Property development – Understanding between parties as to profit share – Respondent investing in and assisting project – Whether appellants estopped from denying respondent entitled to a share in profits – Whether entire agreement clause precluding estoppel – Whether any equity to be satisfied by first appellant personally as well as his company – Appeal dismissed
The first appellant obtained options to purchase two development sites through a company, N Ltd. He secured the participation of the respondent, an experienced developer and project manager, on the understanding that the parties would: (i) each own half of N Ltd; (ii) make an equal investment; and (iii) share equally in the profits. A modification to the understanding resulted in one of the sites (Willes Rd) being transferred into the ownership of the second appellant, a company incorporated for the purpose and controlled by the first appellant. Ultimately, the parties proceeded with the plans for developing only the Willes Rd site. No contract was entered into with regard to the project, although a written agreement was concluded concerning the operation of N Ltd. That agreement was stated to represent the entire understanding between the parties in relation to the matters dealt with therein.
The respondent invested large sums in the project and took numerous steps to aid the development. Relations between the parties broke down before building commenced and the respondent brought proceedings to establish his rights in respect of the project. The judge held that the respondent was entitled to relief pursuant to the doctrine of proprietary estoppel, since an understanding had been reached between the parties, which it would be unconscionable for the appellants to deny, that the respondent would participate in the profit of the development of the Willes Rd site. The judge held that the equity that had arisen in the respondent’s favour was to be satisfied by the second appellant and, if need be, by the first appellant personally. The nature and extent of that equity was left for determination at a further hearing.
On appeal, the appellants contended that: (i) the “entire understanding” clause in the written agreement precluded reliance upon extraneous material to demonstrate the alleged understanding giving rise to the estoppel; (ii) any equity in the respondent’s favour attached to the second appellant, such that the judge could not hold that it might need to be satisfied by the first appellant personally; and (iii) the appellants’ behaviour had not been unconscionable because they had not suggested that their promises to the respondent were irrevocable.
Held: The appeal was dismissed.
(1) The written agreement expressly represented the entire understanding only in relation to the matters dealt with therein, namely the operation of N Ltd. The arrangements concerning the development of and profits from the Willes Rd project were not dealt with, and so the entire understanding clause was not engaged in relation to them. Further, that clause could preclude reliance only upon such extraneous matters as had arisen prior to its existence, whereas there was abundant evidence that the parties had subsequently reiterated their understanding concerning the development.
(2) Although a court could not flit between seeking to enforce an equity against a property owned by a company and seeking to enforce it against the personal property of the company’s sole director and spokesman, the respondent had always pleaded that the first appellant, as well as his company, was fixed with the estoppel. It was relevant that: (i) the original option to purchase had been held by a company half owned by the first appellant; (ii) the property had been transferred to the second appellant only because the first appellant preferred not to receive it directly; (iii) prior to the incorporation of the second appellant, the contributor to the understanding with the respondent could have been only the first appellant; and (iv) the first appellant had never subsequently made it clear that his words and actions were on behalf of the second appellant only. In those circumstances, the judge had been entitled to hold that the first appellant was, in principle, liable to satisfy the equity to the extent, if any, that he had caused or might cause any of the profit of the development to vest in himself and that the equity was unable to be satisfied by the second appellant: Cobbe v Yeoman’s Row Management Ltd [2006] EWCA Civ 1139; [2006] 1 WLR 2964 distinguished.
(3) It was neither necessary to, nor an important factor in, the creation of a proprietary estoppel that the promisor should have made it clear that its promise was irrevocable or enforceable in law. The promisor had to make clear that it would not revoke the promise, not that it could not do so. Equity intervened to make the promise irrevocable at a later stage once the promisee had acted to its detriment in reliance upon it and the promisor sought unconscionably to withdraw from it: Gillett v Holt [2001] Ch 210 applied.
David Taylor (instructed by Varley Hibbs LLP, of Coventry) appeared for the appellants; Simon Clegg (instructed by Alsters Kelley Solicitors, of Leamington Spa) appeared for the respondent.
Sally Dobson, barrister
