The appellant (Mr Herbert) owned the freehold of a house and a large garden. The respondents (Mr Doyle and Mr Talati) owned the freehold of an adjacent property comprising a dental surgery with nine parking spaces. They also leased part of the ground floor in the main house from Mr Herbert. They carried on a practice as dental practitioners from the freehold and leasehold premises and they and their clients used the parking spaces. Mr Herbert wished to develop the former walled garden of Mansfield House and to build mews houses, but to do so he needed Mr Doyle and Mr Talati to exchange some of their parking spaces (the red parking spaces) for others on his property. Planning permission was obtained on 8 November 2000, but the Mr Doyle and Mr Talati noted that the development would encroach on their parking spaces. Mr Herbert therefore proposed to build a compressor house for use in their dental practice on his property which would be included in their leases. Mr Herbert began laying out areas for the building of the mews houses. In April 2003, the parties met and made an oral agreement containing nine conditions, which they intended to be immediately binding. The terms agreed were as follows:
- (1) Mr Herbert would do the following:
- (i) Grant a 999-year lease of the ground-floor flat, together with the quad, subject to retaining a tenancy of a single room;
- (ii) Grant a 999-year lease of the compressor house;
- (iii) Construct a loggia over the quad, incorporating the provision of a cycle-rack;
- (iv) Transfer or provide a total of ten reasonably accessible parking spaces on the site, so far as possible adjacent to Mansfield House, nine of them being freehold and the 10th (being linked to the flat) leasehold;
- (v) Install electrically operated gates to the car-park.
- (2) Mr Doyle and Mr Talati would do the following:
- (i) They would transfer the green parking spaces to Mr Herbert;
- (ii) They would pay an inclusive price of £130,000 for that package.
Mr Herbert proceeded with the development. A dispute arose over the parking spaces, and Mr Herbert commenced proceedings requiring Mr Doyle and Mr Talati to complete the transfer of the green parking spaces to him. The trial judge found that they had given an assurance that they would not withdraw their agreement to the terms agreed between the parties on 14 April 2003. He held that if, however, Mr Herbert was willing and able to satisfy the other terms which had been agreed, it would be unconscionable for Mr Doyle and Mr Talati to resile from their agreement by refusing to transfer the green parking spaces to him. However, if Mr Herbert was not willing and able to satisfy those terms, then it would not be unconscionable for Mr Doyle and Mr Talati to retain the green parking spaces unless and until those other terms were satisfied.
Mr Herbert decided not to exercise that right by complying with the other terms of the agreement. Mr Doyle and Mr Talati amended their defence and counterclaim therefore counterclaimed that if they transferred the spaces and paid the sum in the agreement for Mr Herbert to create an extension then he was bound to transfer to them the parking spaces and to grant a lease to them of the extension and the other building.
The High Court held that the 2003 negotiations and agreement, and the defendants’ reliance upon that agreement to their detriment by allowing Mr Herbert to encroach on the green spaces were sufficient to enable the court to find a constructive trust in favour of the defendants such that Mr Herbert held on constructive trust: (1) a 999 year lease of the staff room extension (2) the freehold of the red parking paces and (3) the freehold of a further parking space. Mr Herbert applied for permission to appeal against (1) the judge’s granting of permission to amend (2) the decision that there was a constructive trust in favour of Mr Doyle and Mr Talati (3) the judge’s decision to award costs in favour of Mr Doyle and Mr Talati.
Mr Herbert argued that the agreement of April 2003 did not have sufficient certainty to amount to a constructive trust and that in effect there were matters outstanding to be agreed. Therefore their agreement was incomplete and subject to contract. The question before the Court of Appeal was therefore whether there was an agreement to enter into a further formal agreement, or whether there were matters remaining to be agreed which meant that the interests in property to be acquired were not defined with sufficient clarity, or whether the parties did not expect their agreement to be legally binding.
- 1) The judge’s decision to permit the amendment after judgment was a case management decision in which an appellate court would be most reluctant to interfere unless it was plainly wrong. In the circumstances, there was no prospect of success of an appeal against that decision;
- 2) If, following an oral agreement, the parties still intended to make a formal agreement setting out the terms on which one or more of the parties was to acquire an interest in property, or if further terms for that acquisition remained to be agreed between them so that the interest in property was not clearly identified, or if the parties did not expect their agreement to be immediately binding, neither party could rely on constructive trust as a means of enforcing their original agreement. If their agreement, which did not comply with s2(1), was incomplete, they could not utilise the doctrine of proprietary estoppel or the doctrine of constructive trust to make their agreement binding on the other party by virtue of s2(5);
- 3) As to the fact that the parties continued to negotiate after April 2003 and subsequently agreed variations, these matters did not of themselves undermine the judge’s finding of a complete agreement as at April 2003. The question was whether the respective property interests of the parties were sufficiently certain at the time that they were agreed and remained sufficiently certain notwithstanding the parties’ further dealings together. This was primarily a question of fact, in the light of the judge’s findings of fact Mr Herbert was not able to show that the agreement even as varied lacked the necessary element of certainty;
4) There was nothing which suggested that the test for certainty or completeness was more strict than is the test for certainty in the law of contract. Given that the agreement in the present case met the test as to certainty and completeness in the law of contract, it followed that it also met the test as to certainty and completeness in the law as to constructive trusts.