Consideration
Proprietary Estoppel
Yeomans Row Management Ltd v Cobbe [2008] UKHL 55
House of Lords
1. It is not sufficient to establish proprietary estoppel to allege and prove that the defendant was guilty of unconscionable conduct
2. Lord Scott defined the essence of properietary estoppel … “An “estoppel” bars the object of it from asserting some fact or facts, or, sometimes, something that is a mixture of fact and law, that stands in the way of some right claimed by the person entitled to the benefit of the estoppel. The estoppel becomes a “proprietary” estoppel – a sub-species of a “promissory” estoppel – if the right claimed is a proprietary right, usually a right to or over land but, in principle, equally available in relation to chattels or choses in action.
Lord Scott
# The essence of the problem to be resolved in this case can be quite shortly stated. A is the owner of land with potential for residential development and enters into negotiations with B for the sale of the land to B. They reach an oral “agreement in principle” on the core terms of the sale but no written contract, or even a draft contract for discussion, is produced. There remain some terms still to be agreed. The structure of the agreement in principle that A and B have reached is that B, at his own expense, will make and prosecute an application for the desired residential development and that, if the desired planning permission is obtained, A will sell the land to B, or more probably to a company nominated by B, for an agreed up-front price, £x. B will then, again at his own expense, develop the land in accordance with the planning permission, sell off the residential units, and, when the gross proceeds of sale received by B equals £2x, any further gross proceeds of sale will be divided equally between A and B. Pursuant to this agreement in principle B makes and prosecutes an application for planning permission for the residential development that A and he have agreed upon. B is encouraged by A to do so. In doing so B spends a considerable sum of money as well, of course, as a considerable amount of time. The application is successful and the desired planning permission is obtained. A then seeks to re-negotiate the core financial terms of the sale, asking, in particular, for a substantial increase in the sum of money that would represent £x. B is unwilling to commit himself to the proposed new financial terms and A is unwilling to proceed on the basis of the originally agreed financial terms. So B commences legal proceedings. The question for your Lordships is what relief, in the circumstances described, B should be granted, for, I believe, none of your Lordships considers that he would not be entitled to any.
# A number of possible bases for the grant of relief to B need to be considered.
(i) First, there is proprietary estoppel. B has, with the encouragement of A, spent time and money in obtaining the planning permission and has done so, to the knowledge of A, in reliance on the oral agreement in principle and in the expectation that, following the grant of the planning permission, a formal written agreement for the sale of the property, incorporating the core financial terms that had already been agreed and any other terms necessary for or incidental to the implementation of the core terms, would be entered into. In these circumstances, it could be, and has been, argued, A should be held to be estopped from denying that B had acquired a proprietary interest in the property and a court of equity should grant B the relief necessary to reflect B’s expectations.
(ii) Second, there is constructive trust. In circumstances such as those described, equity can, it is suggested, give effect to the joint venture agreed upon by A and B by treating A as holding the property upon a constructive trust for himself and B, with A and B taking beneficial interests calculated to enable effect to be given to B’s expectations engendered by the agreement in principle.
(iii) Third, there is unjust enrichment. The grant of planning permission, obtained by B at his expense and through the deployment of his time and planning expertise, has increased the value of the property. So A has been enriched at the expense of B and, since it was A’s repudiation of the oral agreement in principle that frustrated the basis upon which B had been relying, perhaps unjustly enriched.
(iv) Fourthly, there is the question of a quantum meruit. B has supplied valuable services to A in obtaining planning permission for the benefit of A’s property. There is no question of the services having been provided gratuitously but no fee for the services was agreed between A and B. B’s reward was supposed to have been the conclusion of an enforceable contract. In these circumstances a quantum meruit, taking into account the amount of B’s expenditure of time and money and the value of the services, can, it could be argued, be fixed by the court.
