Proprietary estoppel – Agreement in principle – Respondent to obtain planning permission for development after which appellants to sell property to him – Appellants reneging once permission obtained – Whether respondent entitled to relief – Availability of remedy in proprietary estoppel or constructive trust – Lien granted over property – Appeal allowed
The appellant company was the registered proprietor of a block of flats. Acting through its sole director, it entered into an oral agreement in principle with the respondent property developer for a joint enterprise to develop the property by demolishing the existing block of flats and building six town houses in their place. Under the terms of the agreement in principle, the respondent was to apply for planning permission for the development at his own expense and, upon the grant of planning permission and the obtaining of vacant possession, the appellant was to sell the property to him for an advance payment of £12m. The respondent would then carry out the development, sell the six houses, and pay the appellants an overage of 50% of the gross proceeds of sale of the completed houses exceeding £24m.
In 2004, detailed planning permission was granted. The following day, the appellants reneged on the agreement in principle and demanded an advance sum of £20m for the sale of the freehold.
In proceedings against the appellants, the respondent accepted that the agreement in principle was not a legally enforceable contract for the sale of land under section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989, since it was not in writing and further terms remained to be negotiated. However, he claimed entitlement to an interest in the property or its proceeds of sale by proprietary estoppel, by virtue of the unconscionable conduct of the appellants in encouraging him to expend considerable time and money on the planning application in the expectation that they would abide by the agreement in principle. The judge allowed the respondent’s claim on the grounds of proprietary estoppel or constructive trust and granted him a lien over the property for the payment of one-half of the increase in its value resulting from the grant of planning permission. That award was upheld by the Court of Appeal, which dismissed the appellants’ appeal. A subsequent inquiry established the amount payable to the respondent as being £2m. The appellants appealed to the House.
Held: The appeal was allowed.
(1) The remedy to which the respondent was entitled was neither based upon estoppel nor proprietary in character. The ingredients of proprietary estoppel included a proprietary claim by a claimant, the defendant’s answer to which was based upon some fact, or mixed fact and law, that it could be estopped from asserting. A finding of proprietary estoppel should not be made solely upon the basis of the unconscionable behaviour of the defendant in the absence of any coherent formulation of the content of the estoppel and of the proprietary interest that it was designed to protect. In the instant case, the respondent did not dispute that: (i) the agreement was unenforceable for want of writing; (ii) it did not cover all the terms that needed to be agreed between the parties; and (iii) he had not acquired any proprietary interest in the property prior to the grant of planning permission. He had not alleged that the appellants were estopped from asserting any of those matters. The respondent had not identified the content of the estoppel or his proprietary interest: Muschinski v Dodds (1985) 160 CLR 583 considered.
(2) A constructive trust could not be imposed pursuant to the principles applicable to failed joint ventures. Those principles applied where a joint venture involved the acquisition of by one of the joint venturers of a property intended to be used for the purposes of the venture. If that person subsequently sought to retain the land for his own benefit, the courts would regard him as holding it on trust for the joint venturers: Pallant v Morgan [1953] Ch 43, Holiday Inns Inc v Broadhead (1974) 232 EG 951 and Banner Homes Holdings Ltd (formerly Banner Homes Group plc) v Luff Developments Ltd (No 2) [2000] Ch 372 considered. A constructive trust could not be imposed where, as here, the property that was to be the subject of the joint venture was already owned by one of the parties before the joint venture was embarked upon. The property had never been a joint venture property and there was no justification for treating it as such.
(3) The respondent was entitled to a remedy in personam. Since the value of the property had been increased by the grant of planning permission, the appellants had been unjustly enriched at the respondent’s expense. The amount of the unjust enrichment was not, however, the difference between the market value of the property with and without the permission since the permission had not created but had merely unlocked the development potential. Instead, the appellants had been unjustly enriched by obtaining the value of the respondent’s services without having to pay for them. The respondent was entitled to quantum meruit payment for his services in obtaining the planning permission. He had not intended to provide those services gratuitously. The payment should include his outgoings in applying for and obtaining the permission, plus a fee for his services, assessed at the rate appropriate for an experienced developer. A similar result was reached on the ground that the consideration in return for which the respondent had provided his money and services had failed.
Nicholas Dowding QC and Timothy Morshead (instructed by DLA Piper UK LLP) appeared for the appellant; Thomas Ivory QC ands Myriam Stacey (instructed by Bird & Bird) appeared for the respondent.
Sally Dobson, barrister
