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 fully documented in writing. However, section 2(5) excepts implied, resulting and constructive trusts from these strict requirements and, in cases where justice demanded it, the courts were often persuaded to use the doctrine of proprietary estoppel to impose a constructive trust to sidestep the severity of section 2.
It was believed that the decision in Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55; [2008] 3 EGLR 31 had put paid to that. Although he did not actually have to decide the point, Lord Scott doubted whether the doctrine of proprietary estoppel could ever be used to circumvent the requirements of section 2. However, the courts have continued to apply the doctrine – albeit more sparingly – to prevent injustice.
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 fully documented in writing. However, section 2(5) excepts implied, resulting and constructive trusts from these strict requirements and, in cases where justice demanded it, the courts were often persuaded to use the doctrine of proprietary estoppel to impose a constructive trust to sidestep the severity of section 2.
It was believed that the decision in Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55; [2008] 3 EGLR 31 had put paid to that. Although he did not actually have to decide the point, Lord Scott doubted whether the doctrine of proprietary estoppel could ever be used to circumvent the requirements of section 2. However, the courts have continued to apply the doctrine – albeit more sparingly – to prevent injustice.
In Thorner v Major [2009] UKHL 18; [2009] 2 EGLR 111, the court upheld an inheritance claim on the ground that proprietary estoppel is available where a claim is familial in nature. The judgment in Herbert v Doyle [2010] EWCA Civ 1095; 13 ITELR went further. The Court of Appeal distinguished Cobbe, even though the transaction under consideration was commercial, on the ground that the parties had reached an agreement that was neither “subject to contract” nor incomplete.
Whittaker v Kinnear [2011] EWHC 1479 (QB) will add to the debate concerning the use of the doctrine. The case concerned a landowner who sold her property for considerably less than it was worth to a developer who promised her rights of occupation, pre-emption and overage. The High Court accepted arguments that proprietary estoppel has survived the enactment of section 2 and can apply in a case involving a sale of land that is commercial in nature – and sent the case to the county court for trial.
The judge relied on comments made in Yaxley v Gotts [1999] 2 EGLR 181. There, Beldam LJ – who was the chairman of the Law Commission at the time of its report on Formalities for Contracts for Sales of Land, which led to the enactment of section 2 – stated that it had not been the commission’s intention to affect the availability of equitable remedies.
The decision suggests that opinions are divided between members of the judiciary. Some will ask whether it is legitimate to rely on the intentions of the Law Commission when section 2 does not mention proprietary estoppel, and whether it is appropriate to use the law of equity to override legislation enacted for public policy reasons. Others will argue that the law should not be so inflexible as to cause unacceptable hardship and that the courts should be allowed to use the doctrine of proprietary estoppel to rescue informal bargains where justice demands it.
In the meantime, the inconsistency between the authorities renders the law unsatisfactory and uncertain. It is to be hoped that the courts will settle the legal position soon.
Allyson Colby is a property law consultant