(v) Fifthly, the arrangement between A and B for the sale of the property to B can be regarded as involving two stages. The first stage is the making and prosecution by B at his own expense of the application for the grant of planning permission. This stage constitutes, in effect, the consideration given by B to A in return for A’s promise, if planning permission is granted, to enter into a formal written contract of sale embodying, inter alia, the core financial terms that had already been agreed. A’s promise, being no more than an oral promise to enter into a written contract and, moreover, part of an incompletely negotiated agreement, is not contractually enforceable but A’s repudiation of that promise, after B had supplied his first stage consideration and the planning permission had been granted, would, it could be argued, constitute a complete failure of the consideration that A was to have given, and entitle B to a restitutionary remedy.
(vi) Finally, in circumstances such as those described the possibility of a remedy in damages for the tort of deceit must be kept in mind. If A represented to B that he was willing to enter into a written agreement, or regarded himself as bound by an oral agreement embodying the core financial terms that had already been agreed, and so represented at a time when he, A, had already decided to repudiate those terms and demand better ones, B, if and to the extent that he had acted on those false representations and thereby suffered loss, would have an action in deceit for damages.
# Two features of these possible remedies are worth noticing. First, both the proprietary estoppel claim and the constructive trust claim are claims to a proprietary interest in the property. The other remedies do not require proprietary claims but follow upon in personam claims for compensation or restitution. Second, a proprietary estoppel claim and a constructive trust claim would constitute, if successful, a means whereby B could obtain a remedy providing him with a benefit more or less equivalent to the benefit he expected to obtain from the oral and inchoate agreement; in effect a benefit based on the value of his non-contractual expectation. By way of contrast, an unjust enrichment remedy, a quantum meruit remedy and a consideration that has wholly failed remedy are essentially restitutionary in character, concentrating not at all on the value of the expected benefit of which B has been deprived but, as the case may be, on the extent of A’s enrichment at B’s expense, on the value of B’s services or on the amount or value of the consideration provided by B to A. And a tortious remedy for deceit would concentrate on the loss caused to B in acting on A’s false representation and would seek to restore him to the position in which he would have been if the false representation had never been made. One of the main issues for your Lordships to decide on this appeal is, in my opinion, whether B should be held entitled to a proprietary remedy based on the extent of his disappointed expectations or to an in personam remedy of, using the adjective fairly loosely, a restitutionary character. The question of a remedy in deceit does not arise, for no allegation of fraudulent misrepresentation has been made, but the conceptual possibilities of such a claim are useful to keep in mind. It is very well established that the remedy for a fraudulent misrepresentation inducing a contract is, besides rescission of the contract if the victim so elects, a tortious action in deceit for damages for any loss thereby caused; and that, unless the representation has become a term of the contract, the victim is not entitled to claim damages measured by the loss of the benefit he would have obtained if the representation had been true, i.e. he is not entitled to contractual damages….
…Proprietary estoppel
# Both the learned judge and the Court of Appeal regarded the relief granted as justified on the basis of proprietary estoppel. I respectfully disagree. The remedy to which, on the facts as found by the judge, Mr Cobbe is entitled can, in my opinion, be described neither as based on an estoppel nor as proprietary in character. There are several important authorities to which I want to refer but I want first to consider as a matter of principle the nature of a proprietary estoppel. An “estoppel” bars the object of it from asserting some fact or facts, or, sometimes, something that is a mixture of fact and law, that stands in the way of some right claimed by the person entitled to the benefit of the estoppel. The estoppel becomes a “proprietary” estoppel – a sub-species of a “promissory” estoppel – if the right claimed is a proprietary right, usually a right to or over land but, in principle, equally available in relation to chattels or choses in action. So, what is the fact or facts, or the matter of mixed fact and law, that, in the present case, the appellant is said to be barred from asserting? And what is the proprietary right claimed by Mr Cobbe that the facts and matters the appellant is barred from asserting might otherwise defeat?
