UKHL 55: Proprietary Estoppel and Oral Agreements in Property Cases, Study Guides, Projects, Research of Law

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s RowManagement Ltd and another [2008] UKHL 55 2008 June 4, 5; July 30 Lord Ho›mann, Lord Scott of Foscote, LordWalker of Gestingthorpe, Lord Brown of Eaton-under-Heywood and LordMance Estoppel
Conduct, by
Proprietary estoppel
Constructive trust
Property developers oral agreement to purchase block of ats from company for redevelopment
Director assuring and encouraging developer that agreement would be honoured if developer secured planning permission
Developers considerable time and expense in obtaining permission
Directors refusal to honour agreement
Whether developer entitled to equitable relief
Quantum meruit
Law of Property (Miscellaneous Provisions) Act 1989 (c 34), s 2(1)1 The claimant, an experienced property developer, orally agreed with the third defendant, the sole director of the
rst defendant company, to purchase for £12m a property comprising a number of ats, of which the
rst defendant was the registered freehold proprietor, for redevelopment into six town houses. The arrangement was that the
rst defendant would obtain vacant possession of the property and the claimant would develop it and keep any pro
t subject to overage under which each party would have 50% of the gross proceeds of the property over £24m. Acting in the belief, encouraged by the third defendant on behalf of the
rst defendant, that the property would be sold to him, the claimant spent the next 18 months, engaging architects and other professionals, in applying for planning permission. Immediately after the grant of planning permission the defendants withdrew from the agreement, demanded £20m as the price for the sale of the freehold and suggested that the
rst defendant should receive 40% of the amount by which the gross proceeds exceeded £40m. The claimant brought proceedings alleging, inter alia, that the defendants were estopped from denying that he had acquired a bene
cial interest in the property because they had acted unconscionably in knowingly inducing and encouraging by their actions his belief, on which he had relied to his detriment, that the property would be sold to him and then refusing to honour the oral agreement, alternatively that there was a constructive trust in his favour. The judge found that the third defendant on behalf of the
rst defendant had encouraged the claimants belief that if he succeeded in obtaining planning permission the oral agreement would be honoured and that she had taken an unconscionable advantage of him. He concluded that the claims in proprietary estoppel and constructive trust succeeded. The Court of Appeal dismissed the defendants appeal. On appeal by the
rst defendant Held, allowing the appeal, (1) that proprietary estoppel could not be founded simply on unconscionable behaviour and in principle required a proprietary claim and an answer to that claim based on some fact or facts, or some point of mixed fact and law, that the defendant could be estopped from asserting; that the
rst defendant could not be said to be estopped from asserting that the agreement with the claimant was unenforceable for want of writing, since the claimant did not claim that it was enforceable, nor from denying that it had covered all the terms that had needed to be agreed, since the claimant did not claim that it had, nor from denying that the claimant had, before the date when planning permission had been granted, acquired any proprietary interest in the property, since he did not allege that he had; that the claimants claim that the
rst defendant held the property on trust for itself and him A B C D E F G H 1 Law of Property (Miscellaneous Provisions) Act 1989, s 2(1): see post, para 9. 1752 Cobbe v Yeoman’s RowManagement Ltd (HL(E)) [2008] 1WLR did not require or depend on any estoppel; and that, accordingly, the elements of proprietary estoppel were not present and no estoppel had arisen (post, paras 1, 14—15, 16, 28, 85—91, 94, 96). Ramsden v Dyson (1866) LR 1HL 129, HL(E), Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd (Note) [1982] QB 133, dictum of Deane J in Muschinski v Dodds (1985) 160 CLR 583, 615 and Attorney General of Hong Kong v Humphreys Estate (Queens Gardens) Ltd [1987] AC 114, PC applied. Plimmer v Wellington Corpn (1884) 9 App Cas 699, PC and Holiday Inns Inc v Broadhead (1974) 232 EG 951 distinguished. Per Lord Scott of Foscote. Proprietary estoppel cannot be prayed in aid to render enforceable an agreement that is void for want of compliance with the requirements of section 2(1) of the Law Reform (Miscellaneous Provisions) Act 1989 ( post, para 29). Per Lord Walker of Gestingthorpe. The Court of Appeals decision would tend to introduce considerable uncertainty into commercial negotiations. The claimants case fails on the fundamental point that both parties knew that there was no legally binding contract and that either was free to discontinue the negotiations without liability in equity or at law. The claimant took a commercial risk with his eyes open (post, paras 81, 85, 91). (2) That, since the property had been owned by the
rst defendant before any negotiations for a joint venture agreement had commenced, it had never been a joint venture property and a constructive trust as recognised in cases on failed joint ventures could not be imposed; and that the unconscionability of the defendants behaviour in withdrawing from the inchoate agreement was an inadequate basis for imposing a constructive trust on the property (post, paras 1, 36, 93, 94, 96). Holiday Inns Inc v Broadhead (1974) 232 EG 951 applied. (3) That the claimant was entitled to a quantum meruit in respect of the money and services that he had provided (post, paras 1, 42—45, 93, 94, 96). Decision of the Court of Appeal [2006] EWCA Civ 1139; [2006] 1 WLR 2964 reversed. The following cases are referred to in their Lordships opinions: Attorney General of Hong Kong v Humphreys Estate (Queens Gardens) Ltd [1986] HKLR 669; [1987] AC 114; [1987] 2WLR 343; [1987] 2All ER 387, PC Baird Textile Holdings Ltd v Marks & Spencer plc [2001] EWCA Civ 274; [2002] 1All ER (Comm) 737, CA Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437; [2000] 3WLR 1423; [2000] 4All ER 221, CA Banner Homes Group plc v Lu› Developments Ltd [2000] Ch 372; [2000] 2 WLR 772; [2000] 2All ER 117, CA British Steel Corpn v Cleveland Bridge and Engineering Co Ltd [1984] 1All ER 504 Crabb v Arun District Council [1976] Ch 179; [1975] 3 WLR 847; [1975] 3 All ER 865, CA Dann v Spurrier (1802) 7Ves 231 Dillwyn v Llewelyn (1862) 4DeG F& J 517 Gillett v Holt [2001] Ch 210; [2000] 3WLR 815; [2000] 2All ER 289, CA Grundy vOttey [2003] EWCACiv 1176; [2003]WTLR 1253, CA Holiday Inns Inc v Broadhead (1974) 232 EG 951 Inwards v Baker [1965] 2QB 29; [1965] 2WLR 212; [1965] 1All ER 446, CA J TDevelopments Ltd vQuinn (1990) 62 P&CR 33, CA Jennings v Rice [2002] EWCACiv 159; [2003] 1 P&CR 100, CA Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd [2004] EWHC 2547 (Ch); [2005] 2 P&CR 105; [2005] EWCACiv 45; [2005] NPC 132, CA Laird v Birkenhead Railway Co (1859) Johns 500 Lissimore v Downing [2003] 2 FLR 308 A B C D E F G H 1753 Cobbe v Yeoman’s RowManagement Ltd (HL(E))[2008] 1WLR contract. In these circumstances a quantum meruit, taking into account the amount of Bs expenditure of time and money and the value of the services, can, it could be argued, be
xed by the court. (v) Fifthly, the arrangement between A and B for the sale of the property to B can be regarded as involving two stages. The
rst stage is the making and prosecution by B at his own expense of the application for the grant of planning permission. This stage constitutes, in e›ect, the consideration given by B to A in return for As promise, if planning permission is granted, to enter into a formal written contract of sale embodying, inter alia, the core
nancial terms that had already been agreed. As promise, being no more than an oral promise to enter into a written contract and, moreover, part of an incompletely negotiated agreement, is not contractually enforceable but As repudiation of that promise, after B had supplied his
rst-stage consideration and the planning permission had been granted, would, it could be argued, constitute a complete failure of the consideration that Awas to have given, and entitle B to a restitutionary remedy. (vi) Finally, in circumstances such as those described the possibility of a remedy in damages for the tort of deceit must be kept in mind. If A represented to B that he was willing to enter into a written agreement, or regarded himself as bound by an oral agreement embodying the core
nancial terms that had already been agreed, and so represented at a time when he, A, had already decided to repudiate those terms and demand better ones, B, if and to the extent that he had acted on those false representations and thereby su›ered loss, would have an action in deceit for damages. 4 Two features of these possible remedies are worth noticing. First, both the proprietary estoppel claim and the constructive trust claim are claims to a proprietary interest in the property. The other remedies do not require proprietary claims but follow upon in personam claims for compensation or restitution. Second, a proprietary estoppel claim and a constructive trust claim would constitute, if successful, a means whereby B could obtain a remedy providing himwith a bene
t more or less equivalent to the bene
t he expected to obtain from the oral and inchoate agreement; in e›ect a bene
t based on the value of his non-contractual expectation. By way of contrast, an unjust enrichment remedy, a quantum meruit remedy and a consideration that has wholly failed remedy are essentially restitutionary in character, concentrating not at all on the value of the expected bene
