Rolling Back the Years: Estoppel and s.2

[Edit NL 21/6/2011. Owing to some enthusiasm by contributors and an evening off editing by me, we have two reports on this case done on the same evening. I've kept both because they present interestingly different approaches to the issues in this case, but I've combined them. First, strictly temporally, is David Smith's version, followed by Dave's]

Whittaker v Kinnear [2011] EWHC 1479 (QB)

This case raises some interesting questions about estoppel and sale.

K sold her property and it’s grounds to W and his business associate, Mr Nichols in 2007, apparently because she could no longer afford it. This sale was at an undervalue and it was intended that K and his partner redevelop part of the extensive grounds. As part of the deal the property itself and its immediate gardens were rented back to K for 12 months for a rent of £1 per month on a tenancy describing itself as an Assured Shorthold Tenancy. There was also an overage agreement that purported to give W a share in profits over a certain value accruing from the redevelopment.

Mr Nichols divested himself of his interest to W in at some stage. W failed to keep up payments on a loan with the Heritable Bank secured on the property. The Bank accordingly exercised their right under s101 LPA 1925 to sell the property. They proceeded against K in the name of W through LPA receivers for possession to permit the sale by service of notice to quit.

There were essentially two planks to K’s defence. The first was that W had told her that he would transfer the house and its immediate gardens to her and had not done so and that he had represented to her that she would be able to live at the property as long as she desired. In support of this contention was that the property had been transferred to W at a considerable undervalue (allegedly by £500,000) and that W had failed to maintain the structure and fabric of the house. The second component were that the notices to quit were invalid although this was dismissed by the judge and not renewed on appeal.

The primary response by the Bank to these assertions were that s2, Law of a Property (Miscellaneous Provisions) Act 1989 precluded a proprietary estoppel as the alleged agreement made between K and W had not found its way into the particulars of sale they had signed.

The Notices
Before dealing with the estoppel argument it is worth briefly looking at the notice to quit. It was argued, as a new point, before the High Court that the Notices to Quit were both invalid because the tenancy was a yearly tenancy and further because one of them did not have the information prescribed by the Notices to Quit etc (Prescribed Information) Regulations. The Court held that the tenancy had become monthly at the end of the fixed term and so at least one of the notices was valid, probably the second one. Although the second notice did not contain the prescribed information it had been served with the first notice which did, and so that was sufficient. In the face of this the Court was not prepared to allow this new point to be raised on appeal.

The Estoppel Argument
The Court reviewed the key cases on proprietary estoppel. It noted that there was in fact no settled view on whether s2 was sufficient to prevent a proprietary estoppel argument. At this point you might be expecting me to tell you that the Court immediately decided this point and created exciting new law. Unfortunately, you would be wrong.

At first instance the Court had held that the issue could not be dealt with in summary possession proceedings and had adjourned the matter for a full trial. However, the Court had made something of an error as they had not allocated the case to a track as is required by CPR 55.8 where the claim is “disputed on grounds which appear to be substantial”. Following the decision in Forcelux v Binnie the adjourned hearings were not a trial and so the Bank were in effect seeking a summary judgement for possession. Therefore the appeal was not actually about the estoppel issue at all but was really about whether there was a substantial dispute. The Court held that there was a substantial dispute on the face of the evidence before it. It was not really helped in it’s decision making by the failure of either key party to produce any form of witness statement.

Accordingly the appeal was dismissed on the basis that it was not appropriate to give summary judgement and the matter was remitted back to the County Court for a full trial.

[And now Dave's version]

The question as to the interaction between a claim to proprietary estoppel and section 2, Law of Property (Miscellaneous Provisions) Act 1989 was reviewed by us in 2009 and has been something of an obsession of mine for a while (but not compulsive, honest).  The issue is whether proprietary estoppel can be used to get round the formalities in section 2 regarding contracts for the sale or disposition of an interest in land (which require signed writing and incorporating all the terms).  We noted that the recent House of Lords cases and other CA authority did not speak with one voice (to put it nicely) but that there was a logical property law solution.  In Whittaker v Kinnear [2011] EWHC 1479, the issue arose again before Bean J, but this time had to be decided.

On the alleged facts, Ms Whittaker had sold her extensive property to Mr Kinnear and partner (the latter dropped out of the pitcure) at an undervalue in return for certain rights, eg of occupation, pre-emption and overage.  Mr Kinnear, who had intended to obtain planning permission to develop the property, became bankrupt and his mortgagee’s receivers sought possession.  Ms Whittaker pleaded proprietary estoppel but counsel for the receivers, successfully at the County Court (before the claim was allocated to a track) obtained possession on the basis that section 2 effectively defeated the proprietary estoppel claim.  This was a commercial transaction which required formalities.  It was this judgment which Bean J overturned in a short and largely unsatisfactory judgment (although others may disagree).  He gave permission for Ms Whittaker to re-amend the defence to add a constructive trust claim to it.

Bean J went through the various authorities – Yaxley, Thorner, Yeoman’s Row, and Herbert v Doyle – and accepted that this was a commercial transaction. He favoured the judgment and approach taken by Beldam LJ in Yaxley, on the basis that Beldam LJ “… had been Chairman of the Law Commission at the time of its working paper and report on Formalities for Contracts for Sales of Land on which the 1989 Act was based. Like Hengham CJCP who in oral argument on a point of statutory interpretation in a case in 1307 (Aumeye v Anon YB 33-35 Edw 1 82) said to counsel ‘do not gloss the statute, for we know it better than you: we made it’, he was in a good position to say what the Commission had in mind” (at [29]; this quote probably needs an “I kid you not” proviso). Beldam LJ had simply said that it was not the intention of the Law Commission to affect the availbility of equitable remedies by abolishing the doctrine of part performance. Bean J accepts that proposition (at [30], notwithdtanding Lord Scott’s contrary dicta in Cobbe. Now, I’m just not sure whether that is good enough because, whatever the intent of the Commission, that cannot be relied on as an interpretive canon in the face of the express words of the Act. There are other ways of coming to this conclusion.  The problem is that Bean J went on to argue that, although it is extraordinary not to have a decided case on this point ([34]), these types of case (on proprietary estoppel and constructive trust) are fact-sensitive (perhaps sensing the possibility of an appeal). The parting shot was to say that this was a defence which genuinely disputed the claim on grounds which appear to be substantial, within CPR 55.8, and the matter should be remitted to the county court for directions for trial on the point.

There were some other relatively trivial points raised at the last minute by Counsel for Ms Whittaker which were all rejected by Bean J (and rightly so, I’d say).

It will be interesting to see if this case goes further.

Posted in FLW case note, Housing law - All, Trusts and Estoppel.

About David Smith

David is a solicitor specialising in landlord and tenant matters with Anthony Gold Solicitors. He particularly specialises in newer legislation and has written widely on the Housing Act 2004.

One Comment

  1. Doubt if any of you can understand s2 if you dont think that Hansard is an authority. Also the idea is I thought to analyse not to give gushing adulation.

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