The relationship between the doctrine of proprietary estoppel and section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, which imposes strict requirements that apply when entering into contracts to dispose of interests in land, is a thorny one.
Implied, resulting and constructive trusts are exempt from the requirements: section 2(5). But proprietary estoppel is not mentioned – an omission highlighted in Cobbe v Yeoman‘s Row Management Ltd [2008] 3 EGLR 31, causing Lord Scott to suggest that the doctrine cannot “render enforceable an agreement that statute has declared to be void” because statutory provisions take precedence over the law of equity.
The courts have sought to mitigate the severity of section 2 in “familial” contexts, but are frequently faced with contractual disagreements between parties who are not related, but who are not sophisticated business people either, and who have, unwittingly, fallen foul of section 2. Howe and another v Gossop and another [2021] EWHC 637 (Ch); [2021] PLSCS 57 concerned such an agreement.
Unenforceable contract
Anthony and Deirdre Howe had sold a barn to Cheryl and Dean Gossop for conversion into a dwelling, together with rights of access over a roadway that required resurfacing. The buyers agreed to carry out the work in return for £7,000. But, following completion of the work, the sellers offered the buyers two additional parcels of land instead. The parties shook hands on the deal and the buyers cleared rubble, imported topsoil, and seeded and fenced one of the parcels. But the parties fell out and the sellers sought an order for possession and damages for trespass.
The buyers defended the claim on the basis that there was a proprietary estoppel in their favour. They had been encouraged to believe, and had reasonably believed, that the land would be theirs. They had acted to their detriment in reliance on that belief and it would be unconscionable to allow the sellers to change their minds.
The sellers relied on section 2. They argued that this was an arm’s-length agreement, that the parties had yet to identify the precise extent of one of the parcels and the use to which it could be put, that they had not given any assurances that the parties would not need to enter into a formal written contract, and that section 2 is a high hurdle to jump.
A non-contractual claim
The judge examined the authorities, and the textbooks, in order to identify the mischief that the legislation seeks to address. He explained that section 2 is aimed at the formation of contracts for the sale of land and that, in Cobbe, an experienced property developer had been trying to use the doctrine of proprietary estoppel to enforce the terms of a complex unwritten contract, which had not been fully negotiated.
By contrast, the doctrine of proprietary estoppel seeks to remedy unconscionability in the assertion of strict legal rights – and Snowden J seriously doubted whether section 2 was intended to affect the doctrine at all. But he decided that, if it does, it bars the grant of equitable relief if and to the extent that such relief would enforce or give effect to the terms of a contract that does not comply with the statutory provision.
The judge likened the case to Sahota v Prior [2019] EWHC 1418 (Ch); [2019] PLSCS 119. The buyers were not asking for the land to be transferred to them pursuant to their oral contract with the sellers. They were seeking to defeat the sellers’ claim to possession – by obtaining a declaration that they were entitled to an irrevocable licence to use the land as a garden for so long as they owned the dwelling that it served.
Additional points
The sellers claimed that proprietary estoppel is available in “exceptional” cases only – an argument supposedly derived from Herbert v Doyle [2010] EWCA Civ 1095; [2011] 1 EGLR 119, in which the High Court upheld a claim to a constructive trust, arising out of an oral agreement for the transfer of parking spaces. But the judge observed that the Court of Appeal had not, at any stage in its analysis, suggested that the facts of a case must be “exceptional” in order to establish a claim to proprietary estoppel.
Nor was it necessary for the sellers to have represented that they did not intend to rely on “technicalities” such as section 2 (although such an assurance may be essential where a claimant is, in effect, seeking to enforce a non-compliant agreement). The parties had not been “simply negotiating” and had intended their agreement to bind them immediately.
The parcels of land were physically distinct and there was no estoppel in relation to the parcel whose extent and permitted use remained undefined. But that did not prevent an estoppel from arising in relation to the land that had been cleared, seeded and fenced and the remedy that the buyers were seeking would satisfy the equity that had arisen, without contradicting the terms or policy of section 2, if and in so far as it applied.
All’s well…
…that ends relatively well. But section 2 is more than 30 years old and its relationship with the doctrine of proprietary estoppel remains uncertain. Authoritative judicial guidance is needed to put the law on a sounder footing, to facilitate consistent decision-making, and to provide greater certainty and predictability for those who have the misfortune to become embroiled in contractual disputes that concern interests in land.
Key points
- Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 applies to contractual claims
- So equitable relief is available if the doctrine of proprietary estoppel applies and is not being used to enforce the terms of a non-compliant contract for the sale or disposition of an interest in land
Allyson Colby is a property law consultant
