Summary

Claimant had equitable interest in property assigned in course of business transaction.

Facts

The claimant ('B') sought to establish that a trust had been created in the Holwood House Estate ('the Estate'), which he had assigned to the defendant ('G') personally in order that G should be able to use the property as security for a bank loan. His position was that he only agreed to the assignment of the Estate on the basis that his interest remained unchanged from what it was prior to the assignment, namely a 30 per cent interest. In addition to the assignation, B, who had been G's close friend and business associate, had invested large sums of money into their joint ventures (including £750,000 at the time of the assignation) and acted as guarantor. G subsequently became involved in insolvency proceedings. G conceded a proprietary interest but alleged that the true nature of the arrangements between the quasi-partners was that they were entitled to shares in the property in proportion to the amounts that they had invested in the property/project, which would be only about 15 per cent. The dispute between the parties at trial was whether B was entitled to: (i) 30 per cent of the Estate or its proceeds; (ii) 30 per cent of the estate or its proceeds but with equitable accounting for the period from the assignment onwards; or (iii) an interest in the same ratio as he and G had invested in the whole project.

Held

(1) The applicable principles of law were set out in Gissing v Gissing (1971) AC 886. The extent of the interest to be held on trust depended on the true nature of the understanding between the parties and particularly the understanding which B on an objective basis, having regard to what was said and all the circumstances, would get when he consented to the assignment and supplied the further £750,000. (2) When B agreed to the assignment and to put more money in, he did so knowing that his shareholding was 30 per cent. When he was told his interest would be "as before", it was clear that his interest was to stay at 30 per cent. He put in the £750,000 and subsequently the pledge of shares and renewed guarantee not by virtue of obligation or investment but because he wanted to help his friend and because he thought he had a 30 per cent interest and had been so led to believe by G. B did not undertake to put money in pro rata - indeed no one at the time had ever suggested that per cent share. (4) Money which G claimed to have spent by way of maintenance on the property should not be taken into account. It had not been raised in the pleadings. Further, G had had the benefit of having the property in his name since the assignment. That benefit enabled him to use the property as security. The value of that use overtopped any expenditure which he suggested he had made.

Counsel to be heard as to form of order.