The recent House of Lords decision in Yeoman’s Row Management v Cobbe (2008) has important implications for the law relating to proprietary estoppel – and more generally perhaps for all property dealings conducted without the safeguard of a fully concluded contract.
In Yeoman’s Row, C, a property developer, entered into an understanding with L, the owner of a block in Knightsbridge, that C would obtain planning permission for the development of the block. If permission were forthcoming, L would sell the block to C for £12m, C would develop the property, and split any profits over and above £24m with Y (a company owned and directed by L). Both parties appreciated that the arrangement was not legally binding.
Permission having been obtained (causing an immediate and significant increase in the value of the property), L indicated to C that she would no longer honour the understanding. She indicated that she would now sell only for £20m, albeit increasing the overage figure to £40m and reducing Y’s share to 40 per cent. C did not accept the renegotiated terms and pressed for an award commensurate with that originally negotiated.
At first instance, Etherton J found for C, basing his decision on the doctrine of proprietary estoppel and awarding C 50 per cent of the enhanced value of the property. The Court of Appeal rejected a number of legal and factual challenges to this decision. In allowing L’s appeal, the House of Lords firmly rejected proprietary estoppel as a basis for remunerating C, and substituted a much-reduced sum, representing the reasonable value of the work carried out by C.
Lord Scott of Foscote accepted that L took “unconscionable advantage” of C. But, he went on, “to leap from there to the conclusion that a proprietary estoppel case was made out was not, in my view, justified”.
His Lordship’s speech marks a reaffirmation of the traditional elements of that doctrine, including “a proprietary claim made by a claimant and an answer to that claim based on some fact, or some point of mixed fact or law, that the person against whom the claim is made can be estopped from asserting”. Anything falling short of that was, in his Lordship’s opinion, “a recipe for confusion” – and neither the proprietary claim, nor the response to it which L was said to be estopped from making, could be identified in the instant case.
An unsatisfactory taste
The House of Lords also dismissed the other possible proprietary claim, being a claim in constructive trust on the basis of the so-called Pallant v Morgan (1953) equity. Lord Scott stated that L’s unconscionable behaviour was an insufficient basis for such an award in circumstances where the property was never joint venture property and C had been fully aware that his rights were speculative, contingent and unenforceable pending the conclusion of a contract.
Clearly, Yeoman’s Row represents a firm stricture against the use of proprietary estoppel as “an indignant reaction” to unconscionable behaviour. But it is also notable in other ways. For one thing, it constitutes high – if obiter – authority that estoppel cannot be used to avoid the consequences of section two of the Law of Property (Miscellaneous Provisions)