# The pleadings do not answer these questions. The terms of the oral “agreement in principle”, the second agreement, relied on by Mr Cobbe are pleaded but it is accepted that there remained still for negotiation other terms. The second agreement was, contractually, an incomplete agreement. The terms that had already been agreed were regarded by the parties as being “binding in honour”, but it follows that the parties knew they were not legally binding. So what is it that the appellant is estopped from asserting or from denying? The appellant cannot be said to be estopped from asserting that the second agreement was unenforceable for want of writing, for Mr Cobbe does not claim that it was enforceable; nor from denying that the second agreement covered all the terms that needed to be agreed between the parties, for Mr Cobbe does not claim that it did; nor from denying that, pre 18 March 2004, Mr Cobbe had acquired any proprietary interest in the property, for he has never alleged that he had. And what proprietary claim was Mr Cobbe making that an estoppel was necessary to protect? His originally pleaded claim to specific performance of the second agreement was abandoned at a very early stage in the trial (see para.8 above) and the proprietary claims that remained were claims that the appellant held the property on trust for itself and Mr Cobbe. These remaining proprietary claims were presumably based on the proposition that a constructive trust of the property, with appropriate beneficial interests for the appellant and Mr Cobbe, should, by reason of the unconscionable conduct of Mrs Lisle-Mainwaring, be imposed on the property. I must examine that proposition when dealing with constructive trust as a possible means of providing Mr Cobbe with a remedy, but the proposition is not one that requires or depends upon any estoppel.
# It is relevant to notice that the amendments to Mr Cobbe’s pleaded prayer for relief, made when the specific performance and damages for breach of contract claims were abandoned, include the following :
“(4) Alternatively, a declaration that [the appellant and Mrs Lisle-Mainwaring] are estopped from denying that [Mr Cobbe] has such interest in the Property and/or the proceeds of sale thereof as the Court thinks fit.”
This is the only pleaded formulation of the estoppel relied on by Mr Cobbe and, with respect to the pleader, is both meaningless and pointless. Etherton J concluded, in para.85 of his judgment, that the facts of the case “gave rise to a proprietary estoppel in favour of Mr Cobbe”, but nowhere identified the content of the estoppel. Mummery LJ agreed (paras.60 and 61 of his judgment, concurred in by Dyson LJ (para.120) and Sir Martin Nourse (para.141)), but he, too, did not address the content of the estoppel. Both Etherton J and Mummery LJ regarded the proprietary estoppel conclusion as justified by the unconscionability of Mrs Lisle-Mainwaring’s conduct. My Lords, unconscionability of conduct may well lead to a remedy but, in my opinion, proprietary estoppel cannot be the route to it unless the ingredients for a proprietary estoppel are present. These ingredients should include, in principle, a proprietary claim made by a claimant and an answer to that claim based on some fact, or some point of mixed fact and law, that the person against whom the claim is made can be estopped from asserting. To treat a “proprietary estoppel equity” as requiring neither a proprietary claim by the claimant nor an estoppel against the defendant but simply unconscionable behaviour is, in my respectful opinion, a recipe for confusion.
# Deane J, in Muschinski v Dodds (1985) 160 CLR 583, in a judgment concurred in by Mason J, drew attention to the nature and function of constructive trusts in the common law. His remarks, at 612 to 616 repay careful reading but I would respectfully draw particular attention to a passage at 615 relevant not only to constructive trusts but equally, in my opinion, to proprietary estoppel. He said this:
“The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice. As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate processes of legal reasoning, by analogy, induction and deduction, starting from the conceptual foundations of such principles … Under the law of this country – as, I venture to think under the present law of England … proprietary rights fall to be governed by principles of law and not by some mix of judicial discretion, subjective views about which party ‘ought to win’ … and the ‘formless void’ of individual moral opinion …”
A finding of proprietary estoppel, based on the unconscionability of the behaviour of the person against whom the finding was made but without any coherent formulation of the content of the estoppel or of the proprietary interest that the estoppel was designed to protect invites, in my opinion, criticism of the sort directed by Deane J in the passage cited. However, Mr Ivory QC, counsel for Mr Cobbe both in the Court of Appeal and before your Lordships, has relied on authority and to that I must now turn.
# Oliver J (as he then was) stated the requirements of proprietary estoppel in a “common expectation” class of case in a well-known and often cited passage in Taylors Fashions Ltd v Liverpool Victoria Trustees Co. Ltd [1982] QB 133 at 144 :
“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.”
