Odunsi v Daodu

A claimed beneficial interest arising from an oral arrangement must be assessed according to the arrangement’s actual terms. Where an interest is promised in return for contributions over a specified period, the claimant cannot obtain the full interest after stopping those contributions before the period ends. The court may analyse the promised interest as an entitlement to a share of net sale proceeds, rather than as an immediate unconditional beneficial interest in the property. Any such interest may also be subject to a condition that the agreed contributions are made for the full period.

The claimant owned a property acquired from the local authority under the right-to-buy provisions. The defendant, a family member and solicitor, provided funds for the purchase, transaction costs and mortgage payments. He alleged that the claimant had orally agreed to give him a 50 per cent share of the equity after three years, subject to repayment of his contributions and sale of the property at the end of that period.

The claimant denied the agreement but accepted that the defendant was entitled to repayment of the sums advanced. After a dispute about the proposed sale and improvements to the property, the defendant stopped making payments and claimed a beneficial interest under a constructive trust. The issue was whether, on the defendant’s own case, he had acquired the claimed 50 per cent interest.

1. Counterclaim dismissed. The defendant was not entitled to a declaration that the claimant held the property on trust for them in equal shares.
2. The alleged 50 per cent interest was said to be the quid pro quo for the defendant making mortgage contributions for three years. Those contributions stopped less than halfway through the period. His total mortgage contributions were therefore substantially less than the amount contemplated by the alleged arrangement.
3. The defendant could not claim the full 50 per cent participation, which was predicated on three years of payments, after voluntarily stopping those payments. He could have continued paying and sought to enforce the alleged arrangement at the end of the period, but could not stop paying and recover the benefit which the agreement provided only in return for complete performance.
4. The natural analysis of the arrangement was an entitlement to 50 per cent of the net proceeds of sale, after payment of the mortgage and repayment of the defendant’s advances. That was not equivalent to an immediate 50 per cent beneficial interest in the property.
5. Even if the arrangement created a beneficial interest from acquisition, the interest could be subject to a condition defeasant requiring the defendant to make the contemplated payments throughout the three-year period.
6. It was unnecessary to decide whether the alleged agreement had in fact been made. The defendant’s accepted entitlement to repayment of £18,467.55, and any possible equitable lien or similar interest securing that repayment, were not determined.