The claimant company was the owner of several pieces of land comprising a development site (“the Site”). The second defendant was an experienced property developer and the sole director and shareholder of the first defendant company. The company was incorporated as a single purpose vehicle with the sole aim of acquiring and developing the Site.
In September 2006, a meeting took place between a representative of the claimant, A, and the second defendant (at the second defendant’s home). According to the defendants, at that meeting the parties entered into an oral agreement whereby the claimant agreed, upon the first defendant having secured the completion of various preparatory works and having obtained the necessary funding, to sell the Site to the first defendant for £2m.
The claimant accepted that A had visited the second defendant's home but denied that any such oral agreement had been entered into. According to the claimant, any discussions involving the Site had been limited to the second defendant's assertion that the first defendant could match a rumoured offer on the Site. An attendance note by the claimant's solicitor and relating to a telephone conversation with A which had taken place the day after the meeting supported the claimant's version of events.
Subsequently, the claimant sought to sell the Site by way of an informal tendering process. The defendants' solicitors made a written complaint concerning the accuracy of the contents of the particulars of sale. They did not, however, have any problem with the sale in the light of the purported oral agreement.
In the course of the ensuing correspondence, the defendants' solicitors accepted that they had no legal interest in the Site. The defendants had two bids under the tender process rejected. In February 2007, the defendants lodged notices against the registered titles of the Site, on the basis that they had an equitable interest in the Site arising from the alleged oral agreement to sell, and the expenditure incurred in detrimental reliance upon that agreement.
The claimant issued proceedings by which it sought:
§ A declaration that the defendants had no interest in the Site;
§ The cancellation of the notices against the registered titles of the Site; and
§ Damages under s.77 of the Land Registration Act 2002 (“the Act”).
The defendants issued a restitutional counterclaim and the claimant sought summary judgment.
Two main issues fell to be determined by the court:
§ Firstly, whether the defendants' case that an equitable interest in the Site had arisen by virtue of detrimental reliance on the alleged agreement had a real prospect of success; and
§ Secondly, if not, whether the second defendant was personally liable for any damages award made pursuant to s.77 of the Act.
The court ruled that in this case, the defendants had failed to demonstrate the existence of an oral agreement for the sale of the Site to the first defendants. The alleged oral agreement asserted by the defendants was simply incompatible with evidence before the court as well as with the conduct of the defendants.
In particular, the defendants' solicitors had admitted in correspondence that they had no legal interest in the Site, and the defendants had raised no objection to the claimant attempting to sell the Site by tender. In any event, even if such an oral agreement had existed, the first defendant's attempts to bid for the Site during the tendering process had been an acceptance of the claimant's repudiatory breach of that agreement. In such circumstances, the defendants' case had no real prospect of success.
As far as the second defendant’s personal liability was concerned, under s.77 of the Act the primary liability attached to the party making the application to the Land Registry. In this case, that party had been the first defendant.
However, the first defendant had merely been a single purpose vehicle, and it was clear that the second defendant had acted on the behalf of the first defendant in making the application. It had been the second defendant who had instructed solicitors in the course of the litigation, and he had made the statutory declaration in support of the application to the Land Registry. In such circumstances, the second defendant had clearly arranged the application for notices against the claimant's title, and therefore the liability under s.77 of the Act would also attach to him personally.
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© RT COOPERS, 2007. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.