Court of Appeal addresses fundamental point of trust law in LA Micro Group (UK) v LA Micro Group, Inc. for which William Buck acted for the Appellants

28 Feb 2023

On 28 February 2023 the Court of Appeal provided its second judgment in LA Micro Group (UK) v LA Micro Group, Inc. [2023] EWCA Civ 214, a dispute which has generated numerous complex legal arguments over its life.

On this occasion the Court of Appeal addressed whether a constructive trust came into existence when the legal owner of property (the property being shares in LA Micro Group (UK)), and who held that property on express trust, had entered into a specifically enforceable obligation with the beneficiary of the express trust to transfer back their beneficial interest to the legal owner – such that the legal owner held both the legal interest (as a trustee of the express trust) and the beneficial interest (as a beneficiary of the constructive trust, albeit under a ‘sub-trust’). The relevance of this point was the need for there to be a constructive trust, parasitic on the entering into of the specifically enforceable obligation, so as to avoid the formality requirements of s.52(1)(c) of the LPA 1925 and where, on the facts, those requirements had not been complied with.

In determining that a constructive trust did come into existence, the Court of Appeal held that the sub-trust was created and then died “at the same moment”, the effect being to vest absolute title in the original express trustee, and that it was not fatal to that trust analysis that the legal and beneficial interest were held, for that moment, by the same entity.

Separately, the Court of Appeal also held that there existed irreconcilable internal inconsistencies with the judgment under appeal in respect of a proprietary estoppel claim (upon which the Respondents which had been successful at first instance), where the representee’s actual state of mind was entirely contrary to the alleged estoppel.

William Buck, leading William Hooper, acted for the Appellants, instructed by Tom Bolam and Cecilia Ricks at Fladgate LLP.