Cobbe v Yeomans Row Management Ltd & Ors, Rev 1

Mr Joseph Harper Q.C., leading Ms Myriam Stacey, for Mr Cobbe, and Mr Jonathan Seitler Q.C., leading Ms Joanne Wicks, for the First Defendant and Mrs Lisle-Mainwaring, made their submissions, both orally and in opening and closing written skeleton arguments, by addressing, first, the claim for a constructive trust, and then the claim for relief on the ground of proprietary estoppel, and finally the claim in restitution.

At the very end of his oral closing submissions Mr Harper made clear that the primary interest of Mr Cobbe is not to a proportionate share of the beneficial interest in the Property under a constructive trust, but rather to a sum of money reflecting the increase in the value of the Property due to the grant of the Planning Permission.

In those circumstances, and bearing in mind that the claim to specific performance of the Second Agreement is no longer pursued, I find it more convenient to address, in the first instance, the claim based on proprietary estoppel.

The essential elements of proprietary estoppel are summarised in Megarry & Wade, The Law of Real Property (6^th ed.) para 13-001, as follows:

“(a)

the owner of land (O) induces, encourages or allows the claimant (C) to believe that he has or will enjoy some right or benefit over O’s property;

(b)

in reliance upon this belief, C acts to his detriment to the knowledge of O; and

(c)

O then seeks to take unconscionable advantage of C by denying him the right or benefit which he expected to receive.”

The court has a wide discretion as to manner in which it will 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 looks for “the minimum equity to do justice”: Jennings –v- Rice [2003] 1 P&CR 100,110.

Mr Cobbe claims that all the requirements for proprietary estoppel are satisfied in the present case. His factual case is neatly and succinctly summarised in the following paragraph of his counsel’s opening skeleton argument:

“3.

It is the basic case of the Claimant that there was a firm understanding, arrangement or bargain between him and the Defendants that he would obtain planning permission and would then purchase and redevelop the Property whereupon the proceeds of sale would be divided. The Claimant acted on the faith of that agreement by expending time, effort and money over a period of 19 months (between August 2002 and March 2004) in obtaining planning permission for the Property. The Defendants encouraged or allowed him to go on under the belief. Planning permission was obtained on 17 March 2004 as a direct result of the Claimant’s efforts in that regard. The following day, the Claimant was informed that the Defendants were not bound by the agreement. The Claimant describes this as the “ambush”…”

Mr Cobbe claims that, by reason of those facts, and the further fact that the Planning Permission has enhanced the value of the Property, he has an equity, which should be satisfied by relief which, in one way or another, reflects the enhancement in the value of the Property by the grant of the Planning Permission.

Mr Harper submitted that the Second Agreement was, subject only to s.2(1) of the 1989 Act, a complete and binding agreement. He submitted, in the alternative, that the claim based upon proprietary estoppel would be just as valid even if agreement had not been reached on all essential terms or the Second Agreement otherwise lacked certainty in some crucial respect.

Mr Seitler advanced a range of arguments, skilfully and eloquently woven together, in opposition to the claim. At their core, both in relation to proprietary estoppel and constructive trust, was the following contention. Far from the Second Agreement being a concluded agreement on all essential terms, it was never more than a stage in continuing negotiations, which were always “subject to contract” and in which there was never agreement on some essential terms, and so the Second Agreement was never capable of being and never intended to be a binding contract and either party was legally free to withdraw from the negotiations at any time. Those facts, known to Mr Cobbe, are simply incapable, Mr Seitler submitted, of giving rise to any equity in favour of Mr Cobbe. He elaborated on those points as follows.

Mr Seitler submitted that the Second Agreement was incomplete and uncertain since there was no agreement as to, for example, the identity of the vendor or the purchaser of the Property, the security for the overage, the time for obtaining vacant possession or the commencement or conclusion of the development works, and the structures which Mr Cobbe, on the one hand, and the Defendants, on the other hand, might wish to put in place in order to reduce potential tax liabilities arising out of the sale and development of the Property.

He submitted that, in the circumstances, the Second Agreement could not have been more than an agreement to negotiate or to agree, and therefore lacking in certainty and unenforceable, irrespective of s.2 the 1989 Act. He referred, in that connection, to Walford –v- Miles [1992] 2 AC 128.

Further, Mr Seitler submitted, the Second Agreement was plainly always “subject to contract”. He relied on evidence that both Mr Cobbe and Mrs Lisle-Mainwaring anticipated that at a future stage lawyers would be instructed to draw up formal contracts and that such contracts would not be finalised until all the matters Mr Seitler mentioned as outstanding were negotiated and agreed. He contended that, until a formal written contract was entered into, either party was entitled to withdraw from the negotiations at any time and for any reason. Mr Seitler referred in this connection to, and relied upon, AG of Hong Kong –v- Humphreys Estate(Queen’s Gardens) Limited [1987] AC 114, Pridean Limited -v- Forest Taverns Limited [1998] 5 P&CR 447, and London & Regional Investments Ltd –v- TBI Plc [2002] EWCA Civ 355.

To hold otherwise, Mr Seitler warned, would open the floodgates to all manner of claims for compensation when one person has expended time and money in the course of abortive negotiations and in the expectation that they might come finally to fruition.

Mr Seitler relied upon a further point, specific to the present case. He submitted that the Second Agreement was subject to an express condition that planning permission must be obtained by Mr Cobbe by Christmas 2003, and that time was of the essence of that requirement. Bearing that in mind, and also Mrs Lisle-Mainwaring’s evidence that she reminded Mr Cobbe of that condition in November 2003, Mr Seitler submitted that there could be no estoppel in favour of Mr Cobbe since, in continuing to expend time and money on pursuing the planning application after Christmas 2003, Mr Cobbe was clearly and knowingly doing so at his own risk. In seeking to re-negotiate the terms of any agreement, once the Planning Permission had been granted, the First Defendant was doing no more than that which was expressly contemplated by the express condition in the Second Agreement for planning permission to be obtained by Mr Cobbe by Christmas 2003.

I make the following findings of fact relevant to the claim based on proprietary estoppel.

As I have said, it is not an issue between the parties that Mrs Lisle-Mainwaring acted at all times as agent for the First Defendant in her dealings with Mr Cobbe in connection with the sale and development of the Property.

At the time the Second Agreement was made there was no express agreement between the parties as to any date by which vacant possession had to be obtained or as to the time for commencing or completing the development. The belief and understanding of Mr Cobbe at that time was that it would be possible to obtain vacant possession, the Property was to be sold to Mr Cobbe after planning permission was granted, the construction work would start immediately thereafter, and the new houses would be sold as quickly as possible after the development was completed.

I accept Mr Cobbe’s evidence that the reason the Second Agreement was not recorded in a written document at the time it was made was because Mrs Lisle-Mainwaring was concerned about having to sign anything until she had made arrangements to minimise her potential tax liability.

Although the Second Agreement was never expressly stated to be “subject to contract”, either by the use of that expression or language to the same effect, neither Mr Cobbe nor Mrs Lisle-Mainwaring thought the Second Agreement was a legally enforceable contract. Both of them thought that a legally binding contract would only come into existence after planning permission was granted and lawyers were instructed and drew up a formal agreement. Mr Cobbe’s oral evidence, for example, was that he was aware that the Second Agreement was not legally binding because it was not in writing, and that he envisaged instructing lawyers once planning permission had been obtained.

Both Mr Cobbe and Mrs Lisle-Mainwaring envisaged that, if and when lawyers were instructed to draw up a formal contract, terms additional to those of the Second Agreement would be negotiated and agreed. Mr and Mrs Lisle-Mainwaring, in particular, intended to seek advice about arrangements to minimise their tax liabilities arising out the sale and development of the Property; and Mr Cobbe was so aware. No decision had been made as to the precise identity of the vendor or the purchaser. Both parties, according to the evidence of Mr Cobbe and Mrs Lisle-Mainwaring, contemplated that there would be some provision for security for the payment of overage. Further, any formal written agreement would be expected to deal with the time for obtaining vacant possession, and the obligation of the purchaser to commence, carry through and conclude the development of the Property in accordance with planning permission.

On the other hand, I find that, from the end of 2002 until the grant of the Planning Permission on 17 March 2004, Mr Cobbe believed the following: that the Second Agreement comprised all the critical commercial terms, that any outstanding terms were of secondary importance and in the nature of legal mechanics, which would inevitably be agreed one way or another, and that Mrs Lisle-Mainwaring was, and regarded herself as, bound in honour to enter into a formal written contract embodying the terms of the Second Agreement if Mr Cobbe obtained planning permission for the development of the Property by its demolition and its replacement by six houses.

I also accept Mr Cobbe’s evidence that he himself felt the Second Agreement was binding on him in honour. I reject the submission of Mr Seitler to the contrary based on the oral evidence of Mr McMahon, as to what Mr McMahon had been told by, and the general impression that was given to him by, Mr Cobbe, and on a note made by Mr Cobbe in 2004 concerning the First Agreement and its termination.

Mr Cobbe envisaged that, if Mrs Lisle-Mainwaring decided not to proceed with the development of the Property, prior to planning permission being granted, he would be reimbursed his reasonable expenditure. If she did not withdraw, and such planning permission was refused, he would not be reimbursed.

In those beliefs and as a result of them, Mr Cobbe spent considerable time and effort, and incurred considerable expense, pursuing the planning application between the end of 2002 and 17 March 2004. That reflected, in part, the fact that neither the proposed development nor the planning application was straightforward. His expenditure was not less than £69,000.00 and may have been considerably more, without any financial allowance for his own time and out of pocket expenditure.

Those beliefs of Mr Cobbe, and that expenditure by him of time and money in reliance on those beliefs, were encouraged by Mrs Lisle-Mainwaring. Although it is likely that she was not aware of everything done by Mr Cobbe in pursuit of the planning application, including his instruction of the entire team of experts retained by him and the work done by them, she had regular meetings and conversations with Mr Cobbe, and was, as I have already said, at all times fully aware that he had retained PDP, and that he and they were expending time and effort in pursuing the planning application, and that Mr Cobbe was incurring a not insubstantial sum in so doing.

In the course of negotiating and agreeing the Second Agreement, Mrs Lisle-Mainwaring mentioned Christmas 2003 as the date by which Mr Cobbe was to obtain planning permission. I do not accept she mentioned that to Mr Cobbe again in about November 2003 or, if she did, that she mentioned it in such a way as to make clear that any work done or money expended by Mr Cobbe after Christmas 2003 was entirely at his own risk and that she would no longer be bound in honour to carry into effect the Second Agreement if planning permission was obtained.

I accept Mr Cobbe’s evidence that he regarded the reference to Christmas 2003 as an aspirational date, and not a final and irrevocable cut-off date, and I find that, in all the circumstances, he was reasonable in so thinking.

On the other hand, the fact that a date for obtaining planning permission, even an aspirational one, was mentioned by Mrs Lisle-Mainwaring to Mr Cobbe was a further factor giving, and intended to give, the impression to Mr Cobbe that Mrs Lisle-Mainwaring intended to carry through the Second Agreement into a formal binding contract, if planning permission was obtained. In that connection, it is to be noted that Mrs Lisle-Mainwaring’s own evidence, in cross-examination, was that she would have regarded any withdrawal by her from the terms of the Second Agreement prior to Christmas 2003 as “shabby”; and it is further to be noted that, on 18 March 2003, the explanation given by Mrs Lisle-Mainwaring for proposing new terms was not that the Second Agreement was not legally binding as a contract but rather that planning permission had not been obtained by Christmas 2003.

