Elements of proprietary estoppel

The elements of proprietary estoppel are that A must have encouraged or allowed B to entertain a belief to B’s detriment so that it would be unconscionable for A to be allowed to deny the truth of that belief. It does not matter that in so acting A was mistaken as to his own rights in the matter (though this may affect the question of unconscionability). B must be acting in reliance on A’s action (or inaction).

Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd ([1982] QB 133) concerned two leases of neighbouring retail  premises. Each lease contained an option to renew that had not been registered under the Land Charges Act 1925 (because at the time of the grant the prevailing understanding was that registration was not necessary). Each tenant carried out substantial works at their respective property. Each believed that it had the benefit not only of its lease but also of the option to renew. The leases and the reversion were each assigned.

As a result of the decision in Beesly v Hallwood Estates Ltd ([1961] Ch 105) it became clear that options did need to be registered. The assignees of the reversion argued that, as a result, the options were void as against them for non-registration. The tenants argued that the assignees were estopped from denying the validity of the options because they had known of the improvement works that the tenants were carrying out. The landlord argued that an essential element of proprietary estoppel is that the person against whom the claim is made should have known of his own rights at the time he encouraged or allowed the other party to act on the latter’s mistaken belief. Here both the landlord and the tenant had had the same mistaken belief as to the state of the law.

Oliver J held that the elements of proprietary estoppel are that A must have encouraged or allowed B to entertain a belief to B’s detriment so that it would be unconscionable for A to be allowed to deny the truth of that belief. It does not matter that in so acting A was mistaken as to his own rights in the matter (though this may affect the question of unconscionability).  So here it did not matter that the landlord had mistakenly believed that the option was binding on it at the relevant time.

B has to show that he is acting in reliance on the encouragement or acquiescence of A. One of the tenants was able to show this. The other tenant failed because it was held that it was acting on its own mistaken belief rather than as a result of anything that the landlord did or allowed.

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