Legal Principles and Key Points
- In the case of Dowding v Matchmove 2019 EWCA Civ 1233, it was held that an oral agreement for the sale of land was to be enforceable in equity under a constructive trust despite not being evidenced in writing where both parties had considered it to be immediately binding upon them, and where the prospective buyer had then acted to his detriment in reliance upon it.
- A common intention constructive trust can arise in commercial negotiations even when proprietary estoppel cannot arise.
Facts of the Case
- The appellant property developer appealed against a decision ordering him to transfer land to the respondent purchasers on the basis that he was holding it on trust for them.
- The parties who were both friends, agreed in 2003 that the respondents would purchase two pieces of land from the appellant for £200,000.
- One piece of land “the plot” was £120,000 and the other piece, “the meadow” was £80,000.
- In April of 2004, the respondents paid £66,000 towards the purchase price and around this time, there was a dispute regarding a possible right of way over the meadow.
- The disputed lasted more than two years and the respondents contributed to the legal costs.
- In February of 2005, they obtained planning permission in relation to the plot and the appellant permitted them to start building a house whilst the conveyancing was being dealt with.
- Contracts were exchanged for the sale of the plot in September 2005.
- The deposit being stated as £66,000.
- A special condition 6 provided that the respondents entered the contract “solely… on the basis of the terms hereof”, and “not in reliance on any warranty, statements, representation etherise whether oral or implied”.
- At completion, the respondents paid the balance of the sum due for the plot and sole their existing house
- Between October 2006 and November 2005, they paid the appellant a further £80,000 for the meadow. Shortly after this, the parties fell out.
- The appellant sent the respondents a cheque for £40,000 and informed them that they could only purchase half of the meadow.
- In the absence of a contract in writing as required by the Law of Property Act 1989 s.2(5), he dined any binding agreement.
- A judge found the appellant to be a man who expected people to trust his word and to act on it even in the absence of a written agreement.
- He held that by the time the solicitors became involved in April 2005, the parties had concluded what they all regarded as an immediately binding agreement, the appellant promising unconditionally to sell the meadow, and the respondents acting on that promise to their detriment.
- The judge concluded that the respondents were entitled, based on proprietary estoppel and constructive trust, to the entire meadow and that special condition 6 did not negate the oral agreement.
- The appellant argued that the correct conclusion based on Herbert v Doyle  EWCA Civ 1095, 1 E.G.L.R 119, WLUK 265 and Cobbe v Yeoman’s Row Management ltd  UKHL 55,  1 W.L.R 1752 , 7 WLUK 928 is that a constructive trust could not have arisen because the parties were aware at the time of the informal agreement in 2003 of the need for a written contract, which they regarded as a technicality which had to be complied with before the agreement was enforceable.
Issues in Dowding v Matchmove 2016 EWCA Civ 1233
- Could the oral agreement between the parties be enforceable in the absence of a written contractual agreement.
Held by Court of Appeal
- The appeal was dismissed based on the findings that the judge had been correct to hold that the appellant held the meadow on trust for the respondents.
Sir Terence Etherton MR; Lloyd Jones LJ; Arnold J.
- The judges held that there was an oral agreement which both parties intended to be immediately binding, and that the agreement was complete as to all its essential terms, namely the land to be included, the purchase price, and the deposit.
- The respondents had relied upon the agreement to their determent.
- The constructive trust arose as soon as they paid the £66,000 although there had been a subsequent act of reliance.
- It was not clear whether the right of way dispute had arisen at the time of the payment, but even if it had, there would have been no difficulties in treating the respondent’s beneficial interest in the meadow as being subject to that potential constraint.