Sir Nicolas Browne-Wilkinson VC reviewed the cases about constructive trust claims summarising the result as follows: ‘That decision [Lyus] was approved by the Court of Appeal in Ashburn Anstalt v Arnold . . The Court of Appeal put what I hope is the quietus to the heresy that a mere licence creates an interest in land. They also put the quietus to the heresy that parties to a contractual licence necessarily become constructive trustees. They also held . . that the mere fact that property is sold subject to a contractual licence is not sufficient to create a constructive trust. They held . . that the mere fact that somebody has purchased with notice of a claim does not give rise to a constructive trust. However, the Court of Appeal plainly considered that Lyus v Prowsa was rightly decided.
The result, as it seems to me, is that in the normal case a conveyance of land subject to or with notice of prior incumbrances or prior interests will not operate so as to make enforceable under a constructive trust such prior incumbrances or interests which would otherwise be unenforceable.
However, in certain circumstances equity raises a constructive trust because it is unconscionable for the person having received such property not to give effect to the terms on which he received it. As the Court of Appeal said, and with respect I would agree:
‘In matters relating to the title to land certainty is of prime importance. We do not think it desirable that constructive trusts of land should be imposed in reliance on inferences from slender materials.’
It is important always to bear in mind that it is of the greatest importance that the title to land should be capable of being ascertained in accordance with well-known procedures. To raise constructive trusts which do not fit into the conveyancing machinery currently operating, thereby giving rise to liabilities of which purchasers might otherwise not be aware, is a dangerous course to pursue.
In my judgment, the decision in Ashburn Anstalt does not warrant the creation of a constructive trust unless there are very special circumstances showing that the transferee of the property undertook a new liability to give effect to provisions for the benefit of third parties. It is the conscience of the transferee which has to be affected and it has to be affected in a way which gives rise to an obligation to meet the legitimate expectations of the third party.’
Judges:
Sir Nicolas Browne-Wilkinson VC
Citations:
[1991] EWCA Civ 3, [1992] 1 EGLR 186
Links:
Jurisdiction:
England and Wales
Citing:
Cited – Halsall v Brizell ChD 1957
Land in Liverpool was sold in building plots. The vendors retained the roads and sewers and a promenade and sea wall. A separate deed of covenant of 1851 between the vendors and the owners of the plots which had by then been sold, recited that the . .
Cited by:
Cited – Davies and Others v Jones and Another CA 9-Nov-2009
The parties contracted for the sale of land for development. The contract allowed for the costs of environmental remediation, but disputed the true figure set by the eventual builder and retained. The court now heard argument about whether the sum . .
Cited – Chaudhary v Yavuz CA 22-Nov-2011
The court was asked ‘whether and if so how an easement arising informally and not protected by any entry at the Land Registry can be effective against a purchaser of the land over which the easement would be exercised.’ The parties respectively . .
Lists of cited by and citing cases may be incomplete.
Land, Trusts
Updated: 07 July 2022; Ref: scu.245296