Tag Archives: Proprietary Estoppel

Promissory estoppel could not outflank statutory requirements for variation of land sale contracts

Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (the 1989 Act) says:

“(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each

(5) … nothing in this section affects the creation or operation of resulting, implied or constructive trusts.”

In Dudley Muslim Association v Dudley Metropolitan Borough Council [2015] the starting point was that the Dudley Muslim Association (“DMA”) were under an obligation to re-transfer land to the Council in the event of non-completion of a Mosque development by a contractual deadline.

They alleged that the Council had made representations that they be allowed an extension of time beyond the Scheme getting planning permission and that this amounted to a variation of the contract or was the basis of a promissory estoppel.

The Court of Appeal held that an obligation to re-transfer land to the Council was a contract for the disposition of an interest in land and therefore caught by section 2 (1).

Although the obligation to re-transfer was in the nature of a covenant, it made no difference. It was an executory (and initially conditional) commitment to transfer the freehold to the Council in exchange for a specified sum of money. So the obligation to transfer was within the scope of section 2.

Any variation of a contract that falls within the scope of section 2 must itself comply with the required formalities of that section: McCausland v Duncan Lawrie Ltd [1997]. The DMA could not show that the correspondence from the Council alleged to be the source of the estoppel did comply.

McCausland left open the possibility that estoppel might get round the section, though it would be surprising if one could do by promissory estoppel what one could not do by informal contract.

An “estoppel by convention” arises where parties to a transaction act on an assumed state of facts or law, where that assumption is either shared by both, or, made by one party and acquiesced in by the other party. Here, so long as the assumption is communicated by each party to the other, then each is prevented, or estopped, from denying the assumed facts or law if it would be unjust to allow them to go back on the assumption. Godden v Merthyr Tydfil Housing Association (1997) subsequently held that an allegation of an estoppel by convention could not circumvent section 2.

A “proprietary estoppel” involves something being done by a person which that person believes will give him rights in or over land. For example, putting up a building or making improvements to the land. Here the landowner may be estopped from denying the right or title which that person has assumed to exist. Yaxley v Gotts [2000] held that a proprietary estoppel claim could be brought despite section 2 (1) because such a claim fell within the exception in section 2 (5). But the observations of Lord Scott in Cobbe v Yeoman’s Row Management Ltd [2008] later cast doubt on this:

“The proposition that an owner of land can be estopped from asserting that an agreement is void for want of compliance with the requirements of section 2 is, in my opinion, unacceptable. The assertion is no more than the statute provides. Equity can surely not contradict the statute.”

Though the observations were made as an aside and were not essential to the decision, three other Law Lords in the case had agreed with Lord Scott’s speech.

In the present Dudley case, the Court of Appeal was prepared to assume, for the purposes of argument, that a claim in proprietary estoppel is capable of outflanking section 2. But only because it might fall within the express exception within subsection (5) which was itself part of section 2.

A “promissory estoppel” usually involves a promise, given by one party during the performance of a contract, not to hold the other party to the strict terms of the original contract.

Where, as here, a defence was raised based not on proprietary estoppel but on promissory estoppel there was no question of a constructive trust of land arising. Furthermore since the DMA already owned the land, there was no relevant property which was capable of being held on constructive trust for the DMA.

Unless a case fell within section 2 (5), to admit a defence based on promissory estoppel would be effectively to repeal the section by judicial legislation.

So, even if the DMA had been able to plead and prove a defence of promissory estoppel it would not have overcome the extension of time being void for non compliance with the formalities required under section 2 (1) of the 1989 Act.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Constructive trust used to validate verbal land contract

In Ghazaani v Rowshan [2015] Mr Rowshan owned a Leeds property. Dr Ghazaani relied on the doctrine of constructive trusts and/or proprietary estoppel and contended that Mr Rowshan held the Leeds property on constructive trust for him and should be compelled to transfer it to him.

There was an oral agreement under which Dr Ghazaani and Mr Rowshan agreed to exchange the Leeds property for a Tehran apartment together with an equality payment.