Note the reference to “a certain interest in land”. Taylors Fashions was a case where the “certain interest” was an option to renew a lease. There was no lack of certainty; the terms of the new lease were spelled out in the option and the lessees’ expectation was that on the exercise of the option the new lease would be granted. The problem was that the option had not been registered under the Land Charges Act 1925 and the question was whether the freeholders, successors in title to the original lessors who had granted the option, could be estopped from denying the right of the lessees to exercise the option. But what is the comparable expectation and the comparable “certain interest” in the present case? Mr Cobbe’s expectation, encouraged by Mrs Lisle-Mainwaring, was that upon the grant of planning permission there would be a successful negotiation of the outstanding terms of a contract for the sale of the property to him, or to some company of his, and that a formal contract, which would include the already agreed core terms of the second agreement as well as the additional new terms agreed upon, would be prepared and entered into. An expectation dependent upon the conclusion of a successful negotiation is not an expectation of an interest having any comparable certainty to the certainty of the terms of the lessees’ interest under the Taylors Fashions option. In the Taylors Fashions case both the content of the estoppel, i.e. an estoppel barring the new freeholders from asserting that the option was unenforceable for want of registration, and the interest the estoppel was intended to protect, i.e. the option to have a renewal of the lease, were clear and certain. Not so here. The present case is one in which an unformulated estoppel is being asserted in order to protect Mr Cobbe’s interest under an oral agreement for the purchase of land that lacked both the requisite statutory formalities (s.2 of the 1989 Act) and was, in a contractual sense, incomplete.
# A reference to the expectation of “a certain interest in land” had appeared in the speech of Lord Kingsdown in Ramsden v Dyson (1866) LR 1 HL 129 at 170
“If a man, under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation.”
Lord Kingsdown went on to say, at 171, that even if there were uncertainty as to the terms of the contract a court of equity could nevertheless interfere in order to prevent fraud but that it was unclear what, in that case, the remedy should be. The choices, he said, were between the grant of a specific interest in the land and the grant of a restitutionary remedy such as monetary compensation. This is an issue to which I must return but it suffices for the moment to notice that Lord Kingsdown’s remarks at 171 show that, when referring at 170 to “a verbal agreement … for a certain interest in land”, he was referring to an agreement that was complete, with no uncertainty as to its terms.
# Lord Kingsdown’s requirement that there be an expectation of “a certain interest in land”, repeated in the same words by Oliver J in the Taylors Fashions case, presents a problem for Mr Cobbe’s proprietary estoppel claim. The problem is that when he made the planning application his expectation was, for proprietary estoppel purposes, the wrong sort of expectation. It was not an expectation that he would, if the planning application succeeded, become entitled to “a certain interest in land”. His expectation was that he and Mrs Lisle-Mainwaring, or their respective legal advisers, would sit down and agree the outstanding contractual terms to be incorporated into the formal written agreement, which he justifiably believed would include the already agreed core financial terms, and that his purchase, and subsequently his development of the property, in accordance with that written agreement would follow. This is not, in my opinion, the sort of expectation of “a certain interest in land” that Oliver J in the Taylors Fashions case or Lord Kingsdown in Ramsden v Dyson had in mind.
# Mr Ivory cited, also, a number of other authorities in support of his proprietary estoppel case. In Plimmer v Mayor of Wellington (1884) 9 App. Cas. 699, a Privy Council case, the question was whether the appellant, Mr Plimmer, had a sufficient “estate or interest” in land to qualify for statutory compensation when the land became vested in the Wellington Corporation. Plimmer had occupied the land under a revocable licence from the Corporation’s predecessor-in-title and at the request of that predecessor-in-title had made extensive improvements to the land. The Judicial Committee held that these circumstances “were sufficient to create in his [Plimmer's] mind a reasonable expectation that his occupation would not be disturbed…” In effect, the owner of the land became estopped from asserting that the licence remained revocable. That was sufficient to constitute the licence an “estate or interest” for compensation purposes. The Plimmer case does not, in my opinion, assist Mr Cobbe, whose expectation was that of further negotiations leading, as he hoped and expected, to a formal contract. To the extent that he had an expectation of a “certain interest in land”, it was always a contingent one, contingent not simply on the grant of planning permission but contingent also on the course of the further contractual negotiations and the conclusion of a formal written contract.
