Joint Ventures

Ian Quayle examines an interesting case exploring fiduciary issues in the context of a property joint venture, focusing on whether using trust property as security for acquiring additional property constitutes a breach of trust.

Case Name, Reference and Bailii Link

Summary

The question before the Court was whether using trust property as security for the acquisition of further property constituted a breach of trust, and if so whether that gave R a proprietary interest in a property, or simply a financial remedy. No authority could be found which was directly on point. 

Facts

This case concerned a dispute between two joint venturers who had fallen out leading to allegations and counter-allegations were made relating to dealings over many years and many different properties, with little reliable contemporaneous documentation to support either parties’ account. 

Issues

Could the claimant claim an interest in a resulting trust in property acquired by the defendant joint venturer or a company owned solely by the defendant?  

Decision

At first instance, The County Court Judge had rejected the claimants claim to any relief in relation to a property acquired when the defendant used a property for which the claimant owned 28% of the beneficial interest as a security for the purchase of another property.  

On appeal, the court held that the act of using trust property as security for the acquisition of a further property was a breach of trust and rejected a defence that there had been informed consent on the claimant’s part. While rejecting the claimant’s claim to a proprietary interest in the purchased property, the court held that the claimant was entitled to an account of profits arising from its acquisition, remitting that question to the County Court Judge.