Archive for the ‘Estoppel’ Category

Clash between plan referred to in transfer and newly erected fence: where was the true boundary?

January 10, 2012

When interpreting the parcels clause the search is for the parties’ objective intention. The conclusion that would be reached by a competent person visiting the site with a copy of the transfer plan would be a useful guide to this intention. The behaviour of the parties in the months following the transfer is not a reliable guide to the objective intention. Faced with a proprietary estoppel claim, the court should look at the case in the round to see whether it would be unconscionable to allow the landowner to insist on strict legal rights. The scale and duration of the detriment suffered, and their relation to the value of the interest being claimed, are relevant considerations.

In Beale v Harvey ([2003] EWCA Civ. 1883, CA (Eng)) H bought one of three plots on a small residential development. B later bought a neighbouring plot. The developer had erected a fence in a position thought to reflect the boundary between the two plots. Following exchange of contracts for her purchase, Mrs H (with the developer’s knowledge and approval) landscaped the boundary indicated by the fence. B realised (at least after completing the purchase, perhaps before then) that the plan used in the transfers to him and H were consistent with each other but inconsistent with the position of the fence. Which reflected the parties’ objective intentions, the plans or the fence?

The English Court of Appeal decided that, on the facts of this case, priority should be given to the plan. It was referred to in the deeds and was the dominant description, the truer guide to the parties’ objective intentions. When interpreting the parcels clause the search is for the parties’ objective intention. The conclusion that would be reached by a competent person visiting the site with a copy of the transfer plan would be a useful guide to this intention. The behaviour of the parties in the months following the transfer is not a reliable guide to the objective intention.

H argued that, in any event, she could claim the ‘extra’ land (the difference between the land shown as hers on the plan and the extra land extending to the fence) on the basis of proprietary estoppel. This failed too: she could easily change the landscaping that she had carried out and it had been in place for a short time before B complained. The gain to her would be proportionately much larger than the loss to B.  Faced with a proprietary estoppel claim, the court should look at the case in the round to see whether it would be unconscionable to allow the landowner to insist on strict legal rights. The scale and duration of the detriment suffered, and their relation to the value of the interest being claimed, are relevant considerations.

The Court of Appeal rejected B’s argument that H could not raise the proprietary estoppel point because her defence had not specified the type of estoppel in question. This is not necessary. It is enough, in England, to say which allegations in the statement of claim are being denied and to give reasons for the denial.

No constructive trust or estoppel where the ‘agreement’ or ‘assurance’ is a mistake of which the other party is unaware

January 4, 2012

The fact that one party enters into a transaction under a misapprehension as to its terms does not give rise to any kind of equitable claim (based either on estoppel or constructive trust) to give effect to a transaction on the terms that had been anticipated by the mistaken party.

Crossco No 4 Unlimited v Jolan Limited ([2011] EWCA Civ. 1619, CA (Eng)) arose out of a demerger that split a group into two (a trading group and a property group) with each group to be separately owned and controlled. Late in the demerger negotiations it was agreed that a property in central Manchester would be transferred to the property group. It was agreed, however, that the trading group would continue as tenants of the ground floor. The trading group had not checked the terms of the relevant lease. It did not appreciate that the lease contained a break clause allowing the landlord to terminate the lease by giving notice. The property group knew of the break clause and was entitled to assume that the trading group also knew of it. Once the demerger had been completed, the trading group served notice to terminate the lease in accordance with the break clause.

The trading group argued that the parties had a mutual understanding that the trading group could use the ground floor and that this gave rise to a common intention constructive trust (based on the Pallant v Morgan equity) that made it unconscionable for the property group to evict the trading group. Alternatively, the initial understanding meant that the property group was estopped from exercising its rights under the break clause. The property group failed on both grounds. They had simply made a mistake. There was no agreement, common intention or assurance to prevent the property group from exercising its legal rights.

There was a difference of opinion in the English Court of Appeal as to the jurisprudential basis on which the decision in Banner Homes rested. The majority thought that it was bound by authority to hold that it was a common intention constructive trust. Etherton LJ thought that it was, rather, a case of a breach of fiduciary duty.

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.

Proprietary estoppel and subject to contract: proposed lease of a farm

December 19, 2011

In James v Evans ([2000] 3 EGLR 1, CA (Eng)) H and E had agreed in principle for the grant by H to E of a lease of a farm. The discussions were ‘subject to contract’ and, in any event, section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 required the contract to be in writing. H had allowed E into possession of the farm pending completion of the lease. The negotiations failed and H’s estate sought to recover possession of the farm (H had died in the meantime). E argued that because he had gone into possession and worked on the farm, H was estopped from recovering possession. The English Court of Appeal found that there was no estoppel; this was a simple case of subject to contract negotiations that never came to fruition. Because they were subject to contract there could be no estoppel.

