Proprietary Estoppel Claims - Essay Example

Land Law Introduction When proprietary estoppel awards the claimant with a property right in order to satisfy equity, a difficulty arises. This relates to balancing this award with statutorily imposed formality requirements for generating such a disposition, in the normal course of events. This intricate issue rears its ugly head, with disturbing periodicity in the case law, and defies any attempt at satisfactory resolution. The question that arises is that if statute obliges the alleged property right of the claimant to have been created in accordance with an explicit type of formality, why, in the absence of such formality, the claimant can utilise proprietary estoppel to acquire the landowner’s property. 1 As such, the good order of property law is disrupted by proprietary estoppel. In successful proprietary estoppel claims, the court may transfer, change the nature of, or totally rescind proprietary rights. This is accomplished without first requiring the parties to comply with the strict formality tests to which property rights transactions are subject.2 Moreover, it seems that proprietary estoppel violates the all – important principle of property law that there has to be consensus for transfer of interests in property. The underlying notion is that the law of property should function in a manner that protects individual property rights. In addition, while applying it, the court should desist from involving itself in issues related to distributive justice. These issues are the preserve of the legislature and other branches of law. 3 As such, a certain amount of support is provided to proprietary estoppel by those who believe that it permits the courts to redistribute property rights, with scant regard for the owner’s consent. Such thinking is challenged by those who contend that equity should not trespass into realms, wherein the parties can be expected to control their relationship by means of a binding contract. 4 Analysis The following case law reveals the attitude of the courts, in deciding the issues relating to the principle of proprietary estoppel. In Yaxley v Gotts,5 the court reiterated that in accordance with the principles of proprietary estoppel, it was unconscionable for a promisor to break the promise made to the promisee. A very important conclusion to be derived is that an agreement that does not comply with Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, can all the same be enforced by resorting to the doctrine of proprietary estoppel.6 In Pritchard v Briggs, the Court of Appeal held that an interest in land was not created by a right of pre – emption, acting in isolation. What was required, in addition, was the crystallisation of the right that was the interest in the land in question.7 In Sharma v Simposh Limited, a potential purchaser arrived at an oral agreement with a developer, with regard to the acquisition of a future development. An agreement was reached between the developer and the prospective buyer. This agreement stated that the developer would not sell the property, during the development of the first phase of a block of flats. Moreover, the developer consented to provide the prospective buyer with the option of acquiring these flats for £1.1 million at any time prior to the completion of the development. 8 The prospective buyer paid £55,000 to the developer to retain this right. The developer kept to his oral agreement and did not sell the property. However, a decline transpired in the price of this property and the prospective buyer sought to annul their agreement. Accordingly, he reclaimed the amount deposited with the developer. 9 The Court of first instance held that the amount deposited with the developer by the prospective buyer had to be returned to the latter, as this amount had been paid under an annulled contract. The developer contended that the prospective buyer was estopped from claiming the deposit amount, as he had acted to his detriment on the basis of their agreement. 10 The Court of Appeal held that there was no enforceable contract, due to the absence of a formal agreement. However, it opined that an oral contract for sale of land was not void, despite being unenforceable by action.11 Hence, the developer was not required to return the amount deposited with him by the claimant. In Francis v F Berndes Limited,12 a prospective buyer entered into an oral agreement to purchase property from a vendor. Subsequently, the terms of the agreement were written in a letter. The sale of this property by the vendor to some other person caused the prospective buyer to raise an action for damages. The Court of first instance, as well as the Court of Appeal concurred that the letter did not contain evidence regarding the essential obligations, and that there was no mention of an obligation to purchase the property. The claim was thus dismissed.13 In Thorner v Major, a farmer promised a young relative that he would will his farm to him, in return for working on the land for negligible wages. The young relative complied and worked diligently for three decades on the farm. The farmer did not will the farm to this man, which caused the latter to raise an action against this gross injustice. Their Lordships ruled that the long years of service put in by the young relative was tantamount to proprietary estoppel, and awarded the farm to him.14 As such, it is indispensable to comprehend the reason as to why proprietary estoppel constitutes a source of rights, in order to determine the nature and extent of the rights that are derived from it. A description of the objective of the doctrine of