Bulled & Anor v Petrie & Anor

A joint venture constructive trust requires an arrangement or understanding concerning joint ownership of property, together with circumstances making it unconscionable for one party to deny the other’s beneficial interest. Detrimental reliance or an advantage conferred on the defendant may establish unconscionability. Where the arrangement precedes acquisition, it need not be an enforceable contract, although greater certainty may be required where the defendant already owns the property. A corporate structure does not automatically prevent such a trust; the issue depends on the particular interests, arrangement and obligations. The court found that repayment of company borrowing in exchange for all shares gave the transferee the whole beneficial interest in one development site, but did not affect a separate site held on trust for the claimant.

The claim arose from a family dispute concerning the beneficial ownership of the Brentwood Site and the Hornchurch Site, and the proceeds of developing the former. The claimants relied principally on an alleged oral agreement made in 2008, under which the first defendant would discharge a loan owed by the second defendant company and acquire only a 50% interest in the Brentwood Site, while the claimants retained the Hornchurch Site. They alternatively alleged a partnership, proprietary estoppel and pre-existing trusts. The defendants contended that the agreement involved the transfer of all shares in the company, giving the first defendant the entire interest in both sites. The central issues were the terms and effect of the 2008 agreement and the resulting beneficial ownership.

1. Constructive trust principles. The court accepted that a joint venture constructive trust requires an arrangement or understanding that the claimant will obtain a beneficial interest in property, and that it would be unconscionable for the defendant to deny that interest. Unconscionability may arise where, in reliance on the arrangement, the claimant does something or omits to do something which advantages the defendant in relation to the property or is detrimental to the claimant. Where the arrangement precedes acquisition, it need not be sufficiently certain to constitute an enforceable contract. The court did not need to decide whether greater certainty or enforceability is required where the defendant already owns the property.
2. A corporate structure is not necessarily a bar to a joint venture constructive trust. The question depends on the particular facts, including the interest held by the putative trustee, the nature of the arrangement and the obligations arising from it.
3. The evidence showed that the 2008 transaction was a financial rescue. The company was the borrower under the KSF facility, the site was charged to secure it, and all issued shares in the company were transferred to the first defendant. The court found that repayment of the facility was exchanged for the transfer of a 100% interest in the Brentwood Site through acquisition of the entire share capital of the company.
4. The claimants’ later cooperation, guarantees and assistance with development did not displace that conclusion. There was no sufficient arrangement for joint ownership and therefore no constructive trust under the principles in Pallant v Morgan.
5. The agreement did not concern the Hornchurch Site. That site had originally been acquired by the company on trust for the first claimant and a former joint venturer, and the first claimant had subsequently acquired the former venturer’s interest. The later share reorganisation and 2008 transaction did not alter that beneficial ownership.
6. The partnership and alternative beneficial-ownership claims concerning the Brentwood Site failed. The claim for declarations concerning that site, its sale proceeds and the company shares was dismissed. The court granted a declaration that the company held the Hornchurch Site, or its proceeds, on trust for the first claimant.