A verbal agreement to transfer land is enforceable in the court through specific performance, and refusal to mediate can impact costs.
Summary
The court can order one party to a contract to perform their part regarding the sale of a property under the equitable doctrine of proprietary estoppel. This is the case even if the contract does not meet the Law of Property Act requirement that a contract for sale of land must be in writing.
Refusal to mediate can impact the costs award.
Background
The claimant and defendant had reached a verbal agreement that the claimant would sell a barn to the defendants. The defendants intended to convert the barn into residential accommodation and carried out substantial works following the agreement.
The dispute arose when the parties sought to formalise the agreement with their solicitors. The claimant stated that the agreement had included a 'buy back' option, which allowed them to purchase the barn back within 15 years of the sale. The defendants argued this was never part of the agreement.
The claimant applied to court for a declaration that the defendants were not entitled to enter the barn, and asked the court to grant an injunction banning them from doing so.
The defendants counterclaimed based on proprietary estoppel, an equitable doctrine that binds a person to their promise in certain circumstances. They asked the court to transfer ownership to them.
The court's decision
The County Court dismissed the claimant's application and allowed the counterclaim.
Terms of the agreement
The court held that on the evidence, the terms of the agreement did not allow a buy back option.
Law of Property Act and proprietary estoppel
Under section 2 Law of Property (Miscellaneous Provisions) Act 1989, a contract for the sale of land must be in writing and signed by both parties. The court held that section 2 does not apply to proprietary estoppel and the defendants were entitled to equitable relief even though the agreement was made verbally.
This followed the Court of Appeal decision in Yaxley v Gotts [2000] Ch 162.
Elements of proprietary estoppel
The three main elements of proprietary estoppel are:
A representation or assurance by one party
Reliance on that representation or assurance by the other party
The party relying on the assurance suffers detriment as a result
The court held that there had been a representation by the claimant that they would sell the barn to the defendants.
Reliance on the representation was clear from the substantial sums spent on renovating the barn.
The court held that the detriment was clear as a result of the time and money spent on renovations.
Remedy
The court held that the defendants should be able to enforce the terms of the verbal agreement to purchase the barn. This was the minimum relief necessary, as set out in Guest v Guest [2022] UKSC.
Costs
The court expressed concerns that the defendants had refused mediation. Judge Mithani commented:
"The importance of mediation can never be over-emphasised: see, for example, the recent Court of Appeal decision in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416. The defendants will have to advance compelling reasons why the offer of mediation was rejected out of hand by them".
Comments
This judgment is an example of the importance the court places on mediation. Following this case, the judge reduced the defendant's costs by 25% for rejecting a proposal to mediate 'out of hand'. The defendants had a strong case, and the judge accepted that mediation might not have resulted in any agreement. However, refusing to mediate stopped any chance of a resolution.
This follows the Court of Appeal decision in Churchill v Merthyr Tydfil County Borough Council.
Counsel for the claimant has explained more about the judge's reasoning in an article for Civil Litigation Brief.