proprietary estoppel has to be consistent with the test for the availability of a claim with regard to proprietary estoppel, and the extent of the rights that are granted to such a claim.15 Furthermore, in specific instances, proprietary estoppel could permit the informal sanction of a property right, enforcing a promise, or reversing unjust enrichment. However, these aims in isolation do not satisfy the tests for the availability of a claim and the extent of the rights procured because of the claim.16 Several recent decisions of the English courts have utilised proportionality to demonstrate that the objective of proprietary estoppel is to protect the person who relies upon the promise made by another person. The granting of a proportionate award, such as determining the minimum equity for rendering justice, involves recognition of the fact that the person who harbours an expectation has a right that protects such reliance. 17 This was demonstrated in Jennings v Rice,18 wherein the plaintiff had expended considerable effort and time in taking care of the defendant. However, he was not provided with any compensation for his untiring efforts. The plaintiff challenged Rice regarding this unjust dispensation, whereupon she vaguely stated that all her assets would devolve upon him, in the future. The plaintiff had been expecting, at the very least, the house and furniture, which was worth £345,000. His maximum expectation was the entire estate of the defendant, which was worth £1.285 million. Jennings was awarded just £200,000, on the basis of the expenditure that would have been incurred, on hiring full time nursing care. 19 In Ottey v Grundy, Ottey had forsaken her career as an upcoming actress and model, in order to care for Grundy. The latter had promised her a life interest in a houseboat that was worth £240,000 and an apartment.20 Three years later, Grundy died. However, the necessary formalities had not been completed. Langan, J, opined that Ottey’s expectation was disproportionate to the detriment undergone by her, due to reliance on that agreement. Consequently, she was awarded just £50,000 and the apartment. 21 This illustrates the fact that even if there is a clear promise, it will nevertheless be difficult to enforce the expectation, as this may not be the appropriate or proportionate response to the estoppel. The rulings in Jennings and Ottey demonstrate the extent of the discretion enjoyed by the courts, while responding to estoppel claims. 22 Evidently, the proclivity is to diverge from the automatic enforcement of expectations to providing a proportionate or appropriate response and to even re – distribute property rights. Nevertheless, it would be in the fitness of things to determine explicit principles that can be employed in regulating this task. The court must adopt a principled approach, even when it is required to depart from expectations. It is evident that protecting the reliance of the person who has been made the promise is a less predictable norm than enforcing that individual’s expectation in a routine manner. 23 All said and done, evaluating what is proportionate entails an element of judgement. The decision, in this context, will not vest solely with the discretion of the court, and will be determined by the objective of protecting the reliance of the person who has been promised. 24 A property right emerges from an estoppel claim, only if a personal right against the promisor proves to be insufficient to protect reliance by the promisee on that promise. Demonstrating that the promisee requires in specie protection, will be insufficient for this purpose. This is due to the fact that such protection can be achieved by a personal right against the promisor. 25 The principal aspect of a property right that distinguishes it from a personal right is its capacity to bind third parties. Consequently, it has to be established that that the promisee’s reliance on the promisor’s promise is not protected adequately if his right is limited to enforcement against the promisor. 26 Despite this principle’s inadequate articulation in the case law, it tends to be consistent with the majority of the decisions. For instance, in Pascoe v Turner,27 Bruce LJ identified the specific aspects of the case that had resulted in the promisee having the fee simple. In this case, the court was of the opinion that the promisee required a right that could be asserted against the potential transferees of the property. 28 In addition, the mere fact that land is the subject matter of a claim is insufficient to support a property right being granted. In addition, the demonstration by the promisee that he had an expectation that the property right should be safeguarded is also insufficient. The first step is the expectation of the promisee that he can be protected by a personal right to damages against the promisor. 29 This is with regard to instances where the damages reveal the value of the property right expected by the promisee. It has been clearly demonstrated in the case law that the promisee should acquire a property right only when such property right fails to adequately protect his reliance on the promisor’s promise. 30 However, proprietary estoppel bestows rights that become effective immediately, without the necessity of a court order. It is possible to acquire property or personal rights, because of proprietary estoppel. 