Whittaker v Kinnear [2011] EWHC 1479 (QB)

[2011] EWHC 1479 (QB)Case No QB/2010/0631IN THE HIGH COURT OF JUSTICEQUEEN’S BENCH DIVISIONON APPEAL FROM COLCHESTER COUNTY COURTHis Honour Judge LochraneCase No 00001423Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 10/06/2011
Before
MR. JUSTICE BEAN
Between
Alvina Whittaker (Defendant)AppellantAnthony David Kinnear (acting by his agents on Gershinson and Louise Brooks of Allsop LLP being Receivers appointed under the Law of Property Act 1925) (Claimant)Respondent
John McDonnell QC and Clare Roberts (instructed by Fisher Jones Greenwood LLP, Colchester) for AppellantFrancis Moraes (instructed by Wragge & Co, London) for RespondentHearing Hearing dates : 6 May, 2-3 June 2011
Judgment
[1]The appellant Mrs Whittaker was prior to 2007 the freehold owner and occupier of Marks Tey Hall, Colchester. The land was and is registered under two title numbers: one ending 960, which relates to the house, outbuildings and garden; and the other ending 426, which consists of two adjacent parcels of agricultural land with development potential. In 2007 Mrs Whittaker entered into an agreement with the respondent Mr Kinnear, a property developer, and a partner of his called Mr Nichols, for the sale of both registered titles for the sum of £750,000. The transfer document identifies the property and the purchase price. It also contains a pre-emption clause in respect of the house and garden in the event that the purchasers sought to dispose of the property within three years. An overage deed, originally in draft, provided for Mrs Whittaker to have a share of any increase in development value in the event of a sale realising in excess of the base value.After the sale, Mrs Whittaker remained in occupation of the house and garden. A tenancy agreement between Messrs Kinnear and Nichols on one hand and her on the other hand was signed granting what was described as an assured shorthold tenancy for a fixed term of 12 months at a monthly rent of £1. It is accepted by all parties that a tenancy at such a low rent cannot be an assured shorthold tenancy within the meaning of the Housing Act 1988.[2]The purchasers did nothing to develop or realise the potential profit on their investment in Marks Tey Hall. Mr Kinnear and Mr Nichols were initially registered as owners of the property but at some point Mr Nichols divested himself of his interest and Mr Kinnear became the sole registered owner. He took out a mortgage with the Heritable Bank. It appears that he defaulted on the mortgage and the bank obtained a possession order against him. Receivers were appointed under the Law of Property Act 1925 to pursue possession of the property. In early 2010 notice to quit was served on Mrs Whittaker on behalf of the receivers acting (as they were entitled to do) as agents for Mr Kinnear.[3]Mrs Whittaker did not leave the property and on 4th June 2010 the Receivers issued a claim for possession in the Colchester County Court. The claim form specified 2nd August 2010 for the hearing. On that date District Judge Molle ordered that “the hearing of the Claimant’s claim for an order for possession against the Defendant be adjourned and be relisted on 4th October 2010 at 10:30am with a time estimate of 2 hours”.[4]On the latter date the case came before His Honour Judge Lochrane. Both sides were represented by counsel. Neither side sought to call oral evidence. The judge had before him a bundle of documents including witness statements from various individuals, but no statement from either Mr Kinnear or Mrs Whittaker. An amended Defence and Counterclaim which had by then been served raised proprietary estoppel as a defence to the claim. Paragraphs 10-14 of the pleading read as follows:
“10. The agreement had been reached by the Claimant making representations to the Defendant, which she relied upon, thereby also acting to her detriment.”
Particulars: (i) The Claimant knew that the Defendant had no money but wanted to continue to live at the property; (ii) The Claimant stated he was able to develop the property around the house; (iii) The Claimant agreed that the house part of the property should remain occupied by the Defendant at all times; (iv) The Defendant agreed to sell the property to the Claimant for £750,000, as against its true worth of £1,250,000 but subject to conditions; (v) Those conditions were that - the Defendant could and would continue to live in the house for as long as she wanted - the Claimant represented to the Defendant, which she accepted, that title to the house and garden would be transferred to her in lieu of profits on development