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Monday, 20 February 2012

What is proprietary estoppel and the necessary requirements to make a successful claim?

This essay is going to discuss the doctrine of proprietary estoppel and the necessary requirements for a successful claim. It will also discuss the notion of unconscionability and how this element affects the law. Furthermore it will examine how constructive trusts and proprietary estoppel allow the courts to stray from relevant statutory provisions and empowers the judiciary to have more discretion where equitable remedies are queried. However, it must be highlighted that such major step by the court in deciding to allow a claimant a proprietary remedy will only be viable if the necessary formalities are present, this aspect will also be examined in greater detail.
Proprietary estoppel is an equitable remedy developed by the Chancery Court of King John to manage the problems inherent with the rigidity of the common law.   The doctrine contains four main elements; assurance, reliance, detriment and unconscionability.
The doctrine of proprietary estoppel appears to arise from the Law of Property (Miscellaneous Provisions) Act [1989] which was developed to avoid the uncertainties with relation to interests in land. Section 2 of the act states that, ‘Contracts for sale of land must be made in writing and all terms for the sale incorporated in the same document.’ Meaning that oral agreements or informal agreements will be rendered invalid, however, section 2 (5) then states that section 2 does not apply to, resulting, implied or constructive trusts of land. This in itself creates an uncertainty within proprietary estoppel as it has been confused with constructive trusts, due to the act making no reference to proprietary estoppel.
In the case of Yaxley-v-Gotts [2000][1] the discussion about the relationship between constructive trusts and proprietary estoppel arose and it was held that they are inherently different concepts. However, proprietary estoppel does conflict with the act and this will be addressed later on in the essay.
The issue of unconscionability has caused much debate from both academics and the judiciary and is reflected within a number of judicial decisions and relevant case law, raising the question whether unconscionability of conduct alone, can lead to a successful remedy. In order to illustrate this point, recent case law will provide an insight to how such conduct has been held to be unpractical. However, it is also argued that it is the concept of unconscionability that allows the courts to move away from the strict measures laid down in the Law of Property (MP) Act [1989] and therefore allows many claimants to be successful.
The case of Commonwealth of Australia-v-Verwayen [1990][2] provides us with the observation that ‘the notion of unconscionability is better described than defined,’ which demonstrates that the courts see the doctrine in its application as cumbersome. Nevertheless, unconscionability of conduct could be described as ‘harsh and unfair’ behaviour from one party to another.
A claim for proprietary estoppel will occur when an assurance is made to a claimant and they have relied upon that assurance to their detriment. It may be put forward as an equitable remedy when any person who claims to have an interest in land or a right to use the land for a precise reason wishes to rely upon the doctrine, showing that the doctrine is not only used as a shield but also a sword in application. Once this is successfully established the courts must then decide an essential remedy.
To decide a suitable form of relief the courts look at the ‘circumstances in each case to decide in which way the equity can be satisfied.’[3] This is a delicate process for the courts to adopt and they tend to rely upon the words of Scarman LJ in Crabb-v-Arun [1976][4] where he stated “the minimum equity to do justice to the plaintiff”. There are numerous ways in which the court may satisfy the equity and this can be seen throughout case law.   
In the decision of Jennings-v-Rice [2003][5], it was held that, the maximum equity would be able to provide for the claimants’ expectation, it must be balanced with ‘the ultimate aim of the court, which is to obtain justice. This is achieved by making the award proportionate to the expectation of the claimant and in line with the detriment suffered.’[6]
It was also held in the same case by Aldous LJ that, ‘If the conscience of the court is involved, it would be odd that the amount of the award should be set rigidly at the sum expected of the claimant.’[7] Therefore, the courts have discretion when it comes to the remedies provided based on the individual facts of each case.
When a claim of proprietary estoppel comes before the courts all the essential elements of the doctrine must be present rather than looking at individual issues in isolation, this was confirmed by Robert Walker LJ in the case of Gillet-v-Holt [2001][8] the learned judge stated that, ‘the fundamental principle that equity is concerned to prevent unconscionable conduct which permeates all the elements of the doctrine. In the end the court must look at the matter in the round.’ Each case is a question of fact and degree, the court will take all of this into account when establishing proprietary estoppel and there is much uncertainty and lack of clarity when establishing these elements.