31 For instance, in Suggitt v Suggitt,32 a father promised his son that he would will him a farm, if he worked on it. However, the father willed it to some other person. The son had studied agriculture and worked on the farm, relying on the promise made by his father. The court held that the farm and a house to live in were to be provided to the son. 33 This case discloses that strong evidence is not required to support a claim under proprietary estoppel. It can also be construed that there is scant incentive to formalise a proprietary estoppel transaction, as the court requires very little evidence to compensate the promisee, in such cases. Whenever there is a clear specification of the titleholder and the purpose for which the land is allotted, the results tend to be different. Thus, in Haq v Island Homes Housing Association,34 the Council had permitted the claimant to commence improvements on a piece of land. This permission was granted prior to the completion of the documentation stipulated under Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. 35 This state of affairs continued and the documentation was not completed. Subsequently, when the land was transferred to the Island Homes, it declined to sign the documentation. In order to address this unsavoury development, Haq claimed proprietary estoppel with regard to this piece of land.36 The court perused the details of the case and the relevant documents and concluded that Haq could not claim proprietary estoppel. The Council had in all its transactions with Haq, clearly stipulated the term ‘subject to contract’. Hence, any departure from ‘subject to contract’ required the concurrence of both the parties, which was seen to be clearly absent. In addition, there was no evidence or unambiguous representation from the Council that there was no necessity to complete the documentation. 37 These facts enabled the Council to fall back on its strict legal rights. However, in Clarke v Meadus,38 Clarke’s father was bedridden and she consented to her parents’ offer to live with them and care for her terminally ill father. In exchange, she was promised her parents’ house, after the demise of her mother. Accordingly, Clarke sold her house and shifted her residence to that of her parents. Moreover, she wound up her successful business to look after her father. 39 After the demise of her father, she became a joint owner of half of the property along with her mother, in accordance with an express declaration of trust in a deed. Her mother willed her share of the house to Clarke. However, after some days, her mother changed her will and bequeathed her share in the house to Clarke’s sister. 40 Clarke claimed detriment that consisted of shifting her family and business, thereby incurring substantial loss, caring for her mother without remuneration, and improving the property. A summary judgement was made against her claim. However, she was successful in her appeal against this judgement. The court highlighted the following principles, in this case. Despite the trust deed’s express declaration of beneficial interest in the house, it could be annulled on establishing that the elements of proprietary estoppel had been satisfied. 41 As such, one of the most potent weapons of equity is proprietary estoppel. This is due to its interventions in statutory regulation relating to land and the distribution of assets, on the demise of the owner of the land or assets. In such situations, a balance has to be arrived between bargains and promises, and the need for certainty. In essence, proprietary estoppel accords recognition to certain transactions that fail to comply with the necessary formalities. 42 Conclusion Proprietary estoppel is a very important weapon of equity. On the death of an individual, who owns land or assets, proprietary estoppel has the capacity to significantly influence statutory regulation relating to the distribution or transfer of such land or assets. It becomes indispensable to strike a balance between the need for certainty, and the promises and bargains that are relevant. To be precise, proprietary estoppel accords recognition to certain transactions that have not been conducted with the required formalities. In addition, the principle of proportionality has been employed by the courts in the UK to illustrate the fact that the goal of proprietary estoppel is to protect the individual who relies upon the promise made to him by another person. The bestowal of a proportionate award signifies that individuals who rely on a promise made by another are entitled to protection for such trust. Bibliography — — ‘Section 2 of the 1989 Act in the spotlight’ (Shepherd + Wedderburn, 20 March 2012) accessed 2 July 2013. Bright S and McFarlane B, ‘Proprietary Estoppel and Property Rights’ [2005] 64(2) The Cambridge Law Journal 449. Clarke v Meadus [2010] EWHC 3117. Dixon M, ‘Confining and Defining Proprietary Estoppel: The Role of Unconscionability’ (Academia, 2013) accessed 2 July 2013. Francis v F Berndes Limited [2011] EWHC 3377 (Ch). Goo SH, Sourcebook on Land Law (3rd edn, Routledge 2002). Haq v Island Homes Housing Association [2011] EWCA Civ 805. Jennings v Rice [2002] EWCA Civ 159. Law of Property (Miscellaneous Provisions) Act 1989. Ottey v Grundy [2003] EWCA Civ 1176. Pascoe v Turner [1979] 1 WLR 431. Piška N, ‘Hopes, Expectations and Revocable Promises in Proprietary Estoppel’ [2009] 72(6) Modern Law Review 998. Pritchard v Briggs [1980] Ch 338. Samet I, ‘Some Strings Attached: The Morality of Proprietary Estoppel’ (Academia, 2013) accessed 2 July 2013. Sharma v Simposh Limited [2011] EWCA Civ 1383. Stroud A, ‘Chapter 12: Proprietary Estoppel’ (Making Sense of Land Law, April 2012) < http://www.palgrave.com/law/stroud3e/resources/updates/chapter12.html> accessed 2 July 2013. Suggitt v Suggitt [2012] EWHC 903. Thorner v Major [2009] UKHL 18. Yaxley v Gotts [2000] 1 All ER 711. Read More