Correspondence in October 2003 clearly shows that Mrs Lisle-Mainwaring was aware at that time that it was highly unlikely that planning permission would, in fact, be obtained by the end of 2003. Thereafter, until the grant of the Planning Permission in March 2004, Mrs Lisle-Mainwaring not only was aware of, and encouraged, Mr Cobbe’s efforts, through PDP, to obtain planning permission, but she herself was increasingly involved in promoting a successful outcome to the planning application. Indeed, she ensured that relevant correspondence was copied to her, and she communicated directly with PDP, thereby increasing the costs ultimately payable by Mr Cobbe. Further, she was aware of the appointment by Mr Cobbe of Sir Simon Orr-Ewing in 2004. Her evidence was that the cost to Mr Cobbe, and the time and effort he spent, in pursuing the planning application between the end of 2003 and 17 March 2004 was fairly insignificant. I do not accept that evidence. I consider that he continued to apply considerable time and energy, as did PDP and others on his behalf, in pursuing the planning application during that period. Certainly, nothing was said or done by Mrs Lisle-Mainwaring between Christmas 2003 and 17 March 2004 which indicated to Mr Cobbe that whatever he was then doing, and whatever cost he was then incurring, was entirely at his own risk and without any prospect that the Second Agreement would continue to be honoured if planning permission was obtained.

I find that, in fact, some time before Christmas 2003 Mrs Lisle-Mainwaring had formed the settled intention not to abide by the terms of the Second Agreement. She became increasingly certain that the proceeds of sale of the re-developed Property would be far greater than she had originally contemplated, and that the Second Agreement was therefore unsatisfactory in that it left deferred and uncertain a much greater proportion of the consideration, in the form of overage, than she originally envisaged. She formed the intention that, if Mr Cobbe obtained planning permission, she would renegotiate so as to ensure that, on any sale of the Property, a greater proportion of the value of the Property, with its development potential, would be paid by way of a fixed sum rather than overage.

I find that Mrs Lisle-Mainwaring deliberately refrained from giving Mr Cobbe any indication after Christmas 2003 that, if planning permission were obtained by Mr Cobbe, she did not intend to carry into effect the Second Agreement and intended to renegotiate along the lines I have indicated. She did so in order to ensure that Mr Cobbe continued unabated his efforts to obtain planning permission. Her evidence was that it would have been of no concern to her if, had she told him that she no longer considered the Second Agreement to be of any relevance after the end of 2003, he had immediately stopped all efforts to obtain planning permission. Her evidence was that, in those circumstances, she would simply have instructed PDP to act on her behalf. I reject that evidence, and that any such thoughts passed through her mind. It is perfectly plain, from the restriction that Mr Cobbe and PDP have in fact placed on the use of the plans which form the basis of the Planning Permission, that it would have been far from straightforward for Mrs Lisle-Mainwaring, in those circumstances, to have secured the services of PDP. I find that Mrs Lisle-Mainwaring was fully aware of the risks to the successful and timely conclusion of the planning application if, after the end of 2003, she alerted Mr Cobbe clearly and unequivocally to the fact that she no longer regarded the Second Agreement as binding or relevant and wished to renegotiate the basis of any contract in the manner I have indicated.

The overwhelming probability is that the grant of the Planning Permission immediately resulted in a significant increase in the value of the Property. In 2001 Octagon had been prepared to purchase the Property, without planning permission, for £8m or less. The purchase price under the Second Agreement, with planning permission, was £12m plus overage. Following the grant of Planning Permission, the Property has been marketed, on behalf of the First Defendant, at between £17m and £21m.

The day after the grant of the Planning Permission Mrs Lisle-Mainwaring told Mr Cobbe that the Second Agreement was no longer relevant in view of the fact that planning permission had not been obtained by Christmas 2003, and made it clear that she would only enter into an agreement with Mr Cobbe on terms for the payment by him of £20m for the Property together with overage.

Although Mr Cobbe and Mrs Lisle-Mainwaring then entered into discussions resulting in the March 2004 terms, Mr Cobbe was completely shocked, surprised and upset by Mrs Lisle-Mainwaring’s conduct. He believed that he had been very badly treated and, in his own words, “ambushed”.

Mr Cobbe reached an agreement with Mrs Lisle-Mainwaring in principle on the March 2004 terms. He did so because he had invested so much time, effort and money over a period of some 19 months in the pursuit of planning permission, and he wished to try to salvage a commercial deal. I find that he intentionally did not make clear to Mrs Lisle-Mainwaring that, in his mind, the March 2004 terms were no more than a possible commercial framework: he wished to give himself a breathing space to see whether a commercial deal was viable on the terms proposed.

I accept Mr Cobbe’s evidence that, in the end, he decided not to proceed with the March 2004 terms because, upon investigation, they did not provide him with a sufficiently secure and worthwhile return on the money he would have to invest in the purchase and development of the Property.

In that connection, I find that the March 2004 terms represented a significant commercial change to the Second Agreement, and were a much less attractive proposition for a developer proposing to purchase the Property. Notwithstanding Mrs Lisle-Mainwaring’s evidence and Mr Seitler’s submissions to the contrary, the obligation to pay a fixed sum of £20m, apart from overage, even if payable in part some time after the purchase of the Property or even upon completion of the development, would give rise to a significantly increased risk to a developer bearing in mind the possibility of adverse changes in the costs of the development and in the housing market prior to completion of the proposed development and the sale of the new houses.

In my judgment, those facts gave rise to a proprietary estoppel equity in favour of Mr Cobbe for the following reasons.

Over the period of some 19 months between August 2002 and the grant of the Planning Permission in March 2004, the conduct of Mrs Lisle-Mainwaring induced, and was intended by her to induce, Mr Cobbe to expend considerable time and effort and money pursuing the grant of planning permission for the Property in the belief that, even though the Second Agreement was not a legally binding and enforceable contract, Mrs Lisle-Mainwaring regarded it as binding and, if planning permission was granted, intended to ensure that its terms were incorporated in a formal legal agreement.

That conduct and intention on the part of Mrs Lisle-Mainwaring continued even after, some time in 2003, she formed the settled intention, if and when Mr Cobbe obtained planning permission, to renegotiate the basic commercial terms for the sale of the Property to Mr Cobbe and no longer regarded the terms of the Second Agreement as binding even in honour.

While it is true that during 2003, and the first part of 2004, Mrs Lisle-Mainwaring personally played an increasing part in the pursuit of planning permission, reflecting the Defendants’ personal financial interest in the outcome of the planning application, the fact remains that the Planning Permission could not and would not have been obtained when it was without the effort, time and money expended by Mr Cobbe throughout the entire period from September 2002 to March 2004. That conclusion is underlined by the deliberate decision of Mrs Lisle-Mainwaring not to alert Mr Cobbe, at any time between Christmas 2003 and the grant of the Planning Permission in March 2004, to her change of mind about the Second Agreement.

In the circumstances, the fact that planning permission was not obtained by Christmas 2003 does not undermine the equity in favour of Mr Cobbe arising from the conduct of the parties. The conduct of the parties both before and after Christmas 2003 followed the same pattern of, on the one hand, inducement and encouragement by Mrs Lisle-Mainwaring leading, and intended to lead, Mr Cobbe to believe that Mrs Lisle-Mainwaring would honour the Second Agreement, and, on the other hand, the expending of time, effort and cost by Mr Cobbe as a result of that belief.

Mr Seitler submitted that, in the light of all the evidence, the total amount of expenditure on the planning application which has been proved by Mr Cobbe was £69,000.00. That figure does not, however, as I have already said, take account of Mr Cobbe’s own time and effort. Mr Harper explained to me, and I accept, that Mr Cobbe’s legal advisors did not anticipate a rigorous examination of each item of Mr Cobbe’s expenditure at the hearing before me. They believed that, if liability was established, the precise amount of Mr Cobbe’s expenditure would, if necessary, be the subject of an inquiry in due course. It seems likely that the figure of £69,000.00 is, in fact, less than the actual expenditure reasonably incurred by Mr Cobbe on the planning application. Indeed, in her own evidence, Mrs Lisle-Mainwaring said that she believed that about £100,000.00 had been spent by Mr Cobbe, again making no allowance for his own time and effort.

Notwithstanding the attractively presented submissions of Mr Seitler, I do not accept, on the facts of this case, that any claim by Mr Cobbe to a proprietary estoppel equity is wholly undermined by the fact that by Mr Cobbe and Mrs Lisle-Mainwaring envisaged that a binding legal contract would not come into existence until after planning permission had been obtained and a formal written contract drawn up by solicitors was entered into, and there would be further terms which would have to be discussed and agreed.

Both AG of Hong Kong and London & Regional Investments turned on their own particular facts, including, critically, the fact in both cases that an agreement in principle was expressly stated to be “subject to contract”.

In AG of Hong Kong the defendants, representing the Hong Kong government, negotiated with the Hong Kong Land Co. Group (“HKL”), which included the plaintiff company, for an exchange whereby the government would acquire land belonging to HKL, and in exchange HKL would take from the government a Crown lease of certain property and be granted the right to develop it. An agreement in principle was set out in detail in an offer letter from the government dated 12 January 1981 and an acceptance letter from HKL dated 13 January 1981. It was common ground that the negotiations did not result in a contract. Both parties substantially carried out the agreement in principle. HKL then purported to withdraw from the negotiations in April 1984. The government contended that in the events which had happened the parties became estopped from refusing to give effect to the agreement in principle. That contention was rejected and an order for possession was made in favour of the plaintiff by the judge at first instance, which was upheld by the Court of Appeal of Hong Kong, the judgment of which was in turn upheld by the Judicial Committee of the Privy Council.

The judgment of the Privy Council was given by Lord Templeman. He observed, at p.120G, that the agreement in principle was not binding in its inception. The letter dated 12 January 1981 containing the government’s offer was marked ”without prejudice”. The letter stated that the government had agreed “in principle”. After setting out the “basic terms” in some detail, the writer of the letter stated that “the above basic terms may be varied or withdrawn prior to formal execution of the transaction. Furthermore, any agreement reached shall be subject to formal agreement by the government and until the document or documents necessary to give legal effect to this transaction are executed or registered, this letter should not be considered as binding the government in any way.” Lord Templeman stated, at p.121B, that, in the light of the letter, the government were fully aware and intended that either party could at any time and without any reason withdraw from the agreement in principle.

Lord Templeman said, at p.124D, that in order to found an estoppel:

“First the government must show that HKL created or encouraged a belief or expectation on the part of the government that HKL would not withdraw from the agreement in principle. Secondly the government must show that the government relied on that belief or expectation.”

Lord Templeman stated, at p.124H, that in fact at no time did HKL indicate expressly or by implication that they surrendered their right to change their mind and to withdraw. He also stated, at p.126B, that the evidence disclosed that the government did not rely on any belief or expectation that HKL would not withdraw from the agreement in principle.

