Promises, Promises… Proprietary after Yeoman’s Row Management Ltd v Cobbe Ben McFarlane (Reader in Property Law, University of Oxford)

1. Summary

1.1 The reasoning of the House of Lords in Yeoman’s Row Management Ltd v Cobbe [2008] UKHL 55, [2008] 1 WLR 1752, if accepted by lower courts, will have a very significant impact on the operation of . In particular, it seems that in a case where B relies on a non-contractual promise by A that A will give B a right in the future, it will no longer be possible for B to invoke the doctrine of proprietary estoppel. B’s protection, if any, will instead depend on constructive trust principles or unjust enrichment. After setting out the background to the decision of the House of Lords, this paper examines: (i) the reasoning of the House of Lords in Yeoman’s Row and its potential impact; and (ii) the questions which may arise where B relies on constructive trust principles or unjust enrichment rather than on proprietary estoppel. For further discussion see McFarlane & Robertson [2008] LMCLQ 445 (forthcoming) and the updates page of the companion web-site to McFarlane, The Structure of Property Law (Hart, 2008): http://www.hartpub.co.uk/companion/propertylaw/updates.html.

2. Background to the House of Lords Decision

The facts and claims

2.1 The appellant company (YRML) was the registered proprietor of a freehold of land in Knightsbridge with redevelopment potential. The company was controlled by Mr and Mrs Lisle-Mainwaring, who held a long lease over one of the 13 flats on the property. Mr Cobbe (Cobbe), an experienced property developer, entered into lengthy negotiations with Mrs Lisle-Mainwaring (L- M) who acted on behalf of YRML. Those discussions culminated in an oral agreement, the substance of which was as follows:  Cobbe, at his own expense, would apply for planning permission to demolish the existing block of flats and to erect, in its place, a terrace of six houses;  upon the grant of planning permission and the obtaining of vacant possession, the property would be sold to Cobbe, or to a company nominated by him, for an up-front payment to YRML of £12 million  Cobbe, or the nominee company, would develop the property in accordance with the planning permission, sell the six houses and pay to YRML 50 per cent of the amount, if any, by which the gross proceeds of sale exceeded £24 million.

2.2 The trial judge, Etherton J, found that neither Cobbe nor L-M thought that their oral agreement was legally binding. They intended that if planning

1 permission was granted then YRML would enter into a formal agreement with Cobbe or a company nominated by him. That agreement would include not only the core terms forming the oral agreement but also further terms, yet to be negotiated (including for example, some form of security for Cobbe’s duty to pay YRML the agreed overage). Although Cobbe believed that that oral agreement was binding in honour on both parties, he envisaged that if L-M decided not to proceed before planning permission was granted, he would be reimbursed his reasonable expenditure. On that basis Cobbe spent considerable time and effort and incurred considerable expense between late 2002 and March 2004 in applying for planning permission. By late 2003 L-M had formed an intention not to comply with the oral agreement, but to negotiate for a higher up-front purchase price. Nonetheless, she continued to assist and encourage Cobbe’s efforts to obtain planning permission, intentionally giving Cobbe the impression that, if planning permission were obtained, she would enter into a binding contract based on the parties’ oral agreement.

2.3 In March 2004, as a result of Cobbe’s efforts, planning permission was granted. L-M then informed Cobbe that she would proceed with the sale only at a purchase price of £20 million plus overage. Cobbe originally agreed in order to salvage the transaction, but later decided to insist on performance of the oral agreement. He instituted the present proceedings and also refused to allow YRML or L-M access to the architects’ plans used in the successful application for planning permission. Cobbe initially sought specific performance or damages for breach of contract, but later amended his pleadings to seek relief on the basis of:  proprietary estoppel;  a constructive trust;  restitution.

The decisions of Etherton J and the Court of Appeal

2.4 At first instance, Etherton J found for Cobbe on the basis of proprietary estoppel and also indicated that, if necessary, he would have found that a constructive trust had arisen in Cobbe’s favour: [2005] EWHC 266 (Ch). As to proprietary estoppel, his Lordship held that the parties’ oral agreement covered “all points of principle which were at the core of the commercial deal”. When Cobbe began to perform his side of the deal, both parties regarded their agreement as binding in honour and contemplated that a subsequent formal contract was needed only to take care of “legal mechanics”. Etherton J held that Cobbe’s estoppel equity was to be satisfied by a lien over YRML’s freehold securing payment to Cobbe of one-half of the increase in the value of the property caused by the grant of planning permission (the sum due was later assessed to be £2m).1

1 Etherton J’s order was conditional on Cobbe allowing YRML access to the architect’s plans. Etherton J later extended the lien so that it also covered L-M’s leasehold interest in her flat. However, the Court of Appeal reversed that extension, as Cobbe’s proprietary estoppel claim was against YRML, not L-M.

