Sale of land – Contract – Formalities – Proprietary estoppel – Claimant agreeing to sell property to defendant – Claimant withdrawing from sale claiming contract invalid and unenforceable – Defendant counterclaiming for specific performance or damages – Whether agreement satisfying section 2(1) of Law of Property (Miscellaneous Provisions) Act 1989 – Whether defendant entitled to relief under doctrine of proprietary estoppel – Counterclaim allowed in part
The claimant owned 7 Parkside Parade, a mixed-use property located on Northend Road in Dartford, Kent. The defendant was the managing director of a construction company.
In 2017, the company carried out construction work at the claimant’s home. Following substantial completion of the works an issue arose whether the claimant still owed the company some money.
In 2018, the claimant agreed to sell Parkside to the defendant for £270,000. The defendant alleged that that was a binding contract and the claimant had withdrawn from the sale in breach of contract. The claimant said that the agreement was oral, impliedly subject to contract and did not comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.
The defendant registered a unilateral notice against the registered title. On the claimant’s application, an order was made requiring the defendant to cancel the notice on her undertaking not to dispose of the property or her then residence, until the conclusion of the proceedings or further order: [2021] EWHC 2842 (Ch).
The defendant counterclaimed for specific performance of the contract, or alternatively damages. The court dismissed the claimant’s application for summary judgment: [2023] EWHC 1379 (Ch).
The court was now asked to determine, amongst other things, whether the agreement satisfied the formality requirements of section 2(1) of the 1989 Act; and, if there was no valid or enforceable agreement, whether the property should be transferred to the defendant or relief granted under the doctrine of proprietary estoppel.
Held: The counterclaim was allowed in part.
(1) Under section 2(1) of the 1989 Act, for the agreement to be valid it had to contain “all the terms which the parties have expressly agreed in one document”. That meant what it said: there would be no contract if only the main terms were recorded. It only took one agreed term not to be in the written document to render the contract of sale invalid: see Megarry & Wade 9th Edn at 14-027, Enfield London Borough Council v Arajah [1995] EGCS 164, Grossman v Hooper [2001] 2 EGLR 82 and Ruddick v Ormston [2005] EWHC 2547 (Ch); [2006] PLSCS 101 considered.
In the present case, there were three terms expressly agreed which did not form part of the signed letters: a 10% deposit would be paid on exchange; the defendant would fund the legal costs of the claimant in instructing solicitors; and completion would take place within a year.
Therefore, the agreement for the sale of the property did not satisfy the formality requirements of section 2(1) of the 1989 Act in that it did not contain all the terms which the parties had expressly agreed in one document. Accordingly, the claim for damages for breach of contract would be dismissed.
(2) The court would also have rejected the claim for specific performance even if it had concluded the agreement was valid and enforceable. The grant of specific performance was a discretionary remedy and the court would not have exercised its discretion to grant such a remedy in this case. The facts found did not provide an auspicious background for a claim in equity for the transfer of the property to gain an advantage in relation to an uplift in value if the defendant’s advances to the claimant and the remaining debt could be otherwise recovered.
(3) In order to establish proprietary estoppel: (i) the owner of the land must have encouraged the claimant by words or conduct to believe that the claimant had or would in the future enjoy some right or benefit over the owner’s property that was not merely personal; and the claimant must have reasonably believed that the words or conduct were seriously intended to create that right; (ii) the claimant must have acted to his detriment in reliance on the belief that he had or would acquire some right over the owner’s land; and (iii) it had to be unconscionable for the owner to act so as to defeat the expectation that the claimant had been encouraged or induced to believe.
There should be no problem claiming proprietary estoppel, even when dealing with a contract that was void by virtue of section 2(1) the 1989 Act, provided that the estoppel was aimed at doing the “minimum equity” necessary to prevent an injustice. Whilst it might be impermissible to allow the proprietary estoppel to fulfil expectations, as that might undermine the 1989 Act, there could be no objection to estoppel operating to reverse any detriment as a result of the invalid contract.
Therefore, if the requisite elements of a proprietary estoppel were satisfied, the court should be able to grant relief to remedy any unconscionability. In particular, where any detriment which had been suffered could be reversed, there was no substantial undermining of the 1989 Act: Cobbe v Yeoman’s Row Management Ltd [2008] 3 EGLR 31, Thorner v Major [2009] 2 EGLR 111 and Howe v Gossop [2021] EWHC 637 (Ch); [2021] PLSCS 57 considered.
(4) Whilst the claimant’s repudiation was unconscionable in the light of the defendant’s detrimental reliance, something less than full performance would negate any unconscionability caused. The claimant had not been unjustly enriched by maintaining her beneficial interest in the property, or its value or by the defendant paying for the legal expenses incurred in the aborted sale: Guest v Guest [2023] EGLR 2 considered.
In all the circumstances, the court would uphold the fallback proprietary estoppel claim, the common law debt claim, and the restitutionary claim to a limited extent. Subject to further argument, the claimant would be ordered to pay to the defendant: (i) £15,000 based on a waiver of fees said to be owing by the claimant to the company (subsequently assigned to the defendant); (ii) £5,000 paid by the defendant to the claimant by way of deposit; and (iii) £1,150 as a contribution for reimbursement of legal costs on the aborted sale.
Only the latter sum required the application of any equitable doctrine of proprietary estoppel, the other sums being capable of remedy under that doctrine, or the other common law causes of action. There was no further substantial unconscionability which could not be remedied by the law of contract or restitution.
The claimant appeared in person. Jeff Hardman (instructed by Mills Chody LLP) appeared for the defendant.
Eileen O’Grady, barrister
