Archive for the ‘Estoppel by convention’ Category

Estoppel by convention: need for a common assumption or understanding

March 28, 2017

In Preedy v Dunne ([2016] EWCA Civ 805, CA (Eng)) D’s mother (J) and his step-father (B) were partners in a pub business. J owned the pub building.

J died leaving her half share in the pub business to trustees. B had a life interest in the half share. After B’s death the half share was to go to D and his two siblings (J’s children).

D spent over GBP300,000 on renovations at the pub between 1999 and 2003. B sold D a half share in the business in 2001. The renovations enhanced the value of the interests of B as well as D and his siblings.

The dispute was as to whether the trustees of J’s share of the business were liable to contribute to the cost of the renovations.

D relied on estoppel by convention. He alleged a common assumption that the trustees owned J’s share of the business (they did not) and so jointly and severally liable to contribute to the repayment of the loan of the funds for the renovations. The claim failed because there was no such common assumption.

D tried to make a ‘wider case’ based on the proposition that he ought not, in justice, to be left to bear the cost of the renovation works on his own. This was rejected (Vos LJ at [59]).

D’s problem was that he had undertaken the work without securing a clear commitment from anyone else to contribute to the cost.

Michael Lower

Adverse possession: tenant estopped from denying an acknowledgement given in a compromise after the limitation period had ended

January 8, 2013

In Colchester BC v Smith ([1992] Ch. 421, CA (Eng)) T had been in possession of land belonging to the Council for a period exceeding twelve years. To avoid being the subject of proceedings that the Council intended to instigate, T entered into a lease of the land that acknowledged the Council’s title and that he had no claim to the land by virtue of adverse possession. He then sought to claim that he had defeated the Council’s title and that the acknowledgement was ineffective since it had been given after the limitation period had expired (section 29(7) of England’s Limitation Act 1980 provides that an acknowledgement at this stage is ineffective). T failed. He was estopped from denying the acknowledgement since it had been given as part of a genuine compromise agreement.

Ownership of signage above shop front

July 9, 2012

In Century Star Ltd v Knutsford Enterprises Ltd ([2012] HKEC 932, DC) C owned the external walls of a building. K owned ground floor shops. The question was who owned the signage area above the facades but below the first floor slab. This was a question of the construction of the Deed of Mutual Covenant applying the principles from Investors’ Compensation Scheme and Jumbo King. The court asked itself which interpretation made the best business sense of the words of the DMC. It found that the signage area belonged to the shop owners.

Had that failed, a defence of proprietary estoppel would have succeeded. An adverse possession claim would have failed since there can be no possession of the bare surface of a wall. Defences of estoppel by convention and acquiecence, laches or delay would also have failed.

Estoppel by convention

June 26, 2012

In Amalgamated Investment & Property Co Ltd (In Liquidation) v Texas Commercial Bank Ltd ([1982] Q.B. 84) T (a bank) agreed to lend money to ANPP ( a subsidiary of A). In the end, the loan was provided through P (T’s subsidiary). This was part of a much broader set of arrangements under which T provided finance to A secured by mortgages over properties owned by A.  A gave a guarantee to secure all monies it owed to T. The parties both believed that the guarantee extended to cover the loan by P to ANPP (ie from the bank’s subsidiary to the guarantor’s subsidiary) though on a strict interpretation of the guarantee it arguably did not cover the indebtedness to P. T and A conducted their negotiations for the overall financing of A from time to time on the basis that the guarantee covered the loan by P to ANPP.

A went into liquidation and the question was whether the cash realised from the sale of A’s assets had to be applied partly to pay off the indebtedness to P. The English Court of Appeal found in favour of T on the basis of estoppel by convention.

Lord Denning M.R. put it this way:

‘So I come to this conclusion: when the parties to a contract are both under a common mistake as to the meaning or effect of it – and thereafter embark on a course of dealing on the footing of that mistake – thereby replacing the original terms of the contract by a conventional basis on which they both conduct their affairs, then the original contract is replaced by the conventional basis. Either party can sue or be sued upon it just as if it had been expressly agreed between them.’ (at 121 – 122).

Brandon L.J. adopted the definition of estoppel by convention in Spencer Bower and Turner, Estoppel by Representation, 3rd ed (1977):

‘This form of estoppel is founded, not on a representation of fact made by a representor and believed by a representee, but on an agreed statement of facts the truth of which has been assumed, by the convention of the parties, as the basis of a transaction into which they are about to enter. When the parties have acted in the transaction on the agreed assumption that a given statement of facts is to be assumed between them as true, then as regards that transaction each will be estopped as against the other from questioning the truth of the statement of facts so assumed.’

Lord Denning would have been prepared to reach the same conclusion by lifting the corporate veil and looking at all of the dealings (including the guarantees) as if they had all been only between A and T. Brandon L.J. would have been prepared to construe the guarantee so as to extend to the repayment of the loan to P.

Estoppel arising from an agreement as to the layout of an internal access road on a development site

December 23, 2011

Valentine v Allen ([2002] EWCA Civ 915, CA (Eng)) concerned rights over the internal access road serving a small residential development and leading to the public highway. When the initial plan for gaining access to the highway was blocked, the then owners of the properties on the development had a meeting and adopted a new proposed route for the access road based on an agreed plan (‘the Plan’). Based on this, there were transfers of land between the owners and two deeds of grant were entered into. The deeds of grant reflected the Plan but the land transfers were made by reference to a different plan inconsistent with the Plan. The result was that, at law, some parts of the deeds of grant could not take effect since the grantors did not own the relevant land. V sought a declaration to the effect that to this extent the deeds of grant were ineffective. A counterclaimed that V was estopped from denying that the deeds of grant were effective. The counterclaim succeeded on the basis of proprietary estoppel. The assurance that everyone would have access rights based on the Plan was given at a site meeting. A and others had subsequently relied on it in several ways (laying out the road in accordance with the Plan and building walls and a garage in a position that reflected it). On this basis, A and the other owners were entitled to equitable easements that accorded with the Plan and the deeds of grant.

V appealed but the Court of Appeal upheld the decision at first instance. Chadwick LJ preferred to rely not on proprietary estoppel but on estoppel by convention. The terms of the deeds of grant made it clear that all of the owners intended to give effect to the Plan:

‘The parties having embarked on the development of their respective properties on the basis of this common assumption, they (and their successors in title) cannot be allowed to assert rights inconsistent with it in circumstances in which it would be unfair or unjust to do so.’ (para. 65).

The relevant circumstances were the building of walls and a garage and the building of the road in accordance with the common assumption. Hale LJ thought that both proprietary estoppel and estoppel by convention provided acceptable bases for upholding the first instance decision.