Yaxley v Gotts

In Yaxley v Gotts  ([2000] Ch. 162, CA (Eng) Mr Yaxley was a builder. He entered into a ‘gentleman’s agreement’ with Brownie Gotts  that he would convert a house into flats in return for the ownership of the ground floor flats. The property was actually (unknown to Mr Yaxley) bought by Mr Gotts’ son (Alan). Mr Yaxley carried out the building works and managed the property once it was completed and let. For a while, he received the net rents from the ground floor flats. Later, however, Alan sought to resile from the agreement even though he knew of it and had allowed Mr Yaxley to go ahead and carry out the substantial work needed at the property.

At first instance, Mr. Yaxley succeeded on the basis of proprietary estoppel. The English Court of Appeal, however, decided that the arrangement was a contract for the sale or other disposition of an interest in land and so engaged section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. They reached this conclusion even though the agreement was with Brownie Gotts and there was a finding that Alan Gotts was not a party to any contract between Mr Yaxley and Brownie Gotts. To allow proprietary estoppel to operate in these circumstances would be to subvert the public policy underlying section 2(1).

There is, however, a saving for resulting, implied and constructive trusts in section 2(5). If the arrangement could be said to give rise to a common intention constructive trust then effect could be given to it. The Court of Appeal found that the arrangement did indeed give rise to a constructive trust.

Michael Lower

Tags: commercial context, common intention constructive trust, Michael Lower, proprietary estoppel