The case of Yeoman's Row Management Limited v Cobbe has now been heard in the House of Lords in Yeoman's Row Management Limited v Cobbe (2008) UKHL 55; (2008) 35 EG 142. The House of Lords overturned the decision of the Court of Appeal and held that that Mr Cobbe had to repay Yeoman’s Row Management the £2 million he had been awarded, plus interest. Before you read the case note that a 'second agreement' is referred to. This is the oral agreement that was in contention. It is referred to as the second agreement because there had been an earlier agreement in place which had been replaced by this second agreement and it was this second agreement upon which Mr Cobbe was basing his claim. Mrs Lisle-Mainwaring (Mrs L-M), a director of Yeoman’s Row Management was the person with whom Mr Cobbe had been dealing. Lord Scott held that the nature of a proprietary estoppel was as follows: ‘an “estoppel” bars the object of it from asserting some fact or facts, or, sometimes, something that is a mixture of fact and law, that stands in the way of some right claimed by the person entitle to the benefit of the estoppel.’ This sentence is quoted in many of the discussions and commentaries on this case. Despite this, it still makes no more sense than it did than when it was first uttered. You cannot define the nature of an object by referring to the object itself. For example, you cannot say the nature of a horse is that is has four legs, a mane and a tail and looks like a horse because it’s self defeating. Lord Scott has attempted to define proprietary estoppel in the same way and it doesn’t work. Rather clearer is his statement ‘that proprietary estoppel requires ‘clarity as to what it is (facts or a mixture of fact and law) that the object of the estoppel is to be estopped from denying, or asserting, and clarity as to the interest in the property in question that that denial, or assertion, would otherwise defeat. So, whatever it was Mrs L-M stopped from denying had to be clear and whatever interest Mr Cobbe was claiming had to be clear. Look at the second part of this quote first – was it clear what interest Mr Cobbe was claiming? Lord Scott stated that the principles of proprietary estoppel required Mr Cobbe to have an expectation of a 'certain interest in land': He cited Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd (1982), where the terms of the new lease had been spelt out and also Ramsden v Dyson (1866). Mr Cobbe had only an expectation that once he had got planning permission the remaining terms of the contract would be negotiated (for example for Mrs L-M it would be the length of time in which the development had to be completed and how and when she would be paid her share if the profits exceeded a certain amount, and for Mr Cobbe it would be how soon Yeoman’s Row were going to move out of the building so that he could start his development). The already agreed terms together with the outstanding terms that would have to be negotiated following the grant of the planning permission would be concluded by means of a contract. An expectation which depended upon a successful negotiation was not a certain interest because ‘the outcome of future negotiations has always an inherent uncertainty’ and nor could the court infer what terms further negotiations might have produced. Now deal with the first part of Lord Scott’s statement on the requirements of proprietary estoppel. What exactly was Mrs LM stopped from asserting or denying? She was not stopped from saying that the agreement should have been in writing and was therefore unenforceable because Mr Cobbe wasn’t claiming otherwise. She was not stopped from denying that all the terms of the agreement hadn’t been reached because Mr Cobbe agreed that all the terms hadn’t been agreed. Even if she was stopped from denying that the price they had agreed should be the price Mr Cobbe should be allowed to buy the property for, it wouldn’t help Mr Cobbe because he still didn’t have a complete agreement. The requirements of proprietary estoppel were not met and Mrs L-M’s behaviour on its own was not enough.

It was also held obiter that section 2(5) of the Law of Property (Miscellaneous Provisions) Act 1989 did not include proprietary estoppel as an exception. It wasn’t necessary to look at whether a complete agreement that didn’t meet the section 2 requirements could be enforced by proprietary estoppel because Mr Cobbe didn’t have a complete agreement. Lord Scott did state though that using proprietary estoppel to avoid the formalities of section is unacceptable – ‘equity can surely not contradict the statute’ (although the Court of Appeal in Yaxley v Gotts said the opposite).

Things were not looking good for Mr Cobbe and life got steadily worse when it was decided that he was not entitled to claim a constructive trust under the section 2(5) exception either. A constructive trust would be imposed if two or more people agreed that one of them would buy land and they would develop it jointly but afterwards, the party who bought the land kept it for his own benefit. In the case the property had been bought by Yeoman’s long before any discussion with Mr Cobbe and so was it was not a joint venture property. Mr Cobbe only expected to acquire an interest in the property when a formal contact was negotiated. Imposing a constructive trust in such circumstances would be ‘an indignant reaction to Mrs Lisle-Mainwaring’s unconscionable behaviour rather than a principled answer to Mr Cobbe’s claim for relief’. Mr Cobbe could, however, claim a remedy for unjust enrichment because Mrs L-M had obtained his services without paying for them. He could also equally claim a quantum meruit payment (meaning ‘the amount deserved’) which would consist of his costs in obtaining the planning permission and a fee for his services. It could also be seen as an agreement where the consideration for Mr Cobbe providing money and services had totally failed because Mrs Lisle-Mainwaring had not carried out her promise. The court held that Mr Cobbe was entitled to a quantum meruit. Mr Cobbe was not entitled to any increase in the value of the property due to the planning permission. Obtaining the planning permission simply unlocked the development potential. Lord Scott likened his situation to that of a locksmith called out to mend the lock on a box. Mending the lock on the box enable the money inside to be accessed but did not entitle the locksmith to any of that money.

Lord Walker, concurring with Lord Scott, said that if the Court of Appeal’s decision was allowed to stand, it would create too much uncertainty in commercial negotiations.

The words ‘subject to contract’ and proprietary estoppel (page 296)

Lord Scott held that where the words ‘subject to contract’ were used, proprietary estoppel would not normally arise. The purchaser’s expectation of acquiring an interest in the property was subject to a contingency (the contract) that was under the control of the vendor. Any expectation was therefore speculative, i.e. not certain. Lord Scott accepted that such a reservation (the words ‘subject to contract’) could be withdrawn either expressly or implied from conduct but such debate was not relevant to the present case because the agreement was oral, not written.