2 2.5 Etherton J’s decision, both as to the presence of proprietary estoppel and the extent of Cobbe’s resulting right, was upheld by a unanimous Court of Appeal: [2006] EWCA Civ 1139. As a result, the Court of Appeal did not address the constructive trust argument. Some concern was however expressed as to the absence of clear principles to be used in deciding the extent of the right acquired by a successful proprietary estoppel claimant: see e.g. per Dyson LJ at [121]. Indeed, Mummery LJ at [95] described the judge’s finding as to the extent of Cobbe’s right as “the least unsatisfactory of the various forms that relief might take”.

Evaluating the position before the appeal to the House of Lords

2.6 The decisions of Etherton J and the Court of Appeal appeared to give rise to three key questions. First, when, if at all, can a party who acts in reliance on an anticipated contract acquire a right through proprietary estoppel? Second, if Cobbe had acquired such a right, how should a court determine the extent of that right? Third, what impact, if any, should the formality rule imposed by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 have on each of those two questions?

2.7 As to the first question, it could be argued that a party who acts in reliance on an anticipated contract acts at his own risk. That view may lie behind the condemnation of Etherton J’s decision (noted but rejected by Mummery LJ in the Court of Appeal’s decision at [87]) as a “developer’s charter” and a “staggering extension” of the pre-existing law. However, the decisions of the Court of Appeal in Crabb v Arun District Council [1976] Ch 179 and Lloyd v Dugdale [2002] 2 P & CR 13 recognise the possibility of a proprietary estoppel claim for a party acting in reliance on an anticipated contract. It seems that such a claim could arise in the pre-contractual context if:  there was an agreement in principle between the parties; and  A led B reasonably to believe that the agreement in principle would be honoured by A (see McFarlane, Proprietary Estoppel and Failed Contractual Negotiations [2005] Conv 501). On this view, the first question in Yeoman’s Row depended on two further questions:  was the parties’ agreement sufficiently clear to count as a relevant agreement in principle?  could YRML’s acquiescence in Cobbe’s work in preparing and making the application for planning permission suffice as conduct leading Cobbe reasonably to believe that YRML would indeed honour the agreement in principle?

2.8 As to the question of the extent of any right acquired by Cobbe, the Court of Appeal expressed a concern about the absence of clear principles governing the extent of a right arising through proprietary estoppel. This issue has been thoroughly examined by commentators, who have suggested a variety of

3 2 On any view, following the decisions of the Court of Appeal in [2003] 1 P & CR 100; Ottey v Grundy [2003] EWCA Civ 1176; and Powell v Benney [2007] EWCA Civ 1283, it was clear that the right acquired by a successful proprietary estoppel claimant may not necessarily match the right he thought he had or expected to acquire.

2.9 As to the third question, the tendency was for courts to reconcile the availability of a proprietary estoppel claim with the s.2(1) formality rule by relying on s.2(5) of the 1989 Act, with its exemption for “resulting, implied and constructive trusts”: see e.g. the decisions of the Court of Appeal in Yaxley v Gotts [2000] Ch 162 and Kinane v Mackie-Conteh [2005] EWCA Civ 45. However, this approach rests on an expanded definition of a “constructive trust”. For example, in Yaxley, proprietary estoppel imposed a duty on A to grant B a lease (or to pay B a sum of money equal to the value of that lease): as a result, A held no right on trust for B. In Kinane, A’s duty was to grant B a charge over A’s land: again, A held no right on trust for B. It could therefore be argued that the best approach in such cases is to say that the s.2(1) formality rule simply does not apply to proprietary estoppel claims: it affects only B’s ability to make a contractual claim.3 Such an approach would be consistent with the aims of the Law Commission Report which led to the 1989 Act.4

3. The Decision of the House of Lords

3.1 The House of Lords unanimously allowed an appeal against the finding of proprietary estoppel, holding that Cobbe was instead entitled to relief by way of a quantum meruit for his services and expenditure. This had a very significant effect on the sum due to Cobbe, reducing it from £2m to an estimated £150,000. Lord Scott and Lord Walker gave reasons for overturning the decision in relation to proprietary estoppel. Only Lord Scott gave reasons for allowing the quantum meruit claim. Lord Hoffmann and Lord Mance agreed with Lord Scott, while Lord Brown agreed with Lord Scott and Lord Walker.

