Tuesday Law Report: Remedy although agreement was void

6 July 1999 Yaxley v Gotts Court of Appeal (Lord Justice Beldam, Lord Justice Robert Walker and Lord Justice Clarke) 24 June 1999

WHERE A proprietary estoppel arose out of an oral agreement for the sale or disposition of an interest in land, and the facts equally supported the existence of a constructive trust, the plaintiff was entitled to his remedy since, although the agreement was void under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 because it was not made in writing, section 2 did not affect the creation or operation of a constructive trust.

The Court of Appeal dismissed the defendants' appeal against a decision that the plaintiff was entitled to a leasehold interest in certain property which had been the subject of an oral agreement between them.

The plaintiff claimed to have made an oral agreement with the second defendant to the effect that, in return for the carrying out of certain building works on a property which was divided into flats and which the second defendant proposed to purchase, and in return for acting as the second defendant's managing agent for the flats, the plaintiff would become the owner of the ground floor of the property.

Without telling the plaintiff, the second defendant arranged that his son, the first defendant, should purchase the property. The plaintiff carried out the works and acted as managing agent. Later the plaintiff and the second defendant fell out, and the defendants denied that there was any agreement that the plaintiff should have an interest in the ground floor.

The plaintiff commenced proceedings against the defendants, claiming a declaration and order that he was entitled to a long lease of the ground floor of the property for such term as the court might deem just and equitable; or, alternatively, payment for the value of his interest in the property, or at least that the first or second defendant pay him a reasonable sum for the works and services he had carried out.

The judge found that there was an oral agreement between the plaintiff and the second defendant, and that the first defendant had adopted it. He found that an equity was established to the extent of the plaintiff's ownership of the ground floor of the property, and that he was entitled to that ownership for a term of 99 years. The first defendant was directed to execute a lease within four months unless he paid the plaintiff a sum equivalent to the leasehold interest.

The defendants appealed on the ground that the judge should have held that the oral agreement between the plaintiff and the defendants was void by virtue of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989; and that he was wrong in law to hold that the plaintiff was entitled to ownership of the ground floor by virtue of the doctrine of proprietary estoppel, since that doctrine could not operate to give effect to an agreement rendered void by section 2 of the 1989 Act.

Anthony Allston (Hansell Stevenson) for the plaintiff; George Laurence QC and Louise Davies (Bircham & Co) for the defendants.

Lord Justice Robert Walker said that section 2(5)(c) of the Law of Property (Miscellaneous Provisions) Act 1989 specifi-cally provided that nothing in the section should affect the creation of or operation of, inter alia, a constructive trust. There was much common ground between the doctrines of proprietary estoppel and the constructive trust, just as there was between proprietary estoppel and part performance. All were concerned with equity's intervention to provide relief against unconscionable conduct.

In the present case, although the judge had not made any finding as to the existence of a constructive trust since he had not been asked to do so, it was not disputed that a proprietary estoppel arose on the findings of fact which he had made, and that the appropriate remedy was to grant to the plaintiff, in satisfaction of his equitable entitlement, a long leasehold interest rent free of the ground floor of the property. Those findings equally provided the basis for the conclusion that the plaintiff was entitled to such an interest under a constructive trust, and accordingly he was entitled to the relief sought.