Lyus v Prowsa Developments Ltd: ChD 1982

The plaintiffs contracted to buy a plot of registered land with a house to be built on it. The developer had charged the estate as a whole to a bank to secure the development finance. The developer became insolvent and the bank sold the estate as mortgagee to the first defendant ‘subject to and with the benefit of’ the plaintiff’s contract. Three months later the first defendant resold the estate to the second defendant subject to the plaintiffs’ contract so far if at all as it might be enforceable as against the first defendant. The transfer to the second defendant, which was duly registered, did not refer to the plaintiffs’ contract. It was common ground that if the provision in the contract for the sale by the bank to the first defendant was adequate to impose a constructive trust on the first defendant then the effect of the provision in the contract for sale by the first defendant to the second defendant was to impose a similar trust on him.
Held: Both of them had that effect.
Dillon J said: ‘Bearing in mind that there is no basis on which it could be suggested that the bank could be under any obligation to the plaintiffs to complete the house on Plot 29 for them, and bearing in mind the first defendant’s solicitors’ letter to Messrs Strutt and Parker, to which I have referred, I conclude that clause 11 was not inserted in the agreement of October 18, 1979, solely for the protection of the bank, like clause 7 of that agreement which sets out other matters subject to which the property was sold, and I conclude that it was a stipulation of the bargain between the bank and the first defendant that the first defendant would give effect in relation to Plot 29 to the contract which had been made between the vendor company and the plaintiffs.’
He went on to discuss the effect of the 1925 Act: ‘It seems to me that the fraud on the part of the defendants in the present case lies not just on relying on the legal rights conferred by an Act of Parliament, but in the first defendant reneging on a positive stipulation in favour of the plaintiffs in the bargain under which the first defendant acquired the land. That makes, as it seems to me, all the difference. It has long since been held for instance, in Rochefoucauld v. Boustead [1897] 1 Ch. 196, that the provisions of the Statute of Frauds 1677 (29 Car. 2 c.3), now incorporated in certain sections of the Law of Property Act 1925, cannot be used as an instrument of fraud, and that it is fraud for a person to whom land is agreed to be conveyed as trustee for another to deny the trust and relying on the terms of the statute to claim the land for himself. Rochefoucauld v. Boustead was one of the authorities on which the judgment in Bannister v. Bannister [1948] 2 All E.R. 133 was founded.
It seems to me that the same considerations are applicable in relation to the Land Registration Act 1925. If for instance, the agreement of October 18, 1979, between the bank and the first defendant had expressly stated that the first defendant would hold Plot 29 upon trust to give effect for the benefit of the plaintiffs to the plaintiffs’ agreement with the vendor company, it would be difficult to say that the express trust was over-reached and rendered nugatory by the Land Registration Act 1925. The Land Registration Act 1925 does not, therefore, effect the conclusion which I would otherwise had reached in reliance on Bannister v. Bannister and the judgment of Lord Denning M.R. in Binions v. Evans [1972] Ch. 359 had Plot 29 been unregistered land.’


Dillon J


[1982] 1 WLR 1044, [1982] 2 All ER 953


Land Registration Act 1925


England and Wales

Cited by:

ApprovedAshburn Anstalt v Arnold (2) CA 25-Feb-1988
Various leases of properties had been granted. Legal and General occupied the property under an arrangement under which they paid no rent. The landlord sought possession, saying that the agreements were licences not tenancies because of the absence . .
CitedChattey and Another v Farndale Holdings Inc and others CA 11-Oct-1996
The plaintiffs had paid deposits for apartments which were to be built. After the developer became insolvent the plaintiffs sought recovery of the deposits, saying they had a lien which preceded the claims of chargees.
Held: The one appeal . .
CitedHSBC Bank Plc v Dyche and Another ChD 18-Nov-2009
The parties disputed the claimed beneficial interest of the second defendant. The second defendant (C) said that it had been purchased for him by the first defendant (D) from C’s trustee in bankruptcy, and was thereafter held in trust for him on the . .
CitedChaudhary 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.

Registered Land, Contract

Updated: 07 May 2022; Ref: scu.259721