Proprietary estoppel

3.2 Lord Scott at [14] explained “the nature of proprietary estoppel” as, in essence, a modest extension of estoppel by representation:

2 See e.g. Gardner (2006) 122 LQR 492; Bright & McFarlane [2005] CLJ 449; McFarlane, The Structure of Property Law (Hart, 2008), E4:4. 3 This argument is made by eg McFarlane [2005] Conv 501; and see too McFarlane, The Structure of Property Law (Hart, 2008) at E4:7. Dixon reaches the same conclusion by different means, arguing that the inherent in proprietary estoppel takes a proprietary estoppel claim outside the scope of the s.2(1) rule: see eg [2005] Conv 247. See too per Brennan J in Waltons Stores (Interstate Ltd ) v Maher (1988) CLR 387, 433 at 29. 4 See Law Com No 164 (1987), eg at 1.9 and 5.5.

4

“An “estoppel” bars the object of it from asserting some fact or facts, or, sometimes, something that is a mixture of fact and law, that stands in the way of some right claimed by the person entitled to the benefit of the estoppel. The estoppel becomes a “proprietary” estoppel - a sub-species of a “promissory” estoppel - if the right claimed is a proprietary right, usually a right to or over land but, in principle, equally available in relation to chattels or choses in action. So, what is the fact or facts, or the matter of mixed fact and law, that, in the present case, the appellant is said to be barred from asserting?”

3.3 On that analysis, even if the parties had made a reached a reasonably precise agreement in principle, and even if YRML (via L-M) had led Cobbe reasonably to believe that it would honour that agreement, proprietary estoppel could not assist Cobbe. For proprietary estoppel can only function either to prevent YRML denying the existence of that oral, non-binding agreement; or to prevent YRML denying the existence of a non-binding promise to honour that agreement. In either case, the most Cobbe can establish is the existence of a non-binding agreement; proprietary estoppel therefore cannot give Cobbe a right.

3.4 Further, on that analysis, section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 presents an insuperable obstacle to any claim by Cobbe that YRML is prevented from denying a promise to create or dispose of an interest in land in favour of Cobbe. For, even if YRML were prevented from denying the promise, it could simply rely on section 2 to show that, as the promise was not in writing, it could not be contractually binding. So, in Lord Scott’s words at [29], “proprietary estoppel cannot be prayed in aid in order to render enforceable an agreement that statute has declared to be void.”

3.5 Lord Walker’s reasoning differs from that of Lord Scott; but also diverges from the previously prevailing understanding of proprietary estoppel. In Lord Walker’s view, the crucial stumbling block for Cobbe was that he acted only in the belief that YRML would act in a particular way in the future; not in the belief that YRML was under a legal duty so to act. His Lordship stated that “hopes by themselves are not enough” and, at [66], said that, in previous cases in which proprietary estoppel had been established, “the claimant believed that the assurance on which he or she relied was binding and irrevocable.” To the extent that certain “domestic cases” (e.g. where one party makes a gratuitous promise to leave land to a family member or carer) may seem to contradict that strict view, Lord Walker suggested that at least some of those cases might “have been decided differently if the nature of the claimant’s belief had been an issue vigorously investigated in cross-examination.”

Constructive trusts

3.6 Lord Scott also considered whether, independently of any claim based on proprietary estoppel, a constructive trust of YRML’s freehold had arisen in

5 5 His Lordship at [37] made the important point that “The unconscionable behaviour of [YRML via L-M] is, in my opinion, not enough in the circumstances of this case to justify Cobbe’s claim to have acquired, or to be awarded by the court, a beneficial interest in the property.” To show he has acquired a right under a constructive trust, B must do more than simply show that A has, in a general sense, behaved badly; rather, B must fit his claim into one of the specific situations in which the courts have recognised that such a trust can arise.

3.7 Lord Scott considered one such situation, exemplified by the decisions of the Court of Appeal in Pallant v Morgan [1952] Ch 43 and Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372. The principle applying in those cases could not assist Cobbe: it is limited to situations in which A acquires a right as part of a planned joint venture with B and so cannot apply where B seeks to impose a trust of a right which A held before the relevant dealings with B. That analysis departs from Etherton J’s holding ([2005] EWHC 266 (Ch) at [216]-[222]) that the parties’ planned joint venture made the facts of Yeoman’s Row sufficiently analogous to those of Banner Homes.