In relation to unconscionability, the much debated fourth element, it is argued that it is just as important as the other elements and sometimes it can even be entangled within them, therefore agreeing with the statement that unconscionability alone cannot lead to a remedy.
In the case of Greasley-v-Cooke [1980][9] Lord Denning stated, ‘it is sufficient if the party, to whom the assurance is given, acts on the faith of it, in such circumstances that it would be unjust and inequitable for the party making the assurance to go back on it,’ This then backs up the argument that unconscionability is a major element and that the courts look into it in relation to the other elements not just as a single element.
The seminal case of Taylor’s Fashions Ltd-v-Liverpool Victoria Trustees Co [1982][10] confirmed that the three elements must be present and if so it will usually follow that, ‘it would be unconscionable for the landowner to deny the representation or expectation and to insist on his own strict legal rights, although there may well be cases where the court will consider unconscionability as an additional issue in order to ensure that the doctrine is applied in accordance with its underlying rationale.’[11] These cases illustrate how unconscionability may flow through all the elements of proprietary estoppel, nevertheless the courts have clearly established through their approaches to proprietary estoppel that all the four ingredients are required.
Aldous LJ in Jennings-v-Rice [2000][12]  held that, ‘there can be no doubt that reliance and detriment are two of the requirements of proprietary estoppel and that the basis of estoppel is, the interposition of equity; thus the requirement of unconscionability”.’[13] Confirming that unconscionability is required due to the equitable interests involved, it was not said however, that unconscionability alone may lead to a remedy.
The notion of unconscionability and the other three elements of proprietary estoppel are not definitely defined as such, bringing about the argument that the courts appear to have a broad approach in such cases and this results in uncertainty and confusion when the courts are applying such elements. On the other hand, in this particular area of law, it could be said that not having a narrow definition for these elements is a positive concept as each case can be determined on their own relevant facts. 
Generally the doctrine of proprietary estoppel appears to support the claimants’ view that they have relied upon the promise to their detriment and case law substantiates this claim.  However, there have also been numerous cases where the courts have denied the remedy.
The case of Gonthier-v-Orange Contract Scaffolding Ltd (2003)[14] denied the claim for proprietary estoppel as the claimant had knowingly relied upon false evidence to base his claim for detrimental reliance. Such cases show how the courts will deny a claim for proprietary estoppel in fraudulent claims, even without a definitive definition of the doctrine.
Conversely, there have been cases where the equitable doctrine of proprietary estoppel has been granted even without the necessary components being present.  This can be seen in the case of Ravenocean Ltd-v-Gardner (2001)[15] where the claimant gained restitution due to the result of his reliance however it was held that this recovery was more of a restitution rather than an estoppel.
To support the argument that unconscionability alone cannot lead to a remedy, Nigel Gravells, stated that
‘unconscionability alone, without detrimental reliance on a representation, is insufficient in itself to found proprietary estoppel claim.’[16] This is substantiated by the House of Lords decision in Yeoman’s Row Management-v-Cobbe [2008][17].
The issues surrounding unconscionability were ultimately discussed and narrowed down by Lord Scott in Yeoman’s where he held that ‘proprietary estoppel should be limited to the representations only of specific facts’[18].
It was also held in Yeoman’s that judges should not be seen to support claims of proprietary estoppel, if the claimant was only denied, ‘satisfaction of their expectations.’ In other words, the courts will not support claims that were made ‘subject to a valid contract’ simply because a claimant tried to rely on the absence of the formalities, even if there was evidence of reliance which resulted to their detriment.
Yeoman’s ultimately determined that unconscionability of conduct alone will not lead to a remedy, the claimant must show there was an assurance made by the promissor and that they relied upon the promise to their detriment.