t of which B has been deprived but, as the case may be, on the extent of As enrichment at Bs expense, on the value of Bs services or on the amount or value of the consideration provided by B to A. And a tortious remedy for deceit would concentrate on the loss caused to B in acting on As false representation and would seek to restore him to the position in which he would have been if the false representation had never been made. One of the main issues for your Lordships to decide on this appeal is, in my opinion, whether B should be held entitled to a proprietary remedy based on the extent of his disappointed expectations or to an in personam remedy of, using the adjective fairly loosely, a restitutionary character. The question of a remedy in deceit does not arise, for no allegation of fraudulent misrepresentation has been made, but the conceptual possibilities of such a claim are useful to keep in mind. It is very well established that the remedy for a fraudulent misrepresentation inducing a contract is, besides rescission of the contract if the victim so elects, a tortious action in deceit for damages A B C D E F G H 1756 Cobbe v Yeoman’s RowManagement Ltd (HL(E)) [2008] 1WLR Lord Scott of Foscote for any loss thereby caused; and that, unless the representation has become a term of the contract, the victim is not entitled to claim damages measured by the loss of the bene
t he would have obtained if the representation had been true, i e he is not entitled to contractual damages. The facts 5 A, in the present case, is the
rst defendant company, Yeomans Row Management Ltd. B is the claimant, Mr Cobbe. He is an experienced property developer. The property in question consists of a block of, originally, 13 ats, one of which has, since 1983, been the home of Mrs Lisle-Mainwaring and, until his fairly recent death, her husband. In about 1986 Mr and Mrs Lisle-Mainwaring, no doubt recognising the development potential of the property, decided to purchase it. They used the defendant company, of which they were the directors and shareholders, as the vehicle by means of which to do so. First, however, Mrs Lisle- Mainwaring acquired a long leasehold interest in her at (and, later, two other ats with which her at was then physically combined into one unit). Then, in April 1998, the property was transferred to the defendant company subject to Mrs Lisle-Mainwarings long lease and to the tenancies of the other ats,
ve of which were held on Rent Act protected tenancies. Negotiations with Mr Cobbe about the development of the property began in February 2001. It was Mrs Lisle-Mainwaring who, on behalf of the defendant company, played the leading role in the negotiations that led, towards the end of 2002, to an oral agreement in principle being reached between her and Mr Cobbe. This agreement replaced an earlier agreement in principle that she and Mr Cobbe had reached and is, for that reason, referred to in the judgments of the trial judge, Etherton J, and Mummery LJ in the Court of Appeal as the second agreement. I shall, for convenience, also do so. 6 The substance of the second agreement was (i) that Mr Cobbe, at his own expense, would apply for planning permission to demolish the existing block of ats and to erect, in its place, a terrace of six houses, (ii) that, upon the grant of planning permission and the obtaining of vacant possession, the property would be sold to Mr Cobbe, or to a company nominated by him, for an up-front payment to the defendant company of £12m, (iii) and that Mr Cobbe, or the nominee company, would develop the property in accordance with the planning permission and (iv) would sell the six houses and pay to the defendant company 50% of the amount, if any, by which the gross proceeds of sale exceeded £24m. So, in e›ect, Mr Cobbe was to take the risk,
rst, that planning permission might be refused, in which case his expenditure and time spent in seeking to obtain the planning permission would be wasted, and, secondly, that the gross proceeds of sale, after deduction of the cost of obtaining planning permission, the £12m and the building and other costs of development, might leave him with an inadequate pro
t or even none at all. The amount that he, or his nominee company, would have to pay as the up-front price would clearly have constituted an important element in his calculations. 7 The oral agreement in principle that had been reached, i e the core terms, did not cover everything that would have been expected in due course to be dealt with in a formal written contract. It must have been expected, for example, that Mrs Lisle-Mainwaring would have wanted some provision to A B C D E F G H 1757 Cobbe v Yeoman’s RowManagement Ltd (HL(E))[2008] 1WLR Lord Scott of Foscote be included in the formal contract regarding the reasonably expeditious commencement and progress of the development and, also, some security and timetable for the payment of the defendant companys share of the excess over £24mof the gross proceeds of sale. The nature of the transaction would plainly have excluded reliance on a vendors lien. Mr Cobbe, for his part, would probably have wanted some contractual assurance as to the timing of the availability of vacant possession of the block of ats. These would not have been expected to have been di–cult matters on which to reach agreement but were all matters for future discussion, and the outcome of future negotiations has always an inherent uncertainty. 8 Planning permission for the demolition of the existing block of ats and the erection of a terrace of six houses on the site was formally granted on 5 April 2004 but the council resolution approving the grant had been passed on 17 March 2004 and Mrs Lisle-Mainwaring on 18 March announced her dissatisfaction with the
nancial terms of the second agreement and demanded an up-front price of £20m in place of the originally agreed £12m. She suggested that the defendant companys share of the proceeds of sale of the development should become 40% of the amount by which the gross proceeds exceeded £40m. Mr Cobbe at
rst agreed to these changes but subsequently, after further reection on the commercial implications, withdrew his agreement, and insisted on adherence to the
nancial terms of the second agreement. Mrs Lisle-Mainwaring refused to proceed on those terms and the impasse led to Mr Cobbe commencing the proceedings which are now before the House. The proceedings in the courts below 9 Mr Cobbes claim, as originally pleaded, sought speci
c performance and damages for breach of contract, i e contractual relief. However, at the outset of the trial on liability, on 18 January 2005, these contractual claims were abandoned. Section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989made them untenable: A contract for the sale or other disposition of an interest in land can only be made in writing . . . But section 2(5) of the 1989 Act says that nothing in this section a›ects the creation or operation of resulting, implied or constructive trusts, and Mr Cobbe, with the permission of Etherton J, amended his pleadings in order to substitute for the claims he had abandoned claims for declarations that the defendant company held the property on constructive trust for itself and him and was estopped from denying that he had an interest in the property, with, in each case, consequential relief. He added, also, a claim for an inquiry into the time he had spent and expenditure he had incurred in obtaining planning permission and, following that inquiry, such restitution as the court considers just. These amended claims left it, in my opinion, open to the court, if the proprietary estoppel and constructive trust bases of claim should fail, to award relief on the basis of unjust enrichment, or a quantummeruit, or a consideration that had wholly failed. 10 Etherton J held, on 25 February 2005, that the conditions for proprietary estoppel were satis
ed and that the minimum equity to do justice to Mr Cobbe required that he be awarded one half of the increase in value of the property brought about by the grant of planning permission and that he be granted a lien over the property to secure that interest. The judge held, also, that Mr Cobbe would have been entitled to relief on his constructive A B C D E F G H 1758 Cobbe v Yeoman’s RowManagement Ltd (HL(E)) [2008] 1WLR Lord Scott of Foscote beliefs and intentions, the minimum equity to do justice toMr Cobbe is to order the payment to him by [the defendant company] of one half of the increased value of the property due to the grant of the planning permission. It is apparent, therefore, that the judge granted relief on the footing that Mr Cobbe was entitled to compensation calculated by reference to the value of his expectations under the unenforceable and incomplete agreement that the second agreement constituted. Proprietary estoppel 14 Both the judge and the Court of Appeal regarded the relief granted as justi
ed on the basis of proprietary estoppel. I respectfully disagree. The remedy to which, on the facts as found by the judge, Mr Cobbe is entitled can, in my opinion, be described neither as based on an estoppel nor as proprietary in character. There are several important authorities to which I want to refer but I want
rst to consider as a matter of principle the nature of a proprietary estoppel. 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 entitled to the bene
