Dowding and another v Matchmove Ltd

  Constructive trust – Sale of land – Law of Property (Miscellaneous Provisions) Act 1989 – Oral agreement for sale of building plot and meadow by appellant to respondents – Sale of building plot completed – No written contract ever concluded for sale of meadow although respondents making payment in respect of it – Whether respondents entitled to meadow – Whether common intention constructive trust arising so as to fall within section 2(5) of 1989 Act – Whether special conditions of contract for sale of building plot precluding reliance on oral agreement – Appeal dismissed In 2004, the appellant company purchased a building plot and a 10-acre meadow with a view to dividing the building plot into two separate plots (plots 1 and 2) and selling them on. The owner of the company (F) already had an understanding with the respondent couple that they would purchase plot 1 and the meadow for £200,000, namely £120,000 for the plot and £80,000 for the meadow. At the time, F and the first respondent were close friends. In April 2005, after planning permission had been granted for the construction of a three-bedroom house on each of the plots, the parties instructed solicitors to deal with the conveyancing. All correspondence between the solicitors was headed “subject to contract”. By then, the respondents had already paid a deposit of £66,600. In May 2005, F permitted the respondents to start building a house on plot 1 and a contract for the sale of that plot was completed in September 2005. The sale of the meadow did not proceed at that time because there was a dispute between F and third parties who claimed a right of way over the meadow. In the event, no written sae contact in respect of the meadow was ever concluded. The respondents subsequently moved into the completed house. Between October 2005 and November 2006, they made payments totalling £80,000 for the meadow. They also paid £5,000 to F in respect of his legal costs incurred in connection with the dispute over the right of way, which was eventually resolved in October 2006. The parties fell out early in 2007 and F was no longer willing to sell the entire meadow to the respondents. The respondents applied to the court for a declaration that the appellant held the meadow on trust for them. The appellant relied on the lack of a written contract for the sale of the meadow satisfying the formality requirements of section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. It also argued that reliance on any oral agreement was precluded by special condition 6 of the contract for the sale of plot 1, which stated that the respondents had entered into the contract “solely … on the basis of the terms hereof” and not in reliance on any warranty, statements, or representation made by or on behalf of the seller. In the court below, the judge held that a constructive trust had arisen in favour of the respondents, within the meaning of section 2(5) of the 1989 Act, so that they were entitled to the meadow in equity notwithstanding the lack of a written contract. He found that, by the time solicitors became involved, the parties had already concluded what they regarded as an immediately binding agreement, reached in late 2003, and had acted on it. He found that special condition 6 did not preclude reliance on that agreement in relation to the meadow since it was concerned only with warranties, statements or representations made in respect of plot 1, as the subject of the relevant contract. The appellant appealed. Held: The appeal was dismissed. (1) It was common ground that a constructive trust based on the common intention of the parties could arise where there was an express agreement between parties as to the ownership of property, on which one party relied to his detriment, such that it would be unconscionable for the other party to deny his ownership of the property. The judge had found as a fact that, in late 2003, there was an oral agreement between the parties which both sides intended to be “binding immediately”. That agreement was complete as to all its essential terms, namely the land to be included, which was plot 1 and the meadow; the purchase price, which was £200,000 for all the land; and the deposit of £66,000, which was about one-third of the total purchase price. The respondents had relied on that agreement to their detriment, in the first place by paying the deposit and also by subsequent acts, including the contribution of £5,000 towards the costs of the right of way dispute concerning the meadow. Although the respondents’ case was that the constructive trust arose as soon as they paid the £66,600, the subsequent acts reinforced the judge’s conclusion that the agreement was intended to be immediately binding. The oral agreement was not conditional on the resolution of the right of way dispute. It was the appellant’s solicitors who subsequently suggested that the exchange of contracts for the purchase of the meadow should not proceed until it was resolved. Accordingly, the judge had correctly concluded that the appellant held the meadow on constructive trust for them and that the case fell within section 2(5) of the 1989 Act: Herbert v Doyle [2010] EWCA Civ 1095; [2015] WTLR 1573; 2011] 1 EGLR 119 and Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55; [2008] 1 WLR 1752; [2008] 3 EGLR 31 considered. (2) Special condition 6 did not prevent reliance on the oral agreement concluded between the respondents and F. The judge had found that there was was a single, indivisible oral agreement in respect of both plot 1 and the meadow. Special condition 6 was only concerned with plot 1. It excluded other terms relating to that parcel of land, but did not exclude terms relating to a different parcel of land. It was immaterial that the two parcels were previously the subject of one oral agreement, since they were always distinct parcels of land. Jonathan Seitler QC and Jonathan Chew (instructed by Enigma Solicitors, of Plymouth) appeared for the appellant; Amanda Tipples QC and Michael Berkley (instructed by Bennetts Solicitors, of Wrington) appeared for the respondents. Sally Dobson, barrister Click here to read a transcript of Dowding and another v Matchmove Ltd