Lord Templeman concluded, at pp.127H-128A:

“In the present case the government acted in the hope that a voluntary agreement in principle expressly made “subject to contract” and therefore not binding would eventually be followed by the achievement of legal relationships in the form of grants and transfers of property. It is possible but unlikely that in circumstances at present unforeseeable a party to negotiations set out in a document expressed to be “subject to contract” would be able to satisfy the court that the parties had subsequently agreed to convert the document into a contract or that some form of estoppel had arisen to prevent both parties from refusing to proceed with the transactions envisaged by the document. But in the present case the government chose to begin and elected to continue on terms that either party might suffer a change of mind and withdraw. ”

Accordingly, the decision in AG of Hong Kong turned on the precise facts of that case including, importantly, that the agreement in principle was expressly stated to be “subject to contract” and the Hong Kong government did not rely on any belief or expectation that HKL would not withdraw from the agreement in principle.

In London & Regional Investments the first defendant, TBI plc (“TBI”), which carried on both property development and investment and the ownership and management of airports, entered into negotiations for the sale of its property portfolio to the claimant (“L&R”). They entered into a written sale agreement, which was duly completed, for the sale and purchase of the issued share capital of various companies holding properties in TBI’s property portfolio. The sale agreement provided that they were to use reasonable endeavours to agree the terms of a joint venture regarding Cardiff International Airport and Belfast International Airport. The second defendant, Belfast International Airport Ltd (“BIA”), was a wholly owned subsidiary of TBI, and held about 188 acres of development land adjoining Belfast Airport. TBI was also entitled to an option to purchase development land adjacent to Cardiff Airport. The sale agreement did not dispose of any interest in land at either Cardiff or Airport or Belfast Airport. A document called “Heads of Terms for the Proposed Joint Venture”, which was prepared in compliance with a note attached to the sale agreement, was, in accordance with the note, marked “subject to contract” and was sent by L&R’s solicitors to TBI’s solicitors. It included provisions for “the surplus land at the Airport” to be transferred to a “joint venture company (“NEWCO”)” and for deferred consideration to be paid in tranches as parts were developed and sold or, if the development was not sold, by reference to the values of developed parts. L&R’s solicitors then prepared and sent to TBI’s solicitors a draft joint venture agreement. That, however, was never agreed or signed. TBI subsequently informed L&R that it did not intend to proceed with the proposed joint venture.

L&R issued proceedings against TBI and BIA claiming, among other things, (a) a declaration that BIA held the freehold land adjacent to Belfast Airport on trust for L&R and BIA in equal shares, and (b) a declaration TBI held its option in respect of the land adjacent to Cardiff Airport on trust for L&R and TBI in equal shares, and (c) an order for the transfer of one half of the respective interests in those two areas of land to L&R.

L&R contended that there was from the outset an oral agreement or understanding for a joint venture for the development of the Belfast Airport land and the Cardiff Airport land, and that L&R would not have purchased the property portfolio at the price it did without that agreement or understanding. L&R contended that a constructive trust should be imposed on TBI’s interest in the Belfast Airport land and the Cardiff Airport land on the ground that TBI’s conscience was affected by an understanding or assurance of a joint venture agreement. L&R also submitted that TBI and BIA were estopped from disputing the joint venture understanding.

The first instance judge gave summary judgment for TBI and BIA on the ground that the claim for constructive trust and the claim based on estoppel, as well as claims for breach of contract and misrepresentation, had no realistic prospect of success. The Court of Appeal dismissed the appeal of L&R from that decision.

Mummery LJ gave the leading judgment in the Court of Appeal, with which the other members of the Court agreed. Having concluded that certain contract claims by L&R had no real prospect of success, Mummery LJ turned to the constructive trust and estoppel claims. At para [42], he said:

“The “subject to contract” state of the joint venture negotiations at the date of the Sale Agreement indicates that there is nothing unconscionable in TBI’s subsequent refusal to proceed with the joint venture after the Sale Agreement was completed. The validity of this conclusion can be tested by asking this question: when did the trust and the estoppel take effect? It is accepted that no constructive trust or estoppel could have arisen after 13 May 1999 when the parties expressly agreed in the Sale Agreement that the joint venture was “subject to contract”. In general, it is not unconscionable for a party to negotiations, which are expressly stated to be “subject to contract”, to exercise a reserved right to withdraw from the negotiations before a final agreement has been concluded. If that was the effect of the agreement between the parties on 13 May 1999 I do not see how the conduct of TBI before that date can now be relied on to establish unconscionable conduct giving rise to a constructive trust or an estoppel. For the court to hold that a constructive trust existed in those circumstances would be contrary to what the parties had expressly agreed was to be subject to the making of a future agreement.”

It is to be observed that in that passage Mummery LJ acknowledged the possibility (“In general, it is not unconscionable”), even in the case of negotiations expressly stated “to be subject to contract”, for an equity to arise on the basis of an estoppel.

Having referred to the judgment of Lord Templeman in AG of Hong Kong and to Banner Homes Group plc –v- Luff Development Ltd [2002] 2 All ER 117, a case on constructive trust to which I will refer later in this judgment, Mummery LJ emphasised again, at para [47], the fact that the negotiations with which he was concerned were subject to an express “subject to contract” qualification. He said:

“[47] It is true that Banner Homes was a “no contract” case in which the equity was invoked; but it was not, as Mr Howard [counsel for L&R] attempted to argue, the same as a “subject to contract” case in which it is part of the bargain between the parties that specific matters remain in a state of negotiation until a future agreement is made. Banner Homes is distinguishable from a case such as this, in which the two large legally represented commercial organisations have negatived an intention to create obligations in respect of the relevant joint venture land (the Belfast Land and the Cardiff Land) and have done so explicitly in a legally drafted, formal agreement (the Sale Agreement). The recorded intentions as to the joint venture implicitly proceeded on the basis that no concluded agreement had been reached and contemplated that such an agreement might never be reached. ”

The difference between such a case, and one in which an estoppel may arise as a result of reliance by a claimant on a non-contractual promise in circumstances of unconscionable conduct by the defendant, was reflected in comments by Mummery LJ at para [50] of his judgment, where he said:

“Mr Howard cited Gillett v Holt [2001] Ch 210, [2000] 2 All ER 289 (a proprietary estoppel case) on the necessity for a broad inquiry into all the circumstances in a case of unconscionable conduct and for the proposition that the inherent revocability of a non-contractual promise or statement is irrelevant to a promise or assurance which is intended to be relied upon and becomes binding by reason of the promisee’s subsequent detrimental reliance on it. In my view, the valuable judgment of Robert Walker LJ does not assist in this case, as he expressly recognised at p.228A the difference between detrimental reliance in that case and reliance in a case, such as this and the AG for Hong Kong, where the transaction remains expressly subject to contract. ”

Accordingly, like AG of Hong Kong, the decision in London and Regional Investments turned very much on its own specific facts, including, critically, that the negotiations were from beginning to end expressly stated to be “subject to contract” in documents prepared by the parties’ lawyers.

The facts in Pridean were that the plaintiff and the defendant entered into negotiations for the setting up of a joint venture company which would acquire certain premises from the plaintiff either by way of outright purchase or by lease and would manage them as a public house. In the course of the negotiations, the plaintiff raised concerns about the proposed minority interest it was to have in the joint venture company. It rejected the “minority protection points” which the defendant suggested for the protection of the plaintiff’s minority interest. They were never agreed. The defendant entered the premises and spent money on fitting them out and thereafter managing them. Eventually, the plaintiff brought possession proceedings. The defendant contended that the action or inaction of the plaintiff led the defendant to believe that it would be able to occupy and trade from the premises; acting upon that belief, the defendant entered the premises, spent money upon fitting them out and thereafter managed them. The defendant claimed that, in consequence, it had an equity which prevent it from being evicted without appropriate satisfaction of its equity. The Court of Appeal dismissed the defendant’s appeal from the decision of the County Court judge, who had rejected the defendant’s claim to an estoppel and ordered possession.

It is apparent from the judgment of Aldous LJ, with which Stuart Smith LJ agreed, that the critical factor in their decision was that, in the course of discussions between the parties, one matter expressly mentioned to be agreed was the question of the “minority shareholders’ protection points”, but they were never agreed. That issue was described by Aldous LJ, at p. 452, as “fundamental to the whole agreement, as it proved in the end”, and, by Stuart-Smith LJ, at p.457, as “an important matter… upon which the joint venture plan finally came to grief”. Aldous LJ concluded, at p.452, that, in consequence, there was not even an agreement in principle. All the members of the Court of Appeal concluded as a matter of fact that, in the circumstances, there was nothing to support the contention that the plaintiff created or encouraged a belief that the defendant would acquire a legal right to remain in the premises if the negotiations for a joint venture failed.

By contrast, in the present case all points of principle which were at the core of the commercial deal were agreed in the Second Agreement. The precise identity of the vendor and of the purchaser was of no significance. As in many property sales, the contract could provide for the transfer on completion to be in the name of Mr Cobbe or a company nominated by him. Whoever was the vendor in the contract, the transferor on completion would be the person having the ownership of the Property at the time. No issue was ever raised for negotiation and agreement, at the time of the Second Agreement, about security for overage, or the timing of the commencement and completion of building works, or as to the precise legal mechanism for the payment of overage. Mr Cobbe certainly, and in my view Mrs Lisle-Mainwaring also, regarded all such matters as details which there was no reason to believe would prove difficult to resolve.

Holiday Inns Inc –v- Broadhead (1974) 232 EG 951 is a case in which negotiations for the grant of a lease, which never got to the stage of a legally enforceable and binding contract, gave rise to an equity in favour of the proposed lessee. The plaintiff which was a large American hotel company anxious to extend its business into England, was introduced to the first defendant, Mr Broadhead, who owned and controlled a group of companies, of which one member, the second defendant (“Harlington”), owned a site (“the 5 acre site”) near to Heathrow Airport. The plaintiff used to take leases, in its standard form, of sites for hotels. If the plaintiff was itself to bear the cost of the construction of the hotel, it would take a “3 and 1” lease, that formula meaning that the rent was to be 3% of the gross accommodation receipts and 1% of the gross food and beverage receipts. The plaintiff rejected the 5 acre site, but informed Mr Broadhead that another site near Heathrow Airport (“the 15 acre site”), which was not owned by Mr Broadhead or his companies, would be a good one and Mr Broadhead should attempt to secure an option on it. Mr Broadhead visited the plaintiff’s headquarters in the United States, where the whole nature of the plaintiff’s business operations was explained to him, including the plaintiff’s standard form leases and, in particular, the “3 and 1” lease. On his return to England, Mr Broadhead entered into negotiations with the owner of the 15 acre site, who granted Mr Broadhead an option to purchase the site. The plaintiff and Mr Broadhead agreed that the proposed lease of the 15 acre site should be a “3 and 1” lease. The plaintiff, with the full knowledge and approval of Mr Broadhead, took steps to obtain planning permission for a hotel. Following refusal by the local authority, and a public enquiry, the minister granted outline planning permission. The value of the 15 acre site immediately increased substantially. In the ensuing negotiations Mr Broadhead demanded various alterations of the plaintiff’s standard lease terms, including a minimum guaranteed rent and a substantial premium. Before all the terms were agreed, Mr Broadhead entered into arrangements by which the 15 acre site was vested in Harlington, which in turn granted a lease to the third defendant (“Estates”), which was another company controlled by Mr Broadhead, and which then granted a sub-lease to a company unconnected with the plaintiff. The plaintiff commenced proceedings claiming that, with the knowledge and encouragement of Mr Broadhead, it had made the planning application and incurred expense on the basis of a firm understanding, arrangement or bargain which it at all material times believed existed between it and Mr Broadhead that, if planning permission could be obtained, the plaintiff would be granted a “3 and 1” lease of the 15 acre site on the plaintiff’s standard terms. The plaintiff claimed that Mr Broadhead therefore took an unconscionable advantage of the plaintiff, entitling the plaintiff to relief in equity.