t of the estoppel. The estoppel becomes a proprietary estoppela sub-species of a promissory estoppelif the right claimed is a proprietary right, usually a right to or over land but, in principle, equally available in relation to chattels or choses in action. So, what is the fact or facts, or the matter of mixed fact and law, that, in the present case, the defendant company is said to be barred from asserting? And what is the proprietary right claimed byMr Cobbe that the facts and matters it is barred from asserting might otherwise defeat? 15 The pleadings do not answer these questions. The terms of the oral agreement in principle, the second agreement, relied on by Mr Cobbe are pleaded but it is accepted that there remained still for negotiation other terms. The second agreement was, contractually, an incomplete agreement. The terms that had already been agreed were regarded by the parties as being binding in honour, but it follows that the parties knew they were not legally binding. So what is it that the defendant company is estopped from asserting or from denying? It cannot be said to be estopped from asserting that the second agreement was unenforceable for want of writing, for Mr Cobbe does not claim that it was enforceable; nor from denying that the second agreement covered all the terms that needed to be agreed between the parties, for Mr Cobbe does not claim that it did; nor from denying that, pre-18 March 2004, Mr Cobbe had acquired any proprietary interest in the property, for he has never alleged that he had. And what proprietary claim was Mr Cobbe making that an estoppel was necessary to protect? His originally pleaded claim to speci
c performance of the second agreement was abandoned at a very early stage in the trial (see para 8 above) and the proprietary claims that remained were claims that the defendant company held the property on trust for itself and Mr Cobbe. These remaining proprietary claims were presumably based on the proposition that a constructive trust of the property, with appropriate bene
cial interests for the defendant company and Mr Cobbe, should, by reason of the unconscionable conduct of Mrs Lisle-Mainwaring, be imposed on the A B C D E F G H 1761 Cobbe v Yeoman’s RowManagement Ltd (HL(E))[2008] 1WLR Lord Scott of Foscote property. I must examine that proposition when dealing with constructive trust as a possible means of providing Mr Cobbe with a remedy, but the proposition is not one that requires or depends upon any estoppel. 16 It is relevant to notice that the amendments to Mr Cobbes pleaded prayer for relief, made when the speci
c performance and damages for breach of contract claims were abandoned, include the following: (4) Alternatively, a declaration that [the defendant company and Mrs Lisle-Mainwaring] are estopped from denying that [Mr Cobbe] has such interest in the property and/or the proceeds of sale thereof as the court thinks
t. This is the only pleaded formulation of the estoppel relied on by Mr Cobbe and, with respect to the pleader, is both meaningless and pointless. Etherton J concluded, in para 85 of his judgment, that the facts of the case gave rise to a proprietary estoppel equity in favour of Mr Cobbe, but nowhere identi
ed the content of the estoppel. Mummery LJ agreed (paras 60 and 61 of his judgment, concurred in by Dyson LJ (para 120) and Sir Martin Nourse (para 141)), but he, too, did not address the content of the estoppel. Both Etherton J and Mummery LJ regarded the proprietary estoppel conclusion as justi
ed by the unconscionability of Mrs Lisle- Mainwarings conduct. My Lords, unconscionability of conduct may well lead to a remedy but, in my opinion, proprietary estoppel cannot be the route to it unless the ingredients for a proprietary estoppel are present. These ingredients should include, in principle, a proprietary claim made by a claimant and an answer to that claim based on some fact, or some point of mixed fact and law, that the person against whom the claim is made can be estopped from asserting. To treat a proprietary estoppel equity as requiring neither a proprietary claim by the claimant nor an estoppel against the defendant but simply unconscionable behaviour is, in my respectful opinion, a recipe for confusion. 17 Deane J, inMuschinski v Dodds (1985) 160 CLR 583, in a judgment concurred in by Mason J, drew attention to the nature and function of constructive trusts in the common law. His remarks, at pp 612—616, repay careful reading but I would respectfully draw particular attention to a passage, at pp 615—616, relevant not only to constructive trusts but equally, in my opinion, to proprietary estoppel. He said: The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice. As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate processes of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundations of such principles . . . Under the law of this countryas, I venture to think, under the present law of England . . . proprietary rights fall to be governed by principles of law and not by some mix of judicial discretion, subjective views about which party ought to win . . . and the formless void of individual moral opinion. . . A
nding of proprietary estoppel, based on the unconscionability of the behaviour of the person against whom the
nding was made but without any coherent formulation of the content of the estoppel or of the proprietary A B C D E F G H 1762 Cobbe v Yeoman’s RowManagement Ltd (HL(E)) [2008] 1WLR Lord Scott of Foscote interest that the estoppel was designed to protect invites, in my opinion, criticism of the sort directed by Deane J in the passage cited. However, Mr Ivory, counsel forMr Cobbe both in the Court of Appeal and before your Lordships, has relied on authority and to that I must now turn. 18 Oliver J stated the requirements of proprietary estoppel in a common expectation class of case in a well known and often cited passage in Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd (Note) [1982] QB 133, 144: if A under an expectation created or encouraged by B that A shall have a certain interest in land, thereafter, on the faith of such expectation and with the knowledge of B and without objection by him, acts to his detriment in connection with such land, a court of equity will compel B to give e›ect to such expectation. Note the reference to a certain interest in land. Taylors Fashions was a case where the certain interest was an option to renew a lease. There was no lack of certainty; the terms of the new lease were spelled out in the option and the lessees expectation was that on the exercise of the option the new lease would be granted. The problem was that the option had not been registered under the Land Charges Act 1925 and the question was whether the freeholders, successors in title to the original lessors who had granted the option, could be estopped from denying the right of the lessees to exercise the option. But what is the comparable expectation and the comparable certain interest in the present case? Mr Cobbes expectation, encouraged by Mrs Lisle-Mainwaring, was that upon the grant of planning permission there would be a successful negotiation of the outstanding terms of a contract for the sale of the property to him, or to some company of his, and that a formal contract, which would include the already agreed core terms of the second agreement as well as the additional new terms agreed upon, would be prepared and entered into. An expectation dependent upon the conclusion of a successful negotiation is not an expectation of an interest having any comparable certainty to the certainty of the terms of the lessees interest under the Taylors Fashions option. In the Taylors Fashions case both the content of the estoppel, i e an estoppel barring the new freeholders from asserting that the option was unenforceable for want of registration, and the interest the estoppel was intended to protect, i e the option to have a renewal of the lease, were clear and certain. Not so here. The present case is one in which an unformulated estoppel is being asserted in order to protect Mr Cobbes interest under an oral agreement for the purchase of land that lacked both the requisite statutory formalities (section 2 of the 1989 Act) and was, in a contractual sense, incomplete. 19 A reference to the expectation of a certain interest in land had appeared in the speech of Lord Kingsdown in Ramsden v Dyson (1866) LR 1HL 129, 170: If a man, under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money A B C D E F G H 1763 Cobbe v Yeoman’s RowManagement Ltd (HL(E))[2008] 1WLR Lord Scott of Foscote 24 Holiday Inns Inc v Broadhead (1974) 232 EG 951 has been treated as, but correctly analysed is in my opinion not, a case of proprietary estoppel. The plainti›s, Holiday Inns, and the defendant, Mr Broadhead, agreed, in e›ect, on a joint venture, the essential ingredients of which were that a site in the vicinity of Heathrow Airport would be identi
ed as suitable for an hotel. Mr Broadhead, or a company nominated by him, would acquire the site, Holiday Inns would apply for the requisite planning permission and, if planning permission were granted, the site would be leased to Holiday Inns under a lease the terms of which the parties had agreed. A suitable site was identi
ed and was then purchased by a company owned or controlled by Mr Broadhead. Holiday Inns, at their own expense, applied for and obtained planning permission for the building of the hotel. But Mr Broadhead then entered into negotiations for a lease with another hotel group and granted a lease to a company in that group before Holiday Inns could intervene. Whatever equity Holiday Inns had against Mr Broadhead could not have been asserted against the lessee, which had taken the lease without notice of any such equity. Holiday Inns sued Mr Broadhead. The judge, Go› J, accepted, at p 1089, that the Holiday Inns executives who had dealt with Mr Broadhead thought that they and he had reached a gentlemans agreement which would be honoured and that Mr Broadheads failure to inform them of his true state of mind was deceitful and unconscionable. He held, at p 1095, that Holiday Inns were clearly entitled to relief and declared that Mr Broadheads company, which had purchased the site and granted the lease to the rival hotel group, held the land subject to the lease upon trust to sell it and to divide the net proceeds of sale, after discharging various expenses incurred by the respective parties, between itself and Holiday Inns in equal shares. The relief was granted, therefore, by imposing, or recognising, a constructive trust over the property. Whether, if Mr Broadhead had not pre-empted the choice of relief by granting the lease before any restraining injunction could be obtained, Holiday Inns expectation of a lease would have been recognised by an order that they were entitled to a lease on the terms already agreed is an open question. It does not appear from the report of the case that anything remained to be negotiated between Mr Broadhead and Holiday Inns. The terms of the intended lease had been agreed. In the event, however, the relief granted by Go› J was on the same footing as that granted in the joint venture cases to which, starting with Pallant v Morgan [1953] Ch 43, I will later refer, namely, that where a joint venture involves the acquisition by one of the joint venturers of the property intended for the purposes of the joint venture and the pursuit of the joint venture then becomes impracticable or impossible, the acquirer is not entitled to retain the property for his own bene
