Lyus v Prowsa Developments Ltd [1982]

Lyus v Prowsa Developments Ltd [1982] 1 W.L.R. 1044

Property law – Sale of land – Development plot

Facts

The plaintiffs contracted to purchase a plot of land which was part of an estate under the development of the defendant. The plaintiffs paid a deposit for the plot but before the completion of a house being built upon it, the developer became insolvent. The bank, who held a charge over the property sold the land on, but recognising the unique nature of the plaintiffs’ plot within the agreement. The land was again sold three months later, on the same basis with the plaintiffs’ plot being recognised in the process. However, when the transfer was registered, there was no mention of the plaintiffs’ contract. The plaintiffs claimed that the agreement was binding and that an order of specific performance should be granted.

Issue

It was important for the court to understand whether the final purchaser had taken the land, subject to the contract between themselves and the plaintiffs, or whether the plaintiffs had lost their position as a result of the subsequent sales of the property. Specifically, it was important for the court to weigh whether the plaintiffs could rely on their contract under the Law of Property Act 1925.

Held

The court held that the Law of Property Act 1925, section 56 did not apply to the circumstances and therefore the plaintiffs could not rely on their contract. However, the court held that there was a constructive trust between the defendant and the plaintiffs on the basis that having recognised the plaintiffs’ contract at the time of sale, it would be inequitable to deny the existence of it at a later time.