Equity and Trusts: Proprietary Estoppel - Assignment Example

1. Introduction In order to advise Theodore and Christopher with regard to their rights against Tony’s e it will be necessary to consider theirrights under contract and the legal consequences of the contract being oral. Alternatively it will be necessary to evaluate their rights under the doctrine of proprietary estoppel. 2. The Facts Theodore had intended to purchase another property and Tony advised Theodore to save money and live in the barn as his dwelling. In reliance on this, Theodore spent significant sums in converting the barn and renovations for the purpose of living in it as his dwelling. He has lived there since 2003. Tony and Christopher had reached an oral agreement regarding the right to purchase part of the property for the purpose of Christopher’s development plans. In reliance on this agreement and Tony’s assurances regarding an imminent sale, Christopher obtained planning permission. Tony’s arrangement with both Christopher and Theodore was agreed orally. 3. The Problem Tony’s wife is claiming that Theodore and Christopher have no proprietary rights in the Property. Christopher and Theodore’s rights have not been registered and both arrangements were agreed orally, therefore the following issues are in contention: 1) Whether Christopher and Theodore have enforceable estate contracts; 2) If not, whether Christopher and Theodore can satisfy the requirements of assurance and detrimental reliance to enforce their rights under the doctrine of proprietary estoppel 4. Grounds for Recovery 4.1. Estate Contract Both Theodore and Christopher’s rights were orally agreed and Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (the 1989 Act) provides that “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 the contracts have been exchanged, in each”. The essence of Section 2 is the requirement that the contract must be in writing and contain all the terms expressly agreed to and be signed by both parties. If the rules are not complied with, there will be no contract. In the past, failure to comply with the written requirements was remedied by equity when there had been part performance of a contract (Cooke, 2006). Whilst there is no express provision in the 1989 Act specifically abolishing part performance, there has been an assumption that the doctrine is no longer applicable as section 2 clearly renders oral contracts void. Therefore, at law, the oral contracts between Tony and Theodore and Tony and Christopher will be void under section 2 of the 1989 Act. 4.2. Proprietary Estoppel The Law Commission acknowledged that there must be some remedy available where an individual acts to their detriment on the assumption that there is a valid contract in force and asserted that the appropriate remedy was proprietary estoppel rather than part performance (Law Commission Paper Number 163). The case of Wilmot v Barber ((1880) 15 Ch D 96) sets out the following five elements that must be present before an estoppel will be granted: the plaintiffs must have made a mistake as to his legal rights; he must have spent money or relied on mistaken belief; the defendant must be aware of the true position; the defendant must be aware of the plaintiff’s mistake; and the defendant must have encouraged the plaintiff’s expenditure or other act of reliance. This test has been further developed by the case of Taylor Fashions v Liverpool Trustees Co Ltd (1982] QB 133), which saw the courts take a broader and relaxed approach to the Wilmott v Barber probanda by proposing the requirement of three interrelated elements; namely, representation, reliance and detriment for a claim in proprietary estoppel. The first element postulated by the Taylor decision is representation and practical application of this is evident in the case of ReBasham ([1986] 1 WLR 1498) where it was stated that “where a claimant acts on the encouragement of the owner, this can be seen as a representation”. In this case, the plaintiff had spent money on the property under the belief that the deceased had promised her that he would leave it to her in the will. If this is applied by analogy to the current scenario, Theodore clearly acted on encouragement of Tony that the converted barn would be his property. Additionally, Christopher and Tony reached an oral agreement and Christopher was repeatedly told that the sale would proceed soon, thereby constituting a representation for the purposes of proprietary estoppel. The second element of the Taylor proprietary estoppel test is that of reliance and is closely linked to the third element of detriment. It must be demonstrated that the claimant relied upon the representation to the extent that they were influenced or induced. In the case of Greasley v Cooke ([1980] 1 WLR 1306), Lord Denning commented that “once it is shown that a representation was calculated to influence the judgment of a reasonable man, the presumption is that he was so influenced.” If we apply this