Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372

Chadwick LJ

• There are situations in which equity will impose a constructive trust on property acquired by one person, say "A," in furtherance of some pre-acquisition arrangement or understanding with another, say "B," that, upon the acquisition of the property by A in circumstances in which B kept out of the market, B would be granted some interest in the property.

• Requirements:

  1. An arrangement;

  2. The agreement contemplated the possibility of one party acquiring the property and that if he did so then the other party would take an interest;

  3. The acquiring party didn’t inform the other one in time to enable it to take part in the bid;

  4. Unconscionability, defined here as the “existence of the advantage to the one [party], or detriment to the other, gained or suffered as a consequence of the arrangement”.

• Why does a CT arise here? This situation has nothing to do with property rights - the courts are effectively using a remedial constructive trust without admitting it.

• Also this will encourage companies not to bother with binding agreements, which is the proper way to deal with such a situation.