Sale of land – Oral agreement – Beneficial interest – Defendants registering notices against title – Claimant claiming cancellation of notices and damages – Whether claimant entitled to summary judgment – Whether second defendant being personally liable for damages – Application granted
The claimant was the registered proprietor of a site with potential for development. The second defendant was the sole shareholder and director of the first defendant, which was a single purpose vehicle (spv) with nominal assets, that had been formed to acquire and develop the site.
The claimant’s sole director visited the second defendant’s home. The first defendant alleged that an oral agreement had been reached at that meeting under which it would purchase the site from the claimant for £2m. The first defendant argued that it had subsequently relied upon that agreement to its detriment, which was sufficient to give rise to a proprietary estoppel or constructive trust in its favour.
The claimant accepted that a meeting had taken place, but denied that any agreement had been reached; the only reference to the site being an assertion that the first defendant could match an offer that was rumoured to have been made for the site. Following the meeting, the claimant started an informal tendering process to sell the site. The defendants challenged the accuracy of the particulars of sale but made no reference to a purported oral agreement, accepting that they had no legal interest in the site.
However, when their two bids for the site were both rejected, the defendants lodged notices against the titles registered in respect of the site, on the grounds that they had an equitable interest as a result of the alleged oral agreement for its sale and that they had incurred expense to their detriment in reliance upon that agreement.
The claimant commenced court proceedings for: (i) a declaration that the defendants had no interest in the site; (ii) the cancellation of the notices; and (iii) damages under section 77 of the Land Registration Act 2002. The claimant applied for summary judgment of its claim.
The questions for the court were principally whether: (i) the defendants had any real prospect of succeeding in their argument that they had an equitable interest; and (ii) the second defendant was personally liable for damages under section 77 of the 2002 Act.
Held: The application was granted.
(1) The claimant was entitled to summary judgment of its claim for a declaration that the first defendant had no interest in the site and an order leading to the cancellation of the notices. The defendants had failed to demonstrate the existence of any agreement for the sale of the site to them, the detrimental reliance upon which made it unconscionable for the claimant to resile from the agreement. Accordingly, the court had no basis upon which to exercise its broad equitable power to give effect to any promise by the claimant that the first defendant would have an interest in the property: Yaxley v Gotts [1999] 2 EGLR 181 and Cobbe v Yeoman’s Row Management Ltd [2006] EWCA Civ 1139; [2006] 3 EGLR 107 considered.
(2) Although it was not appropriate at this stage for the court to give judgment for damages to be assessed when it had yet to be proved that any loss had been suffered, it was appropriate to make a declaration that the notices in question had been applied for without reasonable cause, contrary to the statutory duty in section 77 of the 2002 Act.
The person owing the primary duty under section 77 was the first defendant, being the party that had exercised the right to apply for the entry of a notice. The question was whether the second defendant was also liable for damages. The relevant test was whether his activities would constitute procurement even if he had not been a director or shareholder of the company. The first defendant was nothing more than an spv with no relevant personnel other than the second defendant, who had acted on its behalf in all matters relating to the registration of the notices. Accordingly, the second defendant’s actions disclosed a clear case of procurement of the commission of the tort of the application for a notice without reasonable cause by the first defendant, sufficient to make him personally liable in damages under section 77(2): MCA Records Inc v Charlie Records Ltd [2003] 1 BCLC 650 applied.
Jonathan Steinert (instructed by Gosschalks, of Kingston-upon-Hull) appeared for the claimant; David Partington (instructed by Blacks, of Leeds) appeared for the defendants.
Eileen O’Grady, barrister
