This case is part of a wider article, "No Contract. No Problem?", where I explained the importance of taking legal advice when buying, or acquiring an interest, in a property, regardless of whether it is a building or land, I explained the relevance of Section 2 of The Law of Property Act (Miscellaneous Provisions) Act 1989 which imposes some restrictions on individuals’ freedom to determine what contractual obligations they will accept in the course of that transaction. The following case study demonstrates what can happen when you have what you think is a clear agreement to purchase, or acquire an interest in, a property or other land, from somebody but it is either not in writing, or only partially in writing. If you do not have a contract to purchase that satisfies the Act’s requirements, you may be able to enforce alleged property rights via a claim based on a ‘common intention constructive trust’; alternatively, the equitable claim of proprietary estoppel may also come to the rescue. You can read the detailed background to this cases here.
In this case[1], Your Best Properties Limited ("YBP") orally agreed to sell a hotel for £1.65 million to the claimant[2], with completion to take place within 18 months, to give the claimant an opportunity to raise the funds. It was also agreed that a deposit of £300,000 was payable (“the Agreement”). Possession of the hotel was given to enable works to be carried out and deposit partly paid over pursuant to the Agreement, but the rest YBP allegedly refused to accept and in the end did not wish to proceed. They ended up excluding the claimant from possession accordingly.
The agreement was oral and therefore ineffective under section 2(1) of the Act. Counsel for the claimant sought to argue for transfer of the hotel pending payment of the balance of the purchase price, based on proprietary estoppel. According to the judge, this claim faced “insurmountable problems”.[3]
The first was that the relevant person on behalf of the claimant was, on the evidence, at all times aware that to acquire an interest in the hotel he would first have to enter into a written contract. Accordingly, the expectation of acquiring an interest in land was thus, on proper analysis, an expectation that a formal contract would be entered into, pursuant to which the claimant would, if and when they paid the full purchase price, acquire the Hotel.[4]
Secondly, and arguably the more interesting issue, was that the claim in the instant case was essentially contractual. What the claimant really wanted was the benefit of the Agreement, namely transfer of the hotel. Such was clearly an attempt to rely upon proprietary estoppel to enforce the terms of an ineffective oral agreement, flouting the policy behind section 2(1) of the Act in the first place.[5]
The claimant’s claim in damages also failed, because of course the judge had found there was no binding contract. The deposit was returnable however, the most appropriate analysis being there was a claim in restitution to recover the deposit because it was paid for a consideration that had wholly failed, due to the Agreement being ineffective.[6]
[1] [2024] EHWC 1284 (Ch) “Pathway”
[2] Though it transpired that apparently the wrong claimant was party to the action anyway because ‘the agreement’, such as it was, was never concluded with them
[3] Para 39, “Pathway”
[4] This was in accord with prior leading authority to such effect, being Cobbe v Yeoman's Row [2008] 1 WLR 175, “Cobbe”
[5] Para 59, “Pathway”
[6] Ibid. para 108, albeit this was not how the claimant articulated their claim
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