t but must be taken to hold the property upon trust for himself and the other joint venturers jointly. Before leaving the Holiday Inns case, it is to be noted that the judge, Go› J, was Sir Reginald Go›, and not Sir Robert Go›, later Lord Go› of Chieveley, as was erroneously stated, at p 122F, in the judgment of the Board (of which, oddly, Lord Go› was a member) delivered by Lord Templeman in Attorney General of Hong Kong v Humphreys Estate (Queens Gardens) Ltd [1987] AC 114. 25 The Humphreys Estate case was one in which a written agreement, expressed to be subject to contract, for the purchase of development A B C D E F G H 1766 Cobbe v Yeoman’s RowManagement Ltd (HL(E)) [2008] 1WLR Lord Scott of Foscote property had been signed. The agreement said that the terms could be varied or withdrawn and that any agreement was subject to the documents necessary to give legal e›ect to the transaction being executed and registered. In short the parties had made it clear that neither of them was for the time being legally bound. The Hong Kong Government, the intended purchaser, was permitted to take possession of the property and to spend money on it. The owners of the property then decided to withdraw from the transaction and gave notice terminating the Governments licence to occupy the property. In the litigation that ensued, the Government contended that the owners were barred by proprietary estoppel from exercising their legal right to withdraw from the transaction: see the submissions of counsel referred to by Lord Templeman, at p 121. The proprietary estoppel relied on was that which had been enunciated by Lord Kingsdown in Ramsden v Dyson LR 1HL 129. The Government lost in the courts in Hong Kong and appealed to the Privy Council but lost there too. Lord Templeman explained why, at pp 127—128: It is possible but unlikely that in circumstances at present unforeseeable a party to negotiations expressed to be subject to contract would be able to satisfy the court that the parties had subsequently agreed to convert the document into a contract or that some form of estoppel had arisen to prevent both parties from refusing to proceed with the transaction envisaged by the document. But in the present case the Government chose to begin and elected to continue on terms that either party might su›er a change of mind and withdraw. The reason why, in a subject to contract case, a proprietary estoppel cannot ordinarily arise is that the would-be purchasers expectation of acquiring an interest in the property in question is subject to a contingency that is entirely under the control of the other party to the negotiations: see also British Steel Corpn v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504, 511, per Robert Go› J; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; London& Regional Investments Ltd v TBI plc [2002] EWCA Civ 355 at [42], per Mummery LJ and Pridean v Forest Taverns (1996) 75 P&CR 447. The expectation is therefore speculative. 26 Both Etherton J and Mummery LJ in the Court of Appeal recognised that, in cases where negotiations had been made expressly subject to contract and a contract had not in the end been forthcoming, it would be very di–cult for a disappointed purchaser to establish an arguable case for a proprietary estoppel. Etherton J, having referred to the relevant authorities, accepted the improbability that in a subject-to-contract case a proprietary estoppel might arise ( paras 119 and 120), but distinguished the present case on the footing that Mrs Lisle-Mainwaring had encouraged Mr Cobbe to believe that if he succeeded in obtaining planning permission the second agreement would be honoured even though not legally binding (para 123) and, also, I think, that nothing equivalent to a subject-to-contract reservation had ever been expressed (para 119) and that no issue likely to cause any di–culty had been raised in the negotiations that culminated in the second agreement: para 122. In the Court of Appeal Mummery LJ dealt with the subject-to-contract point at [2006] 1WLR 2964, paras 53—57. The second agreement, he said, at para 57, was never expressly stated to be A B C D E F G H 1767 Cobbe v Yeoman’s RowManagement Ltd (HL(E))[2008] 1WLR Lord Scott of Foscote subject to contract either by use of that well known expression or by other language to the same e›ect. He agreed with Etherton J, at para 56, that proprietary estoppel could be established even where the parties anticipated that a legal binding contract would not come into existence until after planning permission had been obtained, further terms discussed and agreed and formal written contracts exchanged. 27 My Lords, I can easily accept that a subject-to-contract reservation made in the course of negotiations for a contract relating to the acquisition of an interest in land could be withdrawn, whether expressly or by inference from conduct. But debate about subject-to-contract reservations has only a peripheral relevance in the present case, for such a reservation is pointless in the context of oral negotiations relating to the acquisition of an interest in land. It would be an unusually unsophisticated negotiator who was not well aware that oral agreements relating to such an acquisition are by statute unenforceable and that no express reservation to make them so is needed. Mr Cobbe was an experienced property developer and Mrs Lisle- Mainwaring gives every impression of knowing her way around the negotiating table. Mr Cobbe did not spend his money and time on the planning application in the mistaken belief that the agreement was legally enforceable. He spent his money and time well aware that it was not. Mrs Lisle-Mainwaring did not encourage in him a belief that the second agreement was enforceable. She encouraged in him a belief that she would abide by it although it was not. Mr Cobbes belief, or expectation, was always speculative. He knew she was not legally bound. He regarded her as bound in honour but that is an acknowledgement that she was not legally bound. 28 The reality of this case, in my opinion, is that Etherton J and the Court of Appeal regarded their
nding that Mrs Lisle-Mainwarings behaviour in repudiating, and seeking an improvement on, the core
nancial terms of the second agreement was unconscionable, an evaluation from which I do not in the least dissent, as su–cient to justify the creation of a proprietary estoppel equity. As Etherton J said, at para 123, she took unconscionable advantage of Mr Cobbe. The advantage taken was the bene
t of his services, his time and his money in obtaining planning permission for the property. The advantage was unconscionable because immediately following the grant of planning permission she repudiated the
nancial terms on which Mr Cobbe had been expecting to be able to purchase the property. But to leap from there to a conclusion that a proprietary estoppel case was made out was not, in my opinion, justi
ed. Let it be supposed thatMrs Lisle-Mainwaring were to be held estopped from denying that the core
nancial terms of the second agreement were the
nancial terms on which Mr Cobbe was entitled to purchase the property. How would that help Mr Cobbe? He still would not have a complete agreement. Suppose Mrs Lisle-Mainwaring had simply said she had changed her mind and did not want the property to be sold after all. What would she be estopped from denying? Proprietary estoppel requires, in my opinion, clarity as to what it is 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. If these requirements are not recognised, proprietary estoppel will lose A B C D E F G H 1768 Cobbe v Yeoman’s RowManagement Ltd (HL(E)) [2008] 1WLR Lord Scott of Foscote to be done; or an equity may arise under the principles developed in the proprietary estoppel cases. For the reasons already explained I think the principles developed in the proprietary estoppel cases are inapplicable in cases such as the present; and if the arrangement is of su–cient certainty to be enforced speci
cally there would be a straightforward contractual remedy, with no need to resort to trusts. But the point underlying Chadwick LJs comment is a valid one. If the property that is to be the subject of the joint venture is owned by one of the parties before the joint venture has been embarked upon (as opposed to being acquired as part of the joint venture itself ), on what basis, short of a contractually complete agreement for the joint venture, can it be right to regard the owner as having subjected the property to a trust and granted a bene
cial interest to the other joint venturers? As Chadwick LJ observed in the Banner Homes case, at p 400: The [Pallant v Morgan] equity is invoked where the defendant has acquired property in circumstances where it would be inequitable to allow him to treat it as his own. 34 The Banner Homes case was considered by the Court of Appeal in London & Regional Investments Ltd v TBI plc [2002] EWCA Civ 355. This case, like the present case, was one which concerned a joint venture arrangement that had never become contractually enforceable (it had been expressed to be subject to contract), but in premature reliance on which one of the parties, London & Regional, had taken certain steps said to constitute detriment: see per Mummery LJ, at para 34. The joint venture related to a property which had been owned by TBI before the joint venture had been embarked upon. When TBI announced its decision to withdraw from the joint venture London & Regional claimed a Pallant v Morgan equity in the property. TBI sought summary judgment dismissing London& Regionals claim. They succeeded both at
