidence of a common intention between the parties to share the property.
3. Whether Banner Homes had relied to its detriment on the common intention such that it would be unconscionable for Luff Developments to deny Banner Homes' beneficial interest.

Decision

• The Court of Appeal held that a constructive trust may be imposed in joint venture situations where there is clear evidence of a common intention to share property.
• It was found that Banner Homes and Luff Developments had established a common intention regarding the property.
• Banner Homes had relied on this understanding and acted to its detriment by contributing to acquisition and development.
• The court determined it would be unconscionable for Luff Developments to deny Banner Homes’ beneficial interest in the property.
• Accordingly, a constructive trust was imposed in favour of Banner Homes.

Legal Principles

• Constructive trusts arise by operation of law and are imposed to prevent unjust enrichment where it is unconscionable for one party to retain property to the exclusion of another.
• In joint ventures, a constructive trust requires demonstration of a common intention (which may be inferred from conduct) and detrimental reliance by the claimant.
• The conduct of parties, their shared understanding, and reliance are central to establishing such trusts in equity.
• The absence of a formal agreement does not preclude the imposition of a constructive trust if the equitable elements are present.

Conclusion

The Court of Appeal in Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372 confirmed that a constructive trust can arise in joint venture cases without a written agreement where common intention and detrimental reliance are established, ensuring equity provides a remedy against unjust enrichment in property disputes.