Restitution/ Unjust enrichment

3.8 Whilst denying his proprietary estoppel claim, neither Lord Scott nor Lord Walker held that Cobbe had to go home empty-handed. Lord Scott at [4] contrasted Cobbe’s “proprietary claims” (based on proprietary estoppel and constructive trust) with his “in personam claims” in unjust enrichment, for a quantum meruit, and for a restitutionary remedy arising on a total failure of consideration. The relationship between those three “in personam claims” is not made clear; it seems they are to be considered as separate but inter-related. Lord Scott’s decision was that Cobbe had established each of those three personal claims and, as a result, was entitled to receive from YRML a sum equal to the expenses he had reasonably incurred in applying for and obtaining planning permission as well as an appropriate fee for the services he had provided to YRML. That sum was to be determined by an inquiry, but £150,000 was suggested by Lord Scott as “some indication of the amount a quantum meruit might provide”.6

3.9 Lord Scott’s reasoning in relation to these three personal claims is rather brief. For example, the conclusion that YRML was unjustly enriched at Cobbe’s expense is reached without any specific explanation as to why YRML’s enrichment at Cobbe’s expense was unjust. That question is however impliedly addressed when Lord Scott goes on to consider the other two personal claims. A quantum meruit is available as L-M knew that Cobbe did not provide his services gratuitously; and a total failure of consideration claim can be made because:

5 Lord Walker stated at [93] that “Mr Cobbe cannot in my opinion obtain any further assistance from the doctrine of the constructive trust” but did not provide any reasons for that conclusion. 6 At [44]. But see Lord Mance at [96].

6 “Where an agreement is reached under which an individual provides money and services in return for a legal but unenforceable promise which the promissor, after the money has been paid and the services provided, refuses to carry out, the individual would be entitled, in my opinion, to a restitutionary remedy.”

4. The Decision of the House of Lords as to Proprietary Estoppel: Consequences

4.1 The reasoning of each of Lord Scott and Lord Walker (while differing one from the other) rests on what seems to be a dramatic re-interpretation of proprietary estoppel, as it has come to be commonly understood and applied. Lord Scott’s re-interpretation essentially denies the existence of proprietary estoppel as a distinct doctrine. Its effect is that proprietary estoppel does not exist as an independent means by which B can acquire a right against A. Instead, it seems, “proprietary estoppel” simply consists of an application to particular facts of estoppel by representation or of promissory estoppel.

4.2 First, like estoppel by representation, proprietary estoppel can operate to prevent A from denying the truth of a matter of fact, or a mixed matter of fact and law. In this way, proprietary estoppel can be evidential: it can prevent A bringing evidence to disprove a contention of B (e.g. a contention that B already has a right of way over A’s land).7 However, A’s being bound to that fact is only of use to B if it assists B in establishing an independent cause of action (e.g. it allows B to show he has a contract with A; it allows B to show A has granted B a property right, etc). So, for example, it does not avail B to show that A is estopped from denying that A made a promise to give B a right: the mere fact of such a promise cannot give B a right against A.8 To acquire a right based on A’s promise, B must show that A is estopped from denying the fact that A is under a legal duty to B to perform that promise. And, even then, where A’s promise is part of a bargain under which A is to give B a right relating to land, A may still be able to rely on section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 to show that he is under no contractual duty to B.

4.3 Second, like promissory estoppel, proprietary estoppel can be used by B to prevent A (perhaps only temporarily) from asserting a particular right against B. In this way, proprietary estoppel can be defensive: it can give B a defence against a right of A (e.g. it may be used to prevent A from asserting a right to remove B from A’s land).

4.4 This analysis, as noted by Lord Scott, is consistent with the name of proprietary estoppel; however, it cannot be reconciled with the current operation of the doctrine. Whatever its roots, proprietary estoppel has been used, particularly since the 1960s, as an independent means by which B can

7 For an example see e.g. Knights v Wiffen (1879) LR 5 QB 660. 8 See e.g. Jorden v Money (1854) 5 HLC 185.

7 acquire a right against A. As a result, many examples of its application cannot be explained on the basis put forward by the House of Lords in Yeoman’s Row. For example, in the seminal case of Crabb v Arun DC [1976] Ch 179, B acquired a right against A as a result of B’s reasonable reliance on A’s implied commitment to grant B an easement. Lord Scott at [22] analyses the decision as depending on a representation by A that B already had such a right; not on a promise that B would acquire such a right in the future. However, that view is very difficult to reconcile with the facts of Crabb, or the analysis of the Court of Appeal in that case.9 Moreover, even on Lord Scott’s analysis of Crabb, it is not clear why Arun District Council could not rely on section 52 of the Law of Property Act 1925 to show that it had not, in fact, granted Mr Crabb an easement. If proprietary estoppel cannot be used to avoid the effect of section 2 of the 1989 Act, how can it be allowed to circumvent the effect of another formality rule?