Goff J recorded, at p.955 of his judgment, that:

“… while they [i.e. the plaintiff] have never suggested that the understanding, arrangement or bargain was sufficiently precise to be enforceable as a contract, they claim to be entitled to relief in equity.”

Goff J set out the applicable principle of law, at p.1087, as follows:

“In my judgment the authorities clearly establish that there is a head of equity under which relief will be given where the owner of property seeks to take an unconscionable advantage of another by allowing or encouraging him to spend money, whether or not on the owner’s property, in the belief, known to the owner, that the person expending the money will enjoy some right or benefit over the owner’s property which the owner then denies him. This arises where the person expending the money does so under a mistaken belief that the property is his own, that belief being known to the other, as in Ramsden v Dyson (1866) LR 1 HL 129, but mistake is not an essential element of a claim to relief of this nature. The authorities also establish, in my judgment, that this relief can be granted although the arrangement or understanding between the parties was not sufficiently certain to be enforceable as a contract, and that the court has a wide, albeit of course judicial, discretion to what extent relief should be given and what form it should take.”

Goff J recited the core of the arguments of the parties at p.1089, and it is interesting to note the way in which they mirror in significant respects the arguments of the parties before me:

“Mr Waite [counsel for the defendants]… rested his case on what he described, and rightly described, as the crucial question whether there was present a belief on the part of the plaintiffs, induced by Mr Broadhead’s words or silence, that they would receive a sufficient interest in the land to justify the expenditure. He said this was an arrangement between commercial men dealing with each other at arm’s length with their eyes open, and so the plaintiffs must be taken to have elected as a matter of commercial judgment to run the risk that Mr Broadhead might, as I add he clearly did, have private reservations undisclosed at the date of the expenditure which might frustrate the conclusion of the anticipated bargain, and indeed they might have similar reservations themselves. I am wholly unable to draw any such inference or conclusion. Mr Wilson’s [the head of the plaintiff] evidence, which I accept, was that he thought this was a gentleman’s agreement which would be honoured. Mr Tigrett [the plaintiff’s representative] in his evidence, which I also accept, said that no reservations or thought of backing our ever occurred to him, and the whole tenor of Mr Broadhead’s conduct and letters was calculated to make the plaintiffs believe that if planning permission were obtained they would have a straight 3 and 1 lease on the standard terms. I am satisfied and find as a fact that both Mr Wilson and Mr Tigrett believed that and Mr Broadhead well knew that they did. His failure to inform them of his true state of mind was deceitful and unconscionable. ”

Goff J concluded that the plaintiff had made out a clear case for relief. He concluded that the plaintiff’s equity was, in the circumstances, most appropriately satisfied by a declaration that the 15 acre site was held by Harlington upon trust for sale, and, as to the proceeds of sale, after paying various costs and expenses, on trust for the plaintiff and Harlington in equal shares.

In Banner Chadwick LJ, at p. 138 e-f, expressed the view that Holiday Inns is probably best regarded as a proprietary estoppel case.

Reference was made to Holiday Inns by Lord Templeman in AG of Hong Kong, by Chadwick LJ in Banner (with whom the other members of the Court of Appeal agreed), and by Aldous LJ in Pridean, in each case without disapproval.

The following points of principle may be deduced from A-G of Hong Kong, London & Regional Investments,Pridean and Holiday Inns relevant to Mr. Seitler’s fundamental objection to the claim to a proprietary estoppel in the present case that both parties were at all times aware that a legal contract would not come into existence until after solicitors were instructed to advise and draw up a written contract, other terms had been negotiated and agreed, and a written contract was entered into.

First, in a case in which negotiations are expressly stated to be “subject to contract” (whether those words are used or words to the same effect), it is possible, but unlikely, that an estoppel may arise in the course of the negotiations based on the promises intended to be included in any contract when concluded.

Second, that is particularly unlikely in a case in which the negotiations are conducted at a time when legal advisers have been instructed by the parties and the written communications prepared by the legal advisors are expressly stated to be “subject to contract”

Third, where an issue has been raised in the course of negotiations which the parties are aware is fundamental to any agreement, and one party withdraws from the negotiations before that point of principle has been resolved, whether or not the withdrawal is connected with that point, it is difficult to envisage the circumstances in which an estoppel could arise based on promises which would have been included in any ultimate contract.

Fourth, in all those cases, however, the determining questions, which turn on the evidence, are (a) whether the defendant has in fact created or encouraged a belief or expectation on the part of the claimant that the defendant will not withdraw the promise, arrangement or understanding, and (b) whether the claimant in fact relied on that belief or expectation. In a case in which parties are legally advised and the negotiations are expressly stated in writing to be “subject to contract”, or in which the parties have failed to resolve a fundamental point of principle which has been expressly raised, it will be extremely difficult to prove those facts. In other cases, of which Holiday Inns is a paradigm example, it may be possible to prove those facts, even though the parties envisaged that solicitors would be instructed in the future to draw up a formal contract, and even though not all the terms which might be expected to be addressed in a formal contract have been agreed at the moment the defendant withdraws from the negotiations.

So, in the present case, I have found as proven facts that Mrs Lisle-Mainwaring, on behalf of the First Defendant, encouraged Mr Cobbe to believe that, if Mr Cobbe succeeded in obtaining planning permission in accordance with the Second Agreement, that Agreement would be honoured, even though it was not legally binding, and that, in reliance on that belief, Mr Cobbe, to her knowledge and with her encouragement, acted to his detriment. I have also concluded that, in all the circumstances, she took an unconscionable advantage of him.

As I have previously said, I accept Mr Cobbe’s own evidence that he considered the Second Agreement to be binding on him in honour. In line with my earlier analysis, however, any such finding of fact would be important only if a contrary finding would be evidence that Mr. Cobbe regarded the First Defendant as similarly free to withdraw at any stage. If, however, the agreement, arrangement or understanding between Mr. Cobbe and Mrs. Lisle-Mainwaring in the Second Agreement had been that she would sell him the Property on the terms of that Agreement on condition that he secured planning permission (i.e. a condition precedent rather than an executory promise to be fulfilled by him), it would be, strictly, irrelevant to any proprietary estoppel equity whether or not he regarded himself free to abandon the pursuit of the grant of planning permission.

I turn to other miscellaneous points relied upon by Mr. Seitler in opposition to the claim based on proprietary estoppel.

I do not regard Mr Cobbe’s belief that, if Mrs Lisle-Mainwaring withdrew from the development, he would be paid his expenses as fatal to his claim to an equity. As appears from my findings of fact, that belief was predicated on the basis that she would only consider withdrawing in the period prior to the grant of planning permission.

I do not regard Mrs Lisle-Mainwaring’s offer of the March 2004 terms, and the impression given by Mr Cobbe to Mrs Lisle-Mainwaring that he agreed them, as an obstacle to Mr Cobbe’s claim to a proprietary estoppel. As again appears from my findings of fact, Mr Cobbe’s conduct in that respect was an attempt to mitigate the financial and commercial disaster which would have arisen if all his efforts and expenditure on obtaining planning permission since the end of 2002 had been wholly wasted. As I have said, I accept Mr Cobbe’s evidence that, having investigated the viability of acquiring and developing the Property on the March 2004 terms, he came to the conclusion that they were not commercially viable. The fact that, for that reason, the attempt to mitigate came to nothing does not undermine Mr Cobbe’s claim to an equity arising out of the Second Agreement.

Nor is it any bar to an equity that Mr Cobbe instructed PDP that he did not wish them to permit the First Defendant or Mrs Lisle-Mainwaring to make use of the plans which were the basis of the Planning Permission. Mr Seitler submitted that those instructions, which remain current, prevented the First Defendant from taking advantage of any increase in the value of the Property as a result of the Planning Permission. Those instructions given by Mr Cobbe to PDP were, in my judgment, a reasonable precaution to protect Mr Cobbe’s legal and commercial expectations. He is willing, as a condition of relief in these proceedings, to cancel those instructions to PDP.

Finally, I see no reason to deny Mr Cobbe relief out of concern for the “floodgates” argument of Mr Seitler. As I have said, it will only be in exceptional cases that a claimant will be able to satisfy the requirements of proprietary estoppel in a case of continuing negotiations towards a possible contract; the claimant will only be able to do so in circumstances in which the defendant has taken unconscionable advantage of the claimant. A “floodgates” argument is no justification for refusing relief in such cases.

I turn to the issue of the relief which it is appropriate to grant Mr Cobbe.

In my judgment, in the present case, as in Holiday Inns, Mr Cobbe’s equity would not be adequately satisfied by reimbursement of his expenditure on the planning application.

Mr Seitler advanced a number of arguments to the contrary.

Mr Seitler emphasised the small amount of Mr Cobbe’s expenditure relative to the anticipated costs of the acquisition and development of the Property and the anticipated sales values of the residential units on the re-developed Property. As I have said, Mr Seitler submitted that Mr Cobbe has not proved that he spent more than about £69,000.00 in obtaining Planning Permission. Mr Seitler emphasised that was less than 0.3% of what Mr Cobbe anticipated would be the costs of the acquisition and development of the Property and less than 2% of what he anticipated would be the sales values of the residential units on the re-developed Property and only a tiny fraction of the of the £5m profit which Mr Cobbe anticipated he would make from the development. Mr Seitler further emphasised that, even if Mr Cobbe confined his relief to the increase in the value of the Property as a result of the Planning Permission, Mr Cobbe’s claim was for millions of pounds. Mr Seitler submitted that, on any footing, there was, in the language of his written closing skeleton argument, “an unsettling disproportion between [Mr Cobbe’s] alleged detriment and the remedies he seeks”.

Mr Seitler referred, in this connection, to the decision of Lloyd J in Ravenocean Ltd – v- Garner (unreported) 19.1.2001. In that case Lloyd J struck out a claim for a constructive trust which the claimant contended arose out of an agreement by the defendant to sell to the plaintiff the defendant’s land for £40,000.00. The alleged agreement was an oral agreement, which was conditional on the claimant obtaining planning permission in respect of the land. The claimant alleged that, pursuant to the agreement, and relying on it, the claimant paid out the sum of £3,000.00 in architect’s fees in order to obtain planning permission, which was duly granted. The claimant claimed, among other things, a declaration that the defendant held the land on constructive trust for the claimant, and that it should be vested in him on just and equitable terms, including the payment by him of the alleged agreed purchase price of £40,000.00. There were extensive disputes of fact between the parties. The master struck out a claim for specific performance of the alleged contract, on the ground that the contract would have been void under s.2 of the 1989 Act. He declined, however, to strike out the claimant’s alternative claim to a constructive trust. The defendant appealed. For the purpose of the appeal, Lloyd J was prepared to assume that the facts alleged by the claimant could be proved.