Wright J provided this summary of the ratio in Attorney-General of Hong Kong v Humphrey’s Estate (Queen’s Gardens) Ltd:

‘where negotiations for the sale of an interest in land were being carried on “subject to contract”, so that it was clear that the parties did not intend to be bound until the execution of the documents necessary to give legal effect to the transaction, and unless it could be shown that it was unfair or unjust or unconscionable for the vendor to refuse to proceed, no estoppel operated to prevent him from exercising his legal right to refuse to execute the document and to withdraw from the transaction.’ (per Wright J at 3)

There is an explanation of the fact that a solicitor generally lacks implied authority to bind his client to a contract.


‘Permanent’ tenancy: void for uncertainty?

November 17, 2011

Siew Soon Wah v Yong Tong Hong ([1973] 2 W.L.R. 713, PC) was an appeal to the Privy Council from the Federal Court of Malaysia. S granted Y a lease. The agreement provided that ‘the tenancy shall be permanent’. In the context of the agreement, the intention was that the term should last as long as the tenant liked. The question was whether the lease was void for uncertainty. The Privy Council held that it was not because of Malaysian statutory provisions that meant that S could not grant a lease for more than thirty years. These provisions supplied the necessary certainty of term. The Privy Council went on to ask whether specific performance should be granted. Here the Privy Council resorted to estoppel. Y had occupied the property and made payments to S. This gave rise to an equitable estoppel protecting the right of occupation.

Estoppel and the Statute of Frauds

November 14, 2011

An oral guarantee that results in the extension of credit or some other action or forebearance does not give rise to an estoppel in the absence of some further assurance and some further detriment than are inherent in the guarantee contract itself.

In Actionstrength Ltd v International Glass Engineering In.GL.en SpA ([2003] UKHL 17, HL) C was D1’s sub-contractor. D1 was the main contractor under a contract to build a factory for D2. D1 was in arrears with the payments due to D2 under the sub-contract. C alleged that there was a meeting at which D2 assured C that payments due to D1 would be withheld from D1 and used to pay C. This was disputed but for the purposes of D2’s claim to have the action struck out it was assumed that C’s account of the facts was accurate. D2 argued that the promise would amount to a guarantee and would be unenforceable because of the failure to comply with section 4 of the Statute of Frauds. C argued that, in reliance on D2’s assurance, it had continued to perform its obligations under the sub-contract for a further month. C argued that this gave rise to an estoppel; it would be unconscionable for D2 to resile from its assurance. C failed. This was a simple case of an unenforceable guarantee; there was no additional assurance / detriment to give rise to an estoppel. There was no independent equity subsisting alongside the contract. C had refused to rely on part performance.

Lord Bingham hinted that the outcome might have been different if D2 had made any payment to C pursuant to the alleged assurance (para 9).  Lord Hoffman made the point that equity can intervene where there have been subsequent acts of part performance (paras. 22 – 24). But part performance relies on the distinction to be drawn between the contract, on the one hand, and performance. It cannot intervene to make enforceable  a fully executory contract that does not comply with statutory formalities. It is the later performance that gives rise to the equity.  Giving credit is central to the guarantee arrangement. Treating it as giving rise to an estoppel would mean that estoppel could be invoked in the case of any guarantee (para. 26). Lord Clyde thought that where there was need for some ‘additional encouragement, inducement or assurance’ (para. 35).

Crabb v Arun District Council

October 20, 2011

In Crabb v Arun District Council ([1976] Ch. 179) P owned land with access to a road owned by D at point A. P then decided to sell his land as two separate plots. This meant that he needed an extra right of access to the road from one of the plots at a different point. P and D agreed in principle that a right of access would be granted at a point labelled ‘B’, although details remained to be negotiated (as to whether the right would be an easement or licence and as to the payment required from P). Nevertheless, D erected a new substantial gate at point B. P, thinking he had the new right he needed, sold off the part of the land that would use the access at point A without reserving a right for the retained plot to be able to get to point A. P did this thinking that the retained plot had the benefit of the access at point B. D, however, changed its mind and blocked off the access at point B. P sought a declaration and injunction to the effect that D was estopped from denying that P had a right of access to the road at point B.

