Banner+Homes+Group+Plc.+v.+Luff+Developments

__**Facts**__: Stowhelm, a parent company of Luff (respondent), acquired a development site. Banner (appellant) and Luff made an oral agreement prior to this acquisition that they would develop the site as a joint venture. Although no formal, written agreement was produced to this effect, the intent to form a joint venture was reaffirmed over a series of conversations, proposals and counter-proposals. Banner believed that the signing of a formal shareholder agreement would trigger payment of its share of site acquisition and costs, acquisition in shareholding and appointment of nominees to Stowhelm's board. Trial: Rejected the constructive trust claim on the basis that there was no signed agreement in place, and furthermore that Banner failed to demonstrate detrimental reliance on the arrangement with Luff. Banner is appealing this decision. __**Issue:**__ Is Luff's shareholding in Stowhelm subject to a constructive trust in Banner's favour? __**Reasoning (Chadwick L.J.):**__ When might equity arise and indicate the presence of a constructive trust? 1) //Pallant v. Morgan//: where the arrangement precedes one party's acquisition of the relevant property. If the arrangement is made in relation to a property already owned by one of the parties, equity may also arise. 2) It is not necessary for the arrangement to be contractually enforceable. Equity can act through specific performance, on the recognition of a corresponding trust. 3) The pre-acquisition arrangement includes understanding that one party will acquire the property, and the other party obtains some interest in that property. The acquiring party must not have informed the other that it does not intend to honour the arrangement. 4) The non-acquiring party must have done something that is to the advantage of the acquiring party in relation to the acquisition. "It is the existence of the advantage to the one, or detriment to the other, gained or suffered as a consequence of the arrangement or understanding, which leads to the conclusion that it would be inequitable or unconscionable to allow the acquiring party to retain the property for himself, in a manner inconsistent with the arrangement or understanding which enabled him to acquire it." The advantage or detriment might include an agreement for the non-acquiring party to stay out of the market for the property. 5) An agreement for the non-acquiring party to stay out of the party is not a necessary feature. **Also, the existence of both advantage and detriment is not essential, either is sufficient. "What is essential is that hte circumstances make it inequitable for the acquiring party to retain the property for himself in a manner inconsistent with the arrangement or understanding on which the non-acquiring party has acted".**
 * __Held:__ Yes, it is subject to a constructive trust in Banner's favour. Appeal allowed. **

In this case, the trial judge was wrong to reject the constructive trust claim. Equity is invoked in this case as there is no bargain to be enforced, and because Banner regarded the agreement as an impediment to acquiring the site for itself. It was also clear that Luff wanted to keep Banner on side so that Banner would not emerge as a rival for the site. Linking this case to Pallant v. Morgan: "it may be just as inequitable to allow the defendant to treat the property as his own when it has been acquired by the use of some advantage which he has obtained under the arrangement or understanding as it is to allow his to treat the property as his own when the plaintiff has suffered some detriment under the arrangement or understanding".