Summary

An oral agreement for the sale of land was held to be enforceable in equity under a constructive trust despite not being evidenced in writing where both parties had considered it to be immediately binding upon them, and where the prospective buyer had then acted to his detriment in reliance upon it. The court considered the application of the Law of Property (Miscellaneous Provisions) Act 1989 s.2(5) and Herbert v Doyle [2010] EWCA Civ 1095.

Facts

The appellant property developer appealed against a decision ordering him to transfer land to the respondent purchasers on the basis that he was holding it on trust for them.

The parties, who were friends, agreed in 2003 that the respondents would purchase two pieces of land from the appellant ("the plot" and "the meadow") for £200,000. The plot was £120,000 and the meadow £80,000. In April 2004, the respondents paid £66,000 towards the purchase price. Around that time there was a dispute regarding a possible right of way over the meadow. It lasted for more than two years and the respondents contributed to the legal costs. In February 2005 they obtained planning permission in relation to the plot and the appellant permitted them to start building a house whilst the conveyancing was being dealt with. Contracts for the sale of the plot were exchanged in September 2005, the deposit being stated as £66,000. Special Condition 6 provided that the respondents entered into the contract "solely…on the basis of the terms hereof", and "not in reliance on any warranty, statements, representation otherwise whether oral or implied". At completion, the respondents paid the balance of the sum due for the plot and sold their existing house. Between October 2005 and November 2006 they paid the appellant a further £80,000 for the meadow. Shortly afterwards the parties fell out. The appellant sent the respondents a cheque for £40,000 and informed them that they could only purchase half of the meadow. In the absence of a contract in writing as required by the Law of Property (Miscellaneous Provisions) Act 1989 s.2(5), he denied any binding agreement. A judge found the appellant to be a man who expected people to trust his word and to act on it even in the absence of a written agreement. He held that by the time solicitors became involved in April 2005, the parties had concluded what they all regarded as an immediately binding agreement, the appellant promising unconditionally to sell the meadow, and the respondents acting on that promise to their detriment. He concluded that the respondents were entitled, on the basis of proprietary estoppel and constructive trust, to the entire meadow, and that Special Condition 6 did not negate the oral agreement.

The appellant argued, in reliance on Herbert v Doyle [2010] EWCA Civ 1095 and Cobbe v Yeoman's Row Management Ltd [2008] UKHL 55, that the correct conclusion on the judge's findings was that a constructive trust could not have arisen because the parties were aware at the time of the informal agreement in 2003 of the need for a written contract, which they regarded as a technicality which had to be complied with before the agreement was enforceable.

Held

(1) Based on his findings of fact, the judge had been correct to hold that the appellant held the meadow on trust for the respondents. There was an oral agreement which both parties intended to be immediately binding, and that agreement was complete as to all its essential terms, namely the land to be included, the purchase price, and the deposit. The respondents had relied upon the agreement to their detriment. The constructive trust arose as soon as they paid the £66,000, although there had also been subsequent acts of reliance. It was not clear whether the right of way dispute had arisen at the time of the £66,000 payment, but even if it had, there would have been no difficulty in treating the respondents' beneficial interest in the meadow as being subject to that potential encumbrance. The judge had found that all three parties knew that there was a "technicality which had to be complied with at the end of the day", but the appellant was unable to define for the instant court what that technicality was. The judge had made a clear finding that the parties regarded the agreement as binding despite the "technicality". The judge below had not erred in his treatment of Herbert and Cobbe. Arden LJ's judgment in Herbert envisaged three situations where s.2(5) could not be relied upon, but it was important not to construe those paragraphs of the judgment as if it were statute. She had not intended to describe three situations in which s.2(5) would not apply, but only to describe Cobbe in three different ways, Herbert explained and Cobbe considered (see paras 30, 35-36 of judgment).

(2) It was common ground that the oral agreement was a single indivisible agreement in respect of both the plot and the meadow. The judge had found that Special Condition 6 only prevented reliance upon pre-contractual representations regarding the plot, not the meadow. That was correct. The condition excluded other terms relating to the plot; it did not exclude terms relating to a different parcel of land. The plot and the meadow had always been distinct parcels of land; it was immaterial that they had previously been the subject of one oral agreement (paras 40-45).

Appeal dismissed