Farrar v Miller [2018] EWCA Civ 172

Facts

• Mr. Farrar (appellant) and Mr. Miller (respondent) engaged in an informal commercial joint venture to develop a plot of land.
• Mr. Farrar provided the land; Mr. Miller contributed skills and financial resources.
• The venture was successful and produced significant profits.
• Disagreements arose regarding the distribution of profits and ownership rights.
• Mr. Farrar asserted entitlement to a larger profit share, arguing his land contribution outweighed Mr. Miller’s.
• Mr. Miller argued for an equal division of profits, referencing the parties’ agreement to share risks and rewards.
• There was no formal agreement detailing profit-sharing or ownership rights.

Issues

1. Whether Mr. Farrar’s contribution of land entitled him to a greater share of profits than Mr. Miller.
2. Whether the parties’ intentions, conduct, and contributions should determine beneficial entitlements in the absence of a formal agreement.
3. Whether the principles of constructive and resulting trusts applied to the determination of beneficial interests in this context.

Decision

• The Court of Appeal held that the parties intended to share profits equally, regardless of the disparity in contributions.
• Mr. Farrar’s claim for a larger share based on his land contribution was rejected.
• The court relied on the parties' conduct and communications as indicative of shared intention.
• The contributions of both Mr. Miller (skills and finance) and Mr. Farrar (land) were deemed essential to the project's success.
• The court observed that the absence of agreement increases risk and potential for dispute.

Legal Principles

• Beneficial entitlements in joint ventures depend on the parties’ intentions, as inferred from conduct and contributions.
• Constructive trusts may arise in commercial contexts to reflect equitable interests where legal title and expectations diverge.
• Resulting trusts presume beneficial interest aligns with contributions unless contrary intention is established.
• Courts may invoke principles of unjust enrichment to avoid unfair outcomes when contributions are not proportionately recognized.
• The need for clear, formal documentation in joint ventures is highlighted to prevent disputes and litigation.

Conclusion

The Court of Appeal determined that, in the absence of a formal agreement, beneficial entitlements in commercial joint ventures are governed by equity, intention, conduct, and contributions, resulting in an equal division of profits between the parties in this case.