of parts of the Property - the Defendant had security of occupation of the house and garden; - the Claimant would obtain planning permission to develop the property (but not the existing house and garden) - The Claimant would share the profit of any development as to 30% thereof to the Defendant as set out in an overage agreement - If the Claimant wanted to sell the title of the house and garden he would first offer it to the Defendant at a price as set out in a written agreement - the Claimant would and did enter into a written agreement headed ‘Tenancy Agreement’ which reflected his agreed obligations but was not intended to be a tenancy within the Housing Act 1988 as it was for an expressed nominal ‘rent’; - That the Claimant would have and maintain buildings insurance including against subsidence and the repair of utility pipes. 11. In these circumstances, the Defendant acted to her detriment. Particulars: (i) The Defendant transferred the legal interest to the Claimant and Mr Nicolls; (ii) The Defendant transferred it at a considerable undervalue, being £500,000 (the true value was £1.25 million and the consideration was £750,000). (iii) The Claimant represented to the Defendant, which she accepted, that title to the house and garden would be transferred to her in lieu of profits on development of parts of the Property. 12. Furthermore, the representations made by the Claimant were untrue. Particulars: (i) The Claimant has failed to maintain the fabric of the property in that there is water ingress into the house from the roof (which has become defective); (ii) The Claimant has failed to maintain the water supply to the house in that there is a leak in the supply pipe in the field leading to the house from the road. (iii) These defects were notified in writing to the Claimant by letter from the Defendant’s solicitors in December 2009. (iv) The Claimant represented to the Defendant, which she accepted, that title to the house and garden would be transferred to her in lieu of profits on development of parts of the Property. 13. By reason of the matters set out above, the Defendant has rights in and over the property which has raised an equity by reason of proprietary estoppel. Particulars: (i) The Defendant has acted upon the representations to her detriment as set out above and is therefore entitled to remain in the property for as long as she wants; (ii) Her reasonable expectation relying upon the Claimant’s representations was that the titles to the house and garden, located within the property, would become hers; (iii) The minimum equity to do justice to her equity would be to vest title of the house and garden, together with ancillary rights, in her. 14. Further and in any event, at the time of the sale by the Defendant to the Claimant, there was a limitation on the title which was passed from her to him. Particulars: (i) This limitation is that her title was always subject to her equitable rights granted and agreed with the Claimant. (ii) The Claimant acquired no more than a title to the property subject to the Defendant’s equitable rights; (iii) Those equitable rights have priority over the legal interest by mortgage of Heritable Bank granted by the Claimant; (iv) The Defendant’s rights arose prior to registration of the Heritable Bank’s rights under the mortgage and are protected by the Defendant’s actual occupation; (v) The consequence is that upon registration, those rights are not postponed to the mortgage for they are protected by the operation of section 29(2)(a)(ii) and paragraph 2, schedule 3 of the Land Registration Act 2002.” (i) The Claimant knew that the Defendant had no money but wanted to continue to live at the property; (ii) The Claimant stated he was able to develop the property around the house; (iii) The Claimant agreed that the house part of the property should remain occupied by the Defendant at all times; (iv) The Defendant agreed to sell the property to the Claimant for £750,000, as against its true worth of £1,250,000 but subject to conditions; (v) Those conditions were that - the Defendant could and would continue to live in the house for as long as she wanted - the Claimant represented to the Defendant, which she accepted, that title to the house and garden would be transferred to her in lieu of profits on development of parts of the Property - the Defendant had security of occupation of the house and garden; - the Claimant would obtain planning permission to develop the property (but not the existing house and garden) - The Claimant would share the profit of any development as to 30% thereof to the Defendant as set