Cobbe v Yeomans Row Management Ltd & Ors, Rev 1

A proprietary estoppel may arise during negotiations for a land transaction even where the parties know that no binding contract exists and expect a formal contract later. The claimant must prove that the defendant induced or encouraged a belief that the arrangement would be honoured, that the claimant relied on that belief to his detriment, and that it would be unconscionable for the defendant to withdraw. An express “subject to contract” qualification, unresolved fundamental terms, and legal representation make that proof especially difficult, but do not create an absolute bar. Relief is the minimum equity required by justice and need not reproduce or indirectly enforce the unenforceable agreement. In an exceptional case, it may reflect the enhanced value obtained through the claimant’s efforts.

James Cobbe, a property developer, pursued planning permission for the redevelopment of a block of flats after reaching an informal agreement in principle with Mrs Lisle-Mainwaring, acting for Yeomans Row Management Ltd. The proposed transaction involved the sale of the Property for £12 million and overage after permission and vacant possession were obtained. No written contract was made, and both parties expected solicitors later to negotiate formal terms.

After planning permission was obtained, the company refused to proceed on the original terms and proposed materially different terms. Mr Cobbe claimed proprietary estoppel, a constructive trust and restitution. The issues included whether the informal arrangement could generate an equity despite Law of Property (Miscellaneous Provisions) Act 1989, s 2, and what relief was appropriate.

1. Proprietary estoppel established. The company, through Mrs Lisle-Mainwaring, encouraged Mr Cobbe to believe that the agreed commercial terms would be honoured if he obtained planning permission, although the arrangement was not legally binding. He acted to his detriment by spending substantial time, effort and money. The company knowingly allowed that reliance to continue while privately intending to renegotiate. Its subsequent conduct was unconscionable.
2. The fact that the parties contemplated a future formal contract did not defeat the equity. The cases involving express “subject to contract” arrangements turned on their facts. Such wording, unresolved fundamental terms and legal advice make reliance difficult to prove, but do not impose an absolute rule preventing an estoppel. The decisive questions were whether the defendant created or encouraged the relevant belief and whether the claimant relied on it.
3. The reference to Christmas 2003 did not operate as a final cut-off date. The company’s conduct after that date continued the inducement and did not warn Mr Cobbe that further expenditure was wholly at his risk.
4. Relief. Reimbursement of expenditure would not adequately satisfy the equity. The minimum equity to do justice was a lien for one half of the increase in the Property’s value attributable to the planning permission, valued as at 18 March 2004. The relief was not contractual damages or indirect enforcement of the informal agreement. It was conditional on Mr Cobbe permitting use of the planning plans.
5. The alternative constructive-trust claim could also have been available as a remedial response to unconscionable conduct. A specifically enforceable agreement, full performance, shared occupation, or an intention to share the beneficial ownership was not an essential prerequisite. A lien was, however, the more appropriate remedy. The claim against Mrs Lisle-Mainwaring personally was dismissed because there was no proper basis for piercing the corporate veil.

The Property was declared subject to the lien. Further submissions were reserved on interest and valuation directions.