Lloyd J allowed the appeal, however, and struck out the claim for a constructive trust on the ground that there could be no serious argument that the claimant would be entitled to more than a restitutionary claim for repayment of the alleged expenditure to obtain planning permission. He held that it was plain, on the facts alleged by the claimant, that it would not be inequitable to limit the claimant to a restitutionary claim. He continued:

“To the contrary it seems to me that to apply the analogy of Yaxley v Gotts to the present case where the contract is wholly executory, viewing it in terms of a contract if it had been one, in which nothing has been done other than the incurring of a relatively small expenditure by way of the obtaining of planning permission, to go from that to say that this gives the claimant an equity which can only properly be satisfied by treating it as being in the position of a purchaser under a true contract entitled to an order for the transfer of the property on condition that it paid the price, would indeed drive a coach and horses through section 2, and would be a wholly illegitimate extension to facts which do not in any way justify it, of the doctrine of constructive trust and the decision in Yaxley –v- Gotts.”

Ravenocean was a very different case from the present proceedings. In the present case substantial cost was incurred, pursuant to the Second Agreement, at the risk of Mr Cobbe in return for the prospect of sharing in the commercial potential and financial rewards from the grant of planning permission. It was part of the Second Agreement that he would apply for planning permission and that he would enjoy, through the acquisition and development of the Property, the benefit of the planning permission. An order which merely entitled Mr Cobbe to reimbursement of his expenditure would not reflect the balance of the risks and rewards to him of pursuing the planning application, as perceived by both he and Mrs Lisle-Mainwaring, reflected in the terms of the Second Agreement, and it would leave the First Defendant disproportionately advantaged by the grant of the Planning Permission. That conclusion is not undermined by the fact that, in 2003 and 2004, Mrs Lisle-Mainwaring played an increasing part in the pursuit of planning permission, bearing in mind my findings of fact, including what I have said it paras [76] and [88] above.

Again, the fact that Mr Cobbe believed that, if Mrs Lisle-Mainwaring withdrew from the Second Agreement before planning permission was obtained, Mr Cobbe would be re-paid his expenditure, does not undermine the conclusion that, the Planning Permission having in fact been obtained, it would be an inadequate remedy merely to reimburse his expenditure. It was at the core of the understanding of the parties, reflected in the terms of the Second Agreement, that, if planning permission was obtained by Mr Cobbe, he would enjoy the financial and commercial rewards of the acquisition and development of the Property.

Nor is the fact that Mr Cobbe, on Mrs Lisle-Mainwaring’s case, failed to take up her offer in 2004 to pay his reasonable expenses a reason for denying him any greater relief than reimbursement of his expenditure. I find that her offer was of a tentative nature, that is to say that she would consider whether or not to pay all or part of his expenditure. Mr Cobbe considered, in my judgment rightly, that he ought to receive more than repayment of his expenses, scrutinised by, and subject to a discretionary veto by, Mrs Lisle-Mainwaring. In any event, Mr Harper fairly pointed to the fact that, as I have said earlier, by the time the Defence was served the First Defendant’s formal position was to deny Mr Cobbe any right to reimbursement of expenditure.

Accordingly, I consider that the minimum equity to do justice to Mr Cobbe would be to give him a share in the increased value of the Property as a result of the Planning Permission.

The Second Agreement, broadly speaking, reflected an intention that the First Defendant, through Mrs Lisle-Mainwaring, and Mr Cobbe should share equally the increased value or commercial potentiality arising from the grant of the Planning permission. In all the circumstances, including the conduct of the parties and their mutual beliefs and intentions, the minimum equity to do justice to Mr Cobbe is to order the payment to him by the First Defendant of one half of the increased value of the Property due to the grant of the Planning Permission.

Mr Seitler submitted that such relief would be wrong and unfair to the First Defendant since it would confer a very substantial benefit on Mr Cobbe, which he would not have received under the Second Agreement unless and until he had first purchased and developed the Property. Accordingly, the relief, far from reflecting the Second Agreement, would, Mr Seitler contended, create a state of affairs never contemplated by the parties under that Agreement and would confer on Mr Cobbe a disproportionate benefit.

The fact that, under the Second Agreement, Mr Cobbe would have been required to make substantial payments, both to acquire the Property and then to develop it, before realising his profit is undoubtedly a relevant factor. It is not, however, decisive. It is notable, for example, that the relief granted to the plaintiff in Holiday Inns resulted in that company acquiring a half interest in the 15 acre site, without the plaintiff ever having to build the hotel, the revenues from which would have been the basis for the calculation of rents under the lease intended to be granted.

Moreover, while the effect is to confer on Mr Cobbe immediately a financial return which he would not, under the Second Agreement, have received without further time and expenditure, it will also leave the First Defendant with the advantage of a Property having the benefit of the Planning Permission, which it is free to develop or sell on whatever terms it now considers most advantageous.

Further, such relief renders irrelevant a point which Mr. Seitler pressed, particularly in the context of a constructive trust, namely that an order which would involve Mr. Cobbe sharing ownership of the Property with the First Defendant would be wrong in principle, as well as on the facts of the present case in which the Second Agreement envisaged the outright transfer of the Property to Mr. Cobbe in return for the agreed consideration. The relief I have specified does not involve any sharing of the legal or beneficial title to the Property.

Further, the appropriateness of that relief is not undermined by the fact that vacant possession of the Property had not been obtained by the end of the trial. On the evidence before the court, there was every reason at that time to believe that vacant possession could be obtained from the remaining tenant
(other than Mrs Lisle-Mainwaring) either by agreement and on the payment of a sum of money or alternatively by possession proceedings.

So far as the lease of Flat 50 is concerned, which is currently vested in Mrs Lisle-Mainwaring, I accept Mr Cobbe’s evidence that Mrs Lisle-Mainwaring always led Mr Cobbe to believe that vacant possession of Flat 50 would be given or procured by Mrs Lisle-Mainwaring as part of the implementation of the Second Agreement.

Both sides are agreed that, if the relief I have specified is granted, the valuation for establishing the increase in the value of the Property due to the Planning Permission should be as at 18 March 2004, that being the date on which Mrs Lisle-Mainwaring told Mr Cobbe that she did not intend to abide by the terms of the Second Agreement.

It remains to consider the relevance, if any, of s.2 of the 1989 Act to the proprietary estoppel claim and the relief I have specified.

Section 2, so far as relevant, is in the following terms:

“2.

—(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.

2)

The terms may be incorporated in a document either by being set out in it or by reference to some other document.

(3)

The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract.

(4)

…

(5)

… nothing in this section affects the creation or operation of resulting, implied or constructive trusts.

(6)

…

(7)

…

(8)

Section 40 of the Law of Property Act 1925 (which is superseded by this section) shall cease to have effect.”

The issue to be considered is whether the grant of the relief I have specified in satisfaction of the proprietary estoppel equity of Mr. Cobbe is precluded because it would be contrary to the policy underlying s.2 of the 1989 Act.

In Yaxley v. Gotts, [2000] Ch. 162, in which the Court of Appeal considered the inter-relationship between s. 2 of the 1989 Act and proprietary estoppel, Robert Walker LJ, at p.173, described the relevant principle as “the public policy principle”. He described it by reference to the following statement in Halsbury’s Laws (4^th ed. re-issue) vol 16 (1992) pp. 849-850, para 962:

“The doctrine of estoppel may not be invoked to render valid a transaction which the legislature has, on grounds of general public policy, enacted is to be invalid.”

Robert Walker LJ continued as follows:

“The principal authorities supporting this principle, which I will call the public policy principle, are collected in the speech of Viscount Radcliffe delivering the opinion of the Privy Council in Kok Hoong v. Leong Cheong Kweng Mines Ltd. [1964 A.C. 993, 1015-1018. In Westdeutsche Landesbank Girozentrale v. Islington London Borough Council [1994] 4 All E.R. 890, 929, Hobhouse J expressed the same principle in the context of unjust enrichment under an ultra vires rate swap transaction:

“The application of the principle is subject to the requirement that the courts should not grant a remedy which amounts to the direct or indirect enforcement of a contract which the law requires to be treated as ineffective.””

The facts of Yaxley were that the second defendant orally offered to give the plaintiff, a builder, the ground floor of a house which he was proposing to purchase, in return for which the plaintiff would convert the house into flats and manage the property on behalf of the second defendant. In the event, it was the second defendant’s son, the first defendant, who actually purchased the house. The plaintiff, believing the second defendant to be the owner, performed his side of the bargain, supplying labour, materials and management services. The plaintiff and the defendants subsequently fell out and the first defendant refused to grant the plaintiff an interest in the property.

The Court of Appeal held that the first instance Judge did not (Clarke LJ at pp. 180H-181B) or probably did not (Beldam LJ at p.188A-D) find that there was an agreement between the plaintiff and the first defendant for the transfer or creation of an interest in the property. The Court of Appeal held that, whether or not the first defendant adopted and became a party to the oral agreement between the plaintiff and the second defendant, the first defendant held the property in favour of the plaintiff for an interest in the ground floor to be satisfied by the grant of a 99 year lease, either by reason of a constructive trust or (Beldam LJ and Clarke LJ) a proprietary estoppel.

Counsel for the defendants in Yaxley accepted that, if the first instance judge did not find that there was an agreement between the plaintiff and the first defendant for the transfer or creation of an interest in the property, s.2 of the 1989 Act was irrelevant: see pp.181C and 185E.

Beldam LJ and, as I read his judgment, Clarke LJ held that, notwithstanding the provisions of s.2 (1) of the 1989 Act, such relief to the plaintiff on the ground of proprietary estoppel did not infringe the public policy principle.

Robert Walker LJ preferred to rest his decision in favour of the plaintiff on the ground of a constructive trust, which is expressly excepted from the operation and effect of s.2(1) by s.2(5). He acknowledged, however, at p.174 that:

“the doctrine of estoppel may operate to modify (and sometimes perhaps even counteract) the effect of section 2 of the Act of 1989. The circumstances in which section 2 has to be complied with are so various, and the scope of the doctrine of estoppel is so flexible, that any general assertion of section 2 as a “no-go area” for estoppel would be unsustainable.”

The conclusion that in appropriate circumstances a party may obtain the benefit of an agreement, which under s.2(1) of the 1989 Act is rendered invalid, by the operation of proprietary estoppel has been endorsed by the Court of Appeal in Shah v Shah [2002] QB 35 and in the very recent case Kinane –v- Mackie Conteh [2005] EWCA Civ 45.

In Kinane the Court of Appeal upheld a declaration by the trial judge that the claimant was an equitable chargee under an equitable charge of the defendant’s property, notwithstanding that the claimant relied on an oral agreement by the defendant for the grant to the claimant of a charge on the property and which therefore did not comply with s.2(1) of the 1989 Act. The reasoning of the Court of Appeal was that, on the facts, the claimant established a proprietary estoppel which overlapped with a constructive trust: that is to say the same facts were capable of giving rise to both a proprietary estoppel and a constructive trust within s. 2(5) of the 1989 Act. Arden and Neuberger LJJ gave reasoned judgments. Thorpe LJ said he agreed with both of them.

Arden LJ held, at para. [28], that a claimant seeking to rely on proprietary estoppel as a basis for disapplying s. 2(1) of the 1989 Act is not prevented from relying in support of the case on the agreement which s.2(1) would otherwise render invalid.

She emphasised, however, that in order to succeed in establishing the estoppel it is not sufficient merely for the claimant to put the agreement in evidence. The essential requirements of the estoppel have to be satisfied in every case: in Kinane the claimant had to prove, and did prove, that the defendant encouraged the claimant to believe that the security agreement was valid and binding. As she said, at para.[29]:

“the cause of action in proprietary estoppel is thus not founded on the unenforceable agreement but upon the defendant’s conduct which, when viewed in all relevant respects, is unconscionable.”