The facts in Yeoman’s, held that Mr Cobbe had an equitable remedy of proprietary estoppel, however the ingredients for estoppel were not established, thus the decision of the Court of Appeal and House of Lords provided some insight as to when the required elements are present.
Lord Walker whilst discussing the facts of the case concluded that Mr Cobbe ‘ran a commercial risk, with his eyes open,’[19] therefore he could not rely upon the doctrine to his detriment. This reinforces the view that in a commercial setting failing to comply with the formalities, and going on to claim proprietary estoppel due to unconscionable behaviour, will not be tolerated by the courts, as it would appear too unrealistic to enforce in such commercial practices.
Lord Walker also went on to state that ‘unconscionability plays an important role in the doctrine of equitable estoppel, in unifying and confirming, as it were, the other elements. If the other elements appear to be present but the result does not shock the conscience of the court, the analysis needs to be looked at again,’ proving along with the previous cases that unconscionability is a major element of proprietary estoppel but only if the other elements are satisfied.
Lord Scott backed the judgement of Lord Walker and stated that even though Mrs Lisle- Mainwaring’s conduct was unconscionable, it would not be sufficient to give rise to ‘proprietary estoppel equity,’ affirming that unconscionability cannot stand on its own, even though it appears a major element of estoppel the other ingredients must also be established for it to be relied upon.
Lord Scott then stated that proprietary estoppel requires clarity relating to what is the object of estoppel. He went on to say that, ‘equity can surely not contradict statute,’ this therefore brings about the argument that proprietary estoppel clashes with the Law of Property (MP) Act [1989]. This point was also raised in the case of Hutchison-v-B & DF Ltd (2008)[20] where Peter Smith J followed the conclusion of Lord Scott.
Lord Scott also held that “My present view, however, is that proprietary estoppel cannot be prayed in aid in order to render enforceable an agreement that statute has declared to be void.”[21] Declaring that the doctrine will not be viable when there is a clash between itself and the relevant statute.
Conversely, Dixon states that ‘estoppel is available to cure absence of formality when, but only when, it would be unconscionable for the defendant to rely on the lack of formality to defeat the claimant,’[22] showing on the other hand, that estoppel may apply in certain circumstances relating to the statutory provisions.
There is an underlying argument between proprietary estoppel and the relevant statutes, as to the question does proprietary estoppel allow a buyer to obtain an interest in land where section 2 of the Law of Property (MP) Act [1989] makes it unattainable. This can be seen in situations where a constructive trust arises where there is an exception provided in the statute, but in relation to proprietary estoppel it is widely discarded as the courts aim to provide certainty within the law and will not be seen to support claims that undermine the law.
This is backed up the case of Canty-v-Broad [1995][23] where the claimants failed to finalise a contract for the sale of land by not complying with the necessary criteria set out in section 2 of the act[24], it was held that they were then unable to claim the land through estoppel, based on the principle of agreements being made ‘subject to contract.’ The court followed the judgement made by Lord Templeman in AG of Hong Kong-v-Humphreys Estate (Queen's Gardens) Ltd [1987][25] he stated that it is ‘unlikely that a document expressed to be ‘subject to contract’ would be able to satisfy the courts,’ for a claim of proprietary estoppel.
The contrasting case to Yeoman’s is the case of Thorner-v-Major [2009][26] where the claim of proprietary estoppel succeeded and the House of Lords restored the broad approach of proprietary estoppel.
In relation to the connection between constructive trusts and proprietary estoppel, noted above, Lord Scott confirms that of Yaxley-v-Gotts, as he would also prefer to keep proprietary estoppel and constructive trust as ‘distinct and separate remedies’[27].