out in an overage agreement - If the Claimant wanted to sell the title of the house and garden he would first offer it to the Defendant at a price as set out in a written agreement - the Claimant would and did enter into a written agreement headed ‘Tenancy Agreement’ which reflected his agreed obligations but was not intended to be a tenancy within the Housing Act 1988 as it was for an expressed nominal ‘rent’; - That the Claimant would have and maintain buildings insurance including against subsidence and the repair of utility pipes. (i) The Defendant transferred the legal interest to the Claimant and Mr Nicolls; (ii) The Defendant transferred it at a considerable undervalue, being £500,000 (the true value was £1.25 million and the consideration was £750,000). (iii) The Claimant represented to the Defendant, which she accepted, that title to the house and garden would be transferred to her in lieu of profits on development of parts of the Property. (i) The Claimant has failed to maintain the fabric of the property in that there is water ingress into the house from the roof (which has become defective); (ii) The Claimant has failed to maintain the water supply to the house in that there is a leak in the supply pipe in the field leading to the house from the road. (iii) These defects were notified in writing to the Claimant by letter from the Defendant’s solicitors in December 2009. (iv) The Claimant represented to the Defendant, which she accepted, that title to the house and garden would be transferred to her in lieu of profits on development of parts of the Property. (i) The Defendant has acted upon the representations to her detriment as set out above and is therefore entitled to remain in the property for as long as she wants; (ii) Her reasonable expectation relying upon the Claimant’s representations was that the titles to the house and garden, located within the property, would become hers; (iii) The minimum equity to do justice to her equity would be to vest title of the house and garden, together with ancillary rights, in her. (i) This limitation is that her title was always subject to her equitable rights granted and agreed with the Claimant. (ii) The Claimant acquired no more than a title to the property subject to the Defendant’s equitable rights; (iii) Those equitable rights have priority over the legal interest by mortgage of Heritable Bank granted by the Claimant; (iv) The Defendant’s rights arose prior to registration of the Heritable Bank’s rights under the mortgage and are protected by the Defendant’s actual occupation; (v) The consequence is that upon registration, those rights are not postponed to the mortgage for they are protected by the operation of section 29(2)(a)(ii) and paragraph 2, schedule 3 of the Land Registration Act 2002.”[5]Counsel for Mrs Whittaker placed a written submission before the Judge seeking directions for trial. Counsel for the receivers, however, submitted that the proprietary estoppel argument could not succeed as it fell foul of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.[6]The Amended Defence had also denied the validity of the notices to quit. A point was raised that the assured shorthold tenancy specified that it commenced or would commence in April 2007 and according to the Particulars of Claim it began on 1st April whereas the sale had not taken place until 30th April 2007. That point was apparently raised in oral argument before the Judge who dismissed it and gave leave to amend the date in the Particulars of Claim and has not been renewed in this court. The Judge proceeded on the basis that “one way or another the Defendant (Mrs Whittaker) has been served with a valid notice to quit the property, the term of which has comfortably expired by now”. The sole issue argued before him was whether the pleaded defence of proprietary estoppel was defeated by Section 2 of the 1989 Act. He held that it was, and made an order for possession accordingly. Mrs Whittaker appeals against that order pursuant to leave granted on the papers by the Interim Applications Judge, Nicola Davies J, on 18th February 2011 following refusal by Judge Lochrane. Silber J had already granted a stay of the possession order pending appeal.[7]The Grounds of Appeal seek to put the case in the alternative on the basis of a constructive trust arising out of the same alleged facts as those relied on as creating a proprietary estoppel. Although this was not argued before Judge Lochrane, it is a pure point of law, and I allowed Mr John McDonnell QC, who appears in this court leading Ms Roberts for Mrs Whittaker, to argue it before me.

