Yaxley v Gotts and another

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Robert Walker,Lord Justice Clarke,Lord Justice Beldam
Judgment Date24 June 1999
Judgment citation (vLex)[1999] EWCA Civ J0624-23
Docket NumberCCRTF 1998/0357/2
Date24 June 1999

[1999] EWCA Civ J0624-23





Royal Courts of Justice


London WC2


Lord Justice Beldam

Lord Justice Robert Walker

Lord Justice Clarke

CCRTF 1998/0357/2

Gotts & Anr

MR G LAURENCE QC with MS L DAVIES (Instructed by Messrs Bircham & Co, London SW1H 0DY) appeared on behalf of the Appellant

MR A ALLSTON [MR D HAPPE —for judgment] (Instructed by Messrs Hansell Stevenson, Norfolk NR1 4DS) appeared on behalf of the Respondent


Thursday, 24th June 1999

Lord Justice Robert Walker



This appeal raises a point of some general interest on section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 ("the 1989 Act"). Section 2 of the 1989 Act, so far as now material, provides as follows,

"(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are being exchanged, in each.

(5) This section does not apply in relation to -

(a) a contract to grant such a lease as is mentioned in section 54(2) of the Law of Property Act 1925 (short leases);

(b) a contract made in the course of a public auction; or

(c) a contract regulated under the Financial Services Act 1986; and nothing in this section affects the creation or operation of resulting, implied or constructive trusts.

(8) Section 40 of the Law of Property Act 1925 (which is superseded by this section) shall cease to have affect."


It is a remarkable feature of the case that there was not so much as a passing reference to section 2 of the 1989 Act either in the pleadings, or in counsel's submissions, or in the judgment of His Honour Judge Downes (given in the Norwich County Court on 1 September 1997) from which Mr Alan Gotts and Mr Brownie Gotts, the defendants below, appeal to this court. The judgment below was largely concerned with the assessment of the oral evidence which the Judge had heard (although it also contained an important passage, at the end of the judgment, concerned with proprietary estoppel). The Judge accepted the evidence of the claimant, Mr Keith Yaxley, and rejected much of the evidence of the appellants. In this court the appellants do not challenge the Judge's findings of fact but do raise for the first time the significance of section 2 of the 1989 Act. Mr Anthony Allston (for Mr Yaxley) did not contend that this court should not allow the new point to be raised, but did submit that the failure to raise it before was an indication of its frailty.


Even though Mr Allston did not object to the new point being taken, either on the hearing of an opposed application for an extension of time for appealing (which was granted by Hutchison LJ on 20 March 1998) or on the hearing of the appeal, all the members of this court have, I think, felt considerable concern about it. The court has been asked to hear an appeal raising issues of law of general importance when the trial judge had no pleadings or submissions directed to those issues, and did not therefore have them in mind when making his findings of fact. I shall have to return to this point in connection with Mr Allston's reliance, if necessary, on a constructive trust.


The facts and the issues on the appeal


Although there is no challenge to the Judge's findings they are not entirely clear and (especially in view of the course which this appeal has taken) it is necessary to set out the facts in a little detail. All the parties lived in North Norfolk. Mr Yaxley had for many years worked as a self-employed builder. Mr Brownie Gotts and his son Mr Alan Gotts owned various rented properties in North Norfolk. Mr Yaxley had previously done work for Mr Brownie Gotts and they were friends.


In about August 1991 Mr Yaxley heard of a converted house, 15 Vicarage Road, Cromer ("the property") which was for sale freehold at an asking price of £65,000. Mr Yaxley and a friend of his, Mr Scales, decided to buy it if they could raise the necessary funds. Mr Yaxley approached Mr Brownie Gotts for a loan of £32,500. Mr Yaxley's plan was to refurbish the property and let it as flats. Mr Brownie Gotts looked at the property and told Mr Yaxley that he would not make a loan but would buy the property himself (Mr Scales seems to have dropped out of the matter). Mr Yaxley's evidence, which the Judge accepted, was that at a meeting Mr Brownie Gotts orally offered Mr Yaxley a bargain under which he would get the ground floor flat (which he was to convert into two) in return for work on the four flats on the middle and top floors, and then acting as the landlord's managing agent for his upstairs flats as well as for the ground floor flats which Mr Yaxley would own. After thinking about it for a few days Mr Yaxley orally accepted this offer.