There was never any intention to enter into a formal written agreement. Dr Ghazaani and Mr Rowshan were quite content to proceed to completion on the basis of the oral agreement they had reached. At least by November 2011 all of the terms had been agreed between the parties. There were no further terms to be agreed between them.

Being an oral agreement normally Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 would make that agreement void – certainly as regards the Leeds property. It had been a matter of debate how far proprietary estoppel and constructive trusts could be used to get round the hardship and potential for injustice in this section.

In November 2011 Mr Rowshan granted Dr Ghazaani possession of the Leeds property and instructed a tenant of part of it to pay rent to Dr Ghazaani.

Between 2011 and 2012 Dr Ghazaani carried out significant alterations to the first floor of the Leeds property and had converted it into residential accommodation. Dr Ghazaani had spent £10,490 for the labour and a substantial amount was also spent on the materials. Dr Ghazaani retained possession of the first floor flat. He had 3 daughters and it had been occupied from time to time by two who were studying at Leeds University. The Transfer of the Tehran apartment to Mr Rowshan was made by a Transfer registered in November 2011. The 500 million IR equality money was paid to Mr Rowshan.

The High Court said Dr Ghazaani has made out his case for a constructive trust and/or proprietary estoppel and, in the exceptional circumstances, it would be unconscionable for Mr Rowshan to refuse to complete the Transfer of the Leeds property to Dr Ghazaani.

The parties should be put in the position they would have been if the contract had been concluded in November 2011.

So the court ordered Mr Rowshan to Transfer the Leeds property to Dr Ghazaani.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Brothers had operated all family properties and businesses as co-owners

The recent case of Bhushan & Ors v Chand [2015] concerned a family property dispute.

In the early period it was a traditional family under the close control of the head of the household, initially the husband and after his death his wife. All the sons of the family continued to pay over their wages to their mother who controlled the family’s money. The family home was transferred into her name, and it’s successor was bought in her name.

The mother received money from various sources and simply mixed it and applied it as she thought fit for the family’s benefit, either for daily expenses or in acquiring assets she expected to benefit her sons later.

The High Court said the mixing of funds under her control would make her the beneficial owner of the money each of her sons paid to her.

When an asset such as a house was bought with that money, the ownership of that asset would depend on her intention as expressed at the time, and was not to be treated as relating back to the respective contributions to the mixed fund.

It was the defendant brother’s case that he was or had been entitled either to the whole or some ascertainable share of the beneficial interest in the assets purchased from that fund merely because of his having paid an indeterminable part of the price out of his wages. The High Court said that was insufficient.

But neither had the claimant brothers established a general intention that there be common ownership of all the assets bought from the outset.

The High Court said insofar as assets were bought in his name from that fund, the prima facie position would be that they were legally and beneficially his, if no contrary intention at the time of purchase was proved.

However, if such a property was later sold and the money paid back to the mother, then ownership of that money would vest in her, again, subject to a contrary intention at that time being proven.

In that early period, there was no sufficient evidence of a contrary intention.

But later as the children grew older the evidence of what the family actually did overwhelmingly supported them having agreed to work together in business and build up assets in common.

All of the claimant brothers worked in the joint enterprise family clothes business much more consistently with being owners than with them being four unpaid employees dependant on generosity from a lead family member.

Investments were purchased from the funds of the family business for each brother without regard to their ostensible ownership of the business. The proceeds of those investments were used to buy properties which were not always owned by the same family members. Rental income from properties and cash accumulated were aggregated and applied without distinction as to their origin.

Whatever the distinctions as to ownership presented to outsiders, these did not correspond with the way the properties, businesses and their income were treated between the family members.

The nominal ownerships of the family businesses and the rental properties bore no relationship to the way in which the income and proceeds derived from them were used.

The decisions to use those funds were taken by family members other than the ostensible owners. Those members did not do so as assistants or secretaries to any lead family member.

When a major financial issue arose from the compulsory purchase of one of the properties, it was described to the professionals acting as being owned by all five and the proceeds obtained were predominantly reinvested in a club owned on the same basis.

