The In-House Lawyer

IN YEOMAN’S ROW MANAGEMENT LTD & ANOR v

Cobbe [2008] (see IHL164, p96) no decision was made on whether proprietary estoppel could be used to support a claim that would otherwise fail on the application of s2 of the Law of Property (Miscellaneous Provisions) Act 1989. However, Lord Scott expressed his ‘present view’ that proprietary estoppel cannot be used to render enforceable an agreement that statute declares to be void. Two more cases concerning the subject have now been reported and the judges have taken opposing views on the issue.

Peter Smith J, in Hutchison & ors v B & DF Ltd [2008], accepted Lord Scott’s view. In Herbert v Doyle & anor [2008] Mark Herbert QC, sitting as a deputy judge of the High Court, took the view that if all the requirements to prove proprietary estoppel are otherwise satisfied a claim will not fail solely because it also consists of an agreement that falls foul of s2.

DEFINITIONS

Section 2 requires that a contract for the sale of an interest in land be made in writing ‘incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each’. The section does not apply in relation to a contract to grant such a lease as is mentioned in s54(2) (short leases) of the Law of Property Act 1925 and nothing in the section affects the creation or operation of resulting implied or constructive trusts.

Proprietary estoppel arises in the following situation (quoting Oliver J in Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982]):

‘… if A, under an expectation created or encouraged by B that A shall have a certain interest in land, thereafter, on the faith of such expectation and with the knowledge of B and without objection by him, acts to his detriment in connection with such land, a Court of Equity will compel B to give effect to such expectation.’

HUTCHISON

The claimants were freeholders of an industrial estate and the defendant company took up occupation of a number of units on the estate and subsequently vacated having determined, in the defendant’s view, all its interest in the units. The claimant maintained, inter alia, that in respect of all but one unit the defendant had agreed a short-term letting. That agreement did not have to be in writing and so s2 did not apply. This claim was upheld by the court. In respect of the remaining unit, where a proposed five-year lease would be void because it did fall foul of s2, the claimant claimed that proprietary estoppel should apply. Smith J rejected the claimant’s claim. He followed Lord Scott’s ‘present view’ that an estoppel cannot be used to enforce an agreement that is void for want of compliance with s2.

HERBERT

In this case, Mr Herbert claimed to be entitled to a transfer by the defendants to himself of three parking spaces owned by the defendants. He pleaded that the defendants had agreed to transfer these spaces, onto which Mr Herbert’s adjoining development had encroached, and that the defendants stood by when he began the development without objecting to the proposed encroachment so that he had acted to his detriment in reliance on that agreement. The judge decided that a complex agreement had been reached between the parties evidenced in one e-mail and subsequently changed on a number of occasions by other e-mails and further discussions between the parties. The judge concluded that although it might be unconscionable for the defendants to resile from their agreement to transfer the spaces to Mr Herbert, Mr Herbert was not entitled to the relief he sought because he was not able and willing to satisfy the other terms of the agreement and until he did so it was not unconscionable for the defendants to withhold the spaces. The judge, however, did acknowledge that if Mr Herbert were to satisfy the other terms of the agreement then he would in principle be entitled to require the defendants to transfer the spaces to him. On this basis the judge seems to have been prepared to apply proprietary estoppel to this situation. However, there is still an element of uncertainty in this respect as the judge refers in his judgment to Mr Herbert acquiring an ‘equitable title… by way of a constructive trust’ and so the judge may have been basing his decision on an exclusion to the application of s2 rather than on proprietary estoppel.

CONCLUSION

Proprietary estoppel may enable the buyer to obtain an interest in land where s2 makes it impossible. However, it must still be sensible to record the terms of a property deal properly and to comply with s2.