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Proprietary estoppel

Previous: Licences

Proprietary estoppel refers to a landowner being estopped from denying rights to a third party as a result of that third party relying on a belief in those rights where it would be unconscionable for the landowner to do so. The typical scenario might involve a landowner representing to a third party that their land will pass to the third party upon the landowner’s death if the third party works for the landowner. If, upon death, the third party discovers that the landowner’s land has passed to someone else, he may claim that the landowner was estopped from not passing his land to the third party.

Creation of proprietary estoppel

What is required?

It is commonly assumed that for proprietary estoppel to operate in the prevention of a third party’s right to an interest in land, there must be: a mistake of a third party (the claimant); the landowner must know of this mistake and the landowner must either encourage the mistaken belief or acquiesce to it. This was said in Willmott v Barber (1880), by Fry J.

This exhaustive criteria was simplified in Taylor Fashions v Liverpool Victoria Trustees [1982] to a single requirement of ‘underlying unconscionability’, in non-acquiescence cases, without a knowledge requirement on the part of the landlord. Gillett v Holt buy xanax romania [2001] also favoured a more relaxed approach, finding that unconscionability is required, but detriment and reliance are intertwined and cannot be compartmentalised. Perhaps the best summary can be found in Thorner v Major [2009], which said that there is no perfect formulation of proprietary estoppel’s requirements, but there is usually a representation from the landowner, and reliance and detriment by the third party.

A representation by the landowner

Firstly, although a representation may not be explicit, it must be clear enough, as was said in Thorner v Major [2009]. Secondly, it must relate to identified property. It was accepted in Thorner v Major [2009] that the size of the farmer’s farm on death was sufficient to satisfy this requirement, but in Re Basham [1986], ‘whatever property owned upon death’ was insufficient, but the ‘remainder’ of a person’s estate was sufficient. Thirdly, the representation must be unqualified, unlike in Uglow v Uglow [2004], where a claimant’s expected inheritance was impliedly dependent on the success of a related business partnership.

It is not required that the represented interest is proprietary in nature: an expectation to reside was enough in Inwards v Baker [1965], and a home for life was sufficient in Southwell v Blackburn [2014]. It is acceptable that a claimant makes a mistake as to the interest he is entitled to, as occurred in: Crabb v Arun DC [1976], where the defendant believed that the local council was to build a right of way; Re Basham [1986] where the landowner’s daughter stayed in an area under the belief that she would inherit, and in Gillett v Holt [2001], where, as a result of 40 years of low wages, the claimant believed that he would inherit land. Finally, it is clear that mere hope of an interest in land will not constitute a valid representation. Making a will would not be enough, according to Gillett v Holt [2001], nor would a right ‘subject to contract’, according to Attorney-General of Hong Kong v Humphrey’s Estate [1987]. According to Yeoman’s Row Management v Cobbe [2008], it is easier to distinguish between a representation and claimant’s hope in residential situations – in commercial situations, the impact of a statement will be clearer.

Where a claimant already has rights in land, but these rights are unenforceable, proprietary estoppel may not be used to make those right enforceable. For example, proprietary estoppel would not aid the claimant in Lloyd’s Bank v Carrick [1996], where there had been a failure to register an interest under the Land Charges Act 1972.

Detrimental reliance

According to Greasley v Cooke [1980], reliance will be assumed actions are induced by a landowner. But in any event, according to Thorner v Major [2009], reliance must be reasonable: it may not be reasonable to rely on a landowner who frequently changes their mind. The burden of proof is on the claimant to establish that they detrimentally relied on a landowner’s representation, and the common test utilised by the court is a ‘but for’ test, as illustrated in Wayling v Jones [1993]: but for the representation, would the claimant have acted in same way.

Detriment need not be financial, as exemplified by Gillett v Holt [2001], and will be judged at the time of the revocation of the landowner’s promise. Building work is a common form of detriment, as illustrated by both Dillwyn v Llewelyn [1862] and ER Ives Investment v High [1967]. Detriment may be neither financial nor constitute building work:

Detriment need only be minimal, as illustrated by Pascoe v Turner [1979], where land was transferred as a result of proprietary estoppel based on £230 of decorations in reliance on being told that the land belonged to the claimant.