rst instance and in the Court of Appeal. Mummery LJ, whose judgment was concurred in by the other members of the court, distinguished the Banner Homes case, not only on the subject-to-contract point, at para 47: The recorded intentions as to the joint venture implicitly proceeded on the basis that no concluded agreement had been reached and contemplated that such an agreement might never be reached, but also on the footing, at para 48, that the person sought to be held liable as a constructive trustee has an existing entitlement to the land in question and the claimed agreement to dispose of it, in this case to a joint venture, is too uncertain and vague to be enforced. All of that could be said of the present case. 35 The
nal case on this point to which I should refer is Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd [2005] 2 P&CR 105where a Pallant v Morgan type of equity was claimed consequent upon an abortive alleged joint venture. Lewison J examined in some depth Chadwick LJs judgment in the Banner Homes case and Mummery LJs judgment in the London & Regional case and, on the pre-acquisition or post-acquisition arrangement point, noted, at para 242, that the case was not a case of a pre-acquisition agreement which colours [the
rst defendants] acquisition of [the property in respect of which the equity was claimed]. Kilcarne appealed but its appeal was dismissed [2005] NPC 132. 36 The circumstances of the present case are that the property in question was owned by the defendant company before any negotiations for a A B C D E F G H 1771 Cobbe v Yeoman’s RowManagement Ltd (HL(E))[2008] 1WLR Lord Scott of Foscote joint venture agreement had commenced. The interest in the property that Mr Cobbe was expecting to acquire was an interest pursuant to a formal written agreement some of the terms of which remained still to be agreed and that never came into existence. Mr Cobbe expended his time and money in making the planning application in the knowledge that the defendant company was not legally bound. Despite the unconscionability of the defendant companys behaviour in withdrawing from the inchoate agreement immediately planning permission had been obtained, this seems to me a wholly inadequate basis for imposing a constructive trust over the property in order to provide Mr Cobbe with a remedy for his disappointed expectations. This property was never joint venture property and I can see no justi
cation for treating it as though it was. 37 The unconscionable behaviour of Mrs Lisle-Mainwaring is, in my opinion, not enough in the circumstances of this case to justify Mr Cobbes claim to have acquired, or to be awarded by the court, a bene
cial interest in the property. The salient features of the case that preclude that claim are, to my mind, that the defendant company owned the property before Mr Cobbe came upon the scene, that the second agreement produced by the discussions between him and Mrs Lisle-Mainwaring was known to both to be legally unenforceable, that an unenforceable promise to perform a legally unenforceable agreementwhich is what an agreement binding in honour comes tocan give no greater advantage than the unenforceable agreement, that Mr Cobbes expectation of an enforceable contract, on the basis of which he applied for and obtained the grant of planning permission, was inherently speculative and contingent on Mrs Lisle-Mainwarings decisions regarding the incomplete agreement and that Mr Cobbe never expected to acquire an interest in the property otherwise than under a legally enforceable contract. In these circumstances the imposition of the constructive trust on the property and the pro tanto divesting of the defendant companys ownership of it seems to me more in the nature of an indignant reaction to Mrs Lisle-Mainwarings unconscionable behaviour than a principled answer toMr Cobbes claim for relief. The proprietary claims: conclusion 38 I would for the reasons I have given reject both of the proprietary claims made on Mr Cobbes behalf. Mr Cobbes alternative in personam claims are relatively uncontroversial but before turning to them I want to reect for a moment on the implications of the claim he has not made, namely, a claim in deceit. The
ndings of fact made by Etherton J suggest that well before 18 March 2004 Mrs Lisle-Mainwaring had decided to repudiate the core
nancial terms of the second agreement but none the less had continued to represent to Mr Cobbe, by conduct if not expressly, that she intended to abide by the core
nancial terms and regarded herself as honour-bound to do so. It may be that the detriment incurred by Mr Cobbe had already been incurred and that no further detriment in reliance on any such knowingly false representations was incurred, but that may not have been so. If Mr Cobbes proprietary claims, of proprietary estoppel and to an interest under a constructive trust, were well founded, similar claims could presumably be brought in many cases where a contract had been induced by a fraudulent misrepresentation. The dishonest representation would often have led to unrealised expectations of bene
t. But, unless the representation A B C D E F G H 1772 Cobbe v Yeoman’s RowManagement Ltd (HL(E)) [2008] 1WLR Lord Scott of Foscote had become a term of the contract, no one, I think, would suggest that the victim could claim to be compensated for the loss of the expected bene
t. The tortious damages recoverable for the deceit would be limited to consequential loss. How could the victim be entitled to a better result than that if there were no contract at all but simply a dishonest representation on which he had acted to his disadvantage, or, a fortiori, to a better result if not only had there been no contract at all but, in addition, the representation had not been dishonest? In my opinion, the representations of intention on whichMr Cobbe acted in the present case cannot, in principle, entitle him to a remedy intended to give him the value of his expectations engendered by the representations. A genuine proprietary claim enabled to succeed by the operation of a genuine proprietary estoppel would be in accordance with principle. But a claim for the imposition of a constructive trust in order to provide a remedy for a disappointed expectation engendered by a representation made in the context of incomplete contractual negotiations is, in my opinion, misconceived and cannot be sustained by reliance on unconscionable behaviour on the part of the representor. The in personam remedies 39 Each of these is a well recognised common law remedy and, I think, each produces much the same result. Unjust enrichment 40 There is no doubt but that the value of the property will have been increased by the grant of planning permission and that the defendant company has, accordingly, been enriched by the grant of the permission for which it has had to pay nothing. Since the planning permission was obtained at the expense of Mr Cobbe it is very easy to conclude that the defendant company has been enriched at his expense and, in the circumstances that I need not again rehearse, unjustly enriched. So, in principle, he is entitled to a common law remedy for unjust enrichment. 41 But what is the extent of the unjust enrichment? It is not, in my opinion, the di›erence in market value between the property without the planning permission and the property with it. The planning permission did not create the development potential of the property; it unlocked it. The defendant company was unjustly enriched because it obtained the value of Mr Cobbes services without having to pay for them. An analogy might be drawnwith the case of a locked cabinet which is believed to contain valuable treasures but to which there is no key. The cabinet has a high intrinsic value and its owner is unwilling to destroy it in order to ascertain its contents. Instead a locksmith agrees to try to fashion a key. He does so successfully and the cabinet is unlocked. As had been hoped, it is found to contain valuable treasures. The locksmith had hoped to be awarded a share of their value but no agreement to that e›ect had been concluded and the owner proposes to reward him with no more than sincere gratitude. The owner has been enriched by his work and, many would think, unjustly enriched. For why should a craftsman work for nothing? But surely the extent of the enrichment is no more than the value of the locksmiths services in fashioning the key. Everything else the owner of the cabinet already owned. So here. A B C D E F G H 1773 Cobbe v Yeoman’s RowManagement Ltd (HL(E))[2008] 1WLR Lord Scott of Foscote 48 The authors of Gray & Gray, at para 10.189, propose a classi
cation whichMr Ivory (forMr Cobbe) adopted in his printed case: The concatenation of ideas underlying proprietary estoppel emerges from three broad, and not entirely distinct, categories of circumstance. These categories comprise (1) the imperfect gift cases, (2) the common expectation cases, and (3) the unilateral mistake cases. These cases alike present the essential characteristics of proprietary estoppel, but each class of case in its turn gives a heightened emphasis to one or other of the constituent elements of representation, reliance and unconscionable disadvantage. The tendency in the modern case law is to synthesise the jurisprudence of proprietary estoppel in a more uni
ed doctrine of detrimental reliance. I may have made a small personal contribution to that tendency. But the di–culty and importance of this appeal, and the very full examination of the authorities which counsel have undertaken, remind me that synthesis and uni