Having regard to the decisions and the reasoning in Yaxley and Kinane it is clear for the following reasons that the public policy principle does not preclude my finding of a proprietary estoppel in favour of Mr. Cobbe on the facts of the present case or the grant of the relief I have specified.

First, Mr. Seitler submitted, and I agree, that the Second Agreement did not have the certainty and contain all the necessary terms to amount to a legally binding and enforceable contract. As I have said, the parties themselves plainly envisaged that further terms would be negotiated and agreed in due course. While I accept it is arguable that, in order to give business efficacy to the agreement, the absence of crucial terms could have been met by implied terms to take steps within a reasonable time or to undertake activities with reasonable speed and skill, I consider that the absence of any express provisions dealing with, for example, the time by which vacant possession would have to be obtained and the time for commencing or, possibly, finishing the development of the Property by Mr Cobbe are fatal to contractual certainty.

As I understood his submissions, Mr Seitler accepted that, if the Second Agreement was never an agreement of all essential terms and with all necessary certainty to give rise, subject to s.2(1) of the 1989 Act, to a legally enforceable contract, then s.2 has no relevance to Mr Cobbe’s claim to a proprietary estoppel.

In any event, and crucially, for the reasons I have given and on the basis of the facts I have found, the estoppel in favour of Mr. Cobbe does not rest merely on the existence of the Second Agreement. The estoppel is founded on the First Defendant’s inducement and encouragement of Mr. Cobbe to believe that the First Defendant regarded the Second Agreement as binding in honour and would not withdraw from its terms if Mr. Cobbe obtained planning permission, and Mr. Cobbe’s reliance on that inducement and encouragement, and the unconscionability of the First Defendant’s reliance on its strict legal rights.

Neither the existence of the equity nor the proposed relief amounts, in the circumstances, to a direct or indirect enforcement of the Second Agreement, contrary to the terms of or policy underlying s.2 of the 1989 Act.

It is plainly not a direct enforcement of the Second Agreement since the relief will not grant Mr. Cobbe the same rights and obligations as under the Second Agreement.

Nor is a lien for half the increase in the value of the Property due to the grant of the Planning Permission intended to be, or in fact, compensation for Mr. Cobbe’s loss of profit.

In short, the equity and the relief are not remedies for breach of contract. They are no more, and no less, than the minimum relief necessary fairly to satisfy the equity arising from the facts which establish the estoppel, including, in particular, the unconscionability of the conduct of the First Defendant.

For all those reasons, I order that there be a lien on the Property for the payment to Mr Cobbe of half the increase its value as at 18 March 2004 due to the grant of the Planning Permission. I will hear the parties further as to whether equitable interest should be charged on that amount until payment, and if so, the rate of such interest. That relief is conditional upon Mr Cobbe giving instructions to PDP to permit the use of the Planning Permission plans by the First Defendant.

In view of my decision in favour of Mr Cobbe on proprietary estoppel, it is not strictly necessary for me to consider his alternative claim to a constructive trust. In deference, however, to the extensive submissions to me on that alternative claim, and in case it may assist on any appeal, I shall give my views on it.

As an alternative to the lien I have ordered on the basis of proprietary estoppel, Mr Cobbe is, on my findings of fact, entitled to claim relief under a constructive trust.

Mr Seitler advanced a raft of points against the imposition of a constructive trust. He submitted that such a trust would not be consistent with current case law.

The broad statements of principle as to when a constructive trust will arise are clear enough. In Carl Zeiss Stiftung –v- Herbert Smith No.2 [1969] 2 WLR 427, 444 Edmund Davies L.J. quoted, with approval, the following statement in Snell’s Principles of Equity (26^th ed) (1966) at p.201:

“A constructive trust is a trust which is imposed by equity in order to satisfy the demands of justice and good conscience without reference to any express or presumed intentions of the parties.”

In Paragon Finance Plc –v- D B Thakerar & Co [1991] 1 All ER 400 Millett LJ said at p.409:

“A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the Property and deny the beneficial interest of another.”

Millett LJ went on to describe two different cases of constructive trust. He said, at p.409 b-g:

“In the first class of case, … the constructive trustee really is a trustee. He does not receive the trust property in his own right but by a transaction by which both parties intend to create a trust from the outset and which is not impugned by the plaintiff. His possession of the property is coloured from the first by the trust and confidence by means of which he obtained it, and his subsequent appropriation of the property to his own use is a breach of that trust. Well-known examples of such a constructive trust are McCormick v Grogan (1869) LR 4 HL (a case of a secret trust) and Rochefoucald v Boustead[1897] 1 Ch 196 (where the defendant agreed to buy property for the plaintiff but the trust was imperfectly recorded). Pallant v Morgan [1952] 2 All ER 951, [1953] Ch 43 (where the defendant sought to keep for himself property which the plaintiff trusted him to buy for both parties) is another. In these cases the plaintiff does not impugn the transaction by which the defendant obtained control of the property. He alleges that the circumstances in which the defendant obtained control make it unconscionable for him thereafter to assert a beneficial interest in the Property.

The second class of case is different. It arises when the defendant is implicated in a fraud. Equity has always given relief against fraud by making any person sufficiently implicated in the fraud accountable in equity. In such a case he is traditionally though I think unfortunately described as a constructive trustee and said to be ‘liable to account as constructive trustee’. Such a person is not in fact a trustee at all, even though he may be liable to account as if he were. He never assumes the position of a trustee, and if he receives the trust property at all it is adversely to the plaintiff by an unlawful transaction which is impugned by the plaintiff. In such a case the expressions ‘constructive trust’ and ‘constructive trustee’ are misleading, for there is no trust and usually no possibility of a proprietary remedy; they are ‘nothing more than a formula for equitable relief’: Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 2 All ER 1073 at 1097, [1968] 1 WLR 1555 at 1582 per Ungoed-Thomas J. ”

Both Mr Harper and Mr Seitler took that analysis of Millett LJ as their starting point, and agreed that Mr Cobbe’s claim to a constructive trust falls within the first of those classes of case. In so far as they decided to do so merely to emphasise that the present case is not one in which fraud is alleged against the First Defendant or Mrs Lisle-Mainwaring, their reliance on Millett LJ’s analysis cannot be faulted. On the other hand, it is clear that the factual scenario that Millett LJ was considering in his first category, namely the acquisition of property impressed with a trust from the outset, is plainly not the only situation, absent fraud, in which a constructive trust may be imposed by way of equitable relief for the defendant’s unconscionable conduct.

Mr Seitler presented a complex analysis of what he described as Millett LJ’s first class of case, but which was, in reality, an analysis of all the circumstances in which, he submitted, absent fraud, a constructive trust could be imposed.

In that analysis Mr Seitler submitted that Millett LJ first class of case is sub-divided into “pre-acquisition” and “post-acquisition” cases.

Mr Seitler then further sub-divided the “pre-acquisition” cases into, first, the Pallant –v- Morgan situation, and, second, agreements by spouses or others in a similar relationship to acquire property with a view to sharing it.

Mr Seitler submitted that examples of the first of those sub-categories are Yaxley and Banner, and also possibly Holiday Inns. He submitted that examples of the second of those sub-categories areGissing –v- Gissing [1971] AC 886 and Lloyds Bank –v- Rosset [1991] 1 AC 107.

It is plainly correct that in Yaxley, Banner and Holiday Inns the Court was considering whether the circumstances in which property was acquired by the defendant gave rise to an equity in favour of the claimant by virtue of some agreement, arrangement or understanding prior to the acquisition.

I have already given a brief synopsis of the facts in Yaxley and Holiday Inns. In Yaxley it was not in dispute that, on the findings of fact made by the first instance judge, a proprietary estoppel arose in favour of the plaintiff (subject to the issue of the impact of s. 2 of the 1989 Act and the public policy principle). The Court of Appeal held that that the same facts entitled the plaintiff to relief under a constructive trust.

In Holiday Inns Goff J. made no distinction between the circumstances of unconscionable conduct by a defendant giving rise to proprietary estoppel and to the imposition of a constructive trust. In his view, it would depend on the circumstances of each case whether the equity was best satisfied by a constructive trust or, for example, an equitable lien. In the event, the relief he ordered was the imposition of a trust.

In Banner there were negotiations, leading to an agreement in principle, between the parties to form a joint venture company, which they would own in equal shares, for the acquisition of a development site. After the defendant acquired an off-the-shelf company for that purpose, the defendant began to look for another joint venture partner in place of the claimant. The defendant did not, however, inform the claimant of its change of mind because it feared that the claimant would itself bid for the site if the joint venture was abandoned. Once the new company had acquired the site, with funds provided by the defendant, the defendant informed the claimant that it was withdrawing from the proposed joint venture. The Court of Appeal allowed an appeal from the first instance judge’s dismissal of the claimant’s claim to a constructive trust, and ordered that one half of the new company’s shares be held on trust for the claimant.

The judgment of Chadwick LJ contains an important and comprehensive analysis of the cases concerning the Pallant v Morgan equity. Having reviewed them, he summarised as follows the relevant principles for establishing that equity at pp.138-139:

“(1)

A Pallant v Morgan equity may arise where the arrangement or understanding on which it is based precedes the acquisition of the relevant property by one of those parties to that arrangement. It is the pre-acquisition arrangement which colours the subsequent acquisition by the defendant and leads to his being treated as a trustee if he seeks to act inconsistently with it. Where the arrangement or understanding is reached in relation to property already owned by one of the parties, he may (if the arrangement is of sufficient certainty to be enforced specifically) thereby constitute himself trustee on the basis that ‘equity looks on that as done which ought to be done’; or an equity may arise under the principles developed in the proprietary estoppel cases. As I have sought to point out, the concepts of constructive trust and proprietary estoppel have much in common in this area. Holiday Inns Inc v Broadhead may, perhaps, best be regarded as a proprietary estoppel case; although it might be said that the arrangement or understanding, made at the time when only the five-acre site was owned by the defendant, did, in fact, precede the defendant’s acquisition of the option over the 15 acre site. (2) It is unnecessary that the arrangement or understanding should be contractually enforceable Indeed, if there is an agreement which is enforceable as a contract, there is unlikely to be any need to invoke the Pallant v Morgan equity; equity can act through the remedy of specific performance and will recognise the existence of a corresponding trust… In particular, it is no bar to a Pallant v Morgan equity that the pre-acquisition arrangement is too uncertain to be enforced as a contract… nor that it is plainly not intended to have contractual effect… (3) It is necessary that the pre-acquisition arrangement or understanding should contemplate that one party (the acquiring party) will take steps to acquire the relevant property; and that, if he does so, the other party (the non-acquiring party) will obtain some interest in that property. Further it is necessary, that (whatever private reservations the acquiring party may have) he has not informed the non-acquiring party before the acquisition (or, more accurately, before it is too late for the parties to be restored to a position of no advantage/no detriment) that he no longer intends to honour the arrangement or understanding. 4) It is necessary that, in reliance on the arrangement or understanding, the non-acquiring party should do (or omit to do) something which confers an advantage on the acquiring party in relation to the acquisition of the property; or is detrimental to the ability of the non-acquiring party to acquire the property on equal terms. It is the existence of the advantage to the one, or detriment to the other, gained or suffered as a consequence of the arrangement or understanding, which leads to the conclusion that it would be inequitable or unconscionable to allow the acquiring party to retain the property for himself, in a manner inconsistent with the arrangement or understanding which enabled him to acquire it. … In many cases the advantage/detriment will be found in the agreement of the non-acquiring party to keep out of the market. That will usually be both to the advantage of the acquiring party-in that he can bid without competition from the non-acquiring opportunity to acquire the property for himself. But there may be advantage to the one without corresponding detriment to the other.… (5) That leads, I think, to the further conclusions: (i) that, although, in many cases, the advantage/detriment will be found in the agreement of the non-acquiring party to keep out of the market, that is not a necessary feature; and (ii) that, although there will usually be advantage to the one and co-relative disadvantage to the other, the existence of both advantage and detriment is not essential-either will do. What is essential is that the circumstances make it inequitable for the acquiring party to retain the property for himself in a manner inconsistent with the arrangement or understanding on which the non-acquiring party has acted. Those circumstance may arise where the non-acquiring party was never ‘in the market’ for the whole of the property to be acquired; but (on the faith of an arrangement or understanding that he shall have a part of that property) provides support in relation to the acquisition of the whole which is of advantage to the acquiring party. They may arise where the assistance provided to the acquiring party (in pursuance of the arrangement or understanding) involves no detriment to the non acquiring party; or where the non-acquiring party acts to his detriment (in pursuance of the arrangement or understanding) without the acquiring party obtaining any advantage therefrom.”

