DEVELOPER HELD TO BE CONSTRUCTIVE TRUSTEE OF ‘JOINT VENTURE PARTNER’

Banner Homes Group plc v Luff Developments Ltd ([2000] 2 All ER 117)

The decision of the Court of Appeal in Banner Homes Group plc v Luff Developments Ltd [2000] 2 All ER 117 is a timely reminder of the role of equity in policing the behaviour of parties who are proposing to become joint venture partners. The principles which govern the intervention of equity are usefully summarised by Lord Justice Chadwick in his judgment. In essence he concludes that where parties reach an arrangement or an understanding (which is not contractually binding) under which one party will acquire property in which the other will subsequently obtain an interest and the parties act on that agreement to the advantage of the acquiring party or to the detriment of the non-acquiring party, and the acquiring party later purports to go back on the arrangement a court of equity may prevent him from doing so and conclude that the property so acquired is held on trust for the non-acquiring party in accordance with the terms of their pre-acquisition arrangement. The precise legal foundation for this jurisdiction may be difficult to ascertain with precision but, in so far as it prevents developers from suddenly pulling the carpet from under the feet of prospective co-venturers, the jurisdiction is likely to prove a useful one.