The Nature of the Hearing before the Judge

[8]Claims for possession are governed by CPR Part 55. By Rule 55.5 (1) the Court is to fix a date for the hearing when it issues the claim form. When the claim form was issued on 4th June the Court fixed 2nd August 2010 for the hearing as shown by the date stamp. This first hearing duly took place before District Judge Molle.[9]Rule 55.8, so far as material, provides as follows: - “(1) At that hearing, or any adjournment of it, the court may(a) decide the claim; or(b) give case management directions. (2) Where the claim is genuinely disputed on grounds which appear to be substantial, case management directions given under paragraph (1)(b) will include the allocation of the claim to a track or directions which will enable it to be allocated. (3) Except where (a) the claim is allocated to the fast track or the multi-track or (b) the court orders otherwise, any fact that needs to be proved by the evidence of witnesses at the hearing referred to in paragraph (1) may be proved by evidence in writing.”[10]When District Judge Molle made an order for a two hour hearing on 4th October 2010, he did not allocate the case to a track. This had two consequences:(a) witness statements were admissible in evidence, though oral evidence was not precluded; and(b) any appeal from a judgment given at the 4th October hearing by a circuit judge would be to the High Court, whereas had the case by then been allocated to the multi-track it would have been to the Court of Appeal.[11]In Forcelux Ltd v Binnie [2010] HLR 20Warren J, giving the principal judgment in the Court of Appeal, held that a hearing of this kind was analogous to a summary judgment application and was not a “trial” within the meaning of the rules. Although no application for summary judgment was issued, that was in effect what counsel for the receivers was seeking before Judge Lochrane. His argument was that the defence of proprietary estoppel could not succeed and therefore did not amount to a genuine dispute on substantial grounds. The Judge upheld his argument and made an order for possession. It was not suggested to him by Ms Roberts that if he had rejected the argument based on section 2 he should have dismissed the claim. The proper course in that event would have been to give directions for trial with oral evidence.[12]Mrs Whittaker was selling her home for £750,000 plus a potential share in any development gains. She was advised throughout by a solicitor, who drafted or at any rate advised on the contract of sale. It seems unlikely that if Mr Kinnear had given her the assurances alleged in paragraph 10 of the Amended Defence, she would not have told her solicitor; and the result would have been a very different contract of sale. In particular, if the parties’ intention had been that Mrs Whittaker would, if she wished, be able to remain in the property effectively rent-free for the rest of her life, it might be expected that the contract for sale would have made that abundantly clear. I note that there is no witness statement from Mrs Whittaker herself (nor from Mr Kinnear, who may not be cooperating with the receivers); and statements from the claimants’ valuer and Mrs Whittaker’s solicitor give differing accounts by her of what Mr Kinnear had said to her. Nonetheless Judge Lochrane had to make his decision, and I have to make mine, on the assumption that all the facts alleged in the Amended Defence and Counterclaim are or may be true.[13]I turn from issues of procedure to substantive law.

Special Condition 7

[14]The contract of sale is headed “Agreement incorporating the Standard Conditions of Sale (Fourth Edition)”. It specifies a purchase price of £750,000. (The Special Conditions on the next page unhelpfully begin by incorporating the Standard Conditions of Sale (Third Edition); fortunately there is no material difference, or so I am told, between the two editions which could affect this case). Special Condition 4 provides that “the property is sold with vacant possession on completion”; this is plainly not what happened. Special Condition 8 states that “the Transfer shall contain a provision in favour of the seller whereby the seller shall have a right of pre-emption in respect of the sale of any part of the property for a period of three years from the date of completion”. Special Condition 7, on which Mr McDonnell sought to rely as a defence alternative to that of proprietary estoppel or constructive trust, reads:
“The parties shall on completion enter into an Assured Shorthold Tenancy agreement in the form annexed hereto, and the parties acknowledge that the tenancy shall be capable of renewal in the event that the planning process is unduly delayed.”
[15]Mr McDonnell submitted that on a proper construction of this paragraph, if planning permission was not obtained, Mrs Whittaker would have the right to renew the tenancy from year to year unilaterally and indefinitely. This point was not raised nor even pleaded before the Judge. So Mrs Whittaker needs both leave to re-amend the defence and counterclaim and leave to raise the new point for the first time on appeal. I refuse leave to raise the point for the first time on appeal or to serve a re-amended pleading. I do not consider that Mr McDonnell’s argument is a realistic interpretation of Special Condition 7. It would mean that if the purchasers failed to obtain planning permission or simply delayed “unduly” (whatever that means) in that respect, Mr Kinnear and Mr Nichols would have bought nothing for their £¾ million except a reversion which might not fall in, and one hopes will not fall in, for 30 years or more, Mrs Whittaker being a lady in her early 60s. The 12 month tenancy was no doubt capableof renewal from year to year if both parties agreed, but Mrs Whittaker had no right to insist on its renewal. Indeed, its temporary nature is emphasised by the misguided description of it as an assured shorthold tenancy, which gives no security of tenure beyond the 12 month period.

