Cobbe v Yeoman's Row seems to have narrowed the scope for reliance on proprietary estoppel. Nonetheless, in Herbert v Doyle the High Court found a way to distinguish the recent House of Lords' decision.
Mr Herbert owned the freehold of a large building and grounds. Next to the main building was an annexe, owned by a dentists' practice, who also owned nine spaces in the car park. Mr Herbert redeveloped his building and grounds into houses and flats. A dispute arose over several car parking spaces which belonged to the dentists but which Mr Herbert required for the purpose of his development.
Mr Herbert alleged that, under an oral agreement in 2003, the dentists had agreed to transfer certain car parking spaces to him, in return for replacement car parking spaces. The agreement was unenforceable for want of compliance with Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Mr Herbert's case was founded in proprietary estoppel, or alternatively a constructive trust. He submitted that he had gone ahead with his development, which encroached on the dentists' car parking spaces, in reliance on the dentists' promise to transfer the spaces.
The dentists argued that Mr Herbert was not entitled to the parking spaces without satisfying nine other specified conditions which they claimed to be the terms of the 2003 agreement. These included work that Mr Herbert had agreed to carry out to parts of the main building used by the dentists, and the grant to the practice of two leases of additional areas. The dentists counterclaimed for performance of these conditions, or, alternatively, damages for trespass on their land.
The judge ruled that if Mr Herbert was able and willing to satisfy the other terms agreed, it would be unconscionable for the dentists to resile from their agreement by refusing to transfer the car parking spaces to him. But equally, if Mr Herbert was not able and willing to satisfy those other terms, then it would not unconscionable for the dentists to withhold the spaces unless those other terms are satisfied. The judge therefore refused Mr Herbert's claim to a "straight swap" of the two sets of car parking spaces and awarded the dentists the sum of £5,145 for trespass. However, the judge indicated that he would consider a request to suspend the execution of the order for those damages for a short period in order to allow Mr Herbert an opportunity to obtain a transfer of the parking spaces by satisfying the 2003 agreement. Provided Mr Herbert complied with the conditions to the original agreement, the judge would be prepared to make a declaration that Mr Herbert would be entitled to a transfer of the car parking spaces.
Judgement had been prepared in draft in this case prior to the handing down of the decision in Cobbe v Yeoman's Row, and was subsequently revised to take account of that authority. Having found that the agreement in that case did not contain all the necessary terms, the House of Lords left unanswered the question whether a complete agreement for the acquisition of an interest in land that does not comply with the formalities prescribed by section 2 can become enforceable via the route of proprietary estoppel. However, their Lordships expressed the view that proprietary estoppel could not be invoked to save an agreement which did not comply with section 2.
The judge in Herbert v Doyle noted that these comments did not form part of the binding decision in Cobbe. He was of the view that, even following Cobbe, it remains the case that, if all the requirements are otherwise satisfied for a claim based on proprietary estoppel to succeed, the claim will not fail solely because it also consists of an agreement which falls foul of section 2. The judge suggested that the basis for this may be that the court gives effect to the proprietary estoppel by recognising or imposing a constructive trust. Constructive trusts are specifically excluded from the ambit of section 2.
Things to consider
The facts of this case were complex. The deal comprised numerous elements. These were agreed via a combination of emails and meetings, and changed several times over a number of years. This surely underpins the rationale behind section 2; that all the terms of an agreement relating to land should be contained in one document, signed by both parties.
Despite the judge revising his judgment following Cobbe v Yeoman's Row, the decision feels uncomfortable in the light of the judgment of the House of Lords. The message must remain that parties should ensure they adhere strictly to the terms of section 2, if they want their commercial dealings to have certainty.
What of parties who are concerned that their course of dealings may give rise to an unintended proprietary estoppel? The judge in Herbert v Doyle held that, following Cobbe, it would be extremely difficult if not impossible to establish a proprietary estoppel where negotiations are marked subject to contract after the parties have legal representation, or where one party withdraws from negotiation before a fundamental point has been resolved. However, he held that the facts in Herbert v Doyle did not fall within either of these categories. There was instead an informal agreement where the parties envisaged legal formalities later. In such a case the judge was of the view that it must now be regarded as highly improbable (if not practically impossible) for rights to be created by way of proprietary estoppel in the case of negotiations which are expressly made subject to contract. Although the dentists had stated their intention to instruct solicitors, none of the correspondence had been marked "subject to contract". On the facts the judge was able to find that their agreement was intended to be relied on, and that the parties were no longer free to withdraw at will. Use of the words "subject to contract" will not be conclusive, but it seems that this will make it more difficult for one party to argue that it had altered its position to its detriment in reliance on the alleged agreement.