Laches and estoppel

Patel v Shah

[2005] EWCA Civ 157


A joint venture to purchase properties went wrong when the market fell in the 1990s. The joint venture gave rise to a resulting trust under which the various parties had an equitable interest in the properties. When things went wrong an arrangement was made to retain the properties, rather than sell them sell at a loss, even though the rents received did not meet all the liabilities. The parties agreed to shoulder the ongoing loss. One of the parties however, a company, was dissolved and did not fulfill its obligations under the arrangement but before the dissolution its right had been assigned. The assignees made no contributions and showed no interest until 2000. By that time the properties had recovered from the effects of the slump.


The assignee was prevented from enforcing its rights. The doctrine of laches applied and it would be unconscionable to allow it to do so. The equitable defence of laches is available as a defence in an action by beneficiaries against their trustees for the recovery of trust property. Mummery LJ approved the following statement of principle by Aldous LJ in Frawley v Neill [2000] CP Reports 20:

    "In my view, the more modern approach should not require an inquiry as to whether the circumstances can be fitted within the confines of a preconceived formula derived from earlier cases. The inquiry should require a broad approach, directed to ascertaining whether it would in all the circumstances be unconscionable for a party to be permitted to assert his beneficial right. No doubt the circumstances which gave rise to a particular result in decided cases are relevant to the question whether or not it would be conscionable or unconscionable for the relief to be asserted, but each case has to be decided on its facts applying the broad approach."

Mummery LJ then went on:

    "33. The effect of conduct by the claimants, which may properly be described as unconscionable, is to release a defendant trustee from the equitable trust obligation, which binds his conscience as the holder of the legal title for the benefit of others. In the case of an ordinary trust by way of gift to trustees for the benefit of the beneficiaries, where the beneficiary is not required or expected to do more than receive what has been given for his benefit, it will obviously be extremely rare for laches and delay on the part of the beneficiary to make it unconscionable for that beneficiary to assert his claim to the beneficial interest, or for the trustee to claim that he has been released from the equitable obligations that bind his conscience. 34. The general commercial setting of the particular facts of this case make it, in my view, a different kind of case from that of a beneficiary under a gift trust. .. the persons investing in the purchase of the various properties held from time to time by the defendants were in substance trading in land. They were buying and selling properties with a view to making a quick profit. It was a collaborative commercial venture, in which those participating in it were expected to work together in making their contributions to achieve the aim of the joint ventures, the aim in the case of each acquisition being the same. The creation of resulting trusts arising on the purchases by the defendants of properties in their name, with contributions made by predecessors of the claimants and others, was .. not the aim of the joint ventures. The trusts were a by-product or incidental equitable consequence, a vehicle for accomplishing the commercial aim. .. 38. In my judgment, the deputy judge was right to regard the conduct of the claimants as conduct on which he was entitled to dismiss the claim as unconscionable and barred by laches. The fact that the claimants were seeking to recover capital beneficial interest from the defendants as trustees does not, in my view, make it any the less unconscionable. .. 40. The defendants were released from their equitable obligations to the claimants in the circumstances of this case, both as to capital and to income, and in respect of unmortgaged as well as mortgaged properties."

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