Proprietary estoppel and very clear assurances given in the course of negotiations

Attorney-General v Humphrey’s Estate makes it very clear that an assurance that has been given subject to contract is very unlikely to give rise to a claim on the basis of proprietary estoppel. In Gillett v Holt, however, clear and repeated assurances did give rise to a successful claim even though the claimant knew, or must be taken to have known, that testamentary intentions can be changed at any time before death. There is a tension between these two judgments.

Proprietary estoppel relies on equity’s intervention and relief will be denied where the claimant does not come with clean hands,

In Gonthier v Orange Contract Scaffolding Ltd ([2003] EWCA Civ 873) H negotiated with G for the grant of a lease to OCS (H was the sole director and shareholder of OCS). G wrote H a letter confirming the terms that had been agreed for the grant of the lease and an option to purchase the reversion. This letter was not subject to contract. It did not satisfy section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. H’s solicitor replied, in a letter marked ‘subject to contract’, asking for a draft lease. Before a lease had been agreed,  G allowed H / OCS to enter the property, carry out works to improve it and use it. Later the negotiations broke down when G refused to grant the option to purchase the reversion. H / OCS eventually left the property but claimed to be entitled to compensation for the expense of the works carried out on the basis of the assurance in G’s original letter that an option would be granted. The claim relied on proprietary estoppel. The claim failed in the English Court of Appeal because H did not have clean hands. Some of the invoices relied on to quantify the claim were false and exceeded the sums actually paid.

The court also considered the effect of the ‘subject to contract’ heading to the letter sent by H’s solicitors. Attorney-General v Humphrey’s Estate sent a very strong message that a statement so qualified could hardly ever give rise to a successful proprietary estoppel claim. Gillett v Holt, however, showed that clear and repeated assurances that Gillett would inherit property could be relied on for proprietary estoppel even when the recipient knew that the owner could change his testamentary intentions before death. Thus, it was accepted that a seemingly revocable assurance could nevertheless be an assurance and be relied on. There is a tension between Humphrey’s Estate, on the one hand, and Gillett v Holt, on the other. The court decided not to address this issue since H’s claim had failed on the ‘clean hands’ issue.

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