4.5 Crabb v Arun DC is far from an isolated decision. For example, in Jennings v Rice [2003] 1 P & CR 100 (as in re Basham [1986] 1 WLR 1498) B’s successful proprietary estoppel claim was based on A’s promise to leave property to B in her will. When estoppel operates in relation to promises or assurances as to A’s future conduct, it makes no sense to say that the defendant is ‘estopped’ from asserting some right against the claimant. It may be that, as suggested by Lord Walker, we should now regard Jennings as suspect, as B was not vigorously cross-examined on the question of whether he believed A was legally bound to leave B her property. Yet proprietary estoppel has been routinely applied in cases where B could not possibly have believed that A was bound to grant the promised interest.10 This is most obvious in the cases in which a testamentary disposition is promised. Indeed, in [2001] Ch 210, it was argued that A’s promise to make a will in B’s favour could not be the basis of a proprietary estoppel claim, as it was well known that a will can be revoked. However, the Court of Appeal forcefully rejected that argument; the leading judgment was given by Robert Walker LJ.

4.6 In Jennings v Rice, A had promised to leave B either her whole estate (worth approximately £1.4m) or her house and furniture (worth £435,000); the Court of Appeal (including Robert Walker LJ) confirmed the first instance judge’s finding that A’s estate had to pay £200,000 to B. That sum was not equal to the value of the rights A had promised to give B; the decision is inconsistent with Lord Scott’s characterisation of estoppel as a doctrine that “bars the object of it from asserting some fact”. The remedial flexibility demonstrated in Jennings, and applied more recently by the Court of Appeal in Powell v Benney [2007] EWCA Civ 1283, is an important feature of the modern operation of proprietary estoppel; yet there is no room for it in the Yeoman’s Row analysis.

9 See esp per Lord Denning MR at 187-8. 10 See eg re Basham [1986] 1 WLR 1498; Wayling v Jones (1993) 69 P & CR 170; Campbell v Griffin [2001] EWCA 990; Ottey v Grundy [2003] EWCA Civ 1176.

8 4.7 In Yeoman’s Row itself, the radical re-interpretation of proprietary estoppel was certainly not necessary for the decision reached by the House of Lords. That decision is consistent with the conventional view that proprietary estoppel does exist as an independent means by which B can acquire a right against A; it can be explained on the basis that, on the particular facts of the case, the parties had not made a sufficiently precise agreement in principle; nor had YRML made the necessary commitment to honour such an agreement. As a result, Cobbe’s reliance on an eventual contract was premature. This was an arm’s length commercial transaction; the preliminary agreement was incomplete in significant respects; and it was understood by the parties not to be legally binding. Although Cobbe’s reliance was encouraged by L-M, he undertook the work in the risk that the formal agreement necessary to give him a right in relation to YRML’s land might not be concluded. Cobbe’s estoppel claim therefore failed for essentially the same reasons as that in Attorney- General of Hong Kong v Humphreys Estate (Queen's Gardens) Ltd [1987] AC 114; although here the preliminary agreement was effectively, rather than explicitly, made subject to contract.

4.8 Given this, it is useful to ask why the House of Lords went out of its way to set forward a revised version of proprietary estoppel. It may be that a quite deliberate attempt was made to cut the unruly doctrine of proprietary estoppel down to size. Indeed, on the previously prevailing view of the doctrine, there is an important question as to why B’s reasonable reliance on A’s commitment should be capable of giving B a right if, but only if, A’s commitment relates to some land of A. One way of answering that question, adopted in other jurisdictions (such as Australia and most of the United States), is to remove that restriction on the operation of estoppel as a positive source of rights.11 It may be that Yeoman’s Row adopts the other means of eliminating the inconsistency: abolishing proprietary estoppel. The reasoning also has the advantage of ensuring that commercial parties (such as those in Yeoman’s Row) are not subject to the vague standards (such as the need for ‘unconscionable conduct’) that seem to be a feature of proprietary estoppel. Further, it removes any uncertainty as to the extent of the right acquired by a successful proprietary estoppel claimant: the other side is simply estopped from denying a particular matter of fact or of fact and law.

4.9 However, the great practical problem with this House of Lords’ reasoning is that the need which proprietary estoppel has answered in many cases (such as Crabb v Arun DC, re Basham and Jennings v Rice) remains. There will still be cases in which: (i) B has reasonably relied on a promise by A that B will, in the future, acquire a right in relation to A’s land; but (ii) perhaps due to a failure to comply with a formality rule, B cannot show that A is contractually bound. Indeed, as Dixon has noted, the future extension of electronic registration requirements will mean that such cases will arise more

11 Indeed, it can be argued that certain English decisions (e.g. Brewer Street Investments Ltd v Barclays Woollen Co Ltd [1954] 1 QB 428) are best understood as allowing estoppel to operate as a cause of action even where A’s commitment is not to give B a right relating to A’s land.

9 frequently.12 It is inconceivable that courts will simply ignore the impulse to protect B, formerly given effect to through proprietary estoppel. Instead, courts will have to turn to other areas, such as constructive trusts or unjust enrichment. The difficulty is that these doctrines may be poor substitutes: unlike proprietary estoppel, they have not been developed to meet the specific need of protecting a party who has relied on a belief, for which another is responsible, that he will acquire a right in relation to that other party’s land.

