Ely v Robson

An oral agreement concerning beneficial interests in land may support a constructive trust or proprietary estoppel where its terms identify the parties’ interests with sufficient certainty, the parties intend it to bind them immediately, and one party acts to their detriment in reliance upon their common understanding.

Equity cannot make an incomplete or non-binding arrangement enforceable where material terms remain unresolved, the parties contemplate that only a later formal agreement will bind them, or the intended property interest is insufficiently identified. Contemplated documentation does not prevent an immediate equitable consequence where it merely supplies the mechanics for implementing an already binding agreement.

The legal owner of a family home brought proceedings for declarations defining his former partner’s beneficial interest and for sale. He alleged that an oral compromise reached during earlier possession proceedings limited her interest to a 20% remainder and gave her a temporary right of occupation. His former partner denied that any settlement had been concluded and claimed an equal beneficial interest.

His Honour Judge Blair QC accepted the legal owner’s evidence, found that the parties had reached the asserted compromise, and made the requested declaration. The former partner appealed. The central issue was whether the oral arrangement was sufficiently certain and intended to be immediately binding so that detrimental reliance upon it could give rise to a constructive trust or proprietary estoppel despite the statutory formalities governing contracts for the disposition of land.

1. Appeal dismissed. The trial judge was entitled to find that the parties had orally agreed a compromise defining their respective interests in the property. The contemporary correspondence supported that finding and contradicted the appellant’s evidence that no such agreement had been reached.

2. The principles derived from Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55 and Herbert v Doyle [2010] EWCA Civ 1095 prevent proprietary estoppel or constructive trust from making an incomplete arrangement binding where material terms remain unresolved, the intended property interest is unclear, or the parties do not expect immediate legal effect. Those obstacles were absent here. The terms recorded in the solicitors’ letter were sufficiently clear, and no outstanding matter requiring further agreement was identified.

3. The references in the correspondence to a written settlement and trust deed did not prevent an immediately binding agreement. The contemplated documents concerned only the mechanics required to implement objectives which the parties had already agreed. Unlike the knowingly speculative commercial negotiations in Cobbe, this was an attempt by former cohabitants to resolve costly litigation concerning their property interests.

4. After reaching their common understanding, the respondent acted to his detriment. He discontinued his claims concerning three properties and allowed the appellant to remain in the family home during the lifetimes of two relatives. Whatever beneficial interest the appellant previously possessed, the respondent thereafter held the property on constructive trust subject to the interests defined in the declaration. It would also have been unconscionable for the appellant to assert a contrary interest, and she was estopped from doing so.

5. No further examination of the parties’ whole course of dealing altered the result. There was no evidence of a later or different common understanding, and both parties acted consistently with the compromise until the present dispute arose. Sir Brian Leveson P agreed with Lord Justice Kitchin.

1. Court of Appeal (Civil Division): The appellant’s appeal was dismissed. The declaration made below defining the parties’ beneficial interests was upheld: [2016] EWCA Civ 774.

2. Swindon County Court: His Honour Judge Blair QC found that the parties had reached an oral settlement in 2007 and that equity would enforce the resulting common understanding. By order dated 12 October 2015, he declared the extent of their beneficial interests in the property.