The termination issue

[16]Mr McDonnell applies to amend the grounds of appeal to add a further issue not raised before the Judge. He submits that the tenancy, although not an assured shorthold tenancy, was a yearly tenancy at common law; it therefore required at least six months notice to terminate; such notice was never given; and by a tenant’s notice dated 4th May 2011 (two days before the first hearing of this appeal) Mrs Whittaker renewed the tenancy unilaterally.[17]Two notices to quit were served on 8th March 2010. The first read (so far as is material) “The landlord gives you notice to quit and give vacant possession of the property on the next date being at least four weeks from the service of this notice on which a complete period of your license or your tenancy expires.”[18]The second read:
“The landlord requires possession of the Property at the end of that period of your tenancy which will end next after the expiration of two months from the service upon you of this notice.”
[19]I accept the submission of Mr Moraes for the receivers that after the expiry of the fixed 12 month term this became a monthly, not an annual, tenancy: Alder v Blackman [1953] 1 QB 146.In that case the first notice to quit was effective to terminate it on 30th April 2010; but, if not, then the second notice to quit (perhaps more by luck than judgment) was effective to terminate it on 30th April 2011. The second notice did not contain the statutory reminder to the tenant of her rights under the Protection from Eviction Act 1977 but the first one did, and I accept Mr Moraes’ submission that where, as here, the two were served simultaneously that is sufficient. So however one looks at the case, the notice served on behalf of Mrs Whittaker on 4th May 2011 was too late. There was by then no tenancy to renew.[20]Even if both these arguments are wrong and the landlords were required to serve a single notice to quit both giving a period of at least six months notice and containing the statutory warnings, it would be wrong to allow this point to be raised for the first time on appeal. Judge Lochrane proceeded on the basis that one or other of the notices to quit had validly terminated Mrs Whittaker’s right to occupy, subject only to the proprietary estoppel point. If Ms Roberts had raised the six months notice issue before the judge at the hearing on 4th October 2010, the landlords could have given notice to quit expiring on 30th April 2011. I therefore refuse leave to amend the notice of appeal and to reamend the defence and counterclaim on this issue also.

Overriding Interest

[21]Paragraph 14 of the pleaded defence argues that by virtue of Section 29(2)(a)(ii) of the Land Registration Act 2002 and paragraph 2 of schedule 3 to the same Act the unregistered interest of Mrs Whittaker, as a person in actual occupation, overrides the registered disposition to Mr Kinnear and Mr Nichols. Before me Mr McDonnell accepted that this cannot be a defence to the possession claim brought by the receivers as agents of Mr Kinnear, though it might be of significance if Heritable Bank became parties to this or future litigation concerning the property since their interest was under a subsequent mortgage.[22]I should record that Mr Moraes has two answers to this point. The first is a simple one. Mrs Whittaker’s interest under what was described in the documents as an assured shorthold tenancy was not one which affected the estate immediately before the disposition to Mr Kinnear and Mr Nichols. On the contrary: it could only arise after that disposition, when Mr Kinnear and Mr Nichols became owners of the property and thus in a position to grant a tenancy. That submission is in my view prima facie correct, though in the light of Mr McDonnell’s concession it is unnecessary to decide it..[23]Mr Moraes’ second answer is that the agreement between Mrs Whittaker and Mr Kinnear (or Mr Kinnear and Mr Nichols) relied on as giving rise to the unregistered overriding interest is void under section 2 of the 1989 Act. That is bound up with the principal argument on proprietary estoppel and constructive trust, to which I now turn.

