PP 2010/141

Section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 prevents parties from being bound to contracts to dispose of interests in land unless they are documented in writing.  However, section 2(5) excepts implied, resulting and constructive trusts from the strict requirements imposed by section 2. In cases where justice demanded it, the courts were often persuaded to use the doctrine of proprietary estoppel to impose a constructive trust in order to sidestep the requirements of section 2.  Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55; [2008] 3 EGLR 31; [2008] 35 EG 142; [2008] 36 EG 142 appeared to have put paid to that.  None the less, the courts have continued to apply the doctrine, albeit more cautiously than before. For example, in Thorner v Majors [2009] UKHL 18; [2009] 2 EGLR 111, the court upheld an inheritance claim on the ground that the doctrine of proprietary estoppel remains relevant to claims that are familial, as opposed to contractual, in nature. What, then, are we to make of the decision in Herbert v Doyle [2010] EWCA Civ 1095; [2010] PLSCS 260? This concerned an oral contract for an exchange of land to facilitate a mews-style development. The High Court distinguished Cobbe and upheld the oral agreement. The Court of Appeal has refused to allow an appeal from the judge’s decision based on arguments that it was not “Cobbe-compliant”. Their lordships ruled that the judge had been careful to apply the reasoning in Cobbe and that it was possible to distinguish it, even though the transaction in Herbert was both commercial and contractual in nature. The court explained that Cobbe concerned an agreement that was unenforceable because it was both “subject to contract” and incomplete. It held that, following Cobbe, the relevant question was whether, subject to the application of section 2, there was a valid contract. If the parties to a contract intend to make a formal agreement setting out the terms on which one or both of them is to acquire an interest in property, or if further terms for that acquisition remain to be agreed between them so that the interest in property is not clearly identified or if they do not expect their agreement to be immediately binding, neither party can use the doctrine of proprietary estoppel or constructive trust to render their agreement binding by virtue of section 2(5) of the 1989 Act. The judge had concluded that the oral agreement reached by the parties was a complete agreement for the sharing of use and ownership of property. The arrangements were neither inchoate nor “subject to contract”, as in Cobbe, and the parties had intended them to become binding immediately (even though they continued to negotiate and agree variations, and subsequently fell out with each other). The decision is bound to provoke comment.  Some will find it difficult to reconcile with Cobbe. Others will welcome the clear indication that the courts remain willing to apply equitable principles to prevent an injustice that might otherwise be caused by the strict application of the rules laid down in section 2 of the 1989 Act. Allyson Colby is a property law consultant