The Court of Appeal in Thorner attempted to clarify the law and applied a somewhat subjective factor to proprietary estoppel claims, stating that assurance must be ‘clear and unequivocal’. The House of Lords disagreed with the test, and held even if it did apply the facts of the case would still satisfy it. They stated that the relevant assurance had to be clear enough and they held that, what amounted to sufficient clarity depended on the context on which the doctrine was applied, backing up the previous statement that the facts of a case are of real importance and therefore allows the courts to have discretion when using the doctrine. However, it was stated by Lord Walker in Thorner that, ‘flexible though it is, the doctrine must be formulated and applied in a disciplined and principled way. Certainty is important in property transactions.’ [28] The courts still appear to be somewhat uncertain with the doctrine but the judiciary have not made any distinct moves to amend the doctrine, they may be seeking the assistance of the government.
In contrast to Yeoman’s the proprietary estoppel claim was that of a commercial setting and it was asserted that proprietary estoppel does not have a role in commercial settings, however, in Thorner it was purely a case of ‘familial and personal context,’ hence why the claim for proprietary estoppel was successful.
Conversely, in relation to the assertion in Yeoman’s, the cases of Kinane-v-Mackie [2005][29] and Herbert-v-Doyle [2008][30]  appear to have concluded that when proprietary estoppel is combined with a constructive trust, then proprietary estoppel  may have a role in such a commercial transaction, therefore not ruling out the doctrine in a commercial context altogether.
To conclude, in the case of Henry and Mitchell-v-Henry [2010][31], the Privy Council supported the doctrine of proprietary estoppel, they followed the guidelines set out by Gillet-v-Holt and concluded the claim was successful.  
Finally, it is clear that all the elements must be established for a claim of proprietary estoppel to apply. Unconscionability is a major element that lies within each element, but it alone is not capable of providing a remedy, if it did this would be a ‘recipe for confusion’. The courts have appeared to succumb to the idea that each case is different and that the outcome cannot always be the same, which in itself provides clarity for the courts and promotes justice and as Megarry & Wade said ‘the flexibility of proprietary estoppel... is its strength and its weakness’. The problems however now lie in ‘domestic’ cases and it seems possible that the courts would benefit from a statutory provision in relation to oral agreements in this context.

[1] Ch 162
[2] 170 CLR 394
[3] Sir Arthur Hobhouse in Plimmer v Mayor of Wellington (1884) 9 App Cas 699
[4]1 Ch 179
[5] 1 P&C R 8
[6] Nigel Gravells, ‘Land Law: Text and Materials,’ 3rd Edition, Sweet & Maxwell, 2004, page 612
[7] Nigel Gravells, ‘Land Law: Text and Materials,’ 3rd Edition, Sweet & Maxwell, 2004, page 613
[8] Ch 210
[9] 1 WLR 1306
[10] QB 133
[11] Nigel Gravells, ‘Land Law: Text and Materials,’ 3rd Edition, Sweet & Maxwell, 2004, page 588
[12] 1 P&C R 8
[13] Nigel Gravells, ‘Land Law: Text and Materials,’ 3rd Edition, Sweet & Maxwell, 2004, page 613
[14] EWCA Civ. 873
[15] All ER (D) 116 (Jan)
[16] Nigel Gravells, ‘Land Law: Text and Materials,’ 3rd Edition, Sweet & Maxwell, 2004, page 609
[17] UKHL 55
[18] John Duddlington, Law Express Land Law, 3rd Edtion, Pearson Books, 2011, page 95.
[19] E.H. Burn and J. Cartwright, Maudsley & Burn’s, ‘Land Law Cases & Materials,’ 9th Edition, 2009, Page 1027
[20] EWHC 2286 (Ch)
[21] Yeoman’s Row Management v Cobbe [2008] UKHL 55
[22] Martin Dixon, Modern Land Law, 6th edition, Routledge Cavendish, 2009 page 426.
[23] Court of Appeal Transcript, 25 May 1995, CCRTF 94/1112/B
[24] Law of Property (Miscellaneous Provisions) Act [1989]
[25] 1 AC 114
[26] UKHL 18
[27] E.H. Burn and J. Cartwright, Maudsley & Burn’s, ‘Land Law Cases & Materials,’ 9th Edition, 2009, Page 1031
[28] UKHL 18
[29] EWCA Civ 45
[30] EWHC 3423 (CH)
[31] UKPC 3

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