The Pallant v Morgan equity is a generator of uncertainty, says Jonathan Fowles
- The Pallant v Morgan equity in its current form is arguably an unwelcome intrusion by equity into commercial affairs.
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The High Court has recently confirmed that parties cannot exclude it simply by the use of the phrase “subject to contract”.
The precise scope and nature of the so-called Pallant v Morgan equity is still being worked out by the courts. A recent High Court decision ( Generator Developments LLP v Lidl [2016] EWHC 814 (Ch), [2016] All ER (D) 164 (Apr)) illustrates the uncertainty which the background threat of such an equity may cause in commercial transactions, and underscores the difficulty of setting its boundaries, even aside from debate as to its juridical justification.
Pre-requisites of the equity
The equity distinctively arises out of joint venture relationships in relation to the acquisition of real property. It depends on a pre-acquisition arrangement between the parties to the joint venture “which colours the subsequent acquisition by the defendant and leads to his being treated as a trustee if he seeks to act inconsistently
