Section 2, LP(MP)A and proprietary estoppel: Where are we now?

The Issue

One of the slight frustrations of being an aspiring academic is that you tend to think in bite-size terms as and when the tutorial cycle demands.  We’ve just “done” the now familiar peaks and troughs of the “new model” constructive trust and proprietary estoppel.  When re-reading Thorner v Major (links to our post) and Yeoman’s Row v Cobbe (again, links to our post) for that purpose, a rather important side-issue emerges about whether proprietary estoppel can be used to “get around” section 2, LP(MP)A 1989.  Section 2, it will be remembered, requires that contracts for the sale or disposition of an interest in land require to be made in writing, signed by or on behalf of all parties, and incorporate all the terms.  Implied, resulting and constructive trusts are explicitly excluded from the formalities requirements (as with section 53(2), LPA).  NL’s post below deals with the interesting other issue about section 2 in relation to collateral contracts.

The Cases: A brief summary

The question about whether proprietary estoppel can be used to get round section 2 was first raised in the Court of Appeal in Yaxley v Gotts [2000] Ch 162.  There it was argued, drawing on Halsbury’s Laws (vol 16, para 962, 4th edn reissue), 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 ais to be invalid …”.  Different rationales were provided by the CA in Yaxley, – Beldam LJ, who chaired the Law Commission at the time at which the LP(MP)A was being recommended and therefore should know what he was talking about, made the important point that Halsbury’s needs to be read in the context of the nature of the enactment, the purpose of the provision and the social policy behind it; he says, in accord with the Law Commission report, that proprietary estoppel is not caught by section 2.  Walker LJ (as he then was) got around the issue by saying that the facts in Yaxley would have established a constructive trust anyway.  Clarke LJ occupied the rather awkward space between Beldam and Walker LJJ.

Now to Yeoman’s Row.  Lord Scott , at para 29, obiter (because Mr Cobbe fails in his claim anyway), says as follows:

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. The proposition that an owner of land can be estopped from asserting that an agreement is void for want of compliance with the requirements of section 2 is, in my opinion, unacceptable. The assertion is no more than the statute provides. Equity can surely not contradict the statute.

Lord Walker is careful to avoid saying anything. Lords Hoffmann and Mance explicitly only agree with Lord Scott; and Lord Mance unhelpfully on this point agrees with both Lords Scott and Walker.

Now to Thorner, where you would have thought that the issue must have arisen because the right by proprietary estoppel was granted (we could, of course, argue the toss about whether the HL was right in doing so).  Yet, it is not until para 99 (Lord Neuberger) that we find out that the respondents “… rightly, in my view, eschewed any argument based on section 2″.  Why was that “right”?  Well, Lord Neuberger, who didn’t sit in Cobbe, says:

Section 2 may have presented Mr Cobbe with a problem, as he was seeking to invoke an estoppel to protect a right which was, in a sense, contractual in nature (see the passage quoted at the end of para 96 above), and section 2 lays down formalities which are required for a valid “agreement” relating to land. However, at least as at present advised, I do not consider that section 2 has any impact on a claim such as the present, which is a straightforward estoppel claim without any contractual connection.

So that’s obiter as well. I could be wrong about this (my students have all complained about the length of the case!) but I don’t think that the other Lords actually address the question.

So, how can we make sense of this issue (which must surely reappear before the higher courts before too long)?

The Options

There seem to me to be three options, which we might refer to as: (a) the Yaxley solution; (b) the Thorner solution; and (c) a possible alternative. This is where ivory tower theory meets practical reality because each of these solutions, albeit plausible, potentially lead to different outcomes in different cases. I have to say that I benefited today from discussing this with a professor who knows a few things about property law and it’s always good for aspirationals to be seen to discuss “interesting” matters with professors.

(a) The Yaxley solution
This is to acknowledge that where CT and proprietary estoppel overlap we should not be overly rigourous in our analysis, because the CT is a recognised exception to section 2. Indeed, the strong version of this argument is that proprietary estoppel is a species of CT (see Re Basham). Now quite apart from the issue that they don’t always overlap because (in theory at least) the CT is based on a common intention as regards the acquisition of the land, whereas proprietary estoppel can arise at that point or at any time thereafter – if you think in venn diagrams, it’s the fried egg one with CT as the yolk and proprietary estoppel as the rest – there is also the issue that they are basically not the same doctrine. The Yaxley assimilation line (which goes back to Re Basham and Grant v Edwards [1986] Ch 638 and Rosset [1991] 1 AC 107) just doesn’t wash conceptually any more, and particularly not after Lord Walker’s disavowal of the analogy between them in Thorner (which, as a footnote, is rather odd, because he is the common link between all three cases).
(b) The Thorner solution
This is the Lord Neuberger solution and it’s rather neat, if under-theorised (or what counts for theory in doctrinal law, he says sniffily). This must, it seems to me, to be based on the desire in section 2 to get rid of the doctrine of part performance. So things which look like contracts, but which don’t meet the formalities, are void. Cobbe was just such a case; another is United Bank of Kuwait v Sahib [1997] Ch 107 (attempted equitable mortgage by deposit void). On the other hand, non-contractual cases like Thorner are ok because there is no “contract for the sale or disposition of an interest in land”. Now this is all very well, but what about cases like Taylors Fashions [1982] QB 133 (option to purchase extension to lease, unprotected Class C(iv) land charge, bound purchaser through estoppel – that’s off the top of my head, but I think it’s right) and, indeed, yaxley itself – would they survive section 2?
(c) A possible alternative
This is my proposal (well, I say it’s mine, but it’s kind of derived from a paper published in 1993 by Patricia Ferguson, strangely never heard of again, in the LQR) and again it is doctrinal “theory”. The point here is to recognise something which is commonly forgotten about the difference between CT and proprietary estoppel. Whereas with CT, the equitable interest arises when the detriment occurs, with proprietary estoppel, the key point is that the equity does not arise until the judge declares the estoppel to have arisen, phoenix-like, from the facts. To put this another way, whereas a CT gives an equitable interest from the date of the detriment, the proprietary estoppel is a “mere equity” until the remedy is granted. This is significant because the remedy might not be property based, but the payment of cash for example, or indeed, the remedy might be extinguished by the time the case is heard (and remember that, whatever view you take about the quantification of the beneficial interest under a CT, it is a lot clearer than the mess we’ve been left by Thorner). If it is a mere equity, then section 2 arguably does not come into play at all in any of the proprietary estoppel cases (whether contractually based or otherwise; and s 116, LRA 2002 would not be relevant to this discussion either), we don’t need to find difficult distinctions between near-contract cases and the others.

I suspect there are other possible solutions and would be interested to hear them.

p5rn7vb
Posted in FLW article, Housing law - All, Trusts and Estoppel.

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