As appears from that analysis, the following two points, relevant to the present case, are to be noted with regard to the type of “pre-acquisition” case of which Yaxley, Banner and Holiday Inns are examples. First, in those cases there is a close overlap between proprietary estoppel and constructive trust. Second, the imposition of a constructive trust does not depend on the existence of an agreement which is sufficiently certain to be enforceable as a contract.

I then turn to Mr. Seitler’s suggested second sub-category of “pre-acquisition” case – property acquired by spouses or others as a home to be shared by them. He submitted that the principles applicable to that category of case are to be found in Gissing and Rosset.

Mr Seitler distinguished between his two suggested sub-categories of “pre-acquisition” case as follows in his written closing submissions:

“3.7

The second sub-type “(1(b))” arises where there is a common intention between A and B that a property in the name of A will be held on trust for them both and it would be inequitable for him to deny that trust where B has acted to his detriment in reliance upon the common intention that they would share the beneficial interest. For this reason the 1(b) constructive trust is very similar in its criteria for application to proprietary estoppel.

3.8

The 1(b) constructive trust shares some characteristics with the 1(a), but they are not the same. In particular in the 1(a) constructive trust no detriment is necessary, whereas it is under 1(b). In Banner v Luff p.139 Chadwick LJ held that it was sufficient for B to have conferred an advantage on A; he did not have to show that he had acted to his detriment. By contrast in the 1(b) cases such as Gissing, B must show that he has acted to his detriment or significantly altered his position in reliance upon the common intention: Lloyd’s Bank Plc v Rosset at p.132G.”

That passage in Rosset is from the speech of Lord Bridge:

“The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the Property is to be shared beneficially. The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made it will only be necessary for the partner asserting the claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel.”

The relevant principle in this category of case was described as follows in Lord Diplock’s well known statement in Gissing, at p. 905:

“A resulting, implied or constructive trust – and it is unnecessary for present purposes to distinguish between these three classes of trust – is created by a transaction between the trustee and the cestui que trust in connection with the acquisition by the trustee of a legal estate in land, whenever the trustee has so conducted himself that it would be inequitable to allow him to deny to the cestui que trust a beneficial interest in the land acquired. And he will be held so to have conducted himself if by his words or conduct he has induced the cestui que trust to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land.”

Both those statements were quoted by Robert Walker LJ in Yaxley at pp.176-177, together with the following passage in the judgment of Sir Nicholas Browne-Wilkinson V-C in Grant v. Edwards [1986] Ch 638,656, another case about the acquisition of a shared home, as examples of the overlap of the principles of proprietary estoppel and constructive trust in the area of a joint enterprise for the acquisition of land:

“I suggest that in other cases of this kind, useful guidance may in the future be obtained from the principles underlying the law of proprietary estoppel which in my judgment are closely akin to those laid down in Gissing v Gissing [1971] AC 886. In both, the claimant must to the knowledge of the legal owner have acted in the belief that the claimant has or will obtain an interest in the Property. In both , the claimant must have acted to his or her detriment in reliance on such belief. In both, equity acts on the conscience of the legal owner to prevent him from acting in an unconscionable manner by defeating the common intention. The two principles have been developed separately without cross-fertilisation between them: but they rest on the same foundation and have on all other matters reached the same conclusions.”

The importance to the present case of Mr. Seitler’s distinction between his first and second sub-categories of “pre-acquisition” case is that Mr. Seitler then went on to contend that in the second type of case there is, exceptionally, a “post-acquisition” situation in which a constructive trust can come into existence, that is to say where a common intention is formed at a later date to share the beneficial interest. As his submissions developed, I understood his argument to be that a constructive trust can only arise in such circumstances, however, if there is either a declaration of trust for the claimant or there is an agreement between the parties on all essential terms and with sufficient certainty to give rise to a specifically enforceable agreement.

Both of those are conventional means for the transfer of an equitable interest in property.

In support of his submission that a “post-acquisition” transfer of land is limited to those two categories of case and, in particular, those in which the agreement between the parties for the transfer of an interest in the property is sufficiently certain to be specifically enforceable, Mr. Seitler relied upon the following passage in the judgment in Chadwick LJ in Banner, at p.138 d-e, which I have already quoted:

“Where the arrangement or understanding is reached in relation to property already owned by one of the parties, he may (if the arrangement is of sufficient certainty to be enforced specifically) thereby constitute himself trustee on the basis that ‘equity looks on that as done which ought to be done’; or an equity may arise under the principles developed in the proprietary estoppel cases”

That observation by Chadwick LJ was followed, and commented upon, by Lewison J in Kilcarne Holdings Ltd –v- Targetfollow (Birmingham) Ltd [2004] EWHC 2547 (Ch.). He said, at para [225]:

“where the arrangement or understanding is reached in relation to property already owned by one of the parties, he may (if the arrangement is of sufficient certainty to be enforced specifically) thereby constitute himself trustee on the basis that “equity looks on that as done which ought to be done”; or an equity may arise under the principles developed in the proprietary estoppel cases. (I interpose to say that Mr Nugee [counsel for the defendants] submitted (without dissent from Mr Purle) [counsel for the claimant] that the reference to an arrangement reached in relation to property already owned by one of the parties is a reference to the ordinary rule that a specifically enforceable contract for the disposition of an interest in land itself creates a trusteeship of a kind under which the vendor is a qualified trustee for the purchaser):”

Later Lewison J referred to paras [47] and [48] of the judgment of Mummery LJ in London and Regional Investments. I have already quoted para [47] of Mummery LJ’s judgment. Para [48] of his judgment was as follows:

“[48] Nor was Banner Homes a case, such as this, in which the person sought to be held liable as a constructive trustee has an existing entitlement to the land in question and the claimed agreement to dispose of it, in this case to a joint venture, is too uncertain and vague to be enforced. The effect of accepting L&R’s submissions would be that the Belfast Land and Cardiff Land would be held on a constructive trust for L&R and TBI in equal shares, even though the parties have expressly agreed that the joint venture in respect of that land was still in negotiation. L&R seeks to invoke equity not to counter unconscionable conduct by one party which would defeat the informal understanding of both parties, but to reverse the effect of the express agreement they have made and replace it with a state of affairs (joint ownership of the land with no joint development) which was never contemplated.”

Referring to that paragraph, Lewison J said in Kilcarne, at para [230]:

“The second distinction that Mummery LJ draws is the distinction between an understanding reached before either party acquires the land in question, and an understanding reached when one of the parties already has an interest in or entitlement to the land. This was a distinction that Chadwick LJ drew in the first and second of the propositions I have summarised above. In the latter case (but not in the former) the arrangement or understanding must be sufficiently certain to be capable of specific performance. Hence Mummery LJ’s comment that the claimed agreement was “too vague and uncertain” to enforce. ”

Mr. Seitler concluded, on the basis of his analysis and those cases, that it is impossible, as a matter of law, for a constructive trust to arise in the present case for essentially two reasons. First, the present case is not a case in which the parties were to share occupation or possession of the property, and so falls outside the principles in Gissing, Rosset and Grant v. Edwards. Second, the Second Agreement, as I have found, was not an agreement which was sufficiently comprehensive and certain to amount to an enforceable contract (subject to s. 2 of the 1989 Act).

Notwithstanding the skilful and attractive way in which Mr. Seitler presented this part of his clients case, I reject his analysis and his conclusions. I do so for the following reasons.

First, contrary to Mr. Seitler’s submission, there are no distinct and separate principles, in this area of the law, which apply to cases in which property is acquired by parties to be shared by them. This was established in Pettitt v. Pettit [1970] AC 777: and see Gissing at p.899E (Viscount Dilhorne). The same principles of property law and equity apply as in other cases.

Second, it is now clear that in the Gissing type of case there is no difference in outcome whether the true analysis lies in constructive trust or in proprietary estoppel: the constructive trust is merely one of a range of remedies which the court can grant in order to give effect to the beneficial interest in the property of one party, the existence of which the other party (having the legal title) is estopped from denying: Oxley v. Hiscock [2004] 2 FLR 669 at paras. [66], [70] and [71] This was, as I have said, the approach of Goff J in Holiday Inns.

Third, accordingly, in this as in other appropriate cases, including the Pallant v Morgan situation, a constructive trust is imposed as a remedial instrument to prevent injustice to the claimant from the defendant’s unconscionable conduct. It is not required to conform to any technical requirements for the creation of an express trust, such as certainty as to the beneficial interests: Oxley at paras. [66] and [69]; Gissing at p. 908E-G (Lord Diplock).

Fourth, there is no reason in principle why a constructive trust should not be as equally available as a remedial instrument in a “post-acquisition” case as in a “pre-acquisition” case in order to prevent injustice from the defendant’s unconscionable conduct in circumstances where the facts are capable of giving rise to a proprietary estoppel. Nor is there any authority binding on me to the contrary.

Fifth, although Chadwick LJ in Banner, at p. 138e (followed by Lewison J. in Kilcarne), expressed the view that, where an arrangement or understanding is reached in relation to a property already owned by one of the parties, a constructive trust may arise if the arrangement “is of sufficient certainty to be enforced specifically”, it is clear that he was not ruling out the possibility of a constructive trust in other “post-acquisition” cases. That is apparent from his statement immediately afterwards that “the concepts of constructive trust and proprietary estoppel have much in common in this area” and his reference in that context to Holiday Inns. In the latter case, as I have said, the relief actually granted was a declaration that the defendant held the 15 acre site on trust for the plaintiff as to a half interest, albeit that Chadwick LJ said that it might, perhaps, best be regarded as a proprietary estoppel case.

Sixth, in any event, Chadwick LJ’s comments on this aspect were not a necessary part of his decision. It is clear from other cases and established principle that a “post-acquisition” constructive trust is not limited to a situation in which there is a specifically enforceable contract between the parties. That is not what was said by by Lord Bridge in Rosset in the passage quoted earlier in this judgment. In his general statement of principle, Lord Bridge made no distinction, in this respect, between a “pre-acquisition” situation and a “post-acquisition” situation. He referred to “any agreement, arrangement or understanding” reached “at any time prior to acquisition, or exceptionally at some later date” that the property is to be shared beneficially. He is there plainly stating that “an agreement, arrangement, or understanding”, which falls short of a binding and specifically enforceable legal agreement, may be sufficient to give rise to a constructive trust in appropriate circumstances whether in a “pre-acquisition” or a “post-acquisition” case.

