NARENDRA KUMAR PATEL v GURDIAL SINGH MANN & Ors

An oral agreement to acquire land may create a common intention constructive trust even where the parties later arrange for a company to be registered as proprietor. The court must identify the contracting parties and agreed terms from the documentary evidence, commercial context and parties’ motivation, giving appropriate weight to the unreliability of recollection.

An agreement to develop land remains unenforceable as an agreement to agree where essential matters, including the scope, cost and timing of the development, remain unresolved. A purchaser contributing 50% of the acquisition cost may alternatively establish a presumed resulting trust. The court may appoint an additional trustee and order sale where necessary to protect the beneficiary’s interest.

The claimant contributed £500,000 towards the purchase of freehold properties occupied by his supermarket business. The properties were acquired in the name of a company controlled by the first defendant, who asserted that the parties had agreed to use a special purpose vehicle. The claimant contended that he had contracted personally with the first defendant and was entitled to an equal beneficial interest.

The claimant sought declarations of trust, appointment as trustee and registered proprietor, sale of the properties, exoneration from charges, and rectification of the company’s statutory registers. The central issues were the identity of the contracting parties, the terms of the oral agreement, whether any development agreement was enforceable, and the appropriate relief.

1. Disposition. Judgment was given for the claimant. The properties were declared to be held on trust for the claimant and the third defendant as tenants in common in equal shares. The claimant was appointed an additional trustee and registered proprietor, the properties were ordered to be sold, and he was discharged and exonerated from liabilities under charges registered against them.
2. Contracting parties and terms. The oral agreement was concluded no later than 2 May 2014. The third defendant could not have been an original contracting party because it had not then been incorporated, and there was no evidence of novation. The second defendant was also not a party. The agreement was between the claimant and the first defendant, who could nominate a company under his control to hold or perform his interest.
3. The agreed arrangement was that the parties would contribute equally to acquisition costs, hold the properties jointly, share the headlease rent and divide development profits equally. The email of 16 July 2014 supported direct co-ownership and was inconsistent with ownership through an SPV, since an SPV would receive the rents and would require provisions concerning capitalisation and shareholder rights.
4. Development. No legally enforceable development agreement had been concluded. The parties had not agreed essential matters such as the number of flats or storeys, cost, timing or what would happen if redevelopment proved impossible. The development arrangement was therefore an agreement to agree.
5. Trust and relief. The company held the properties on a common intention constructive trust for the claimant as to one half. Alternatively, the claimant’s contribution of half the purchase price established a presumed resulting trust. Under section 41 of the Trustee Act 1925, appointment of the claimant as an additional trustee was expedient to protect his interest. Sale was ordered under section 14(2) of the Trusts of Land and Appointment of Trustees Act 1996.
6. The purported registration of the claimant and his company as shareholders and of the claimant as a director was unauthorised. The company’s statutory registers and corresponding Companies House records were ordered to be rectified. The claimant was awarded his costs on the standard basis.