Mrs Zipporah Lisle-Mainwaring runs and owns a company called Yeoman’s Row Management Ltd (“YRM”). It owns 38 – 62 Yeoman’s Row, Knightsbridge, London. In 2001 she met Mr Cobbe, an experienced developer, and they began negotiations for a deal which eventually got as far as some sketchy heads of terms. These said that Mr Cobbe would try to get planning permission to redevelop the Yeoman’s Row property at his own expense. He or a company nominated by him would buy the property for £12m, if and when planning permission was granted. If the sale proceeds of the developed units exceeded £24m, whoever bought would split the surplus 50/50 with YRM.
No written contract was ever prepared although both Mr Cobbe and Mrs Lisle-Mainwaring seem to have appreciated the effect of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989; which requires all contracts for land disposals to contain all the deal’s terms, be in writing and signed by both seller and buyer. Mr Cobbe, possibly rather naively, thought that she would be a woman of her word. He got on with the job of getting planning permission.
Mrs Lisle-Mainwaring seems to have thought that the absence of a written contract satisfying section 2 was a “get out of jail free” card, because some time before permission was granted, she decided that £12m was not nearly enough, but did not tell Mr Cobbe. She wanted him to go on beavering away and get the all-important planning permission. As Lord Justice Scott said, Mrs Lisle-Mainwaring “… gives every impression of knowing her way around the negotiating table.”
When Mr Cobbe’s efforts had yielded a permission, Mrs Lisle-Mainwaring told him that the deal was off unless he paid £20m, i.e. £8m more than she had originally agreed. Not long afterwards, Mr Cobbe started proceedings. These were heard in the Chancery Division in January 2005. He won, with Etherton J. maintaining that he was entitled to an interest in the property on the basis of proprietary estoppel. Mrs Lisle-Mainwaring appealed and lost again in the Court of Appeal in July 2006, when the Appeal Judges again upheld the existence of a proprietary estoppel preventing both her and YRM from relying on section two of the 1989 Act.
Not surprisingly, the 2006 Appeal decision cast a lot of doubt on how much reliance anyone can place on section two of the 1989 Act, even where there’s no written agreement that satisfies section two. This triggered the writing of many learned articles.
Nothing daunted, Zipporah Lisle-Mainwaring, whose conduct was criticised as “unconscionable” both in the Chancery Division and the Court of Appeal. She appealed to the House of Lords who gave their decision in July. For Mr Cobbe it was a pyrrhic victory, but Mrs Lisle-Mainwaring, although defeated to some extent, is laughing all the way to the bank.
All five members of the House of Lords agreed that nothing in the entire sorry saga, not even conduct as “unpleasant” as Mrs Lisle-Mainwaring’s, gave Mr Cobbe an equitable interest of any kind in the property. All he got was a “quantum meruit” award for reimbursement of his expenses and payment “on a generous scale” for his time and effort “at the rate appropriate for an experienced developer”.
However sorry one may feel for Mr Cobbe, the property industry should be glad that section two of the 1989 Act, which gives everyone so much certainty, has been upheld. As Walker LJ put it: “Equity has some important functions in regulating commercial life, but those functions must be kept within proper bounds.”
If you would like more advice on this issue, please contact Andrew Campbell