Unconscionability

It is arguable whether or not unconscionability is a separate requirement or not, yet in either event, it must exist. Southwell v Blackburn [2014] suggests balancing benefits expected with detriment suffered to decide whether a landowner acted unconscionably. This would follow Sledmore v Dalby [1996] in finding that estoppel can be exhausted. Yeoman’s Row Management v Cobbe [2008] confirmed that the test for unconscionability is an objective test.

The landowner’s knowledge and role in creating the claimant’s mistaken belief is relevant in finding unconscionability. In Taylor Fashions v Liverpool Victoria Trustees [1982] and Ives Investment v High [1967], the landowner encouraged the mistaken belief, making the denial of rights seem more unconscionable. In Joyce v Epson & Ewell BC [2012] was enough to constitute unconscionability. According to Lord Hoffman in Thorner v Major [2009], if an assurance is to be taken seriously, the fact of a claimant’s reliance should be enough to generate proprietary estoppel without a landowner needing to foresee that reliance.

Effect of proprietary estoppel

Assuming that proprietary estoppel has been established, it is said that the claimant will obtain a proprietary equity from the moment of his reliance. Re Basham [1986] explained (inheritance based) proprietary estoppel in terms of a floating trust which attaches to the landowner’s estate at the moment of his death, for the benefit of the claimant. Assuming that the value of the trust has not been diminished, as it could have been if used to pay for care costs, as said in Thorner v Major [2009], the court, in accordance with Crabb v Arun [1976], will assess the extent of the ‘equity’ and decide how best to satisfy it.

Satisfying the equity

Courts have been inconsistent in how they satisfy the equity created by claimants’ reliance:

General approach

Often arising is whether a claimant should be awarded the equivalent of his expectation, or of his detriment. It is clear from Jennings v Rice [2002] that the value of the claimant’s expectation will be the greatest value awarded and that a court will award an expectation-equivalent remedy only in cases with a nature not far short of an enforceable contract. In Sledmore v Dalby [1996], the claimant had already utilised free accommodation for 18 years, rendering any equity used up.

Just as with licences, a court will not force parties to live together or have future dealings, according to Pascoe v Turner [1979]; unless the parties had already been sharing, as in Porntip Stallion v Albert Stallion Holdings [2009].

Generally, a court will strive to provide a clean break for parties, according to Gillett v Holt [2001]. providing an injunction, as in Inwards v Baker [1965] does not provide closure for parties. Once a remedy has been awarded, it will not be revoked by a claimant’s bad behaviour, according to Williams v Staite [1979]. One odd case is that of Suggitt v Suggit [2012], where the claimant’s expectation interest was fulfilled in an uncertain (non-akin to contract) case, with no reference to Jennings v Rice [2002]. It is submitted that this case should not be followed.

Successors in proprietary estoppel

Successors of the landowner

In registered land, an equity generated by proprietary estoppel can bind a landowner’s successor subject to the rules of priority, according to s 116 LPA 1925. Birmingham Midshires Mortgage Services v Sabherwal [2000] suggested that equities may be capable of being overreached, however, it is submitted that this is likely the wrong  approach.

In unregistered land, equities can bind: personal representatives, according to Dodsworth v Dodsworth [1973]; beneficiaries, according to Greasley v Cooke [1980], and purchasers with actual or constructive notice, according to Ives Investment v High [1967]. Re Sharpe [1980] disagreed with the constructive notice point.

Following non-clean break remedies, it is unknown whether equities will still exist.

Successors of the claimant

It is submitted as unknown whether claimants can pass their equity to their successors.

Interests in land

In National Provincial Bank v Ainsworth [1965], it was said that interests in land should be definable, identifiable by third parties, capable of assumption by third parties and have some degree of stability or permanence.

According to National Provincial Bank v Hastings Car Mart [1964], licences are not proprietary in nature. It is submitted that equities generated through proprietary estoppel should not be classed as proprietary given their uncertainty. Although Smith disagrees.

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