Paul Godden v Merthyr Tydfil Housing Association

A transaction which includes the disposition of an interest in land cannot be divided artificially into separate oral agreements to avoid the formal requirements of Law of Property (Miscellaneous Provisions) Act 1989, section 2. Where the parties’ obligations form one unified bargain involving the transfer of land, the whole arrangement must comply with that section. Equitable doctrines, including estoppel by convention, cannot validate a transaction which Parliament has made void for public-policy reasons. An action should be struck out only where it is plain and obvious that it cannot succeed, but that threshold is met where section 2 plainly defeats the pleaded agreement. A possible restitutionary claim should be pleaded and considered properly, rather than introduced for the first time on appeal.

The appellant, a building contractor, claimed damages for breach of an alleged oral agreement with the respondent housing association. He said that he would acquire and prepare a site, obtain planning permission and demolish existing buildings, in return for reimbursement and a later construction contract. The pleaded particulars were subsequently clarified to include a term that he would transfer the freehold to the association.

The Newport County Court, before His Honour Judge D G Morgan, struck out the claim on 26 September 1996 as disclosing no reasonable cause of action. The appeal concerned whether the alleged agreement was void for non-compliance with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, and whether equity or restitution permitted the claim to proceed.

1. Appeal dismissed. The pleaded agreement was properly struck out because it was plainly incapable of succeeding.
2. The arrangement was one single, unified bargain. The reimbursement of acquisition and development expenditure had no commercial purpose unless the appellant was ultimately to transfer the freehold to the association. The obligations were therefore integral to a transaction involving the disposition of an interest in land.
3. Section 2(1) requires a contract for the sale or other disposition of an interest in land to be made in writing and to incorporate all expressly agreed terms in one document, or in exchanged contracts. The alleged oral agreement did not satisfy those requirements and was void. The court rejected the attempt to characterise the arrangement as a first contract for a second, separate contract.
4. Daulia Ltd v Four Millbank Nominees Ltd [1978] 1 Ch 231 supported treating the substance of the transaction as decisive. Tootal Clothing Ltd v Guinea Properties Ltd [1992] 64 P&CR 452 was distinguishable because both contracts there were in writing.
5. Section 2(5), preserving resulting, implied and constructive trusts, did not assist. The claim was for damages and identified no property capable of being subjected to a relevant trust. Proprietary estoppel was also inapplicable.
6. Estoppel by convention could not be used to defeat the statutory writing requirement. The statutory rule was enacted to prevent precisely the factual disputes arising from an alleged oral land transaction. The reasoning in Waltons Stores (Interstate) Ltd v Maher 164 CLR 387 did not provide a basis for circumventing section 2.
7. A possible restitutionary claim was not finally determined. Any such claim would require proper pleading and factual consideration, and it was inappropriate to introduce it by amendment during the appeal.

• Newport County Court: On 26 September 1996, His Honour Judge D G Morgan struck out the claim as disclosing no reasonable cause of action.
• Court of Appeal (Civil Division): The court dismissed the appeal and upheld the striking-out order. Lord Justice Simon Brown gave the leading judgment; Lord Justice Thorpe and Sir John Balcombe agreed.