This Row Management Ltd[1] which concerned the operation

This paper is to critically analyse the
statement of Lord Scott within Cobbe v
Yeoman’s Row Management Ltd1 which concerned the operation of the doctrine
of proprietary estoppel. Amongst others, Lord Scott proposed in his majority
opinion that “… proprietary estoppel
cannot be prayed in aid in order to render enforceable an agreement that
statute has declared to be void.”2
As said otherwise, this doctrine cannot be invoked by a claimant due to
non-compliance with statutory controls, specifically the rules contained in the
Law of Property (Miscellaneous Provisions) Act 1989.3
After exploring the principles of proprietary estoppel and considering the
relationship between equity and statutory rulings, this paper will critically
assess whether equity should or should not prevail over the statute.

Nevertheless, this paper will support Lord Scott to an extent that the doctrine
should not able to render an enforceable agreement where it does not comply
with the statutory regulations in cases of a commercial context.

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Section
2 of the 1989 Act4 requires that contracts
regarding the creation or transfer of an estate or interest in land must be in
writing, that all terms that the parties have expressly agreed must be
incorporated into one document and lastly, this contract must be signed by or
on behalf of each party to the transaction. This paper will focus on the
formality that a property right taking place in land or equity must be granted
by signed writing.5 The purpose of this act is to declare void any agreement
purporting to create or dispose of an interest in land which does not comply
with the mandatory formalities.6
An exception arises for resulting, implied and constructive trusts according to
Section 2(5)7 however this section does
not account for proprietary estoppel. Does an agreement for the acquisition of
an interest in land that does not comply with formalities, become enforceable
through the method of proprietary estoppel?8 In
order to critically evaluate this, we must first explore the nature of this
doctrine.

 

Proprietary
estoppel is a means of creating an equitable interest within land9 that
may be acquired where the correct formalities have not been followed, allowing
those who have relied upon their own detriment or an assurance made are able to
claim to a remedy in court. A proprietary right is then created through
informal means.10
To exemplify, A encourages B to believe he has a right over A’s land or that A
will confer such right on him, and B then, in reliance on that belief, acts to
his detriment and may be entitled to relief – a right in rem.11 The purpose of this
doctrine is best explained by Lord Denning in Crab v Arun12 where the proprietary estoppel is “…to
prevent a person from insisting on his legal right…whether arising under
contract, or on his title deeds, or by statute…when it would be inequitable for
him to do so having regard to the dealings which have taken place between the
parties”. This
doctrine can operate as both a ‘sword’ and ‘shield’ as suggested by Lord Scott where
it was a ‘sub-species’ of promissory estoppel.13
For instance, in Plimmer14, this doctrine was applied as
a sword to prevent a licensor from going back on his representation.  

 

Ramsden v Dyson15
is best known as the foundation of the modern law of proprietary estoppel.16
So as to invoke this principle, the representee had to satisfy the following. Firstly,
that the other party, the representor that is, has raised an expectation which
would influence the reasonable man. Next, that it would be unconscionable for
the expectation not to be fulfilled.17 However, an intake of proprietary estoppel cases in the last few decades
has resulted in a wider and flexible interpretation of the requirements of this
doctrine. A contemporary approach, ensuring an effective
remedy, was presented in Taylor’s
Fashions Limited v Liverpool Victoria Trustees Co Ltd18  which was founded
on the concept of unconscionability as set out by Oliver J. Proprietary
estoppel operates on the concept of unconscionable behaviour and can be used to
award an interest in land as a remedy where it would be immoral for the holder
of the legal title to deny the claimant’s entitlement.19
To summarise the current elements, a
statement or action is made by the defendant, who ought to appreciate the
claimant will rely on it; Secondly, an act by the claimant in the reasonable belief that he has or will get
an interest in land, induced by that statement or action; and lastly there is a
consequent detriment to the claimant if the defendant is entitled to resile
from his actions.20

 

In Cobbe,
the House of Lords emphasized that proprietary estoppel would only exist where
it was clear that the claimant believed he had a certain interest in another’s
property however it has held here that the claimant, an experienced property
developer, only had expectations of further negotiations to enter into a
certain contract, there was no interest in land itself. The oral agreement
between the defendant company and claimant was not s.2 compliant thus the
claimant was not entitled to an estoppel due to Lord Scott’s notion that
‘equity cannot contradict the statute’.

