‘Subject to contract’ and a land exchange

In Salvation Army Trustee Co Ltd v West Yorkshire Metropolitan County Council ((1981) 41 P. & C.R. 179) Bradford City Council proposed to acquire site A from the Salvation Army for road-widening purposes. The parties agreed that the Salvation Army would buy a new site (site B) from Bradford City Council. It would use site B as the new base for its operations in the area. Negotiations dragged on; they were ‘subject to contract’. On 12th November 1973, the solicitor acting for the Salvation Army wrote to Bradford City Council seeking permission to take possession of site B and to start work on its new building there. This, said the Salvation Army’s solicitor, would be part performance of the agreement between the Salvation Army and the Council. The Salvation Army subsequently carried out the anticipated building works on site B. The sale of site B was later completed. The sale of site A from the Salvation Army to the Council never took place. Following a re-organisation of local government, Bradford City Council’s functions were taken over by the defendant and they decided not to proceed with the purchase of site A. The Salvation Army invoked proprietary estoppel in order to compel the defendant to purchase site A.

Woolf J. held that this claim clearly would have succeeded as against Bradford City Council. Crucially, this was not simply a case of a single contract for the sale of site A but part of a linked pair of transactions involving sites A and B. If there had been no contract for the sale of site B, the Salvation Army could successfully have invoked proprietary estoppel in order to acquire its interest in that site. Giving relief in respect of that equity would necessarily require site A to be taken into account.

What effect did the re-organisation have on that conclusion? The defendant was bound in the same way as its predecessor would have been. The equity had arisen before the re-organisation. Giving possession after receipt of the letter of 12th November 1973 amounted to conduct encouraging the Salvation Army to believe that the arrangenment was one from which the predecessor Council could not resile. It was a representation to the effect that they were committed to both transactions. The defendant was bound because it knew of the Salvation Army’s belief and its actions. Thus, the defendant’s silence (failure to correct the Salvation Army) was ‘conscious silence’ capable of giving rise to proprietary estoppel (at 196). The defendant thus endorsed the intentions of its predecessors.

Woolf J. was anxious to point out that this case was extremely unusual and could not be taken as undermining the operation of the ‘subject to contract’ label.  It was part of a wider arrangement. The predecessor had given possession knowing of the Salvation Army’s intentions to erect a new hall on site B (198 – 199).

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