Constructive trust – Certainty – Appellant carrying out development encroaching on respondent neighbours’ land – Agreement that development could proceed on agreed terms – Terms relating to swapping of parking spaces and granting of leases to respondents of parts of appellant’s property – Whether appellant obliged to transfer parking spaces and grant leases – Whether agreement enforceable as constructive trust – Whether sufficient certainty as to interest to be acquired – Section 2(5) of Law Reform (Miscellaneous Provisions) Act 1989 – Appeal dismissed
In November 2000, the appellant obtained planning permission to redevelop his freehold property, including the construction of mews houses in the garden area. Since the proposed development would encroach on parking spaces belonging to the respondents’ adjacent freehold property, from which they operated a dental practice, negotiations took place for an exchange of some of the respondents’ spaces (the green parking spaces) for others on the appellant’s property (the red parking spaces). In 2001, the parties reached a separate agreement under which the appellant would build a compressor house on his property, which he would let to the respondents for use in their dental practice, along with other parts of his ground floor that they already leased. In April 2003, when the appellant began to lay out areas for the mews houses, the parties conducted a meeting in order to resolve the outstanding issues concerning encroachment.
After completing the development, the appellant brought proceedings against the respondents requiring them to transfer the green parking spaces as agreed. The respondents contended that the arrangements reached between the parties were more complex than those claimed by the appellant. The judge found that the April 2003 meeting had resulted in an oral agreement on the terms on which the development could proceed. Those terms, together with subsequently agreed amendments, included: (i) the grant to the respondents of a new 999-year lease of a staffroom extension and the compressor house by reference to the terms of the existing lease and in return for a payment of £15,000; and (ii) a transfer to the respondents of nine freehold parking spaces on the appellant’s land. He held that the appellant was entitled to a transfer of the green parking spaces provided that he took the other steps required of him under the agreement. However, the appellant did not want to take those steps and the respondents sought and obtained a further ruling that should they transfer the green parking spaces and pay £15,000, they would be entitled to the leases and the nine red parking spaces, including a replacement, to be selected by the judge, for an inadequate parking space that the appellant had previously allocated to them. The judge found that the April 2003 agreement was intended to be legally binding and not subject to contract and that although it did not meet the formality requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, it gave rise to a constructive trust enforceable under section 2(5).
The appellant appealed. The central issue was whether, in the light of Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55; [2008] 3 EGLR 31; [2008] 35 EG 142, the arrangements between the parties had sufficient clarity to satisfy the requirements of a constructive trust.
Held: The appeal was dismissed.
Both proprietary estoppel and constructive trust, although distinct concepts, had a requirement in certain situations, including commercial transactions, for completeness of agreement with respect to an interest in property. In those situations, certainty as to that interest was a common component. If the parties intended to make a formal agreement setting out the terms on which one or more of them was to acquire an interest in property, or if further terms for that acquisition remained to be agreed between them so that the interest in property was not clearly identified, or if the parties did not expect their agreement to be immediately binding, neither party could rely on proprietary estoppel or constructive trust as a means of enforcing their original agreement: Cobbe, Stack v Dowden [2007] UKHL 17; [2007] 2 AC 432 and Thorner v Major [2009] UKHL 18; [2009] 2 EGLR 111 applied.
The transaction between the parties should be treated as commercial in nature since the parties were dealing at arm’s length and had ready access to the services of lawyers. That transaction satisfied the requirements for a constructive trust. On the judge’s findings, the April 2003 agreement was not subject to contract. The respondents had relied on the appellant’s assurances to their detriment because they had allowed him to build the mews houses with an allocated parking space that lay partly on their land. Moreover, that agreement satisfied the need for certainty. On the judge’s findings, there was no doubt over the extent of the respondents’ interest in the staffroom extension or in the compressor house and it had not been shown that the terms of the judge’s order did not conform to the terms of the existing lease. The fact that the ninth parking space to be transferred to the respondents was not precisely identified did not render the agreement uncertain. By implication, that parking space was to be chosen by the appellant. His failure to do so did not mean that there was no valid contract under section 2 of the 1989 Act. It was further implicated that he would choose the space within a reasonable time and if he failed to do so, it would be such as the court should determine. There was nothing to indicate that the April 2003 agreement would to take effect only if the appellant took the step of choosing the ninth space.
The fact that the parties had continued to negotiate after April 2003, and had agreed variations to the agreement, did not undermine the judge’s finding of a complete agreement as at April 2003. The question was whether the parties’ respective property interests were sufficiently certain at the time they were agreed and remained so notwithstanding the parties’ further dealings. In the light of the judge’s findings, the appellant could not show that the agreement as varied lacked certainty. The variations did not make the agreement uncertain but simply altered its content for the purposes of its future operation.
Timothy Becker (instructed by the direct public access scheme) appeared for the appellant; Amanda Tipples (instructed by Moore Blatch) appeared for the respondents.
Sally Dobson, barrister
