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Is an oral agreement for the sale of land worth the paper it’s written on? Matchmove Limited v Dowding and Church [2016] EWCA Civ 1233

This case considered the vexed relationship between section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, which requires a contract for the sale or other disposition of an interest in land to be in writing, and the preservation in section 2(5) of ‘resulting, implied or constructive trusts’.

In a joint judgment by Sir Terence Etherton MR, Lloyd Jones LJ and Arnold J, it was noted that the circumstances in which section 2(5) does or does not apply were considered by the Court of Appeal ‘in some detail’ in Herbert v Doyle [2010] EWCA Civ 1095. Notwithstanding the earlier decision, this area remains deeply problematic, for both practitioners and first instance judges.

The facts

Two former friends reached an oral agreement for the sale of a building plot and a meadow. A draft contract conveying both plots was drafted but not executed. A written contract was concluded in respect of the building plot but not for the meadow as a dispute arose over the latter. Notwithstanding this, Mr Dowding and Ms Church sold their house and paid the purchase price for the meadow. The parties fell out and no written contract was ever completed for the meadow.

The first instance decision

His Honour Judge McCahill QC sitting as a Judge of the High Court held at first instance that the agreement to sell the meadow was enforceable through proprietary estoppel and constructive trust notwithstanding the absence of a written contract. He held that the defendant did make a promise to the claimants to sell them the meadow and the claimants agreed to it. Both parties agreed that the agreement would be binding immediately. The terms of the agreement were sufficiently clear as to the extent of the land in question, the interest which the claimants were to obtain and the price which was payable.

The law

Before the Court of Appeal, the parties accepted that a common intention constructive trust could arise where (i) there was an express agreement between parties as to the ownership of property (ii) which was relied upon by the claimant (iii) to his or her detriment such that (iv) it would be unconscionable for the defendant to deny the claimant's ownership of the property.

In Kinane v Mackie-Conteh [2005] EWCA Civ 45 at [32] Arden LJ noted that ‘section 2(5) plays a role similar to that of part performance, although it operates more flexibly than that doctrine. Unconscionability on the part of the party seeking to rely on subsection (1) is the touchstone giving rise to a constructive trust. It will arise where a party led another party to believe that he would obtain an interest in property to another and then stands by while that other party acts to his detriment in reliance on that promise.’

The Court of Appeal in Matchmove noted that Cobbe v Yeoman's Row Management Ltd [2008] UKHL 55 (where the proprietary claim failed) was a case in which the parties reached an agreement in principle, but intended to make a formal agreement setting out the terms of the acquisition, further terms remained to be agreed and the parties did not regard the agreement in principle as immediately legally binding. Accordingly, there was no constructive trust upon which section 2(5) of the 1989 Act could bite.

By contrast, the Court of Appeal noted at [35-6] that (a) there was an oral agreement between the parties which both parties intended to be binding immediately; and (b) the agreement was complete as to all its essential terms, namely the land to be included, the purchase price and the deposit. The claimants relied upon the agreement to their detriment, such as by paying the deposit. The parties knew that there was a ‘technicality’ to be dealt with, but nonetheless regarded the agreement as binding. The judge at first instance was therefore correct to conclude that Mr Dowding and Ms Church had established that the Meadow was held by Matchmove on constructive trust for them and therefore the case was within section 2(5) of the 1989 Act.

A useful re-statement

The case provides a useful and clear illustration of the criteria which the court will apply when considering whether an oral agreement for the sale of land between parties dealing at arm’s length should be given effect as a common intention constructive trust. Although these cases will always be complicated, legally, factually and conceptually, we now have more clarity about the criteria that the court will be applying.

David Sawtell / 12th Dec 2016


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