Valbonne Estates Limited v United Homes Limited

A vendor-purchaser constructive trust arises only where the contract is specifically enforceable, or would be specifically enforceable on the relevant facts. A mere possibility that specific performance may become available in the future is insufficient. Where a lease assignment requires landlord consent, the court must assess objectively whether consent would have been available and whether specific performance could have been ordered, including the effect of any default by the assignor. A retrospective assessment may consider facts that could have been provided to the landlord. Where the applicable legal test and factual evidence remain uncertain, the issue is unsuitable for summary judgment.

Valbonne contracted to purchase a leasehold property from Cityvalue Estates Limited. Completion was conditional on written consent from the freeholder, the London Borough of Newham. Consent had not been given when Cityvalue purportedly transferred the property to United Homes Limited, which later transferred it to Beckton Development Limited.

Valbonne sought declarations that the successive owners held the property on constructive trust for it, together with related claims. United Homes applied for reverse summary judgment, contending that no specifically enforceable contract, and therefore no constructive trust, could have existed before Newham’s consent. Valbonne applied to amend its pleading and join Beckton. The central issues were whether specific performance could have been available retrospectively as at 4 November 2020 and whether the amended ancillary claims were adequately pleaded.

1. Summary judgment. United Homes’ application was dismissed, subject to the striking-out direction concerning the conspiracy and procurement claims. Beckton was joined as a party, and permission to amend was granted subject to a further decision on one allegation.
2. A constructive trust in favour of a purchaser arises only where a court of equity would grant specific performance: Howard v Miller [1915] AC 318. The equitable interest arising under a binding contract subject to a condition subsequent is distinct from the purchaser’s right to specific performance. The mere possibility of future specific performance does not create the constructive trust.
3. In a lease assignment requiring landlord consent, the relevant question is whether the landlord could reasonably refuse consent and whether the assignee would face a real risk of forfeiture or doubtful title. Consent need not have been formally given if the court can objectively conclude that the landlord had no proper grounds to refuse it. The assignor’s failure to take reasonable steps to obtain consent may also be material.
4. Because the inquiry was retrospective, the court had to assess objectively whether, as at 4 November 2020, Newham would have consented and whether Valbonne would have been ready, willing and able to complete if required to commit itself to that position. The assessment could include information Valbonne could and would have provided but for Cityvalue’s defaults. The evidence gave Valbonne a realistic prospect of proving that consent would have been given, or that Cityvalue’s defaults prevented reliance on the condition.
5. The issues concerning whether the First Award varied the contract and affected the priority of the unilateral notice were novel and unsuitable for summary determination. The First Award was not on its face an order for specific performance and was not an order of a court for the purposes of section 87(1)(b) of the Land Registration Act 2002.
6. The unlawful means conspiracy claim was inadequately particularised because it identified neither the unlawful means nor the alleged intention to injure. The procurement claim failed to identify the acts of persuasion, encouragement or assistance, their causal connection with the breach, and the relevant knowledge. Those paragraphs were liable to be struck out, but Valbonne was given an opportunity to amend them.

• High Court: Bacon J set aside an injunction obtained by Valbonne for material non-disclosure. That decision was upheld on appeal in the same litigation: [2021] EWCA Civ 973.
• High Court: Master Brightwell dismissed United Homes’ reverse summary judgment application, permitted Beckton’s joinder and allowed amendment subject to further consideration of one allegation.