cation, however desirable as objectives, have their dangers. Without embarking on anything like an exhaustive review of the case law, I propose to look at some of the key authorities with Gray & Grays suggested taxonomy in mind. 49 Dillwyn v Llewelyn (1862) 4 De G F & J 517, one of the earliest leading cases, is a very clear example of an imperfect gift. In 1853 a father wished to give his younger son an estate in Wales, and thought he had done so by signing a memorandum presenting it to him for the purpose of furnishing himself with a dwelling-house. The memorandum was unfortunately not a deed. The son incurred great expense in building himself a house on the land. Two years later the father died and the elder son disputed his brothers title. Sir John Romilly MR decreed that the younger son was entitled to a life interest. Lord Westbury LC allowed the younger sons appeal. He said, at p 521: About the rules of the court there can be no controversy. A voluntary agreement will not be completed or assisted by a court of equity, in cases of mere gift. If anything be wanting to complete the title of the donee, a court of equity will not assist him in obtaining it; for a mere donee can have no right to claim more than he has received. But the subsequent acts of the donor may give the donee that right or ground of claim which he did not acquire from the original gift . . . So if A puts B in possession of a piece of land, and tells him, I give it to you that you may build a house on it, and B on the strength of that promise, with the knowledge of A, expends a large sum of money in building a house accordingly, I cannot doubt that the donee acquires a right from the subsequent transaction to call on the donor to perform that contract and complete the imperfect donation which was made. The case is somewhat analogous to that of verbal agreement not binding originally for the want of the memorandum in writing signed by the party to be charged, but which becomes binding by virtue of the subsequent part-performance. Lord Westbury LC awarded the younger son the fee simple since (at p 522) no one builds a house for his own life only . . . 50 Although Dillwyn v Llewelyn is aptly described as a case of imperfect gift, it also had a slight avour of common expectation, because A B C D E F G H 1776 Cobbe v Yeoman’s RowManagement Ltd (HL(E)) [2008] 1WLR LordWalker of Gestingthorpe the father wanted to have his son living near him (Lord Westbury referred almost in the same breath to an agreement and a donation). It also had an element of mistake, but not of unilateral mistake. Both father and son must be taken to have made the common mistake of supposing the signed memorandum to be an e›ective way of making a gift of land. Had the mistake been discovered during the fathers lifetime, it would no doubt have been put right without the need for legal proceedings. 51 Cases of unilateral mistake occurred quite frequently in the 19th century, when the construction of canals and railways, coupled with the complexity of unregistered conveyancing in those days, made it not uncommon for building works to be carried out on land whose owner (or part-owner) had not agreed to the works. An example is Rochdale Canal Co v King (1853) 16 Beav 630, 633—637, in which Sir John Romilly MR said, at pp 633—634 The principle on which the defendants rely is one often recognised by this court, namely, that if one man stand by and encourage another, though but passively, to lay out money, under an erroneous opinion of title, or under the obvious expectation that no obstacle will afterwards be interposed in the way of his enjoyment, the court will not permit any subsequent interference with it, by him who formally promoted and encouraged those acts, of which he now either complains or seeks to take advantage. This is the rule laid down in Dann v Spurrier (1802) 7 Ves 231, Powell v Thomas (1848) 6 Hare 300, and many other cases, to which it is unnecessary to refer, because the principle is clear. Dann v Spurrier (1802) 7 Ves 231was a decision of Lord Eldon LC in a case concerned with improvements to a leasehold property carried out by the tenants assignee in circumstances where it was uncertain whether the length of the term (seven, 14 or 21 years) was at the option of the lessee alone (and ultimately the case was decided on that point of construction). Lord Eldon LC made clear, at pp 235—236, that the fact of the defendants knowledge (of the plainti›s mistake) must be proved by strong and cogent evidence. He gave some weight to the fact that the plainti› was a professional man who had acted incautiously. 52 The great case of Ramsden v Dyson LR 1 HL 129 has, rightly, been closely examined in the course of the appeal. Stuart V-C had held that two tenants of Sir John Ramsden, the owner of a large estate near Hudders
eld, were entitled to long leases of plots on the estate. They ostensibly held the plots as tenants at will only, but they had spent their own money in building on the strength of assurances, said to have been given to them by the landowners agent, that they would never be disturbed. This House reversed that decision by a majority (Lord Cranworth LC, Lord Wensleydale and Lord Westbury, Lord Kingsdown dissenting). The di›erence of opinion was over an issue of fact, that is, the substance of what was said on the occasion when some tenants agreed to be tenants at lower rents than were being paid by other tenants of Sir John Ramsden. Lord Kingsdowns statement of the law, at p 170, emphasising the element of encouragement, has often been preferred to Lord Cranworths, at pp 140—141, emphasising the importance of mistake on one side and knowledge of the mistake on the other side. Lord Kingsdown was seeing the case as one of common expectation (of the tenants right to be granted a long lease on demand), whereas Lord A B C D E F G H 1777 Cobbe v Yeoman’s RowManagement Ltd (HL(E))[2008] 1WLR LordWalker of Gestingthorpe Vol 1 73 Cranworth was seeing it as one of unilateral mistake. Ramsden v Dyson is a good example of a case which does not
t neatly into one category to the exclusion of another. 53 The passages in Ramsden v Dyson that I have just mentioned are too well known to need repetition. But Mr Dowding (for the defendant company) drew attention to another, less frequently quoted, passage in Lord Cranworths speech. After mentioning, at p 145, one competing version of the substance of what had been said (that is, that the tenants could safely allow the matter to rest in the honour of the Ramsden family) Lord Cranworth said, at pp 145—146: If any one makes an assurance to another, with or without consideration, that he will do or will abstain from doing a particular act, but he refuses to bind himself, and says that for the performance of what he has promised the person to whom the promise has been made must rely on the honour of the person who has made it, this excludes the jurisdiction of courts of equity no less than of courts of law. Lord Wensleydale made similar comments at the end of his speech, at p 170. These may be the
rst references to the notion that an arrangement which is expressly and deliberately acknowledged to be a gentlemans agreement may not be capable of giving rise to an estoppel. It is of some relevance to this appeal, the facts of which are stated in the opinion of my noble and learned friend, Lord Scott of Foscote, whose account I gratefully adopt. 54 Plimmer v Wellington Corpn (1884) 9 App Cas 699 was a common expectation case. Mr Plimmer seems to have been a businessman of some substance, and he was dealing with the provincial government, but their arrangements seem to have been attended by a high degree of informality. In that respect it is in striking contrast to Attorney General of Hong Kong v Humphreys Estate (Queens Gardens) Ltd [1987] AC 114, discussed below. In Plimmers case the nub of the Privy Councils decision appears at p 712: In the present case, the equity is not claimed because the landowner has stood by in silence while his tenant has spent money on his land. This is a case in which the landowner has, for his own purposes, requested the tenant to make the improvements. The Government were engaged in the important work of introducing immigrants into the colony. For some reason, not now apparent, they were not prepared to make landing-places of their own, and in fact they did not do so until the year 1863. So they applied to John Plimmer to make his landing-place more commodious by substantial extension of his jetty and the erection of a warehouse for baggage. Is it to be said that, when had had incurred the expense of doing the work asked for, the Government could turn round and revoke his licence at their will? Could they in July, 1856, have deprived him summarily of the use of the jetty? It would be in a high degree unjust that they should do so, and that the parties should have intended such a result is, in the absence of evidence, incredible. 55 In Plimmers case the opinion of the Privy Council, delivered by Sir Arthur Hobhouse, is of interest because it discusses Ramsden v Dyson at some length, at pp 710—712, and rejects the argument (based on Lord Cranworths speech) that some sort of unilateral mistake is necessary A B C D E F G H 1778 Cobbe v Yeoman’s RowManagement Ltd (HL(E)) [2008] 1WLR LordWalker of Gestingthorpe fell sharply in 1984). The Government of Hong Kong was at pains, as appears from the documents quoted by the Privy Council (and still more from the fuller quotations from the documents in the judgments in the Hong Kong Court of Appeal [1986] HKLR 669), to emphasise on every occasion that it was not committing itself in any way. By the same token, it could not expect the developer to be committing itself, either in law or in equity. It could not be unconscionable for the developer to follow a course which the Government repeatedly insisted was open to itself. 63 The present appeal is not a case of imperfect gift, like Dillwyn v Llewelyn 4 De G F & J 517. Nor is it a case of unilateral mistake to which the Willmott v Barber 15 ChD 96 probanda would be appropriatethat is, a case of the defendant taking advantage of a mistake as to title of which he is well aware. This case is, in the terminology used by Gray & Gray, a case of common expectation if it is anything. The critical issue, to my mind, is whether there was, on the judges