However when the contracts were exchanged (on or about 30 October 1991) for the purchase of the property the purchaser was named not as Mr Brownie Gotts but as his son Alan, who on 29 January 1992 became the registered proprietor. The purchase price was £60,000 and although the Judge rejected substantial parts of the Gotts' evidence, he appears to have accepted their evidence that the whole of the purchase price was provided by Alan. It was only later that Mr Yaxley came to know these facts. Between January and September 1992 Mr Yaxley carried out work on all three floors of the property. In his witness statement Mr Yaxley estimated that he had spent about £2000 of his own money on materials, together with a great deal of time. He said,

"The value of my time had I charged it to Mr Gotts on a normal basis would have been at least £7,500 and quite possibly substantially more. Thereafter and over the following years until the dispute arose in early 1995, I must have spent hundreds of hours in dealing with the tenants."


Mr Yaxley later quantified what he had spent (in labour, materials and subcontractors' charges in respect of all the flats and the common parts of the property) at £9,346. Nearly half of this sum was spent in respect of the ground floor flats.


The Judge accepted that figure as reasonable. He said that although it was challenged, it had not been contradicted by any other evidence. He also seems to have accepted Mr Yaxley's evidence that he did at a fairly early stage ask for some formal legal document showing his interest in the ground floor of the property and that Mr Brownie Gotts said that a document would be prepared. But in the event it was left as what was called a 'gentleman's agreement'. The Judge found that Mr Yaxley had a "close relationship" with Mr Brownie Gotts, and trusted him, but the Judge did not (and was not asked to) find that there was any sort of fiduciary relationship.


Mr Yaxley worked first on the flats on the middle floor and then on those on the top floor. Those four flats were let by the end of March 1992 at weekly rents of £55 or £50. The two ground floor flats were ready for letting by September 1992. Some of the rents were paid direct to Mr Alan Gotts (as housing benefit) by the North Norfolk District Council. Mr Yaxley's evidence (which the Judge accepted, and found to be partly confirmed by some documentary evidence) was that every Saturday he collected all the rents which were not paid direct, and took them to Mr Alan Gotts' house either at once or the next morning, and that every three or six months there would be a settling up under which Mr Yaxley received £105 a week for the ground floor flats.


In February 1995 Mr Alan Gotts excluded Mr Yaxley from the property, and on 24 April 1996 Mr Yaxley commenced proceedings in the Chancery Division of the High Court. The proceedings were on 19 March 1997 transferred to the Norwich County Court. Mr Yaxley pleaded an oral agreement with Mr Brownie Gotts and alternatively a representation by Mr Brownie Gotts that he would become owner of the ground floor of the property, in reliance on which Mr Yaxley carried out the works, expended money, and performed management duties. He also pleaded that Mr Alan Gotts was a party to, or was fully aware of, the oral agreement and the representation. He sought a declaration that he was entitled to a long lease of the ground floor and an order for execution of such a lease by Mr Alan Gotts; alternatively payment of a sum equal to the value of a long leasehold interest, or equal to the value of his works and services.


The Judge apparently found that there was such an oral agreement and that it had been adopted by Mr Alan Gotts. But then without any reference to section 2 of the 1989 Act the Judge referred to the submissions made to him about proprietary estoppel, and the authorities cited to him, including the decision of this court in Crabb v Arun District Council [1976] Ch. 179. He referred to the three questions posed by Scarman LJ (at page 193),

"First, is there an equity established? Secondly, what is the extent of the equity, if one is established ? And, thirdly, what is the relief appropriate to satisfy the equity?"


The Judge decided that an equity was established to the extent of Mr Yaxley's ownership of the ground floor of the property. His order (as agreed by counsel after some discussion about the position as between Mr Alan Gotts and his father) was that Mr Yaxley was entitled to ownership of the ground floor for a term of 99 years from 29 January 1992, free of ground rent, and to all rent from the ground floor as from 1 August 1992. Mr Alan Gotts was directed to execute a lease within four months unless he paid Mr Yaxley a sum...

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