Oates v Stimson & Anor

An oral agreement to dispose of an interest in land may fail the writing requirement in section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989, but section 2(5) preserves the creation and operation of constructive trusts. Where one party relies on the other's conduct, changes position and suffers detriment, it may be unconscionable to refuse enforcement of the agreement through a constructive trust. Equitable relief must be proportionate to the detriment and represent the minimum equity needed to do justice, taking all relevant circumstances, including the parties' conduct, into account.

Two co-owners orally agreed that one would assume responsibility for the mortgage and leave the property, while the other would pay him £2,500 and receive his interest in the house. The Recorder found the agreement proved, declared that the net sale proceeds belonged to the continuing owner subject to payment of £2,500, and dismissed the departing owner's counterclaim for a share in a replacement property.

The appeal concerned the effect of the statutory writing requirement, the availability of a constructive trust, detrimental reliance, and the appropriate equitable relief.

1. The appeal was dismissed. The Court of Appeal upheld the declarations made by the Recorder and the dismissal of the counterclaim.
2. The oral agreement did not comply with section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. However, subsection (5) preserved the creation and operation of constructive trusts. The respondents were therefore entitled to rely on constructive-trust principles.
3. On the evidence, the appellant's conduct was relied on by the respondent, who changed his position to his detriment. Lord Justice Auld held that this gave rise to a constructive trust in the respondent's favour and made it unconscionable to prevent enforcement of the oral agreement. That conclusion fell within the principle identified in the observations of Lord Bridge, speaking for their Lordships, in Lloyds Bank Plc v Rosset [1991] 1 AC 107 at 132, and the ruling in Yaxley v Gotts & Anor [2000] Ch 163.
4. Sir Christopher Staughton agreed that the respondent had acted to his detriment by assuming the mortgage, outgoings, insurance obligations, repair costs and improvement expenditure. Relief had to be proportionate to the detriment, with the court seeking the minimum equity needed to do justice and considering all relevant circumstances, including the parties' conduct.
5. The appropriate relief was therefore payment of the agreed £2,500, with the appellant surrendering the remaining interest in the original property. The later increase in value did not justify awarding him a substantially larger share of the proceeds or an interest in the replacement property. There was no order as to costs.

• Court of Appeal (Civil Division): In [2006] EWCA Civ 548, the appeal was dismissed. The declarations and dismissal of the counterclaim were upheld.
• Swindon County Court: Mr Recorder Malcolm QC found that the parties had entered into the oral agreement, declared that the net proceeds belonged to the respondent subject to payment of £2,500, dismissed the counterclaim, and made no order as to costs.