# Inwards v Baker [1965] 2 QB 29 was the case in which an indulgent father had encouraged his son to build a bungalow on his, the father’s, land. The son had done so in the expectation, encouraged by the father, that he, the son, would be permitted to remain in occupation. The Court of Appeal held that the son had an equity entitling him to live in the bungalow as long as he wished. In effect the father, and after his death the trustees of his will, were estopped from denying that the son’s licence to occupy the land was an irrevocable one. The case was on all fours with Plimmer’s case, which was relied on both by Lord Denning M.R. (36/37) and by Danckwerts LJ (38) in their respective judgments. The principle that, if A, an owner of land, encourages B to build on his, A’s, land on the footing that B will be entitled thereafter to occupy the new buildings for as long as he wishes and B, taking A at his word, then acts accordingly, A will be estopped from denying the right of B to continue to occupy the new buildings, is undoubted good law but is a principle of no assistance to Mr Cobbe in the present case. Crabb v Arun D.C. [1976] Ch 179 is likewise of no assistance to Mr Cobbe. The case was one in which the DC had led Mr Crabb to believe that he could have access to his land via a road belonging to the DC. In reliance on that promise Mr Crabb allowed his land to become otherwise landlocked. He was held entitled by way of proprietary estoppel to a right of way as promised. The DC was estopped from denying that he had the right of way.
# Closer to home, so far as support for Mr Cobbe’s promissory estoppel claim is concerned, is the line of cases in which a claimant has expended money on land on the basis of an informal or incomplete agreement and in the expectation that, in due course, a binding agreement would be forthcoming. The present case, if the proprietary estoppel claim is to succeed, must be brought within this line of cases. Laird v Birkenhead Railway Co. (1859) Johns.500 is an early example. The plaintiff applied to the defendant railway company for permission to construct and use a private branch line connecting with the railway company’s main line. Agreement was reached for the plaintiff to do so “on reasonable terms, which were to be afterwards settled” (per Page Wood V-C at 513). The plaintiff, acting on this agreement, constructed and used the branch line and for some two and a half years paid tolls at an agreed rate to the railway company. Agreement in principle was reached on the details of the plaintiff’s user of the branch line but a formal agreement was never signed. The railway company gave notice to the plaintiff to cease his user of the branch line. The Vice-Chancellor said that the railway company had allowed the plaintiff “to expend his money on the faith that he would be permitted to join their line on reasonable terms” (513) and that the tolls agreed upon and paid by the plaintiff for his past user must be assumed to represent reasonable terms. “It must”, said the Vice-Chancellor, “be inferred, from the nature of the transaction, that the privilege of using the line was not to be determinable …” (511). The Vice-Chancellor’s ability, by inference from the nature of the transaction and from the basis on which the plaintiff for the past two and a half years had been using the branch line, to fill in the gaps in the parties’ contractual agreement is not an ability that has its counterpart in the present case. The court could not have made complete the inchoate second agreement. On none of the three outstanding matters referred to in paragraph 6 above would the court have been able to infer the contractual terms that further negotiations would or might have produced and Etherton J, quite rightly, did not attempt to do so.