 

To
what extent should estoppel be allowed to create property rights when there is
a clear policy expressed in statute that these rights should be created with a
certain degree of formality?21To
critically assess Lord Scott’s statement, it must be questioned, should equity
prevail over the statutes despite non-compliance with the formality rules? There
has been uncertainty within this debate as to the approach of the courts when
faced with a proprietary estoppel claim where the agreement falls foul of s.2.

 

This
paper will first argue against Lord Scott’s view. The decision held in Cobbe of the non-compliance with s2 where
no proprietary right was given, has been subject to notable criticism.

The judgement has been regarded as a ‘severe curtailment of the doctrine’ and
was believed to have greatly narrowed the scope of its operation which lead to
some commentators believing it was the ‘death of proprietary estoppel’ within
commercial cases. Scott’s view may restrict the scope of the doctrine as it
serves to defeat a claim of proprietary estoppel. According to the Modern Law
Review, this decision has serious implications for the doctrine. In relation to
land this would effectively preclude the operation of proprietary estoppel, as
all agreements in relation to land are void unless satisfying the formality
requirements of section 2. This
suggesting that any proprietary estoppel claim based on an indication or
promise that the claimant will get an interest in land will fall foul of
section 2, unless the claimant happens to be able to establish a constructive
trust. If this is correct, that could represent a substantial blow to the
doctrine.

 

Those
in objection to the controversial reasoning in Cobbe would argue that when one party claims a proprietary right,
an estoppel should be considered an antidote for formality defects.22
To support this argument, we must consider the judges in favour of the doctrine,
for  instance, Lord Walker in Cobbe, denoted that the doctrine was
‘flexible’ where the courts may use when appropriate to prevent injustice
caused by the inconstancy of human nature. Therefore, we must analyse instances
where the courts have done so. For instance, in Whittaker v Kinnear23, where the sale of
land was concerned, it had survived the enactment of s2 LPMPA despite Lord Scott’s
obiter which suggested the contrary in Cobbe.

 

Some
may further argue that equity should intervene to give a purchaser equitable rights where no document
compliant exists. This was demonstrated Yaxley v Gotts24
where Lord Walker suggested “the doctrine of estoppel may operate to modify and
even counteract the effect of s. 2 of the 1989 Act. The circumstances in which
s. 2 has to be complied with are so various, and the scope of the doctrine of
estoppel is so flexible, that any general assertion of s.2 as a ‘no go area’
for estoppel would be unsustainable … In this case, that principle must, of
course, be applied consistently with the terms in which s. 2 of the 1989 Act
has been enacted, including the saving at the end of s.2(5)”25
This suggests the courts intentions as they were willing to find an interest in
land within equity. A constructive trust can be found as an exception, however,
this may have little significance to commercial cases like Cobbe where such trust
could not found.

 

Another reasoning as to why this doctrine may
render an agreement enforceable is due to the perception that proprietary
estoppel should be available to cure absence of formality when ‘it would be
unconscionable for the defendant to rely on lack of formality to defeat the
claimant’. It is evident that there is proportionality in its doctrine which
may be applicable in certain circumstances relating to statutory provisions.

Although, it is important to note that this doctrine should be distinguished
from the doctrine of constructive trust although the two concept requires
detriment and work on the basis that it would be unconscionable for the legal
owner to deny the existence of the beneficial interest.

 

The doctrine has been noted as ‘flexible’ but
is this sufficient enough to against formality rules?