Proprietary Estoppel/Constructive Trust

[24]In Yaxley v Gotts [2000] Ch 162 the second defendant offered to give the claimant builder, who was a friend, the ground floor of a house which he was proposing to purchase in return for which the claimant would convert the house into flats and manage the property on his behalf. In the event, it was the second defendant’s son, the first defendant, who actually bought the house. The builder, believing his friend to be the owner performed his side of the bargain and did the work. The parties subsequently fell out and the first defendant refused to grant the claimant an interest in the property. The trial judge found that there had been an oral agreement between the claimant and the second defendant which had been adopted by the first defendant. He held that the claimant was entitled to a 99 year lease of the ground floor by virtue of the doctrine of proprietary estoppel. The defendant’s appeal relying on section 2 of the 1989 Act failed. The Court of Appeal held that the oral agreement, though itself void and unenforceable under section 2, nevertheless gave rise to a constructive trust in circumstances where previously proprietary estoppel might have been relied upon. Although the trial judge had made no findings as to the existence of a constructive trust, the facts on which he held a proprietary estoppel to have arisen provided equally the basis for the conclusion that the Claimant was entitled to an interest under a constructive trust, which by virtue of s 2(5) survived the enactment of s 2(1).[25]Thorner v Major [2009] 1 WLR 776was a dispute between two cousins, David and Peter. Peter made what were found by the trial judge to have been clear and unambiguous assurances that he would leave his farm to David and David worked on the farm for nearly 30 years in reliance on those assurances. Peter died intestate. The House of Lords reversing the Court of Appeal and restoring the order of the trial judge upheld David’s claim against Peter’s estate on the basis of proprietary estoppel. An argument based on section 2 of the 1989 Act was rejected: as Lord Neuberger said, section 2 has no impact on a straightforward estoppel claim without any contractual connection.[26]In Yaxley v Gotts the parties were friends; in Thorner v Major they were relatives. In contrast to these two cases is Cobbe v Yeomans Row Management Ltd [2008] 1 WLR 1752. The relationship between the parties in that case was (to adopt the words of Lord Neuberger in Thorner), “entirely arm’s length and commercial” and the person raising the estoppel was a highly experienced businessman. Mr Cobbe had devoted considerable time, effort and expertise to obtaining planning permission for land owned by Yeoman’s Row. Although they reached an oral “agreement in principle” the parties had decided not to enter into a contract. Mr Cobbe went ahead on the basis, as the other party appreciated, that he expected them to enter into a contract once planning permission was obtained. The other party changed their mind. Mr Cobbe’s claim based on proprietary estoppel failed although he was held to be entitled to a payment for his services on a quantum meruit basis. His claim failed, on Lord Neuberger’s analysis because he was effectively seeking to invoke proprietary estoppel to give effect to a contract which the parties had intentionally and consciously not entered into and because he was simply seeking a remedy for the unconscionable behaviour of Yeoman’s Row. Mr Cobbe’s claim, whether on the basis of proprietary estoppel or constructive trust, could not succeed.[27]Lord Scott of Foscote, with whom Lords Hoffmann, Brown and Mance agreed, made some observations at paragraph 29 on which Mr Moraes relies and which were the foundation of

Judge Lochrane’s decision in his favour:

“Section 2 of the 1989 Act declares to be void any agreement for the acquisition of an interest in land that does not comply with the requisite formalities prescribed by the section. Subsection (5) expressly makes an exception for resulting, implied or constructive trusts. These may validly come into existence without compliance with the prescribed formalities. Proprietary estoppel does not have the benefit of this exception. The question arises, therefore, whether a complete agreement for the acquisition of an interest in land that does not comply with the section 2 prescribed formalities, but would be specifically enforceable if it did, can become enforceable via the route of proprietary estoppel. It is not necessary in the present case to answer this question, for the second agreement was not a complete agreement and, for that reason, would not have been specifically enforceable so long as it remained incomplete. My present view, however, is that proprietary estoppel cannot be prayed in aid in order to render enforceable an agreement that statue has declared to be void. The proposition that an owner of land can be estopped from asserting that an agreement is void for want of compliance with the requirement of section 2 is, in my opinion, unacceptable. The assertion is no more than the statute provides. Equity can surely not contradict the statute. As I have said, however, statute provides an express exception for constructive trusts.”
[28]Lord Scott made it clear that these remarks were obiter. They are accordingly not binding on me. There is force in the dictum of Ungoed-Thomas J in Re Grosvenor Hotel (No 2) [1965] Ch 1210 that a battery of howitzers off the target is more impressive than a popgun on it; but also in the retort of Salmon LJ in the same case that a battery of howitzers off target can cause a great deal of damage.[29]One of the members of the court in Yaxley v Gotts was Beldam LJ. He had been 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. Like Hengham CJCP who in oral argument on a point of statutory interpretation in a case in 1307 (Aumeye v Anon YB 33-35 Edw 1 82) said to counsel “do not gloss the statute, for we know it better than you: we made it”, he was in a good position to say what the Commission had in mind. He said:
“In the present case the policy behind the Commission’s proposals was as clearly stated as its intention that the proposals should not affect the power of the Court to give effect in equity to the principles of proprietary estoppel and constructive trusts. Even if the use to be made of the Commission’s report is to be confined to identifying the defect in the law which the proposals were intended to correct, in a case such as the present it is unrealistic to divorce the defect in the law from the policy adopted to correct it. The Commission’s report makes it clear that in proposing legislation to exclude the uncertainty and complexities introduced into unregistered conveyancing by the doctrine of part performance, it did not intend to affect the availability of the equitable remedies to which it referred.”
[30]I therefore accept Mr McDonnell’s submission that, notwithstanding Lord Scott’s dicta in Cobbe, proprietary estoppel in a case involving a sale of land has survived the enactment of s 2 of the 1989 Act.[31]In Cobbe Lord Walker did not think it necessary or appropriate to consider the issue of s 2. However, he drew a distinction between commercial and domestic cases:
“It is unprofitable to trawl through the authorities on domestic arrangements in order to compare the forms of words used by judges to describe the claimant’s expectations in cases where this issue (hope or something more?) was not squarely raised. But the fact that the issue is seldom raised is not, I think, coincidental. In the commercial context, the claimant is typically a business person with access to legal advice and what he or she is expecting to get is a contract. In the domestic or family context the typical claimant is not a businessperson and is not receiving legal advice. What he or she wants and expects to get is an interest in immovable property, often for long term occupation as a home. The focus is not on intangible legal rights but on the tangible property which he or she expects to get. The typical domestic claimant does not stop to reflect (until disappointed expectations lead to litigation) whether some further legal transaction (such as a grant by deed or the making of a will or codicil) is necessary to complete the promised title.”
[32]Lord Neuberger drew a similar distinction between commercial and domestic cases in Thorner v Major. I accept Mr Moraes’ submission that 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. Judge Lochrane classified the present case as commercial. In my view he was right to do so. .[33]The question is then whether, on the assumption that what is pleaded in the Amended Defence may be true, assurances of the kind given by Mr Kinnear to Mrs Whittaker can create a proprietary estoppel or a constructive trust in her favour notwithstanding that the parties went on to sign a contract of sale which made no mention of them.[34]It is quite extraordinary that there appears to be no reported case which decides this issue. The one which comes closest, and on which Mr Moraes strongly relied, is Herbert v Doyle [2010] EWCA Civ 1095, where Arden LJ said:
“10. As I said in Kinane v Mackie-Conteh [2005] WTLR 345, the policy of section 2(1) of the 1989 Act is “to protect the public by preventing parties from being bound by a contract for the disposition of an interest in land unless it has been fully documented in writing.”
It needs to be repeated loud and clear that this is the rule which Parliament had laid down in section 2 of the 1989 Act, and that is a rule admitting of few exceptions under section 2………….. 56. The distinction between proprietary estoppel and constructive trust must…..be kept in mind, but it appears from Cobbe that, in some situations at least, both doctrines have a requirement for completeness of agreement with respect to an interest in property. Certainty as to that interest in those situations is a common component. A relevant situation would be where the transaction is commercial in nature. In my judgment, the transaction in the present case should be treated as commercial in nature since the parties were dealing at arm's length, and they had ready access to the services of lawyers had they wished to use them. 57. In my judgment, 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. [emphasis added][35]Mr Moraes submits that this passage is conclusive in his favour. However, strictly speaking it, like the observations of Lord Scott in Cobbe, is obiter. The trial judge in Herbert v Doyle (in the first of three judgments delivered at first instance) had found that although initially the parties had been intending to enter into a formal contract drafted by lawyers, that had changed. His finding that a constructive trust arose from an oral agreement made thereafter was described as a surprising one, but was nevertheless upheld in the Court of Appeal.[36]One lesson to be drawn from Herbert v Doyle and Thorner v Major is the fact-sensitivity of claims based on proprietary estoppel or constructive trust. As Lord Neuberger said in Thorner at paragraph 80, “the meaning to be ascribed to words passing between parties will depend, often very much, on their factual context”. He went on to emphasise that the trial judge in that case had the advantage of hearing the parties’ oral evidence and was consequently “far better able than any appellate tribunal (even with the benefit of transcripts of the evidence) to assess not only how the statements would have been intended by Peter and understood by David, but also whether any understanding and any reliance by David were reasonable”. The decision of the Court of Appeal was set aside and that of the trial judge restored.[37]Lord Neuberger also emphasised the fact-sensitivity of constructive trust cases in Stack v Dowden [2007] 2 AC 432 at paragraphs 128-129:
“A constructive trust does not only arise from an express or implied agreement or understanding. It can also arise in a number of circumstances in which it can be said that the conscience of the legal owner is affected. For instance, it may well be that facts which justified a proprietary estoppel against one of the parties in favour of the other would give rise to a constructive trust. However, in agreement with Lord Walker, I do not consider it necessary or appropriate to discuss proprietary estoppel further in this case. It is hard to identify, particularly in the abstract, the factors which can be taken into account to infer an agreement or understanding, and the effect of such factors. Each case will be highly fact-sensitive, and what is relevant, and how, may be contentious, whether one is considering actions, discussions or statements, even where there is no dispute as to what was done or said.”
It is hard to identify, particularly in the abstract, the factors which can be taken into account to infer an agreement or understanding, and the effect of such factors. Each case will be highly fact-sensitive, and what is relevant, and how, may be contentious, whether one is considering actions, discussions or statements, even where there is no dispute as to what was done or said.”[38]Mr McDonnell submits that even the facts pleaded in paragraphs 10-13 of the Amended Defence may not tell the story in sufficient detail. Assuming for present purposes that Mr Kinnear did give Mrs Whittaker the assurances alleged, he submits, the fact that they are missing from the sale documents may be because(a) she changed her mind about the terms she would accept; or(b) she did not instruct her solicitors accurately enough; or(c) she did instruct her solicitors accurately but they made a mistake, perhaps too readily accepting a draft sent by the other side. At this stage the court does not know.

Conclusion

[39]In my judgment, reached after much fuller argument than was addressed to Judge Lochrane, there is no binding authority which gives a definitive answer to the question set out in paragraph 33 above; and the facts are not sufficiently clear for the case to be suitable for summary determination on the documents. The claim is therefore “genuinely disputed on grounds which appear to be substantial” within the meaning of CPR Rule 55.8. The appeal must accordingly be allowed, the order for possession set aside and the case remitted to the Colchester County Court. The parties are each at liberty to apply to the Designated Civil Judge for East Anglia, His Honour Judge Moloney QC, for directions for trial.

Cited in 3 later judgments