ndings, a common expectation of the type capable of raising an equitable estoppel. Although they are not based on common mistake (as in the imperfect gift cases) or unilateral mistake (as in the standing by cases) common expectation cases often have at least a avour of mistake, or at any rate what restitution lawyers call misprediction (Mr Cobbe predicted, wrongly, that Mrs Lisle-Mainwaring would not withdraw from the non-binding arrangement). Was it also necessary for Mr Cobbe to believe, wrongly, that Mrs Lisle-Mainwaring had no legal right to withdraw from it? 64 On this point the language of Lord Kingsdowns much-quoted statement in Ramsden v Dyson LR 1HL 129, 170 is not without ambiguity: under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest . . . But an expectation of an interest is the same thing as a contracted interest only if it can be relied on. The rest of the speech indicates (at p 172) that Lord Kingsdowns reading of the facts was that the tenants believed (wrongly) that they had a legal right to a long lease, and that that was of critical importance. So he seems not to have di›ered, as to the law on this point, from Lord Cranworth (at pp 145—146, a passage I have already quoted) and the rest of the majority. Reliance on the Ramsden familys honour was not enough. 65 In Plimmers case 9 App Cas 699 the Privy Council (at p 712, the passage I have already quoted) regarded it as an irresistible inference that Mr Plimmer thought that his compliance with the Governments request gave him a right to security of tenure, even if the duration of that security was uncertain. It is not enough to hope, or even to have a con
dent expectation, that the person who has given assurances will eventually do the proper thing. 66 The point that hopes by themselves are not enough is made most clearly in cases with a commercial context, of which Attorney General of Hong Kong v Humphreys Estate (Queens Gardens) Ltd [1987] AC 114 is the most striking example. It does not appear so often in cases with more of a domestic or family avour, from Inwards v Baker [1965] 2 QB 29 and Pascoe v Turner [1979] 1 WLR 431 to Windeler v Whitehall [1990] 2 FLR 505; Gillett v Holt [2001] Ch 210; Grundy v Ottey [2003] WTLR 1253; Jennings v Rice [2003] 1 P & CR 100 and Lissimore v Downing [2003] A B C D E F G H 1781 Cobbe v Yeoman’s RowManagement Ltd (HL(E))[2008] 1WLR LordWalker of Gestingthorpe 2 FLR 308. The son who built the bungalow in Inwards v Baker, the young farm manager in Gillett v Holt, the elderly country neighbour in Jennings v Rice and the female companions in the other three cases almost certainly did not take any legal advice until after the events relied on as creating the estoppel. They may not have had a clear idea of the quantum of what they expected to get (in Grundy v Ottey, unusually, the expected quantum was precisely de
ned). But in those cases in which an estoppel was established, the claimant believed that the assurance on which he or she relied was binding and irrevocable. 67 It may possibly be that some of the domestic cases might have been decided di›erently if the nature of the claimants belief had been an issue vigorously investigated in cross-examination. In Gillett v Holt [2001] Ch 210, 229 there was such cross-examination: Mr Gillett was cross-examined at length about some increasingly improbable eventualities: that Mr Holt would marry his housekeeper, that he would have children, that his elderly sister would suddenly lose all her investments and turn to him for help. Mr Gillett naturally enough conceded that in those circumstances Mr Holt could or would have made some provision for these moral obligations. But, in giving evidence, he stuck resolutely to the promises made to him . . . Mr Gillett was not in the witness box to take part in a seminar on the elements of proprietary estoppel (although parts of his cross- examination suggest otherwise). He was there to give evidence, which was largely unchallenged and which the judge accepted, about the assurances made to him and his detrimental reliance on them. In most of these cases the controversial issues tend to be whether any su–cient assurance was made, and whether it was causally relevant (often cross-examination is directed towards establishing that the claimant would have done the same in any case, out of friendship or family feeling). 68 It is unpro
table to trawl through the authorities on domestic arrangements in order to compare the forms of words used by judges to describe the claimants expectations in cases where this issue (hope or something more?) was not squarely raised. But the fact that the issue is seldom raised is not, I think, coincidental. In the commercial context, the claimant is typically a business person with access to legal advice and what he or she is expecting to get is a contract. In the domestic or family context, the typical claimant is not a business person and is not receiving legal advice. What he or she wants and expects to get is an interest in immovable property, often for long-term occupation as a home. The focus is not on intangible legal rights but on the tangible property which he or she expects to get. The typical domestic claimant does not stop to reect (until disappointed expectations lead to litigation) whether some further legal transaction (such as a grant by deed, or the making of a will or codicil) is necessary to complete the promised title. 69 Etherton Js
ndings of fact, which are not challenged in any signi
cant respect, need to be examined with these points in mind. His
ndings are clearly identi
ed and set out in paras 62—84 of his judgment [2005] WTLR 625. To say that they are dispassionate is not to suggest that they are in any way unfocused; quite the reverse. A B C D E F G H 1782 Cobbe v Yeoman’s RowManagement Ltd (HL(E)) [2008] 1WLR LordWalker of Gestingthorpe 70 The crucial
ndings, to mymind, are in paras 68—70: 68. On the other hand, I
nd that, from the end of 2002 until the grant of the planning permission on 17 March 2004, Mr Cobbe believed the following: that the second agreement comprised all the critical commercial terms, that any outstanding terms were of secondary importance and in the nature of legal mechanics, which would inevitably be agreed one way or another, and that Mrs Lisle-Mainwaring was, and regarded herself as, bound in honour to enter into a formal written contract embodying the terms of the second agreement if Mr Cobbe obtained planning permission for the development of the property by its demolition and its replacement by six houses. 69. I also accept Mr Cobbes evidence that he himself felt the second agreement was binding on him in honour. I reject the submission of Mr Seitler [QC, counsel for the defendants] to the contrary based on the oral evidence of Mr McMahon, as to what Mr McMahon had been told by, and the general impression that was given to him by, Mr Cobbe, and on a note made by Mr Cobbe in 2004 concerning the
rst agreement and its termination. 70. Mr Cobbe envisaged that, if Mrs Lisle-Mainwaring decided not to proceed with the development of the property, prior to planning permission being granted, he would be reimbursed his reasonable expenditure. If she did not withdraw, and such planning permission was refused, he would not be reimbursed. 71 So the judge found that Mr Cobbe believed that Mrs Lisle- Mainwaring was, and regarded herself as, bound in honour to enter into a formal written contract if planning permission was granted; and that Mr Cobbe regarded himself as similarly bound. It is implicitin my view necessarily and deliberately implicitin the judges carefully chosen language that neither Mrs Lisle-Mainwaring nor Mr Cobbe regarded herself or himself as legally bound. They were both very experienced in property matters and they knew perfectly well that that was not the position. 72 Another unusual feature of this case is the judges
nding that Mr Cobbe believed that he would be reimbursed his reasonable expenditure if Mrs Lisle-Mainwaring decided to withdraw from the arrangement before planning permission was granted. This emphasis on the actual grant of planning permission as the crucial condition produces a strange result: would it be conscionable for Mrs Lisle-Mainwaring to withdraw (subject only to reimbursement) at a stage when 99% of the work necessary to obtain planning permission had been done, and success was virtually certain, but unconscionable to do so once success had actually been achieved? This feature of the arrangement emphasises the risk which Mr Cobbe was undertaking, in deciding to rely onMrs LisleMainwarings sense of honour. 73 The judge then proceeded to analyse the position, at paras 85—129 of his judgment, stating at the outset his conclusion that the facts did give rise to a proprietary estoppel in favour of Mr Cobbe. The judges analysis is lengthy and closely-reasoned but there are, as I see it, three main themes. 74 The
rst is the importance (para 86) of Mr Cobbes belief that, even though the second agreement was not a legally binding and enforceable contract, Mrs Lisle Mainwaring regarded it as binding . . . The judge did not add in honour only but that was necessarily implicit. Mr Cobbe knew A B C D E F G H 1783 Cobbe v Yeoman’s RowManagement Ltd (HL(E))[2008] 1WLR LordWalker of Gestingthorpe That applies to commercial negotiations whether or not they are expressly stated to be subject to contract. 82 The judge went on to consider how he should exercise his discretion so as to give e›ect to the estoppel which he had found to be established. The di–culties that he encountered are a further indication, I think, of the incongruity of trying to apply the doctrine of equitable estoppel to a complicated commercial negotiation in which one crucial elementhow Mr Cobbe was going to fund the project, and provide security both for the funding and for Mrs Lisle-Mainwarings overage interesthad hardly been addressed. 83 The Court of Appeal (Mummery, Dyson LJJ and Sir Martin Nourse) [2006] 1WLR 2964 unanimously dismissed Mrs Lisle-Mainwarings appeal from the judges main judgment (her appeal against being made personally liable, a matter covered in the judges second judgment, was allowed, and nothing now turns on that). Mummery LJ gave the leading judgment in the Court of Appeal. He summarised the
