Cobbe v Yeoman's Row Management Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mummery,Lord Justice Dyson,Sir Martin Nourse |
| Judgment Date | 31 July 2006 |
| Neutral Citation | [2006] EWCA Civ 1139 |
| Docket Number | Case No: A3/2005/0536 & 1896 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 July 2006 |
[2006] EWCA Civ 1139
Lord Justice Mummery
Lord Justice Dyson and
Sir Martin Nourse
Case No: A3/2005/0536 & 1896
HC04C02359
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR JUSTICE ETHERTON
Royal Courts of Justice
Strand, London, WC2A 2LL
MR JONATHAN SEITLER QC & MS JOANNE WICKS (instructed by DLA Piper Rudnick Gray Cary LLP) for the Appellants
MR THOMAS IVORY QC & MS MYRIAM STACEY (instructed by Bird & Bird) for the Respondent
Introduction
This case is more difficult and more interesting than most cases in the field of proprietary estoppel. The main challenge for the court is fashioning relief in a form that fairly reflects the particular facts of the case; is just, reasonable and realistic; and is consistent with general legal principles.
On this topic the courts have built up a considerable body of case law. A doctrine designed to grant relief for unconscionable conduct covers a wide spectrum of situations and needs to be flexible. As it potentially affects property rights and interests, it needs to be certain. The imprecise limits of the doctrine and its relationship to more precise concepts of contract, property and trust law commend a cautious approach. It would be unwise, on the one hand, to cramp the court's competence to achieve just outcomes in as many cases as possible. On the other hand, simply doing what the court thinks is just and equitable on the facts of each individual case is liable to increase uncertainty in matters affecting property, in which certainty is important. Unpredictability and inconsistency also make it difficult for parties in actual or prospective litigation to obtain the sufficiently solid advice for negotiating sensible settlements.
An article in (1999) Vol 115 LQR 438 The Remedial Discretion in Proprietary Estoppel is the most valuable discussion that I have read about the principles of equitable relief for proprietary estoppel. It was referred to by Robert Walker LJ in Jennings v. Rice [2003] 1 P & CR 100 at 112. The author, Dr Simon Gardner, concentrates on two main theses: (a) discretion and (b) expectation. Other theses are (c) detriment (relief for the claimant's detrimental reliance on the defendant's unconscionable conduct) and (d) restitution (of the benefits which have unjustly enriched the defendant guilty of unconscionable conduct e.g. by encouraging the claimant to act so as to increase the value of the defendant's property or to save the defendant the expense of paying for something to be done in connection with his property or of doing something himself.)
This case is set very close to contract territory. It arises in the context of pre-contractual negotiations for the sale, purchase and development of a block of flats in Knightsbridge. Under English law there is no general duty to negotiate in good faith, but there are plenty of other ways of dealing with particular problems of unacceptable conduct occurring in the course of negotiations without unduly hampering the ability of the parties to negotiate their own bargains without the intervention of the courts.
The case is also set in the area of work done or services rendered by a claimant without having first secured a contract to protect his position. The work done by this claimant was not, according to the judge, merely in anticipation of a contract: it was done in the positive expectation of a promised contract to sell deliberately induced, encouraged and then ultimately defeated by the unconscionable conduct of the defendant.
Where the defendant has received and accepted the benefit of the claimant's enhancement of the defendant's property, but the promised contract to sell, which encouraged the claimant to act for the defendant's benefit, never materialises, what is the claimant entitled to expect from the court? The question provokes different reactions. First, there are those who think that the claimant is not entitled to expect anything. The person who acts prematurely and imprudently without securing the protection of a prior contract takes the risk of getting nothing. Secondly, there are those who think that entitlement should be limited, for example to reasonable payment for his efforts and reimbursement of his expenditure. Thirdly, there are those who think that the court should not let off lightly the defendant who is culpable of unconscionable conduct: he should be made to behave decently, such as by satisfying the specific expectation of a right or interest in property that he has raised in the claimant and from which he has unconscionably derived, and seeks to retain for himself, the value added by the claimant to the defendant's property.
