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.
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].
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 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.
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
[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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