 

Despite
evidence in favour of the allowance of equity, the ultimate stance of this
paper is in agreement with Lord Scott to an extent, where ‘equity cannot
contradict the statute’ but subject to particular contexts. Lord Scott, in
supporting his view, indicated in his obiter comments that the doctrine cannot
be used to circumvent s2 1989 act.  In Cobbe, it was unnecessary to decide the
point because of the agreement, being incomplete, fell outside the section. But
Lord Scott nonetheless stated (at para.29) that “My present view, however, is
that proprietary estoppel cannot be prayed in aid in order to render
enforceable an agreement that statute has declared to be void.”.

 

To
support this view, Peter Smith J expressed his agreement with the obiter
comments of Lord Scott  in Hutchinson v B & DF Limited26
where a 5- year lease term, having failed to comply with the s.2(1)
formalities, could not be made enforceable through proprietary estoppel. His
comments were themselves obiter as the case for proprietary estoppel had not
been made out in other respects. But if we consider this point, it is evident
that where a term of a lease fails with rules, proprietary estoppel cannot be
relied upon. We can see the necessity of the rules of the statute which must be
followed.

 

Secondly,
equity should not conflict with the statute due to the principle of public
policy. Referring back to Yaxley, it
was questioned whether estoppel can be used to get around section 2. Here the
claimant had entered into an ‘oral’ contract to purchase a building, rendered
void by s2 LPMPA but held a constructive trust interest due to the faith of a
contract plus money claimant spent. There it was argued that: “‘The doctrine of
estoppel may not be invoked to render valid a transaction which the legislature
has, on grounds of general public policy, enacted is to be invalid …”. 27
Robert LJ identified what is known as the public policy principle. The use of
estoppel contradicts policy behind legislation by attaching an element of
validity to an arrangement that requires to being in a certain form – which
parties have failed to observe.28
We can see the significance of statutory controls, so why override them? If we
do not comply with the formality rules, what purpose does the statute hold? Arguably,
the doctrine may undermine the purpose of the statute and these policy
principles.29 In further support of this argument of public policy, we
can refer to Kok Hoong Appellant v Leong
Cheong Kwneg Mines Ltd30 where
it was considered to be against the general principle of social public policy
to allow an estoppel to effect Parliaments aims. It is evident that there is a
necessity for the certainty of contracts whereby the statute should be obeyed
subject to these policy rules.

 

Nevertheless,
to place an in-depth analysis of whether proprietary estoppel can override the
statute, we must focus on the context in which estoppel is being claimed,
relative to commercial and domestic contexts. To question does proprietary
estoppel have relevance to?

 

The
case of Thorner v Major involved a successful proprietary estoppel claim where there was a
domestic context. This was a proprietary estoppel case based on the claimant
working his father’s cousin’s farm for no pay on the expectation of receiving
it on the owner’s death where it was distinguished that this case was a “classic
farm and family” in contrast to the contractual case of Cobbe. Lord Neuberger stated at para 99: “I do not consider that section 2
has any impact on a straightforward estoppel claims without any contractual
connection”. The emphasis in Thorner
was on the fact that this had been a gift rather than a contract, which is why
s.2 did not apply and indicates a distinction between commercial and
non-commercial proprietary estoppel claims. In non-commercial situations, the
estoppel claim is not dependent on facts suggesting the sort of agreement
requiring formality, so these types of domestic cases are unlikely to be
affected by the decision in Cobbe. It may be that s.2 can be
overcome in the domestic, familial context but the position remains largely
unresolved. Furthermore, if we refer back to Whitteaker, Bean J also suggested a
distinction between commercial and domestic cases where it is the nature of
party’s dealings; which allows estoppel to succeed in domestic cases. A more intrusive equitable
intervention is appropriate in the domestic, as compared to

the commercial, context. 31

 

 

Thorner
– upheld on the basis of (oblique) promises by D. John me

 

 

However,
we must contrast this to commercial contexts like Cobbe. The status of claims of
proprietary estoppel in commercial
situations is still somewhat unsettled but suggestively aa that such a claim
will only succeed if connected to a claim for a constructive trust. The
strictness in Cobbe may be due to the
commercial relationship between the parties where their agreements are to be
judged by a ‘business common sense’32.

