Analysis
The appellant appealed a decision regarding the enforceability of an agreement to sell a piece of land through proprietary estoppel and constructive trust notwithstanding the absence of a written contract.
F, a property developer, was the moving spirit of the appellant (M). In 2002, F began negotiations with G for the purchase of a plot of land (the land) and a meadow (the meadow). F intended to divide the land into two plots. Plot 1 and plot 2 would be sold separately. G did not want to sell until he had planning permission, which was granted in 2003.
By late 2003, a ‘common understanding’ and agreement had been reached orally by F with the respondents (D&C) that D&C would purchase plot 1 and the meadow from F for £200,000. £120,000 was for plot 1 and £80,000 was for the meadow, on which D&C wished to keep horses.
On 21 April 2004, M completed the purchase from G. D&C paid M £66,600 towards the purchase price for plot 1 and the meadow. From 2004 to October 2006, there was a dispute between M and another couple (W) regarding a right of way of the meadow. Legal proceedings ensued during the course of which D&C paid £5,000 towards F’s legal costs.
By February 2005 planning permission was granted for a three-bedroom house on each of plot 1 and 2. Permission was granted in the names of J, who intended to purchase plot 2. D&C co-operated with J in the planning applications.
In April 2005 solicitors were instructed to deal with the conveyancing. On 27 April 2005 M’s solicitors sent D&C a draft contract for sale of plot 1 and the meadow, which was subsequently lost. In May 2005 F permitted D&C to start building a house on plot 1 and for J to start building on plot 2.
Contracts for sale were exchanged on 5 September 2005 stating the purchase price as £120,000 and the deposit of £66,600 already paid. A special condition 6 provided:
‘The buyer admits that he has inspected the property and that he enters into this agreement solely as a result of his inspection of the property, and on the basis of the terms hereof, and not in reliance on any warranty, statements, representation otherwise whether oral or implied, and whether made by or on behalf of the seller other than written relies by the seller’s solicitors to enquiries made by the buyer’s solicitors prior to the date hereof.’
M and J exchanged contracts for plot 2 the same day. In June 2005 D&C sold their existing house and moved into an extension. D&C made payments totalling £80,000 for the meadow between October 2005 and November 2006. By the time the right of way dispute was resolved, they had moved into the house on plot 1.
In February 2007 F told D&C they could only have half the meadow and sent them a cheque for £40,000. D&C did not cash the cheque. No written contract for the meadow was ever completed.
D&C commenced proceedings in 2008 for inter alia a declaration that M held the meadow on trust for them. M denied any binding agreement had been concluded for the meadow relying on s2(5) of the 1989 Act and counterclaimed for possession.
The judge found that special condition 6 was not an unusual term in modern contracts and was concerned with preventing reliance on any representations regarding plot 1 only, not the meadow. He also held that once solicitors became involved in the conveyancing process with all correspondence thereafter headed with the term ‘subject to contract’ had no bearing. He held that this was a case where any concluded agreement relating to the land was intended by the parties to be binding immediately and where there was an overlap between the principles of proprietary estoppel and constructive trust. Satisfied that D&C relied on that agreement and acted to their detriment by paying the £66,600, selling their home and moving, paying the balancing payment and contributing to F’s legal costs, as well as doing works to the meadow, they were entitled to equity in the entire meadow on the basis of both proprietary estoppel and constructive trust.
The grounds of F’s appeal were as follows:
- (i) Although Herbert v Doyle [2010] EWCA Civ 1095. [2015] WTLR 1573 had been cited to the judge he had not referred to it in his judgment or considered the applicability of Arden LJ’s reasoning at [57]. If analysed in that way, the correct conclusion on the judge’s findings of fact was that at the time of the informal agreement in 2003, the parties intended to make a formal agreement setting out the terms of the sale of plot 1 and the Meadow and were aware of the need for written contracts. Therefore no constructive trust arose.
- (ii) The judge wrongly construed special condition 6. It excluded any other terms that would otherwise have been part of the bargain. Since there had only been one prior agreement, which was indivisible and related in part to plot 1, reliance upon that agreement was excluded.
Held:
- 1) In Herbert v Doyle [2010] EWCA Civ 1095, [2015] WTLR 1573 Arden LJ was not intending to describe three different situations in which s2(5) would not apply, but rather describe Cobb v Yeoman’s Row Management Ltd [2008] UKHL 55 in three different ways. The gravamen of the judge’s findings of fact was that in late 2003 there was an oral agreement which both parties intended to be ‘immediately binding’. That agreement was complete as to all its essential terms. D&C relied upon it to their detriment. The oral agreement was not condition upon the resolution of the right of way dispute and the parties regarded it as binding despite the ‘technicality’. The judge also found that D knew he had to sign contracts at some stage ‘at least when dealing with people who were not close friends’. At the time of the oral agreement however, D and F were good friends. Accordingly the judge was correct to conclude that D&C had established that the meadow was held by M on constructive trust for them and therefore the case was within s2(5) of the 1989 Act.
- 2) Regarding (ii), special condition 6 was only concerned with plot 1. It excluded other terms relating to that parcel of land and did not exclude terms relating to a different parcel of land. It is immaterial that the two parcels were previously the subject of one oral agreement. They were always distinct parcels of land.
- 3) Appeal dismissed.
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