Nor does any such suggested limitation appear in the following statement by Viscount Dilhorne in Gissing at p.901.

“It may be that it is alleged that some time after the acquisition of the matrimonial home the spouses formed the intention of sharing the beneficial interest. It may well be difficult to establish this but if it was, for instance, proved that up to the time when such an intention is alleged to have been formed, the mortgage payments were made by one spouse and thereafter by the other, then proof of that would tend to support the allegation.”

Further, subsequent to Banner, Chadwick LJ’s comprehensive and meticulous examination of the authorities in Oxley, with which the other members of the Court of Appeal agreed in that case, has now established clearly, as I have said, the availability of constructive trust as a remedial weapon in circumstances in which proprietary estoppel can be established and a constructive trust would be the most appropriate way of preventing injustice to the claimant arising from the defendant’s unconscionable conduct. There is no logical or jurisprudential reason for making a distinction, in this respect, between “pre-acquisition” and “post-acquisition” cases.

Further, seventh, the decision of the Court of Appeal in Kinane is now clear authority, binding on me, that it is not an essential pre-requisite for a constructive trust in a “post-acquisition” case that the parties entered into a specifically enforceable agreement. That was a “post-acquisition” case in which specific performance was precluded by s. 2 of the 1989 Act, but the court nevertheless imposed a constructive trust. The reasoning of the court was that the constructive trust was not founded on the unenforceable agreement but on the defendant’s conduct which was unconscionable: paras. [29], [32] and [33] (Arden LJ).

Eighth, there is no authority to support the submission which Mr Seitler appeared at one time to advance that a constructive trust cannot be imposed unless the agreement between the parties has been fully performed. He emphasised, for example, that in Yaxley all the works had been fully performed by the plaintiff. He also referred to the following passage in the judgment of Robert Walker LJ in that case, at p. 180, referring to the exception in s.2(5) of the 1989 Act.

“I cannot accept that the saving should be construed and applied as narrowly as Mr Laurence contends. To give it what I take to be its natural meaning, comparable to that of section 53(2) of the Law of Property Act 1925 in relation to section 53(1), would not create a huge and unexpected gap in section 2. It would allow a limited exception expressly contemplated by Parliament, for those cases in which a supposed bargain has been so fully performed by one side, and the general circumstances of the matter are such, that it would be inequitable to disregard the claimant’s expectations, and insufficient to grant him no more than a restitutionary remedy.”

Robert Walker LJ was doing no more there than indicating the typical circumstances that would give rise to (a proprietary estoppel and) the imposition of a constructive trust in a case in which an agreement had all the ingredients of a binding contract but failed to comply with s.2(1)-(3) of the 1989 Act. Even in the quoted passage he did not refer to the need for full performance by the claimant. He referred to such degree of performance and other circumstances as would make it appropriate to impose a constructive trust. None of the reported cases lays down the requirement of full performance or near full performance of an agreement, arrangement or understanding between the parties as an essential pre-requisite to establishing a proprietary estoppel or a constructive trust. Indeed, Holiday Inns is a striking example of a case in which a proprietary estoppel equity was established and a trust imposed on the defendant even though the agreement, arrangement or understanding between the parties was far from fully performed: in that case the plaintiff had not constructed, and was never going to construct, a hotel on the 15 acre site as intended by the parties.

Ninth, it follows from all the above that it is not a pre-requisite to a constructive trust, whether in a “pre-acquisition” or a “post-acquisition” case, that the intention of the parties was to share the beneficial interest in the property. Indeed, Kinane is now clear authority for that proposition since the parties in that case had no intention to share the beneficial interest, let alone share the property as a home. It is true that the statement of Viscount Dilhorne in Gissing at p. 901 and the statement of Lord Bridge in Rosset at p. 132, which I have quoted earlier in this judgment, referred to an agreement, arrangement or understanding that the beneficial interest was to be shared between the parties, but that merely reflected the factual scenario in those cases. In principle, if a constructive trust can arise when the owner of property agrees to transfer part of the beneficial interest to another in circumstances in which it would be unconscionable not to give effect to that agreement, then there is no reason why a constructive trust should not equally arise where it has been agreed by the owner of the property to transfer the entire beneficial interest to another in circumstances in which it would be unconscionable not to give effect to that agreement.

A powerful judicial analysis against the imposition of a constructive trust in a “post-acquisition” case, in which the intention of the parties was that the existing owner should sell the entire land to another if and when, if ever, a concluded and binding agreement was reached, is contained in the judgment of Mummery LJ in London and Regional Investments.

In paragraph [48] of his judgment, which I have quoted earlier, Mummery LJ observed that the creation or imposition of a constructive trust would, on the facts of that case, have conferred an interest on the developer purchaser which was quite contrary to the intention of the negotiating parties: the effect would be to replace their actual intention and agreement with a state of affairs, namely joint ownership of the land with no joint development, which was never contemplated. By way of analogy, Mr Seitler pertinently observed that the imposition of a constructive trust in the present case, conferring on Mr Cobbe part of the beneficial interest in the Property, would not reflect the Second Agreement but would create a wholly different state of affairs to that contemplated and intended by the parties, namely joint ownership of the land without any obligation to develop.

Those are powerful considerations, but they are relevant to the question of the appropriate form of relief on the particular facts of the case giving rise to the estoppel, rather than showing that as a matter of law a constructive trust can never be imposed on facts such as I have found in the present case. So, for example, in Holiday Inns Goff J considered that the appropriate relief was to confer on the plaintiff a half share in the 15 acre site (encumbered by a lease and a sub-lease) under a constructive trust for sale, even though what had been contemplated and agreed by the parties was the grant of a lease of the property on which the plaintiff was to build an hotel.

In all the circumstances, on the facts that I have found and in the light of my conclusion that they gave rise to an equitable estoppel equity in favour of Mr. Cobbe, a possible remedy to satisfy that equity would be the imposition of a constructive trust under which the Property is held by the First Defendant on trust for sale and for the proceeds of sale to be held on trust to pay Mr Cobbe one half of the increase in the value of the Property as at 18 March 2004 by virtue of the Planning Permission or, possibly, on trust for such proportion as reflects half of the increase in the value of the Property at 18 March 2004 as a result of the Planning Permission relative to the value of the Property as a whole on that date.

That is not, in my judgment, a surprising result. As Robert Walker LJ stated in Yaxley, at p.176E, in certain areas, such as a joint enterprise for the acquisition of land, the two concepts of estoppel and constructive trust coincide.

I agree with Mr Harper that the Second Agreement was in the nature of, or reflected, a commercial joint enterprise between Mr Cobbe and the First Defendant, acting through Mrs Lisle-Mainwaring. The securing of planning permission was for the benefit of both of them, as would be the subsequent development of the Property, giving rise to a profit for Mr Cobbe and overage for the First Defendant. The imposition of a constructive trust, under which Mr Cobbe would enjoy an interest in the Property reflecting in some way the enhanced value due to the grant of the Planning Permission, would be one possible way to correct the unconscionability of the conduct of the First Defendant in withdrawing from the joint enterprise in the circumstances I have found.

Furthermore, although for the reasons I have given it is not necessary so to find for the purpose of my decision, it may be said, adopting Mr Seitler’s categorisation, that the present case is in any event loosely analogous to a “pre-acquisition” case. The parties were aware at the time of the Second Agreement that the grant of planning permission would confer on the owner of the Property valuable rights in relation to the use to which the Property could be put. Although they were not, strictly speaking, property rights, they were rights which attached to and would pass with the ownership of the Property. The Second Agreement was intended to define the rights and obligations of the parties in relation to their joint venture to exploit those rights, if and when obtained.

In looking at the situation in that broad way, it is appropriate to bear in mind that, before setting out in Banner the principles for establishing a Pallant v Morgan equity, Chadwick LJ referred, at p.138b, to the observation of Millett J in Lonhro Plc –v- Fayed (No.2) [1991] 4 All ER 961 at 969 that equity must retain its “inherent flexibility and capacity to adjust to new situations by reference to main springs of the equitable jurisdiction”. Chadwick LJ continued “Equity must never be deterred by the absence of a precise analogy, providing that the principle invoked is sound”.

For the reasons which I have given in the context of proprietary estoppel, the imposition of a constructive trust in the present case is not precluded by virtue of the amount of the proved expenditure of Mr Cobbe relative to the purchase price of the Property and the anticipated sales following completion of the development and his anticipated profit, or Mr Cobbe’s belief that if Mrs Lisle-Mainwaring withdrew from the development before the grant of planning permission he would be reimbursed his expenditure, or any offer by Mrs Lisle-Mainwaring to reimburse Mr Cobbe’s expenditure, or Mr Seitler’s “floodgates” argument; and nor, for the reasons I have given in para [127] above, need any constructive trust be on the terms of, or reflect, the March 2004 terms.

If a constructive trust was imposed on the First Defendant no issue would arise in relation to s. 2 of the 1989 Act in view of the provisions of s. 2(5).

The reason, and the only reason, why a constructive trust is neither necessary nor appropriate in the present case is because the lien I have ordered is, in all the circumstances, a more appropriate way of satisfying the equity of Mr. Cobbe arising from the facts.

In view of my decision in relation to proprietary estoppel and constructive trust, it is not necessary for me to consider further the claim in restitution.

In the amended Particulars of Claim it is alleged that at all material times Mrs Lisle-Mainwaring has been the director of and the guiding mind of the First Defendant and has made all its decisions on its behalf. So far as Mr Cobbe is aware, that is particularly true of the First Agreement, the Second Agreement and the March 2004 terms. In the prayer to the amended Particulars of Claim, an order is sought against Mrs Lisle-Mainwaring “on behalf of the company, to give effect to such orders the court may make” for a constructive trust or pursuant to proprietary estoppel.

Mr Harper submitted that, on the facts of the present case, the court should not hesitate to penetrate the corporate veil of the First Defendant and make orders directly against Mrs Lisle-Mainwaring who, as the directing mind of the First Defendant in relation to the sale and development of the Property, should be held personally responsible for giving effect to the relief granted in favour of Mr Cobbe.

I can see no proper legal basis for making an order against Mrs Lisle-Mainwaring as sought in the amended Particulars of Claim. The only necessary and proper Defendant to the proceedings is the First Defendant. There are no valid grounds for penetrating the corporate veil in the manner suggested by Mr Harper.

Accordingly, I dismiss the claim against Mrs Lisle-Mainwaring.

For the reasons I have given in this judgment, I declare that the Property is subject to a lien in favour of Mr Cobbe for an amount equal to half the increase in the value of the Property as a consequence of the grant of the Planning Permission. The valuation is to be carried out as at 18 March 2004 and is to disregard the effect on the value of the Property resulting from the planning application of 3 July 2003. That relief is conditional on Mr Cobbe undertaking to instruct PDP to permit the use of the Planning Permission plans by the First Defendant or, at its direction, any other person.

I shall hear submissions further as to whether interest should be charged in equity on that amount until payment, and, if so, as to what rate and for what period.

I shall also hear further from counsel as to directions for the conduct of any inquiry to ascertain that value.

I dismiss the claim against Mrs Lisle-Mainwaring.