This appeal requires the court to find a principled way of devising relief in a form that fits a case where the court below found an expectation by the claimant that the defendant would not withdraw from a promise of a contract to sell property on agreed terms, and the specific expectation has been raised and then disappointed by the unconscionable conduct of the defendant.
In giving judgment for the claimant, Mr James Cobbe, against the defendant, Yeoman's Row Management Limited (YRML), the trial judge, Etherton J, held that Mr Cobbe had established a case of proprietary estoppel. It was based on his expectation of acquiring from YRML for re-development the property for which he had been encouraged by YRML to apply for and obtain detailed planning permission in the belief that it would not withdraw from a promise to sell the property to him on agreed terms. In all this Mr Cobbe had been encouraged and induced to act by the conduct of the controlling director of YRML, Mrs Zipporah Lisle-Mainwaring (Mrs LM).
There is an appeal by YRML against the conclusion that this was a case of proprietary estoppel. Another question is whether the judge was wrong in the relief he granted to Mr Cobbe. It took the form of a share, secured on the property by a lien and calculated by reference to the amount by which the planning permission obtained by him had increased the value of YRML's property as at the date when YRML withdrew from the promised contract.
Overview of case
Before examining the detailed facts and the law a brief overview of the main events will set the scene.
Mr James Cobbe is a very experienced property developer. After reaching an oral agreement "in principle" in August/September 2002 to buy a property from YRML for re-development into six town houses, he expended substantial labour, skill, time and money (he says about £196,818, YRML concedes about £80,000) over a period of 18 months between about September 2002 and March 2004. Mr Cobbe's efforts were specifically directed to a planning application for the development of the freehold block of 11 flats at 38–62 Yeoman's Row, Knightsbridge, London SW3 (the Property).
YRML was formed in 1995 as a vehicle to purchase the Property. It had owned it since 15 April 1998 when it was registered as proprietor of the freehold. The Property was subject to tenancies, including long leases (105 years from 25 March 1998) of three flats on the ground floor, which were physically combined into one flat now known as No 50 Yeoman's Row, held personally by Mrs LM and registered under a separate title. Mrs LM is the sole director of YRML, in which her husband, Mr Robert Lisle –Mainwaring, (Mr LM) is the sole shareholder.
Mr Cobbe acted in the belief, which was encouraged by Mrs LM on behalf of YRML, that, if the planning application was successful, YRML would honour the "in principle" 2002 agreement and sell the Property to him. In reliance on that belief Mr Cobbe set about obtaining planning permission. He retained professional advisers, including architects, in relation to the proposed development and paid them; he attended various meetings in relation to the proposed development over the next 18 months with Mrs LM, professional advisers and the Royal Borough of Kensington and Chelsea Planning Department.
The planning application was submitted on 3 July 2003, revised on 21 November 2003 and revised again on 28 January 2004. The resolution granting planning permission was passed on 17 March 2004. Planning permission was formally granted on 5 April 2004.
The price orally agreed with YRML (acting through Mrs LM) in August / September 2002 was £12m. Mr Cobbe would develop the Property. Subject to an overage arrangement, under which each party would have 50% of the gross proceeds of the Property over £24m, Mr Cobbe would be entitled keep any profit from the development.
YRML did not honour the agreement. No binding contract of sale ever materialised, even though the planning permission did. Almost as soon as the resolution to grant detailed planning permission was passed on 17 March 2004 YRML, acting by Mrs LM, withdrew from the oral "in principle" agreement and demanded £20m instead of £12m. Further negotiations between the parties broke down at the end of May 2004.
Proceedings were issued on 20 July 2004. On 22 July 2004 notice of a pending land action was registered by Mr Cobbe against YRML's title. (No such notice was ever registered against Mrs LM's leasehold interest in the flat No 50.) This was removed on 27 January 2005 on the undertaking of YRML not to deal with the Property. No undertaking was sought or given by Mrs LM in respect of her leasehold interest.
Mr Cobbe initially sought specific performance against YRML. The specific performance claim...
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