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Yeomans Row v Cobbe
Yeomans and s2 of 1989 Act
Assurance and reliance - Thorner

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Yeomans and s2 of 1989 Act

In Yeomans Row Management Ltd v Cobbe, Lord Scott (at paragraph 29) expressed the view (obiter) that proprietary estoppel cannot be used to make enforceable an agreement that does not comply with s2 of the Law of Property (Miscellaneous Provisions) Act 1989. Lord Walker, the only other judge who gave a full judgment, said that it was not necessary or appropriate to consider the issue (para 93).

So what is the position?

In Herbert v Doyle [2010] EWCA Civ 1095 Mr Herbert sought the transfer to himself of three car parking spaces owned by a dental practice that adjoined his property, in return for which he would transfer alternative car parking spaces. He had lengthy discussions with the dentists, and had carried out some work for them, but the agreement between the parties was oral and hence not compliant with s2 and therefore, unless s2(5) applied, (constructive trust) not legally binding.

Although Mr Herbert had relied to his detriment on the oral agreement (subsequently varied) in carrying out the building works, the judge held that no constructive trust had arisen in his favour because he had not completed the works.

Permission to appeal was refused by the CA. In coming to that conclusion detailed consideration was given to Yeomans Row Management Ltd v Cobbe. At para 57 Arden LJ said this about the discussion in Cobbe:
    "There is a common thread running through the speeches of Lord Scott and Lord Walker. Applying what Lord Walker said in relation to proprietary estoppel also to constructive trust, that common thread is that, if the parties intend to make a formal agreement setting out the terms on which one or more of the parties is to acquire an interest in property, or, if further terms for that acquisition remain to be agreed between them so that the interest in property is not clearly identified, or if the parties did not expect their agreement to be immediately binding, neither party can rely on constructive trust as a means of enforcing their original agreement. In other words, at least in those situations, if their agreement (which does not comply with section 2(1)) is incomplete, they cannot utilise the doctrine of proprietary estoppel or the doctrine of constructive trust to make their agreement binding on the other party by virtue of section 2(5) of the 1989 Act."
The point was not really therefore dealt with head on.

However, in Whittaker v Kinnear [2011] EWHC 1479 (QB) the High Court did grapple directly with the issue. It was held that proprietary estoppel in a case involving the sale of land has survived the enactment of s2 Law of Property (Miscellaneous Provisions) Act 1989 despite Lord Scott’s dicta which suggested the contrary in Cobbe v Yeomans Row.

And, although Lord Neuberger in Thorner v Major drew a distinction between commercial cases (where it was less likely that an estoppel would be established) and domestic cases, it is the nature of the parties’ dealings, not the nature of the property, which determines whether a case is to be regarded as commercial or domestic.

Facts

C sold her house and adjacent agricultural land to a property developer (D) at an undervalue on the basis that she would be permitted to stay in the house for as long as she wanted and that she would share in the profits of development and in the absence of any such profits the house would be re-conveyed to her. This agreement was not written into the contract of sale and was not formalised.

D took out a mortgage on the land and when he defaulted the bank sought to terminate C’s occupancy of the house by a notice to quit. C defended the subsequent claim for possession on the basis that D’s representations on which she had relied to her detriment gave rise to a proprietary estoppel.

First instance

At first instance the District Judge said that the proprietary estoppel claim was defeated by s2 of the 1989 Act and held that the claim was therefore not “genuinely disputed on grounds which appear to be substantial” under CPR Rule 55.8. On appeal the case was argued also in the alternative on the basis of a constructive trust.

High Court

Allowing the appeal and setting the order for possession aside, the High Court held that there was no binding authority that a proprietary estoppel could not arise in a commercial transaction situation. The nature of the dealings between the parties had to be analysed in each case to establish whether there was a complete agreement (Herbert v Doyle [2010] EWCA Civ 1095 cited) and whether that agreement gave rise to an expectation of a contract or an interest in immovable property, often for long term occupation in a home. (Yaxley v Gotts [2000] Ch 162; Cobbe v Yeomans Row Management Limited [2008] 1 WLR 1752; Thorner v Major [2009] 1 WLR 776). The case was therefore remitted to the county court for those issues to be determined. The fact sensitivity of these cases was emphasised (paras 35 and 36).

Comment

This case provides a useful summary of the recent cases on the issue of proprietary estoppel and its use in the cases involving interests acquired in commercial and domestic situations. The obiter dicta of Lord Scott in Cobbe that: “proprietary estoppel cannot be prayed in aid in order to render enforceable an agreement that statute has declared to be void” were contrasted with the dicta of Beldam LJ in Yaxley v Gotts. Beldam LJ had been the Chairman of the Law Commission at the time of its working paper and report on Formalities for Contracts for Sales of Land on which the 1989 Act was based. He was therefore in a good position to state that the 1989 Act: “did not intend to affect the availability of the equitable remedies” including proprietary estoppel. (para 30).

This case held that although previous cases had drawn a distinction between commercial sale of land agreements and domestic agreements, there was no binding authority that s2 of the 1989 Act excluded a defence based on proprietary estoppel.


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