ve main grounds of appeal, at paras 45—63: (i) the mutual promises point: that Mr Cobbe had not performed all (or substantially all) of his side of a complex bargain; (ii) the uncertainty point: that Mr Cobbes expectation was of a contract, which was meaningless unless the terms of the contract were clear; (iii) the subject to contract point: this has been su–ciently explained already; (iv) the unconscionability point: that it was not, in all the circumstances, unconscionable for the
rst defendant company to continue to allow Mr Cobbe to spend money, after Christmas 2003, in seeking planning permission and (v) a point on section 2 of the Law of Property (Miscellanous Provisions) Act 1989. 84 Mummery LJ disposed of the
rst four of these points relatively briey, at paras 45—61, and then went on to the
fth point, to the relief granted and to the problems raised by the judges second judgment. Dyson LJ agreed with Mummery LJ and added some further reasoning on the issue of relief. SirMartin Nourse agreed with both judgments. 85 My Lords, I yield to no one in my respect for Etherton J and for the three very experienced judges in the Court of Appeal who upheld his main judgment. But I have after anxious consideration reached the clear conclusion that they stretched the boundaries of the doctrine of equitable estoppel too far in granting relief going well beyond the restitutionary relief to which I would hold Mr Cobbe to be entitled. In my opinion the Court of Appeals decision, if it were to stand, would tend to introduce considerable uncertainty into commercial negotiations, and not only in the
eld of property development (compare Baird Textile Holdings Ltd v Marks & Spencer plc [2002] 1 All ER (Comm) 737 which the editors of Meagher, Gummow & Lehane, 4th ed (2003), para 17-050 contrast with recent developments in Australia). Equity has some important functions in regulating commercial life, but those functions must be kept within proper bounds: see generally Sir Peter Millett, Equitys Place in the Law of Commerce (1998) 114 LQR 214. 86 My reasons for di›ering from the courts below are three-fold (although, as always seems to happen in this area of law, the points are not completely distinct; they rub shoulders together). They broadly correspond to the
rst four grounds of appeal in the Court of Appeal, but taking the
rst and second grounds together. A B C D E F G H 1786 Cobbe v Yeoman’s RowManagement Ltd (HL(E)) [2008] 1WLR LordWalker of Gestingthorpe 87 The informal bargain made in this case was unusually complex, as both courts below acknowledged. When a claim based on equitable estoppel is made in a domestic setting the informal bargain or understanding is typically on the following lines: if you live here as my carer/companion/lover you will have a home for life. The expectation is of acquiring and keeping an interest in an identi
ed property. In this case, by contrast, Mr Cobbe was expecting to get a contract. Under that contract he (or much more probably a company controlled by him) would have been entitled to acquire the property for a down-payment of £12m, but only as part of a deal under which the block of ats on the site was to be demolished, the site cleared, and six very expensive town houses were to be erected instead, and sold for the best prices that they would fetch. The interests of Mrs Lisle-Mainwaring and YRML were not restricted to the £12m down- payment. She was to receive a further sum amounting (together with the £12m) to one half of the gross proceeds of sale of the six town houses. She would expect this future sum to be secured on the property. The bank or other institution providing the development
nance would also expect its lending to be fully secured. At some point a very large sum of money was going to be secured on an empty site. None of these matters seems to have been under negotiation before the deal collapsed in March 2004. Mr Ivory made a virtue of that point, arguing that the absence of any active negotiations between September 2002 and March 2004 shows that the parties did not expect to encounter any di–culty in agreeing these matters. It is more likely, to my mind, that they both accepted that there was no point in tackling them until planning permission had been obtained. 88 I have already mentioned the judges
nding [2005] WTLR 625, para 68, thatMr Cobbe believed that the second agreement comprised all the critical commercial terms, that any outstanding terms were of secondary importance and in the nature of legal mechanics, which would inevitably be agreed one way or another . . . Mr Dowding did not directly attack this conclusion, but he did submit (to my mind convincingly) that the matters which were not agreed (or even under negotiation) were far from trivial. The fact that one or both parties may have expected that all outstanding points would be resolved does not mean that that outcome was certain or near-certain (as is con
rmed by recent events in the mortgage lending and property sectors). 89 The judge may also have taken rather too broad a view of the commercial reality of the proposed deal. In discussing the issue of relief he observed, at para 140: The second agreement, broadly speaking, reected an intention that [the defendant company], throughMrs Lisle-Mainwaring, andMr Cobbe should share equally the increased value or commercial potentiality arising from the grant of the planning permission. That was no doubt true, in a very broad sense. But Mr Cobbes prospective rewards were much more highly geared, and vulnerable to changing economic and
nancial circumstances. Not that there was anything unfair in that: after all, Mrs Lisle-Mainwaring and her company were bringing the property into the venture, and Mr Cobbes main contribution was his A B C D E F G H 1787 Cobbe v Yeoman’s RowManagement Ltd (HL(E))[2008] 1WLR LordWalker of Gestingthorpe entrepreneurial skill and experience. But it is important, I think, to grasp the degree of risk which Mr Cobbe was undertaking, on any view of the relationship of trust between himself andMrs Lisle-Mainwaring. 90 These considerations (which are loosely connected with the
rst and second grounds of appeal in the Court of Appeal, and more closely with points made at various places between paras 52 and 78 in the defendant companys printed case) are not in themselves decisive. It may be possible to imagine a situation in which an equitable estoppel might arise even though the expected outcome was not really within the gift of the party estopped. But the considerations which I have mentioned do at the least indicate that the estoppel claimed in this case is a very unusual one, which calls for rigorous and even sceptical examination. 91 When examined in that way, Mr Cobbes case seems to me to fail on the simple but fundamental point that, as persons experienced in the property world, both parties knew that there was no legally binding contract, and that either was therefore free to discontinue the negotiations without legal liabilitythat is, liability in equity as well as at law, to echo the words of Lord Cranworth LC in Ramsden v Dyson LR 1 HL 129, 145—146 quoted in para 53 above. Mr Cobbe was therefore running a risk, but he stood to make a handsome pro
t if the deal went ahead, and the market stayed favourable. He may have thought that any attempt to get Mrs Lisle-Mainwaring to enter into a written contract before the grant of planning permission would be counter-productive. Whatever his reasons for doing so, the fact is that he ran a commercial risk, with his eyes open, and the outcome has proved unfortunate for him. It is true that he did not expressly state, at the time, that he was relying solely onMrs Lisle-Mainwarings sense of honour, but to draw that sort of distinction in a commercial context would be as unrealistic, in my opinion, as to draw a
rm distinction depending on whether the formula subject to contract had or had not actually been used. 92 Mr Dowding devoted a separate section of his printed case to arguing that even if the elements for an estoppel were in other respects present, it would not in any event be unconscionable for Mrs Lisle- Mainwaring to insist on her legal rights. That argument raises the question whether unconscionability is a separate element in making out a case of estoppel, or whether to regard it as a separate element would be what Professor Peter Birks once called a
fth wheel on the coach: Birks & Pretto (eds), Breach of Trust (2002), p 226. But Birks was there criticising the use of unconscionable to describe a state of mind (Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437, 455). Here it is being used (as in my opinion it should always be used) as an objective value judgment on behaviour (regardless of the state of mind of the individual in question). As such it does in my opinion play a very important part in the doctrine of equitable estoppel, in unifying and con
rming, as it were, the other elements. If the other elements appear to be present but the result does not shock the conscience of the court, the analysis needs to be looked at again. In this case Mrs Lisle-Mainwarings conduct was unattractive. She chose to stand on her rights rather than respecting her non-binding assurances, while Mr Cobbe continued to spend time and e›ort, between Christmas 2003 and March 2004, in obtaining planning permission. But Mr Cobbe knew that she was bound in honour only, A B C D E F G H 1788 Cobbe v Yeoman’s RowManagement Ltd (HL(E)) [2008] 1WLR LordWalker of Gestingthorpe