Finally, there was evidence of arrangements between the brothers, supporting the existence of a common intention trust in that the defendant had acknowledged the existence of such an arrangement by discussing the division of assets, and, by beginning to compile his own list of the assets to be divided.

Anyone wanting to show a common intention constructive trust must have relied to his detriment on the agreement he, or she, argues existed.

That was easy here as each of the brothers himself worked in the various businesses bought or established, in circumstances where, prima facie, he would not otherwise be entitled to any reward from those businesses or interest in the assets.

In the circumstances it was unnecessary to go on to consider the doctrine of proprietary estoppel or the precedents set by the court decisions based on the previous case of Pallant v Morgan.

In any case the facts would not fit easily with Pallant v Morgan since there was no suggestion that one or more brothers had the opportunity to acquire particular properties but had instead stood back in favour of another.

An agreement for joint ownership fitted more easily with a common intention trust than a promise of an interest in the property of another.

Their respective cross entitlements under that ownership remained to be settled – being complicated by the fact that for some time the defendant had been operating the club and the other brothers had been operating the other businesses.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Estoppel based on promise of permanent home

In the Court of Appeal case of Southwell v Blackburn [2014] the Appellant and the Respondent had set up home together in Droitwich, in 2002. The Respondent, a divorcee with 2 daughters, had given up a secure tenancy of a property in Manchester, which she had spent roughly £15,000 on, based on his representations that she would have a long term home and the same security as a wife. The Appellant funded the purchase of the house with the equity from his old house and a repayment mortgage in his sole name which he alone repaid.

When the relationship broke down 10 years later the Respondent unsuccessfully claimed that the Appellant held the Droitwich house under a constructive trust for the benefit of both of them in equal shares. But the judge at first instance found she had an enforceable equity, in the Droitwich house, by operation of proprietary estoppel to the tune of £28,500.

It’s notable that the representations he made to her were specific as to the nature and extent of the “long term commitment” he gave her “to provide her with a secure home” but were not specific as to ownership of their new home.

The judge at first instance found that he had led the Respondent to believe she would have an entitlement which would, on any breakdown of the relationship, be recognised in the same way as the contribution of a wife to the assets of a marriage would be recogised on a marital breakdown. Without that she would not have given up her secure tenancy in Manchester.

His promise had not been of a half share in the house, but he had given her a promise of security, which he had failed to fulfil, and it would be unconscionable for the Appellant not to try to put her back in much the same position as she was before she gave up her own house.

The case is also significant in that much the larger part of her award was quantified not on what she spent on the Droitwich house but on what she had spent on the Manchester house, they not cohabited in, and that she had given up.

On top of her spending on her old home that she had given up, she had spent £4,000 – £5,000 as her contribution to setting up the new house with the Appellant. The Respondent had been relieved of her liability to pay rent in Manchester and had lived rent-free in Droitwich but her practical support had assisted him to increase his earnings by at least one major career promotion. The value of the new house had increased from £240,000 to £320,000. Allowing for inflation £20,000 was adjusted to the £28,500 she was awarded. That figure reflected the prejudice she had been subjected to by the Appellant not fulfilling his promise and should allow her to get back to her 2002 position.

The detriment to the Respondent had not been that she embarked upon a relationship with the Appellant but that she had abandoned her secure home in which she had invested, and she had then invested what little else she had in the Droitwich home even though she had no legal title to it.

It was that detrimental reliance which made the Appellant’s promise irrevocable and led to the conclusion that he could not conscionably go back on the assurance about her having a long term secure home.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.

Right to have and keep gates shut could bind successors

In the Court of Appeal case of Bradley & Anor v Heslin & Anor [2014] what was claimed was a right to maintain gates across the entrance to a joint drive, and a right to open and close those gates at all times and for all purposes connected with the enjoyment of one of the properties, No. 40 Freshfield Road Formby, Merseyside.

The claimant and respondent’s respective predecessors were Mr Thompson and Mr Ewing. Mr Thompson had done work on Mr Ewing’s land including designing and erecting gate pillars and gates, building boundary walls to the driveway, laying out and edging the driveway, planting the hedge and tarmacing the end of the driveway.

