Yaxley v Gotts

Section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 makes a non-compliant contract for the disposition of land void and has removed the former doctrine of part performance. But section 2(5) expressly preserves resulting, implied and constructive trusts.

A constructive trust may therefore arise despite an invalid oral land contract where there was an agreement, arrangement or understanding that the claimant would acquire a beneficial interest, the claimant acted to his detriment in reliance on it, and it would be unconscionable for the legal owner to deny that interest. The saving is not confined to circumstances in which a constructive trust would have arisen under the former law. Estoppel is not categorically excluded by section 2, although its availability depends on whether its operation would frustrate the statutory policy.

The claimant builder agreed orally with the second defendant that, in return for refurbishing and managing a converted house, he would receive the ground floor. The first defendant acquired the property, knew of and adopted that promise, permitted the claimant to perform substantial work at his own expense, and paid him the ground-floor rents for several years.

His Honour Judge Downes in the Norwich County Court found a proprietary estoppel and ordered the grant of a rent-free 99-year lease of the ground floor, subject to an option to pay its value. The defendants appealed, relying for the first time on section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. The central issue was whether the statutory writing requirement prevented proprietary relief founded on the informal arrangement.

1. Appeal dismissed. Robert Walker LJ held, with Clarke LJ agreeing, that the claimant was entitled to the leasehold interest under a constructive trust. Beldam LJ reached the same conclusion. The order made below could therefore stand.
2. Section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 rendered the oral land contract void. The former doctrine of part performance had not survived. That did not, however, conclude the case because section 2(5) provides that nothing in section 2 affects the creation or operation of resulting, implied or constructive trusts.
3. The findings established the necessary common-intention constructive trust. There was a sufficiently definite arrangement that the claimant would obtain the ground floor. He acted to his substantial detriment by carrying out the works and management duties in reliance on it. The registered proprietor knew of the promise, encouraged its performance and accepted its benefits. It would be unconscionable for him to deny the claimant’s interest. The court applied the approach in Lloyds Bank v Rosset [1991] 1 AC 107.
4. The statutory saving was to receive its natural meaning. It was not confined to trusts which would have arisen under the pre-1989 law, nor did it leave a claimant who had fully performed only a restitutionary remedy. Its operation created a limited, express exception where the circumstances made it inequitable to disregard the claimant’s expectation.
5. The court distinguished Lloyds Bank v Carrick [1996] 4 AII AER 630, which concerned a specifically enforceable contract under the old law and the priority of rights against a third party. Beldam LJ also held that the same facts supported proprietary estoppel. Section 2 did not create an absolute prohibition on estoppel, though its availability remained sensitive to the statutory policy and the facts.

The appeal was dismissed with costs. Permission to appeal to the House of Lords was refused, with a stay pending a petition.

• Court of Appeal (Civil Division) — dismissed the defendants’ appeal and upheld the claimant’s entitlement to a 99-year leasehold interest: [2000] Ch 162.
• Norwich County Court — His Honour Judge Downes, on 1 September 1997, found a proprietary estoppel and ordered the grant of a rent-free 99-year lease of the ground floor, subject to payment of its value instead.
• Chancery Division of the High Court — proceedings were commenced on 24 April 1996 and transferred to the Norwich County Court on 19 March 1997.