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The essence of the problem to be resolved in this case is - A (in this case the appellant, Yeoman’s Row, with Mrs Lisle-Mainwaring as a director and shareholder) is the owner of land with potential for residential development and enters into negotiations with B (in this case the respondent, Mr Cobbe) for the sale of the land to B. They reach an oral “agreement in principle” on the core terms of the sale but no written contract, or even a draft contract for discussion, is produced. There remain some terms still to be agreed. The structure of the agreement in principle that A and B have reached is that B, at his own expense, will make and prosecute an application for the desired residential development and that, if the desired planning permission is obtained, A will sell the land to B, or more probably to a company nominated by B, for an agreed up-front price, £x. B will then, again at his own expense, develop the land in accordance with the planning permission, sell off the residential units, and, when the gross proceeds of sale received by B equals £2x, any further gross proceeds of sale will be divided equally between A and B.

Pursuant to this agreement in principle B makes and prosecutes an application for planning permission for the residential development that A and he have agreed upon. B is encouraged by A to do so. In doing so B spends a considerable sum of money as well, of course, as a considerable amount of time. The application is successful and the desired planning permission is obtained. A then seeks to re-negotiate the core financial terms of the sale, asking, in particular, for a substantial increase in the sum of money that would represent £x. B is unwilling to commit himself to the proposed new financial terms and A is unwilling to proceed on the basis of the originally agreed financial terms. So B commences legal proceedings.

The question before the House is what relief, in the circumstances described, B should be granted.

A number of bases of relief could be considered - proprietary estoppel; constructive trust; unjust enrichment; quantum meruit; the tort of deceit.

The House of Lords stated that the critical issue in this case was whether there was, on the judge’s findings, a common expectation of the type capable of raising equitable estoppel. 

The judge at first instance held that the conditions for proprietary estoppel were satisfied 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 trust claim but that relief on the basis of proprietary estoppel was the more satisfactory way of satisfying the equity to which the facts of the case entitled him. The judge did not, therefore find it necessary to deal with Mr Cobbe’s alternative claim in restitution.  

The Court of Appeal unanimously dismissed Mrs Lisle-Mainwaring’s appeal from the judge’s main judgement.  The Court of Appeal agreed with the judge 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.”

The House of Lords unanimously allowed Yeoman’s Row’s appeal. 

Proprietary estoppel
The House of Lords did not agree that the relief granted was justified on the basis of proprietary estoppel.  It noted that the judge and then the Court of Appeal had regarded their finding that Mrs Lisle-Mainwaring’s behaviour in repudiating, and seeking an improvement on, the core financial terms of the agreement was unconscionable, as sufficient to justify the creation of a “proprietary estoppel equity”.  She took unconscionable advantage of Mr Cobbe.  The advantage taken was the benefit 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 financial terms on which Mr Cobbe had been expecting to be able to purchase the property.  However, the House held that to leap from there to the conclusion that a proprietary estoppel case was made out, was not justified.

Constructive trust
Nor did the House of Lords consider that there existed grounds for a claim of constructive trust.  The property was never joint venture property and the House could not see any justification for treating it as though it was. 

Unjust enrichment
The House noted that there was no doubt that the value of the property would have been increased by the grant of planning permission and that the appellant had been enriched by the grant of planning permission for which it had had to pay nothing.  But what was the extent of the unjust enrichment?  The House held that it was not the difference in market value between the property without planning permission and the property with it.  The planning permission did not create the development potential of the property – it unlocked it.  Therefore the unjust enrichment was the value of Mr Cobbe’s services – the fashioning of the key to unlock the development potential.

Quantum meruit
The House held that it was clear that Mr Cobbe was entitled to a quantum meruit payment for his services in obtaining planning permission.   The amount of the quantum meruit for Mr Cobbe’s services would represent the extent of the unjust enrichment for which the appellant should be held accountable to Mr Cobbe.