# Holiday Inns Inc. v Broadhead (1974) 232 EG 951, 1087 has been treated as, but correctly analysed is in my opinion not, a case of proprietary estoppel. The plaintiffs, Holiday Inns, and the defendant, Mr Broadhead, agreed, in effect, on a joint venture, the essential ingredients of which were that a site in the vicinity of Heathrow Airport would be identified as suitable for an hotel. Mr Broadhead, or a company nominated by him, would acquire the site, Holiday Inns would apply for the requisite planning permission and, if planning permission were granted, the site would be leased to Holiday Inns under a lease the terms of which the parties had agreed. A suitable site was identified and was then purchased by a company owned or controlled by Mr Broadhead. Holiday Inns, at their own expense, applied for and obtained planning permission for the building of the hotel. But Mr Broadhead then entered into negotiations for a lease with another hotel group and granted a lease to a company in that group before Holiday Inns could intervene. Whatever equity Holiday Inns had against Mr Broadhead could not have been asserted against the lessee, which had taken the lease without notice of any such equity. Holiday Inns sued Mr Broadhead. The judge, Goff J, accepted that the Holiday Inns executives who had dealt with Mr Broadhead thought that they and he had reached “a gentleman’s agreement which would be honoured” and that Mr Broadhead’s “failure to inform them of his true state of mind was deceitful and unconscionable” (1089). He held that Holiday Inns were “clearly entitled to relief” (1094) and declared that Mr Broadhead’s company, which had purchased the site and granted the lease to the rival hotel group, held the land subject to the lease upon trust to sell it and to divide the net proceeds of sale, after discharging various expenses incurred by the respective parties, between itself and Holiday Inns in equal shares. The relief was granted, therefore, by imposing, or recognising, a constructive trust over the property. Whether, if Mr Broadhead had not pre-empted the choice of relief by granting the lease before any restraining injunction could be obtained, Holiday Inns’ expectation of a lease would have been recognised by an order that they were entitled to a lease on the terms already agreed is an open question. It does not appear from the report of the case that anything remained to be negotiated between Mr Broadhead and Holiday Inns. The terms of the intended lease had been agreed. In the event, however, the relief granted by Goff J was on the same footing as that granted in the joint venture cases to which, starting with Pallant v Morgan, I will later refer, namely, that where a joint venture involves the acquisition by one of the joint venturers of the property intended for the purposes of the joint venture and the pursuit of the joint venture then becomes impracticable or impossible, the acquirer is not entitled to retain the property for his own benefit but must be taken to hold the property upon trust for himself and the other joint venturers jointly. Before leaving the Holiday Inns case, it is to be noted that the judge, Goff J, was Sir Reginald Goff, and not Sir Robert Goff, later Lord Goff of Chieveley, as was erroneously stated at 122F in the judgment of the Board (of which, oddly, Lord Goff was a member) delivered by Lord Templeman in Attorney-General of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] AC 114.
# The Humphreys Estate case was one in which a written agreement, expressed to be “subject to contract”, for the purchase of development property had been signed. The agreement said that the terms could be varied or withdrawn and that any agreement was subject to the documents necessary to give legal effect to the transaction being executed and registered. In short the parties had made it clear that neither of them was for the time being legally bound. The Hong Kong government, the intended purchaser, was permitted to take possession of the property and to spend money on it. The owners of the property then decided to withdraw from the transaction and gave notice terminating the government’s licence to occupy the property. In the litigation that ensued, the government contended that the owners were barred by proprietary estoppel from exercising their legal right to withdraw from the transaction (see the submissions of counsel referred to by Lord Templeman at 121). The proprietary estoppel relied on was that which had been enunciated by Lord Kingsdown in Ramsden v Dyson. The government lost in the courts in Hong Kong and appealed to the Privy Council but lost there too. Lord Templeman explained why at 127H
“It is possible but unlikely that in circumstances at present unforeseeable a party to negotiations expressed to be ‘subject to contract’ would be able to satisfy the court that the parties had subsequently agreed to convert the document into a contract or that some form of estoppel had arisen to prevent both parties from refusing to proceed with the transaction envisaged by the document. But in the present case the government chose to begin and elected to continue on terms that either party might suffer a change of mind and withdraw.”
The reason why, in a ‘subject to contract’ case, a proprietary estoppel cannot ordinarily arise is that the would-be purchaser’s expectation of acquiring an interest in the property in question is subject to a contingency that is entirely under the control of the other party to the negotiations (see also British Steel Corporation v Cleveland Bridge and Engineering Co. Ltd [1984] 1 AER 504 per Robert Goff J at 511; Walton Stores (Interstate) Ltd v Maher [1988] 164 CLR 387; London & Regional Investments Ltd v TBI Plc. [2002] EWCA 355 per Mummery LJ at para.42 and Pridean v Forest Taverns (1996) 75 P&CR 447). The expectation is therefore speculative.
