Proprietary estoppel as a substitute for part performance?October  23,  2010

Christine Davis, in a 1993 article (ʻ‘Estoppel: An adequate substitute for part performance?ʼ’, (1993) 13 OxfordJournal of Legal Studies 99), explored the question as to whether proprietary estoppel could replace thedoctrine of part performance.  This was a question that seemed especially urgent in the UK at that time becauseof the then recently introduced section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.   Thisprovides that  ʻ‘[a] contract for the sale or other disposition of an interest in land can only be made in writingand only by incorporating all the terms which the parties have expressly agreed in one document or, wherecontracts are exchanged, in each.ʼ’ (s. 2(1)). Section 2(5) provides that nothing in the section affects the creationor operation of resulting, implied or constructive trusts. Section 2(5) does not expressly save proprietaryestoppel.

Section 2(1) leaves no room for part performance since there will be no valid contract at all (nothing to be savedby part performance) in the absence of a written document that satisfies section 2. Could proprietary estoppelreplace part performance? One question is whether this should be possible as a matter of policy since simplyreplacing one equitable doctrine with another would seem to subvert the whole point of section 2. On the otherhand the Law Commission consultation documents that preceded section 2 did suggest that there would still beroom for proprietary estoppel. This is a question that the English Court of Appeal considered in  Yaxley vGotts([2000] Ch 162) and in Cobbe v Yeomanʼ’s Row Management Ltd ([2008] UKHL 55).

Davis suggests that, in any event, proprietary estoppel is not a completely adequate substitute since it clearlycould not be invoked by sellers since the only promise made to them was that they would receive the purchaseprice and proprietary estoppel is not available; this is a simple debt claim. Davis points out that personalremedies based on restitution might have a part to play (as they did later in Cobbe).

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World Food Fair in the Court of Appeal: Part PerformanceOctober  7,  2010

In the Court of Appeal decision in World Food Fair Ltd v Hong Kong Island Development Ltd ([2005] HKLRD 665)the parties were negotiating for the grant of a lease of premises in a shopping mall. They had agreed many ofthe principal terms of the lease. The tenants then paid a deposit of $200,000. They were allowed to enter thepremises and to carry out alteration works. The court had to decide whether there was a concluded agreement.If there was the court had to decide whether it was enforceable notwithstanding the failure to comply with s.3(1)of the Conveyancing and Property Ordinance. The Court of Appeal found that there was a concluded agreementand that the payment of the deposit and going into possession were sufficient acts of part performance. Thedecision was overturned by the Court of Final Appeal on the basis that there was in fact no concluded contract.That being so, the question of part performance did not need to be considered in the Court of FinalAppeal ([2007] 1 HKLRD 498).

Posted in Formalities, Part peformance | 1 Comment »

Part performance: Steadman v SteadmanSeptember  25,  2010

Section 3(2) of the Conveyancing and Property Ordinance states that section 3 (laying down the formalities to beobserved in the case of land contracts) does not affect the law relating to part performannce.

The equitable doctrine of part performance makes an oral contract concerning land enforceable. The idea is thatsometimes a party to an alleged land contract might have performed actions that indicate the existence of theland contract. In these circumstances, it can be inequitable for the other party to be allowed to use section 3(1)of the Conveyancing and Property Ordinance as a defence in an action to enforce the contract. The modernstatement of the requirements of part performance are found in the House of Lords decision in Steadman vSteadman ([1976] AC 536, HL).

In Steadman v Steadman, the partiesʼ’ marriage had broken down. The wife had applied for a declaration that thematrimonial home was jointly owned and an order for sale. The husband was making maintenance payments tothe wife and he had applied for a variation of the maintenance order. Negotiations took place at the door to thecourtroom and it was agreed that the wife would sell her interest in the house to her husband for GBP1500. Healso agreed to pay GBP100 in respect of arrears of maintenance payments. The agreement was explained to thecourt which made orders implementing what the parties had agreed concerning maintenance. The husband paidthe GBP100 and his solicitors prepared a deed to transfer the wifeʼ’s interest in the house to the husband. Thewife, however, refused to sign the deed and relied on the English equivalent of s.3(1) of the Conveyancing andProperty Ordinance. The husband argued that she was legally bound to transfer her interest in the matrimonialhome to him since there had been acts of part performance of the oral agreement. The husband succeeded.

In essence, the House of Lords held that part performance is available where the alleged acts of partperformance point on the balance of probabilities to some contract between the parties and either showed thenature of the contract or were consistent with the oral agreement alleged. There was some inconsistency of viewbetween the members of the House of Lords as to whether the acts relied on had merely to point to theexistence of a contract or whether they had to point specifically to the existence of a contract concerning land.There was also a difference of aproach as to which of the acts that had been performed were relevant.

Lord Simon of Glaisdale provided an explanation as to why he thought that it was enough that the acts showedon the balance of probabilities that some contract (not necessarily a land contract) had been entered into:

ʻ‘The law here is not logical: it represents the compromise of the two principles to which I have referred near theoutset of this speech. If the contract alleged is such that it ought not to depend on oral testimony, it is thiscontract, not merely some contract, that the acts should prove. If the plaintiff has so performed his obligationsunder the contract that it would be unconscionable for the defendant to plead the statute, it is immaterialwhether or not the plaintiffʼ’s acts prove the contract – let alone some other contract. But it is this sort ofillogical compromise, doing some deference to each of two competing and inconsistent principles, in whichEnglish law abounds. There is no reason to disturb it so long as it does subsantial justiceʼ’ (at 562)

The equitable doctrine of part performance does not require the court to find some acts that point to theexistence of a contract and only then to hear oral evidence of the alleged contract. It looks at the acts and thealleged contract side by side when deciding whether the acts are acts of part performance.

Michael Lower