Yeoman's Row Management Ltd & Anor v Cobbe

This appeal concerned remedies available to a developer (Cobbe) who, having incurred expense and obtained planning permission in reliance on an oral "agreement in principle" with the landowner (Yeoman's Row), was refused the originally agreed financial terms after permission was granted. The House of Lords considered whether proprietary estoppel or a constructive trust could be used to give effect to the claimant's disappointed contractual expectation and whether in-personam restitutionary remedies (unjust enrichment, quantum meruit or return for failed consideration) should be awarded instead. The court held that proprietary estoppel and constructive trust were inappropriate on the facts: an estoppel requires a clear expectation of a "certain interest in land" and cannot be used to render enforceable an agreement that was incomplete and statutorily unenforceable under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989; a constructive trust was not justified where the owner held title before negotiations and the joint-venture type trust could not be imposed to give effect to an inchoate bargain. The appropriate relief was an in personam award measured by the value of the developer's services (a quantum meruit / restitution) rather than a proprietary remedy giving him the benefit of his contractual expectation.

Background and facts:

Yeoman's Row Management Ltd (through Mrs Lisle-Mainwaring) owned a block of flats. Mr Cobbe, an experienced developer, agreed in principle (the "second agreement") that he would at his expense seek planning permission to demolish and redevelop the site into six houses; if permission were granted the property would be sold to him (or his nominee) for an up-front price of £12 million and the parties would share 50% of gross proceeds above £24 million. The oral agreement was incomplete and both parties understood it was not legally binding. Cobbe obtained planning permission after spending time and money. Immediately after permission was secured the owner sought materially to alter the financial terms. Negotiations failed and Cobbe commenced proceedings.

Procedural history:

• At first instance Etherton J found for Cobbe on proprietary estoppel/constructive trust grounds and awarded a lien and half the increase in value attributable to planning permission (later fixed by agreement at £2 million and paid by Yeoman's Row).
• The Court of Appeal ([2006] EWCA Civ 1139) upheld the proprietary estoppel-based relief.
• The House of Lords allowed Yeoman's Row's appeal.

Nature of the claim and issues:

• Cobbe originally sought specific performance and damages for breach of contract but abandoned those contractual claims at trial because of the statutory writing requirement (s.2 Law of Property (Miscellaneous Provisions) Act 1989).
• The live issues before the House were whether proprietary estoppel or a constructive trust could provide proprietary relief reflecting Cobbe's expectations and, if not, whether in personam remedies in unjust enrichment, quantum meruit or restitution for failed consideration should be awarded.

Court's reasoning and decision:

• The court analysed the elements of proprietary estoppel and stressed that it requires a clear expectation of a certain proprietary interest; an expectation dependent on future negotiation of outstanding contract terms was too uncertain to ground a proprietary estoppel in this commercial context. The court also expressed the view that proprietary estoppel should not be used to render enforceable an agreement which statute declares void (s.2), and noted that s.2(5) expressly preserves constructive trusts but not proprietary estoppel.
• On constructive trust the court held that the cases which give rise to a trust normally involve a pre-acquisition or joint-venture acquisition of property such that it would be inequitable for the acquirer to retain the property. Where the owner held the property before negotiations and the agreement was incomplete, imposing a trust to satisfy disappointed contractual expectations was not justified.
• The court concluded that in-personam restitutionary relief was appropriate: unjust enrichment entitled Cobbe to recover the value of the services he provided in obtaining planning permission; a quantum meruit (including expenses reasonably incurred plus a fee for his services) was the suitable remedy. The House substituted orders for assessment of a quantum meruit, provided for repayment and set-off arrangements in respect of the £2 million previously paid, and allowed £150,000 to be retained pending assessment.

Appeal allowed. The House of Lords rejected proprietary estoppel and constructive trust as bases for awarding Cobbe a proprietary interest reflecting his disappointed expectation under the incomplete oral agreement. Instead the court awarded in personam restitutionary relief: Cobbe was entitled to a quantum meruit (restitution for services and expenses in obtaining planning permission), with orders for assessment, interest and set-off against the £2 million previously paid to him.

[2006] EWCA Civ 1139; trial judgment by Etherton J (liability judgment 25 February 2005; supplemental judgment 12 August 2005). Appeal to House of Lords allowed [2008] UKHL 55.