Property development — Planning permission — Claimant agreeing to obtain planning permission at own expense Third defendant verbally agreeing to sell property to claimant following grant of planning permission First and third defendants subsequently denying existence of legally binding agreement — Whether claimant entitled to interest in property — Claim allowed
The first defendant was the registered proprietor of a block of 11 flats (the property). The second defendant was the sole shareholder and a director of the first defendant. His wife, the third defendant, was the secretary of the first defendant. The claimant, a property developer, claimed that, in 2002, he agreed with the third defendant, as agent of the first defendant, that he would, at his own expense, apply for planning permission and conservation area consent for the demolition of the property and the erection of six houses in its place. Following the grant of planning permission, the property would be sold with vacant possession to the claimant for an immediate payment of £12m and, once the development had been completed, “overage” of 50% of the gross proceeds of sale of the new houses in excess of £24m.
The claimant contended that, pursuant to that agreement and in reliance upon it, he had spent considerable time and money applying for planning permission, which was granted on 17 March 2004. The first and third defendants denied that any legally enforceable or complete agreement had ever been reached and asserted that any expense incurred by the claimant had been entirely at his own risk.
The claimant accepted that, by reason of section 2 of the Law of the Property (Miscellaneous Provisions) Act 1989, he could neither obtain specific performance of the alleged agreement nor claim damages. However, he claimed entitlement to an interest in the property or its proceeds of sale by constructive trust or proprietary estoppel, or to a payment in restitution. He contended that he was entitled to one of those remedies because he had relied upon the agreement that he believed existed between himself and the defendants and because of the unconscionable conduct of the first defendant, acting through the third defendant, in encouraging or permitting him to take such steps and subsequently refusing to implement the agreement despite the grant of the planning permission.
Held: The claim was allowed.
The property would be the subject to a lien for the payment to the claimant of half of the increase in its value as at 18 March 2004 consequent upon the grant of the planning permission. This would be conditional upon the claimant instructing his architects to permit the first defendant to use the planning permission plans.
The grant of relief was not precluded by section 2 of the 1989 Act since, in appropriate circumstances, a party might obtain the benefit of an agreement, which, under section 2(1), was rendered invalid, by the operation of proprietary estoppel: Shah v Shah [2001] EWCA Civ 527; [2002] QB 35 and Kinane v Mackie-Conteh [2005] EWCA Civ 45; [2005] 06 EG 140 (CS) considered.
The court had a wide discretion as to how it would give effect to the equity, having regard to all the circumstances of the case, including, in particular, the expectations and conduct of the parties. The court looked for “the minimum equity to do justice”: Jennings v Rice [2002] EWCA Civ 159; [2003] 1 P&CR 8 applied.
The third defendant, on behalf of the first defendant, had encouraged the claimant to believe that, if he obtained planning permission, the agreement would be honoured even though it was not legally binding. The claimant had relied upon that belief, with the third defendant’s knowledge and encouragement, and he had acted to his detriment. The third defendant had taken an unconscionable advantage of the claimant: Holiday Inns v Broadhead (1974) 232 EG 951; Attorney-General of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] 1 AC 114; London & Regional Investments Ltd v TBI plc [2002] EWCA Civ 355 and Pridean Ltd v Forest Taverns Ltd (1998) 75 P&CR 447 considered.
Joseph Harper QC and Myriam Stacey (instructed by Bird & Bird) appeared for the claimant; Jonathan Seitler QC and Joanne Wicks (instructed by DLA Piper Rudnick Gray Cary UK LLP) appeared for the defendants.
Eileen O’Grady, barrister