The English Court of Appeal agreed that B should have an easement starting at point B on the basis of proprietary estoppel. The agreement reached and D’s conduct in encouraging P to believe that he had the relevant right (eg by installing a permanent gate at point B) provided the necessary representation. The sale of the plot without the reservation of a right of way from point A was the detrimental reliance. It would be unconscionable for D to dispute that P had the right claimed. Given the loss and delay caused by D’s high-handed actions (that had prevented the land from being put to use in a way that would have benefited not only P but also, perhaps, the local economy) the appropriate award was an easement (rather than a licence) and an award of damages for the lost opportunity to profit from the land during the time that it was land-locked.

It is interesting to note that the assurance was effective in this case despite the parties’ awareness that the agreement in principle would need to be made firmer (by agreeing on details such as payment) and would need to be incorporated in a deed or contract. The subsequent conduct both illustrated that the parties’ thought that there was a firm agreement and amounted to a representation in its own right.

Lord Denning commented (at 187) on the fact that some estoppels (proprietary estoppel) can provide a cause of action. He also sought to explain that, in this case too, equity is modifying common law rights where conscience required it. Lord Scarman doubted that there was any benefit in distinguishing between proprietary and promissory estoppel (at 193).

Member of Wui objecting to sale

July 26, 2011

The mere fact that a member of a Wui signs a form consenting to a sale of Wui property does not estop him from lodging objections to the sale with the District Officer (or otherwise bind him to promote the carrying out of a contract entered into by the managers of the Wui for the sale of Wui property). The managers of a Wui are in a trustee relationship with members (they are not the agents of the members). Rectification of a formal agreement to make it conform to the terms of a provisional agreement will only be ordered where there is convincing proof that the provisional agreement reflects the parties’ true intentions while the formal agreement does not.

In Million Way Ltd v To Shing Wo ([2011] HKEC 560, CA) the managers of a Wui negotiated the sale of Wui property to MW. The members of the Wui approved the sale. A provisional agreement for sale was entered into, this was conditional on obtaining the District Officer’s consent to the sale. The provisional agreement gave MW the right to terminate the agreement if the consent was not obtained within a specified time. The formal agreement, by contrast, provided that the agreement would terminate automatically if the consent had not been obtained by the end of the relevant period.  An application to sell the property was signed by the  members of the Wui, including D4.  D4, nevertheless, wrote to the District Officer objecting to the sale and, as a result, the District Officer refused to consent to the sale. When the period specified in the formal agreement came to an end without the consent having been obtained, the Wui’s solicitors claimed that the agreement was terminated. MW sought a declaration that D4 was estopped from acting so as to prevent the necessary consent from being obtained.

On appeal, MW argued that the managers acted on behalf of the members and that each member was bound by the contract (and therefore precluded from acting so as to prevent the consent from being obtained). This was rejected, managers are trustees for, not agents of, the Wui members. The managers personally enter into the contract. MW also sought rectification of the formal agreement so that it reflected the terms of the Provisional Agreement (which gave MW an option as to whether to terminate the contract or not). This also failed. MW had failed to provide convincing proof that the terms of the Provisional Agreement (rather than the Formal Agreement) reflected the parties’ intentions.

Effectiveness of evidence to show that an assignment was intended to have some other effect

March 23, 2011

Where a deed plainly asserts that there has been an outright assignment to third parties, external evidence to contradict the fact that an assignment has taken place is inadmissible. In these circumstances, the assignor’s interest under a resulting trust would, in any event, be postponed to the interest of a third party who derived title from the assignee without notice of the trust. Following registration of the assignment the assignor is  estopped as against such a third party from denying the truth of the registered details.

In Tsang Chuen v Li Po Kwai ([1932] AC 715, PC) Li Po Kwai (the respondent) assigned leasehold property to two assignees. One of these was his son and the other was himself (under an alias). On the face of the deed, this was clearly a sale by the respondent to two other people with the full consideration having been paid. The assignment was registered at the Land Registry. The memorial gave full details of the parties, property and price. Again, there was nothing to indicate that this was anything other than a sale with the purchasers having paid the full purchase price. The son mortgaged his half share in the property to Tsang Chuen (the appellant). The respondent claimed that the property was not subject to the mortgage. He had not intended the assignment to be a sale at all but merely a ‘marking out’ of the property as being intended (in principle) to be left to his son after the respondent’s death.

The respondent failed. First, his claim was an outright contradiction of the plain terms of the deed. External evidence to this effect could not be admitted. Second, if the respondent claimed under a resulting trust his interest would fail since the mortgagee had no notice and since the respondent had made it possible to deceive the appellant. Third, the registration of the details of the assignment at the Land Registry estopped the respondent from denying the truth of the registered details.