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Lloyd v Dugdale [2001] EWCA Civ 1754

LAND LAW – PROPRIETARY ESTOPPEL – CONSTRUCTIVE TRUST

Facts

The defendant had arranged for his company to do building work on the claimant’s land on the understanding that the claimant would grant the defendant a sub-lease. This was due to a promise made by the claimant’s predecessor. The claimant never signed the sub-lease, and sought to evict the defendant. The claimant’s head-lease stated that it was subject to the defendant’s rights.

Issue

The defendant claimed that he had a proprietary interest to remain, either due to proprietary estoppel or constructive trust. The issue in this case was primarily in what circumstances a constructive trust will arise.

Held

The Court of Appeal held that the defendant had no interest in the land. Any proprietary estoppel would arise only in the defendant’s company’s favour (as they were the ones who incurred detrimental reliance), and a constructive trust did not arise for the following reasons.

The Court restated the principle that a constructive trust will only arise if the court is satisfied that the conscience of the claimant is sufficiently affected that it would be unconscionable to allow him to rely on his strict legal rights. In this kind of case, it is crucially relevant to determine whether the claimant has undertaken a brand-new obligation to give effect to a particular interest or right. Pre-existing obligations will not give rise to a trust. In this case, the claimant was only affected by a pre-existing promise.

In addition, the Court held that simply because a conveyance is made subject to another’s rights does not mean that the Court will grant that person rights via constructive trust which would not otherwise exist.

The Court also reiterated the principle that contractual licenses do not create proprietary interests in land.


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