Regular updates on relevant case law and legislation - October 2009

CHAPTER 12 PROPRIETARY ESTOPPEL

Box A1 An assurance or representation (page 274)

In Thorner v Curtis [2009] UKHL 18; [2009] 1 WLR 776, sometimes referred to as Thorner v Majors, the House of Lords overruled the Court of Appeal (see web update October 2008 for the facts and the Court of Appeal decision). David Thorner was claiming entitlement to a farm through proprietary estoppel. For 30 years without payment David Thorner had devoted his life to helping Peter run his farm both physically and in its financial management. David had relied on implied ‘understandings’ that he would inherit the farm from Peter. Peter had revoked his will following a disagreement with one of the intended beneficiaries (not David) and had never made another will and so David had not inherited the farm. In the House of Lords it was held that context is everything and will determine whether a representation is clear enough. The deputy judge had found a continuing pattern of conduct by Peter that David should inherit the farm. The deputy judge was also sensitive to the unusual circumstances of the case:

‘The deputy judge heard a lot of evidence about two countrymen leading lives that it may be difficult for many city-dwellers to imagine—taciturn and undemonstrative men committed to a life of hard and unrelenting physical work, by day and sometimes by night, largely unrelieved by recreation or female company.’

It makes you want to weep, doesn’t it? Proprietary estoppel was recognised and David Thorner was awarded the farm.

Box A4 Unconscionability (page 277)

In McGuane v Welch [2008] EWCA Civ 785; [2008] 2 P&CR 24, Mr McGuane wanted to raise money. He had a right to buy his long lease from the Council at a discount. He agreed to buy the long lease with the aid of a mortgage. Mr McGuane would keep the property for three years so as not to have to pay back the discount after which Mr Welch would buy the lease from him. McGuane declared a trust of the lease for three years in favour of Mr Welch together with an undated deed of transfer. In the meantime, Mr Welch paid Mr McGuane a cash payment. Mr Welch then paid Mr McGuane’s mortgage instalments, carried out improvements, rented the property out keeping the rent money and also paid off the mortgage to avoid repossession after the mortgage repayments had fallen into arrears. The question at the end of the day was who owned the beneficial interest in the lease. Mr Welch couldn’t rely on the declaration of trust and undated transfer documents because stamp duty hadn’t been paid and so the documents could not be given as evidence in court. He claimed proprietary estoppel because he had been encouraged by Mr McGuane that he would be the owner of the lease. He had relied on the promise by paying the cash to Mr McGuane, by paying the mortgage repayments and he had carried out improvements. It was held that it was not unconscionable for Mr McGuane to refuse to transfer the lease to Mr Welch because of the unconscionable behaviour by Mr Welch himself which amounted to the following,

‘Mr McGuane did not have the benefit of independent legal advice when he agreed to dispose of the Lease; the price paid for it was substantially less than its estimated market value; and the agreement was implemented in documents prepared by solicitors who, although acting as solicitors for him as vendor, received and acted on inaccurate instructions from Mr Welch as purchaser.’

It was held that there was a wide judicial discretion when determining how an equity by estoppel should be satisfied. The court did not have to give effect to the bargain between the parties but had to look for the minimum equity to do justice. Mr Welch’s loss could be quantified in financial terms and he could be compensated accordingly. Mr McGuane kept the property subject to paying back Mr Welch for his expenditure on the property.

The lease was not held on constructive trust by Mr McGuane for Mr Welch either because the finding of an inferred agreement constructive trust was inconsistent with the express agreement that Mr McGuane would hold the property on express trust for Mr Welch for three years after which the lease would be transferred to Mr Welch.

Constructive trusts, proprietary estoppel and the requirements of section 2 of the Law of Property Miscellaneous Provisions) Act 1989 (page 290)

In Hutchison v B & DF Limited [2008] EWHC 2286 (Ch), Mr Hutchinson was trying to enforce a five year lease through estoppel. The lease had not been made in writing and so was void under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Mr Hutchinson said that BDF were estopped from denying the existence of a lease. Mr Hutchinson relied on assurances by BDF before he let them into possession; he acted to his detriment because he didn’t insist on the lease being executed; BDF paid and Mr Hutchinson accepted rent as though the lease had been executed. In the House of Lords in Yeoman’s Row Management v Cobbe [2008] UKHL 55; [2008] 1 WLR 1752, it had been held obiter that proprietary estoppel could not be used to enforce an agreement that statute has declared to be void. Whilst acknowledging that the comment was obiter, the judge in Hutchison followed ‘the present view’ in Yeoman’s and held that Mr Hutchinson’s claim to enforce the 5 year lease on estoppel grounds would fail. He also said:

‘I do not believe for one minute that Claimants (including an experienced property lawyer and an experienced surveyor) believed that there was an enforceable agreement for a 5 year term made orally. They cannot say that they allowed the Defendant into possession in a mistaken belief that there was a binding agreement.’

In Herbert v Doyle [2008] EWHC 1950 (Ch); [2009] WTLR 589, there was a different conclusion. The facts were similar to Yeoman’s (and far too complicated to even begin to go through) but basically a dental practice had agreed to transfer parking spaces to Mr Herbert in return for Mr Herbert transferring different parking spaces to them and meeting several other conditions including carrying out building work on the building owned by the dental practice and the granting of further leases to the practice. Yet again, there had been negotiations that did not satisfy s2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. Because there was no complete agreement, the relationship between s2 and proprietary estoppel did not have to be decided. However, the judge expressed the view that the obiter words in the House of Lords in Yeoman’s Row Management that proprietary estoppel could not be used to enforce an agreement that statute has declared to be void, should remain obiter. If all the requirements for proprietary estoppel are met, then it doesn’t matter that section 2 is avoided and effect could be given to the agreement by means of a constructive trust. Only if the negotiations had been subject to contract would a claim in proprietary estoppel be exceptionally difficult or impossible. In the event, the judge suspended any order leaving time for Mr Herbert to carry out his side of the bargain in which case the judge would declare a transfer of the parking spaces.

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