Archive for the ‘Third parties’ Category

Licence for life binding on trustee in bankruptcy

November 10, 2011

In Re Sharpe ([1980] 1 W.L.R. 219) J made a loan to her nephew S. The purpose was to allow him to buy a shop with living accommodation above it.  S had agreed that J would be able to live there with S and his wife as long as she liked. S became bankrupt and the trustee in bankruptcy sought vacant possession of the property so that he could sell it. This was refused. The licence arrangement gave rise to a constructive trust (on a basis akin to proprietary estoppel). The trustee in bankruptcy had notice of this and was subject to it. The trustee in bankruptcy had agreed to sell to a third party and the court was careful to say that it expressed no view as to whether that third party (who had no notice of the licence) was bound by it.

Michael Lower


Proprietary estoppel where the representee is a corporation

May 12, 2011

For the purposes of proprietary estoppel, where representations are made to A (a director or shareholder of B Ltd) it is A rather than B Ltd who must suffer detriment in reliance on the representation. Where the owner / representor sells the relevant land to a third party, that third party purchaser will only be subject to a constructive trust to protect the equity generated by the estoppel where it would be unconscionable to allow the purchaser to take free of the interest. The mere fact that he bought the property ‘subject to’ any possible equity is not enough to make it unconscionable for him to take free of it.

In Lloyd v Dugdale ([2001] EWCA Civ. 1754, CA (Eng)) Mr I orally agreed to grant a long lease of land. There was some uncertainty as to whether the agreement was with D or with JAD (the company controlled by D). While the lease was being negotiated and settled D / JAD was allowed into possession and, with I’s knowledge, D / JAD spent a substantial sum of money on the property. Mr I refused to complete but, instead, sold the property to the claimants who sought possession. The English Court of Appeal held that the agreement was with D and that it was therefore vital that D (rather than JAD) suffer some detriment. They found that he had, in fact, suffered detriment because he had foregone the opportunity to buy other properties on the understanding that he would be granted a lease of the property in question. The question was whether the equity that arose from this successful proprietary estoppel was binding on the purchaser of the property. It was not. Although the purchaser had bought the property subject to any such rights, this was not enough to create a fresh obligation in favour of D. There was no basis for imposing a constructive trust on the purchaser.

Michael Lower