• In the case of Farrar v Miller 2018 EWCA Civ 172, it was found that in respect of the sale of a piece of land for development, the appellant was granted permission to amend his particulars of claim to include a claim for breach of fiduciary duty.

Facts of the Case

  • A property developer (F) appealed against a decision refusing him permission to amend his particulars of claim to introduce a claim for breach of fiduciary duty concenring the sale of land. The respondent (M) appealed against granting F permission to amend his particulars of claim to allege a breach of constructive trust and proprietary estoppel.
  • F and M has been in business together as property developers, operating as Roxylight Holdings Ltd.
  • Roxylight acquired Edmond Homes, which owned a piece of land known as Long Stratton.
  • Thereafter, the registered proprietor of Long Stratton was a company, Saxon, in which F and M each had a 50% interest.
  • It was F’s case that in 2008 he, M and the chairman of Edmond Homes (C) made an oral agreement, known as the joint venture agreement, expressly providing that C would obtain planning permission for housing on the land, it would be transferred into a new entity owned by the contracting parties in equal shares, and once planning permission was obtained it would be sold with each of the parties receiving one third of the net profits of sale.
  • F stated that M was given the responsibility of transferring the land to the joint venture entity, and that M owed him and C fiduciary duties pursuant to the joint venture agreement; he then entered into a collateral agreement with M and another businessman (B) to the effect that B would receive a beneficial interest in Roxylight, and the net profit from the sale of Long Stratton would be divided between himself, B, C and M. Saxon became insolvent.
  • Administrators sold Long Stratton to Artillery, which was owned by Roxylight. Artillery sold the land to a company of which M and B were members, but F was not. It was later sold to a company in which M, C and B had an interest, but F did not.
  •  F asserted that those sales took place without his knowledge or consent. Planning permission was subsequently granted and the land was sold. F’s claim that M had acted in breach of the express or implied terms of the joint venture agreement was struck out.
  • By appeal, he was granted permission to amend his particulars of claim to argue that the proceeds of sale were held on trust for him by M under a constructive trust, or that the facts gave rise to a proprietary estoppel.

Issues in Farrar v Miller 2018 EWCA Civ 172

  • Did a constructive trust arise in favour of F regarding Long Stratton.

Held by Court of Appeal

  • Appeal allowed; cross appealed dismissed.

Patten LJ 

  • Here regarding a constructive trust, the facts and matters on which F relied were enough to raise a properly arguable case of breach of constructive trust. M was entrusted to deal with the land in accordance with the agreement he had made but instead appropriated it to his own use.
  • Here, there was a real prospect that the trial judge would conclude that M represented, and F reasonably assumed, that M would ensure that F would secure an interest in Long Stratton through the joint venture and that, despite their failure to satisfy the formality rules, it would be unconscionable for M to contend otherwise. It was not a requirement of a proprietary estoppel that the parties had reached an agreement.
  • M’s control of the land was coloured from the start by the trust and confidence by which he obtained it and his misappropriation of it was a breach of that trust. It was therefore a claim for the recovery of trust property or its proceeds and was one falling within the Limitation Act 1980 s.21(1)(b) to which no limitation period applied.
  • “The claim based on the Pallant v Morgan constructive trust and the alternative claim based on proprietary estoppel both depend (in terms of the pleading) on Mr Farrar having allowed Long Stratton to be transferred to Artillery and placed under the control of Mr Miller in reliance on the representations and assurances previously made to him as part of the joint venture agreement. Paragraphs [21B] and [21C] of the amended particulars of claim do not make it clear whether it is alleged that the constructive trust arose when Long Stratton was transferred to Artillery or only when it was subsequently transferred to Edged Red. Both are possible candidates. There are also potential issues about whether any constructive trust could have attached to the land itself rather than shares in Edged Red or Sunguard given that it was contemplated under the joint venture agreement that Mr Farrar would be a shareholder in the development vehicle rather than having a direct interest in Long Stratton. A similar issue arose in the Banner Homes case where the Court of Appeal ordered the successful claimant to be given shares in the development company” [89]