The work undertaken considerably exceeded maintenance of the shared portion of the driveway.

There was now a neighbour dispute between their successors as to Mr Thompson’s successors’ rights to close the gates.

Also it was extremely unlikely that Mr Thompson would have done that work on Mr Ewing’s land without any discussion with Mr Ewing, or that Mr Ewing would just stand by and permit it to happen.

Mr Bradley had confirmed orally that Mr Thompson had told him that he had tacitly agreed with Mr Ewing to build the gateposts but there was no direct evidence of any express formal agreement or of any specific terms.

However it could only be inferred that the building of the northern and southern pillars flanking the driveway and the installation of working gates and the other work must have been done with the express agreement of Mr Ewing and that both Mr Thompson and Mr Ewing benefited from the arrangement.

It was evident that the gates had not been not erected with the intention that they be purely ornamental and would never be shut. Mr Thompson had an aggressive dog. One purpose of the gates was to prevent it going onto the road.

It could be inferred that the gates were regularly closed for that reason.

However it could not be inferred that the default position was that the gates were always shut as the dog would probably have been chained or kept in the house as well.

When shut, the gates must have interfered somewhat with Mr Ewing’s freedom to go to and fro.

However there being no evidence of disagreement supported the view that that hindrance was consensual and reasonable.

Doubtless Mr Thompson had constructed the northern gate pillar at his own expense, to his design in his chosen location, and hung from it gates which he operated according to his need. Altogether they contributed to a coherent and unified frontage design which made the entire frontage appear to be part of Mr Thompson’s property.

Mr Thompson had gone far beyond just discharging an obligation to share the cost of maintaining a jointly used driveway. His work and contributions had given Mr Ewing extensive and enduring benefits – even if the agreement had been “tacit”.

Thereafter Mr Thompson acted as an owner of the northern pillar and gates would be expected to act and Mr Ewing did not act as such owner.

Mr Thompson had done so because he reasonably understood that he would be entitled to do so.

That such was the understanding of Mr Thompson must have been known to Mr Ewing who must have intended Mr Thompson to be so entitled in return for all the work that Mr Thompson did at his own expense on property that belonged to Mr Ewing.

If in 1979 Mr Ewing had demolished the northern pillar or painted it pink that would not have been regarded as conscionable. Equity would have estopped Mr Ewing from exercising such rights as registered proprietor of the ground on which Mr Thompson had built the pillar.

If such an estoppel originally governed the relationship between Mr Ewing and Mr Thompson then it continued to bind their successors.

Mr Thompson’s successors could assert rights to ownership of the northern pillar as (assumed) registered proprietors of it. The frontage appeared a unified whole and to be the frontage to No.40. The owners of No.40 were in actual occupation of the pillar so their equitable rights to it were protected as an old overriding interest under the Land Registration Act 1925.

Accordingly, the northern pillar belongs to the Bradleys as owners of No. 40.

As to the ownership of the gates that hung between the pillars, they belonged to the owners of No.40 as well. Mr Thompson had paid for them: and they hung between pillars which belonged to him and had since devolved to his successors as owners of No.40.

When (if ever) may the gates be closed?

It was not intended that the gates should be purely ornamental. Whilst there was no direct evidence of such agreement, the fact that they were used as soon as they were erected evidenced a “tacit” agreement between Mr Ewing and Mr Thompson that the gates were to be functional.

The owner of the property that had the right of way had gated the way and thereby interfered with the landowner’s rights.

If the gates were closed whenever those owners wanted to pass through them, then they would be seriously inconvenienced, as would their predecessors in title have been.

So for the Bradleys to close the gates over the driveway would be a trespass over the Heslins’ land, unless they had a right to do so: which right would be in the nature of an easement. The right to hang and close a gate could be a right capable of being an easement and could be acquired by grant or prescription or as here result from a proprietary estoppel. It was simply the right to occupy airspace by hanging a gate over the land forming a driveway which was quite capable of being an easement that made life better for the property that benefited from it.

It was compatible with being an easement as it did not amount to a claim to the whole beneficial use of the driveway, nor did it render the Heslins’ ownership of the driveway illusory.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.