Suggestively, if the parties are familiar with a commercial sense, it should be
imposed that they be aware of contractual nature of developments as such as in
Cobbe and understand the differences between certainty in land and certainty
with intention to create a contract.

 

This
paper supports the idea that despite the harshness of the decision, further
formalities are to be required for the expectation to be realised in cases Cobbe
where a commercial setting, a written contract, followed by a conveyance, had to be
negotiated and completed, As the
House of Lords made abundantly clear in Thorner, the divide between the
two cases rests on the difference in context.33

 

To
conclude, it is evident that proprietary estoppel is an equitable doctrine
where claimants may be able to rely on when acquiring a property right in land.

As to the question of whether this doctrine can render an agreement enforcement
where there has been non-compliance with s2 still remains to be unsolved, but
with the direction of case law, it is evident that cases regarding a commercial
context like Cobbe, proprietary estoppel will fail, however in cases like Thorner where s2 is inapplicable, a
domestic context may allow equity to prevail.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1
2008 UKHL 55, 2008 1 WLR 1752

2 Ibid
1, para 29, per Lord Scott of Foscote

3 Law of Property (Miscellaneous Provisions) Act
1989 s2

4 Ibid 3

5 Conveyancer and Property Lawyer 2011
Failure to estop: rationalizing proprietary estoppel using failure of basis
Mischa Balen Christopher Knowles

6 Lord
Neuberger ‘The Stuffing of Minerva’s Owl?’ Taxonomy and taxidermy in
equity

(2009) 68 CLJ 537 541

7 Section 2(5) LPMPA 1989

8 Proprietary
estoppel and contracts for the sale of land Or: The Parliamentary Paradox Guy
Adams St John’s Chambers

9 Land Law Textbook. Ben McFarlane Nicholas Hopkins, Sarah Nield
page 166

10 Ibid 5

11
https://www.oxbridgenotes.co.uk/revision_notes/law-land-law/samples/proprietary-estoppel

12 Crab v Arun District Council 1975 EWCA Civ 7

13 Lord Scott in Cobbe (at para.14)

14 Plimmer
v Wellington 1884 L.R. 9
App. Cas. 699, PC

15 Ramsden v Dyson 1866 LR 1 HL 129

16 Lord
Neuberger ‘The Stuffing of Minerva’s Owl?’ Taxonomy and taxidermy in
equity

(2009) 68 CLJ 537 541

17 From acquiescence to expectation by R.D
Mullholland

18 1982 QB 133

19
http://bykcq64a.myq-see.com/equitable-estoppel-essay140-c9.html

20 Ibid 6

21 Dixon, Martin, Confining and
Defining Proprietary Estoppel: The Role of Unconscionability (2010) 30 Legal
Studies 408.  

 

22 Elizabeth Cooke (Modern Studies in Property
Law, Volume 2)

23 2011 EWHC 1479 (QB)

24 2000 Ch 162

25 Ibid 24

26 2008 EWHC 2286 (Ch)

27 Halsbury’s Laws (vol 16, para 962, 4th edn reissue)

28 Proprietary
Estoppel and Formalities in Land Law and the Land Registration Act 2002: A
Theory of Unconscionability 1

29 Filler, Consideration and form 1941 Colombia Law review 799

30 Kok
Hoong Appellant v Leong Cheong Kwneg Mines Ltd 1964 AC 993.

 

31 Proprietary Estoppel, Promises and Mistaken Belief John Mee* 2011

32 Ibid 6

33 Ibid 5

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