# Both Etherton J and Mummery LJ in the Court of Appeal recognised that, in cases where negotiations had been made expressly subject to contract and a contract had not in the end been forthcoming, it would be very difficult for a disappointed purchaser to establish an arguable case for a proprietary estoppel. Etherton J, having referred to the relevant authorities, accepted the improbability that in a subject-to-contract case a proprietary estoppel might arise (paras. 119 and 120), but distinguished the present case on the footing that Mrs Lisle-Mainwaring had encouraged Mr Cobbe to believe that if he succeeded in obtaining planning permission the second agreement would be honoured even though not legally binding (para.123) and, also, I think, that nothing equivalent to a subject-to-contract reservation had ever been expressed (para.119) and that no issue likely to cause any difficulty had been raised in the negotiations that culminated in the second agreement (para.122). In the Court of Appeal Mummery LJ dealt with the subject-to-contract point in paragraphs 53 to 57. The second agreement, he said, “was never expressly stated to be ‘subject to contract’ either by use of that well known expression or by other language to the same effect” (para.57). He agreed with Etherton J that
“proprietary estoppel could be established even where the parties anticipated that a legal binding contract would not come into existence until after planning permission had been obtained, further terms discussed and agreed and formal written contracts exchanged.”
# My Lords, I can easily accept that a subject-to-contract reservation made in the course of negotiations for a contract relating to the acquisition of an interest in land could be withdrawn, whether expressly or by inference from conduct. But debate about subject-to-contract reservations has only a peripheral relevance in the present case, for such a reservation is pointless in the context of oral negotiations relating to the acquisition of an interest in land. It would be an unusually unsophisticated negotiator who was not well aware that oral agreements relating to such an acquisition are by statute unenforceable and that no express reservation to make them so is needed. Mr Cobbe was an experienced property developer and Mrs Lisle-Mainwaring gives every impression of knowing her way around the negotiating table. Mr Cobbe did not spend his money and time on the planning application in the mistaken belief that the agreement was legally enforceable. He spent his money and time well aware that it was not. Mrs Lisle-Mainwaring did not encourage in him a belief that the second agreement was enforceable. She encouraged in him a belief that she would abide by it although it was not. Mr Cobbe’s belief, or expectation, was always speculative. He knew she was not legally bound. He regarded her as bound “in honour” but that is an acknowledgement that she was not legally bound.
# The reality of this case, in my opinion, is that Etherton J and the Court of Appeal regarded their finding that Mrs Lisle-Mainwaring’s behaviour in repudiating, and seeking an improvement on, the core financial terms of the second agreement was unconscionable, an evaluation from which I do not in the least dissent, as sufficient to justify the creation of a “proprietary estoppel equity”. As Mummery LJ said (para.123), she took unconscionable advantage of Mr Cobbe. The advantage taken was the benefit of his services, his time and his money, in obtaining planning permission for the property. The advantage was unconscionable because immediately following the grant of planning permission, she repudiated the financial terms on which Mr Cobbe had been expecting to be able to purchase the property. But to leap from there to a conclusion that a proprietary estoppel case was made out was not, in my opinion, justified. Let it be supposed that Mrs Lisle-Mainwaring were to be held estopped from denying that the core financial terms of the second agreement were the financial terms on which Mr Cobbe was entitled to purchase the property. How would that help Mr Cobbe? He still would not have a complete agreement. Suppose Mrs Lisle-Mainwaring had simply said she had changed her mind and did not want the property to be sold after all. What would she be estopped from denying? Proprietary estoppel requires, in my opinion, clarity as to what it is that the object of the estoppel is to be estopped from denying, or asserting, and clarity as to the interest in the property in question that that denial, or assertion, would otherwise defeat. If these requirements are not recognised, proprietary estoppel will lose contact with its roots and risk becoming unprincipled and therefore unpredictable, if it has not already become so. This is not, in my opinion, a case in which a remedy can be granted to Mr Cobbe on the basis of proprietary estoppel.
# There is one further point regarding proprietary estoppel to which I should refer. 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 statute 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 requirements 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. So to Mr Cobbe’s constructive trust claim I must now turn
