Herbert v Doyle & Anor

In an arm’s-length property transaction, an oral agreement may support a constructive trust despite Law of Property (Miscellaneous Provisions) Act 1989, section 2(1), if the parties intended immediate legal effect and agreed sufficiently certain proprietary interests. Relief is unavailable where the parties contemplated a later formal agreement, material terms remain unsettled, or neither expected immediate legal obligations.

The required certainty is no stricter than contractual certainty. Where an agreement gives one party a choice needed to identify property, the court may make that choice if necessary to give the agreement practical effect and prevent a unilateral veto.

The appellant sought the conveyance of parking spaces owned by neighbouring dental practitioners. The deputy judge found that the parties had made an immediately binding oral agreement involving an exchange of parking spaces and leases of a compressor house and staff room extension. After the appellant declined to perform the wider arrangement, the respondents amended their counterclaim and obtained declarations that he held the relevant property interests on constructive trust.

The Court of Appeal considered whether that oral agreement was sufficiently certain and complete to create a constructive trust preserved by section 2(5) of the Law of Property (Miscellaneous Provisions) Act 1989, consistently with Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752. It also considered challenges to the amendment, implementation of the agreement and costs.

1. Appeal dismissed to the extent permission was granted; the remaining permission applications refused. The judge was entitled to find an immediately binding and sufficiently certain oral agreement which created a constructive trust within section 2(5) of the Law of Property (Miscellaneous Provisions) Act 1989.

2. Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 established a common thread for commercial property arrangements. A party cannot employ constructive trust or proprietary estoppel to enforce an agreement which does not comply with section 2(1) where the parties intended a later formal agreement, material terms affecting the proprietary interest remained unsettled, or the parties did not expect immediate legal effect. The present arm’s-length transaction was commercial, but none of those disqualifying features was established.

3. The respondents had acted to their detriment by permitting development to encroach upon their parking space in reliance upon the appellant’s assurances. The interests in the compressor house and staff room extension were identifiable because their leases were agreed by reference to the existing lease. Later negotiations and agreed variations altered the agreement’s content but did not make the proprietary interests uncertain.

4. The failure initially to identify the ninth parking space did not invalidate the agreement. By necessary implication, the appellant was required to choose a qualifying space within a reasonable time. If he failed to do so, the court could select a space meeting the agreed objective criteria. Otherwise, the agreement would be unworkable and the appellant would possess a unilateral veto.

5. Morgan J agreed that the agreement satisfied contractual standards of certainty and completeness. Nothing in Cobbe or Thorner v Major [2009] UKHL 18 imposed a stricter standard for constructive trusts.

6. The parties did not need to acquire a joint proprietary interest. It was sufficient that each acquired an identifiable interest under their mutual arrangement. The disputed strip was outside the agreed parking spaces and did not undermine certainty.

7. The challenges to the post-judgment amendment, the lease drafting, the strip and the costs orders lacked a real prospect of success. The amendment was a case-management decision made before the proceedings had concluded by a sealed order.

1. Court of Appeal (Civil Division): Permission to appeal was granted on limited grounds, but the appeal was dismissed. The remaining applications for permission, amendment of the grounds and extension of time were refused: [2010] EWCA Civ 1095.
2. High Court, Chancery Division: Mark Herbert QC, sitting as a deputy High Court judge, permitted the respondents’ amended counterclaim and declared that the appellant held specified leasehold and freehold interests on constructive trust: (2008) EWHC 3423.