5. Proprietary Estoppel Substitutes: Constructive Trust?

5.1 Following the decision of the House of Lords in Yeoman’s Row, the constructive trust route has three key advantages to B. First, it is a means by which B can acquire a right as a result of his reliance on A’s promise to give B a right in relation to A’s land. Second, due to s 2(5) of the 1989 Act, there is no need for A’s promise to be made in a form complying with the requirements of s.2(1) of that Act. Third, it may be that a constructive trust can arise even if A’s promise does not relate to a specific right but is rather, for example, a promise to leave A’s estate, on his death, to B: see e.g. per Edward Nugee QC in re Basham [1986] 1 WLR 1498 at 1510. Given the impulse to protect B in such cases, it is likely that constructive trusts principles will be extended and possibly distorted in order to provide protection formerly available through a proprietary estoppel claim. After all, as noted above, the concept of a constructive trust has already been extended in cases such as Yaxley v Gotts and Kinane v Mackie-Conteh. This may well undermine Lord Scott’s laudable attempt to circumscribe the situations in which such trusts can arise; it may also undermine any certainty created by the limits placed on the operation of proprietary estoppel.

5.2 In Yeoman’s Row, Lord Scott analysed Cobbe’s constructive trust claim by focussing on the cases such as Pallant v Morgan and Banner Homes Group plc v Luff Developments Ltd. It is submitted that his Lordship was correct when noting that the principle underlying such cases can apply only where, as a result of a promise made to B, A has acquired a right.13 The principle is therefore of limited assistance to B where B’s claim comes from B’s reliance on A’s promise: it will only be relevant where B’s reliance contributed to A’s acquisition of a right.

5.3 However, in cases where B has relied on A’s promise, a different form of constructive trust may provide assistance to B: the so-called “common intention” constructive trust. Indeed, following Stack v Dowden [2007] 2 AC 432, B can invite a court to undertake an examination of all the factors that may allow for an inference, or even an imputation, of a common intention of A and B that B should acquire a right in relation to A’s land.14 It seems that

12 Dixon, ch 9 in Modern Studies in Property Law, vol 2 (ed Cooke, 2002) at 165-166. 13 See further McFarlane (2004) 118 LQR 667. 14 For a (non-exhaustive) list of possibly relevant factors in a domestic case see per Baroness Hale in Stack v Dowden [2007] 2 AC 432 at [69].

10 future claims, formerly capable of being dealt with by the reasonably well- settled principles of proprietary estoppel, will instead push the boundaries of this form of constructive trust. For example, can this form of constructive trust arise where the parties’ common intention is not that B currently has a right to a share of the benefit of A’s land, but rather that B will acquire such a right in the future? The analysis of Edward Nugee QC in re Basham [1986] 1 WLR 1498 at 1509-10 suggests a positive answer. Further, can this form of constructive trust apply where the parties’ common intention is not that B will acquire a right to a share of the benefit of A’s land but rather that B will acquire a different form of right (such as a right of way, a lease, or a charge)? The analysis of the Court of Appeal in Yaxley v Gotts and Kinane v Mackie- Conteh suggests that it can. Moreover, can this form of constructive trust lead to B acquiring a right that is less extensive than the right intended by the parties? It has been suggested, or perhaps assumed, that the answer is No;15 but the flexibility shown in proprietary estoppel cases such as Jennings v Rice and Powell v Benney may have to be incorporated into this form of constructive trust in order to avoid B’s acquisition of a right disproportionate to the extent of the detriment he would otherwise suffer.16

6. Proprietary Estoppel Substitutes: Unjust Enrichment/Restitution?

6.1 In general, when considering a claim based on A’s unjust enrichment at B’s expense, four questions must be answered:17  Has A been enriched?  Was that enrichment received at B’s expense?  Is there a reason for which it is unjust for A to retain the benefit of that enrichment?  Are there any defences available to A against B’s unjust enrichment claim?

6.2 Prior to Yeoman’s Row, the courts struggled with the notoriously difficult question as to whether an unjust enrichment claim should be available where B carries out work in reliance on a contract that is not, in fact, concluded.18 The recognition of such a claim by the House of Lords is therefore very significant; but the importance of the decision is undermined by the rather laconic way in which the claim is explained. First, the very brief treatment given to the three “personal claims” identified by Lord Scott means that little

15 See e.g. per Baronness Hale in Stack v Dowden [2007] 2 AC 432 at [61]; per Chadwick LJ in Oxley v Hiscock [2005] Fam 211 at [69]. 16 Some support for that analysis is provided by Lawrence Collins J in van Laethem v Brooker [2006] 2 FLR 495 at [263]. 17 See e.g. per Lord Steyn in Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221 at 226-7. 18 For a thorough attempt to deal with this question see the judgment of Nicholas Strauss QC in Countrywide Communications v ICL Pathway [2000] CLC 324. See too Regalian Properties v London Docklands Development Corpn [1995] 1 WLR 212; Easat Antennas Ltd v Racal Defence Electronics (unrep, Hart J, 28 March 2000).

11 guidance is available as to the basis and future application of those claims. Second, the relationship between those three claims (unjust enrichment; quantum meruit; and “consideration which has wholly failed”) is not made clear: for example, are the latter two claims simply vehicles for enforcing a wider principle against unjust enrichment, or does either have a force independent of that general principle?

6.3 When considering the possibility of a restitutionary claim based on work done prior to a contract that does not materialise, Goff & Jones sets out three crucial questions that must be answered: “what is a benefit in this context; what is the ground of the restitutionary claim; and has the claimant accepted the risk that negotiations may fail and his expenditure may be wasted?”.19 As to benefit, Lord Scott notes that the value of YRML’s freehold was increased by the grant of planning permission, which in turn was obtained by Cobbe’s work. However, is that fact alone enough to constitute a benefit? In Yeoman’s Row itself, YRML showed itself to be willing to sell its freehold (albeit at a higher price than initially agreed) and so it can be said that it regarded its benefit as “realisable”;20 but what if YRML had pulled out of the planned contract with Cobbe as it had decided not to proceed with the permitted redevelopment of the land? In such a case, has a benefit still been received? And if the application for planning permission had not been granted, would that mean that YRML had not received a benefit, even though Cobbe would still have provided professional services at the request of YRML?21

6.4 Given the distinction drawn by Lord Scott between an unjust enrichment claim on the one hand, and a quantum meruit on the other, the question also arises of whether the latter claim can be made without needing to show the receipt of any benefit by the defendant. At [42], Lord Scott states that the quantum meruit award should include Cobbe’s reasonably incurred expenses in applying for and obtaining planning permission in addition to a fee for his services assessed at the “rate appropriate for an experienced developer.” The inclusion of Cobbe’s expenses suggests that the award does not aim solely to remove YRML’s benefit, but also addresses the detriment suffered by Cobbe. It is also worth asking whether the reward initially agreed by the parties, allowing Cobbe some share of the increased value of YRML’s freehold if planning permission were granted, can be used in assessing the “appropriate rate” for Cobbe’s services: given Cobbe provided his services on a ‘no-win no-fee’ basis (taking the risk of being paid nothing if planning permission

19 Emphasis in the original: G Jones, Goff and Jones’ Law of Restitution (7th edn, Sweet & Maxwell, London, 2007), 26-010, where it is pointed out that the English cases to date “provide no clear answer” to those questions. 20 In the term used by Goff & Jones (see G Jones, Goff and Jones’ Law of Restitution (7th edn, Sweet & Maxwell, London, 2007), 1-023) and adopted by Judge Bowsher QC in Marson Construction Co Ltd v Kigass Ltd [1989] 15 Con LR 116 and by Nicholas Strauss QC in Countrywide Communications v ICL Pathway [2000] CLC 324. 21 Of course, on the facts of Yeoman’s Row itself, a failure to obtain planning permission would have been fatal to Cobbe’s claim, as it was found that the work was done on the basis that no payment would be received if no planning permission was obtained: see per Lord Scott at [6].

12 were not obtained) it is not implausible that the “appropriate rate” should include an uplift in the event of success.

6.5 As has been noted, the ground of the unjust enrichment claim is not explicitly addressed by Lord Scott. When considering the quantum meruit claim, his Lordship notes at [42] that L-M knew that Cobbe was not acting gratuitously. This view is consistent with the controversial idea that “free acceptance” may be a valid ground for a claim based on unjust enrichment; but it can hardly be taken as well-established that A comes under a duty to pay B if A simply stands back and allows B to perform an act, knowing that B hopes to be paid. When considering the “consideration which has wholly failed” claim, his Lordship at [43] refers to a principle applying where “an individual provides money and services in return for a legal but unenforceable promise”; but Yeoman’s Row is clearly different from cases where both parties have a mistaken belief that a contract already exists between them.

6.6 As to whether Cobbe accepted the risk of non-payment, it is important to ask whether the grounds on which Cobbe’s proprietary estoppel claim failed should also have been fatal to any restitutionary claim. In dismissing the former claim, Lord Walker at [91] placed considerable emphasis on the fact that Cobbe had taken a risk that a contract might not ultimately be made: Cobbe “ran a commercial risk, with his eyes open”, knowing “that there was no legally binding contract” and that either party was “free to discontinue the negotiations without liability.” As noted by Goff & Jones, it is well accepted that a restitutionary claim will also fail where B takes a risk that a contract will not eventuate, and undertakes work in the mere hope that a contract will be made.22 Again, the House of Lords do not explicitly address this point: both Lord Scott at [12] and Lord Walker at [72] noted the trial judge’s finding that Cobbe believed he would be reimbursed his reasonable expenditure if YRML withdrew before planning permission was granted, although not if planning permission was refused. However, it would be odd if Cobbe’s subjective expectation of reimbursement justified a restitutionary claim that would not otherwise have been available. Moreover, the quantum meruit award was not limited to Cobbe’s expenditure, but included a reasonable fee for his services.

6.7 Nonetheless, if it can be said that YRML acquired a benefit at Cobbe’s expense, it may be possible to support the conclusion that YRML was unjustly enriched at Cobbe’s expense. It is important to distinguish between the various risks that Cobbe may be said to have accepted. First, it was found that he accepted the risk of receiving nothing if planning permission was not obtained. Second, the House of Lords found, that as YRML had not made a representation that it was under a legal duty to sell its land to him, Cobbe accepted the risk that such a sale might not occur. However, it seems that Cobbe did not accept the risk that, in the event that planning permission was obtained, he would receive nothing. So, the ground of Cobbe’s restitutionary

22 See G Jones, Goff and Jones’ Law of Restitution (7th edn, Sweet & Maxwell, London, 2007), 26-013 to 26-014.

13 claim can be seen as the failure of a basis, shared with YRML. That basis can be analysed in a number of ways. Two alternative possibilities are: (i) if planning permission was obtained, a contract would be concluded under which Cobbe would receive some reward for his work; and (ii) if planning permission was obtained, both parties would attempt in good faith to reach a contract based on their oral agreement. On the latter basis, Cobbe took the risk that the contract might not proceed because of a bona fide failure to reach agreement on the terms outstanding (such as security for the overage), but did not take the risk of the transaction going off because of a change of mind by L-M about the agreed financial terms.23 Further, given that L-M encouraged Cobbe to continue his work even after she had decided not to proceed with the initial agreement, it may be possible to say Cobbe did at least some of that work in the mistaken belief that L-M, on behalf of YRML, had a current intention to proceed with the planned deal on the agreed financial terms.

6.8 Given the limited analysis of the unjust enrichment/restitution claim in Yeoman’s Row, we are left with an awkward uncertainty: when will such a claim be available to B, a party who has relied to his detriment on A’s non- contractual promise that he will give B a right in relation to A’s land? The likelihood of such a claim is of course increased where B’s reliance consists in providing a requested benefit to A. For example, it may even be possible to re- conceptualise the award in Jennings v Rice as based on the enrichment received by Mrs Royle as a result of the care gratuitously provided by Mr Jennings. A strict unjust enrichment approach, however, cannot take into account forms of unrequested reliance that do not otherwise benefit A: for example, part of Mr Gillett’s reliance in Gillett v Holt consisted of losing his foothold on the property ladder and failing to take steps to secure his future financial position; and in Crabb v Arun DC, Mr Crabb’s only reliance was to sell off part of his own land without reserving a right of way for the benefit of his retained land. In such cases, the doctrine of proprietary estoppel (as formerly understood) could assist B independently of any benefit received by A; but that option now seems to be precluded by the reasoning of the House of Lords in Yeoman’s Row.

7. Conclusion

7.1 A makes a non-contractual promise to B that he will give B a right in relation to A’s land. B acts in reliance on his belief that A will indeed give him that right. As a result, B would suffer a detriment if A were to renege on the promise. Whether in domestic or commercial contexts, the courts have frequently protected B in such situations. The doctrine of proprietary estoppel was the mechanism by that protection was available. The reasoning of the House of Lords in Yeoman’s Row now precludes proprietary estoppel from fulfilling that role. The crucial question is whether that reasoning will cause courts (i) to abandon their long-standing protection of B; or, instead, (ii) to

23 Following the approach taken in Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880.

14 give effect to a desire to protect B through other means, such as the common intention constructive trust or unjust enrichment.

7.2 Time alone can provide the answer. However, it would be surprising if the impulse to protect B were to disappear entirely. As a result, the common intention constructive trust and principles of unjust enrichment are likely to be pressed into action. The problem is that those doctrines, unlike proprietary estoppel itself, are not chiefly designed to deal with the particular problem of ensuring that B does not suffer a detriment as a result of his reasonable reliance on A. Nonetheless, one clear lesson from the history of English private law is that lawyers and judges are very adept at putting the square pegs of legal doctrines into the round holes of just results.

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