by analogy to Theodore, it is evident that Theodore clearly believed he was going to have a legal right to the converted barn as a dwelling and that Christopher was clearly aware of this in encouraging Theodore to spend his money on the conversion instead of purchasing another property as Theodore had originally intended. Moreover, Theodore relied on this belief by spending twelve months carrying out significant renovation works to the barn and converting it into his home where he has lived since 2003. Similarly with regard to Christopher, in addition to the oral agreement he was given numerous assurances by Tony that “sale would soon go ahead”. On the basis of his belief, Christopher incurred considerable expenditure on obtaining planning permission. Accordingly, I feel that the assurances by Tony and subsequent expenditure by both Theodore and Christopher in reliance satisfies the requirements for enforcing proprietary rights in Tony’s estate under the doctrine of proprietary estoppel. In line with the reasoning in the Taylor case, the expenditure by both Christopher and Tony will satisfy the requirement of “detriment”. 4.3. Conflict between the 1989 Act and Proprietary Estoppel The conflict between proprietary estoppel and the 1989 Act was discussed in the case of Yaxley v Gotts ([2000] Ch 162), where the plaintiff was granted rights under the doctrine of proprietary estoppel without reference to section 2. On appeal, the Court of Appeal argued that this undermines the section 2 requirement. Nevertheless, the Court of Appeal circumvented section 2 by creating an analogous parallel between proprietary estoppel and the principles of common intention constructive trust as established in Gissing v Gissing ([1971] AC 886) . It was held that this method of interpretation complied with the 1989 Act, further supported by the wording in section 2(5) excluding constructive trusts. This argument was further developed in the case of Kinane v Mackie-Conteh ([[2005] EWCA Civ 24), where A borrowed money from B and agreed to give security by granting a mortgage. The mortgage was never executed and A argued that B’s letter (which was signed by A and not B) recording the agreement was not section 2 compliant and the issue of contention was whether B could claim security. The Court of Appeal supported B’s claim on grounds of proprietary estoppel. The justification for this premise was rooted in the fact that A had encouraged B that he would have a security interest in the land and B had acted to his detriment in advancing the money in the belief that he would get a mortgage. The Court of Appeal further argued that this had parallels with the common intention constructive trust and was therefore effective as an equitable charge despite failure to comply with section 2 of the 1989 Act. Moreover, in the recent case of Yeomans Row Management Limited (1) Mrts Zipporah Lisle Mainwaring v James Cobbe ([2006] EWCA Civ 1139), further compounded this ambiguity. The case concerned work done by the claimant in reliance of an “in principle” oral agreement for the sale of a property similar to Christopher’s arrangement regarding Tony’s estate. On this basis, the claimant “expended substantial labour, skill, time and money” to obtain planning consent as Christopher had done in the current scenario. However, upon approval of planning, the owners refused to complete the “contract”. The High Court held that the owner’s conduct was unconscionable and the claimant could enforce the contract under proprietary estoppel. The Court of Appeal upheld the High Court ruling, with Mummery LJ going as far as suggesting that “the assurance, arrangement or understanding relied on to found an estoppel need not be sufficiently certain to be an enforceable contractual obligation. The crucial element is that the defendant has created or encouraged the belief on the part of the defendant”. Therefore it would appear that the conflict with section 2 of the 1989 Act will not preclude a claim of both Theodore and Christopher in proprietary estoppel against Tony’s estate. 5. Conclusion In conclusion, I feel that the facts indicate that Tony clearly gave assurances to both Christopher and Theodore indicating that they would acquire property rights in the estate. They both relied on this to their detriment and whilst their oral agreements with Tony are void under section 2 of the 1989 Act, this will not preclude them enforcing their proprietary rights under the equitable doctrine of proprietary estoppel. BIBLIOGRAPHY Eizabeth Cooke, (2006). Land Law. Oxford University Press. M Dixon., (2005). Principles of Land Law. 5th Edition Routledge-Cavendish Publishing. J MacKenzie& M Phillips (2005). Land Law. 10th Edition Oxford University Press. R J Smith (2003) Property Law 4th Edition, Longman R J Smith (2003) Property Law Cases & Materials 2nd Edition, Longman Megarry and Wade., (2007) The Law of Real Property. 7th Edition Sweet & Maxwell Todd and Wilsons., (2007). Textbook on Trusts.8TH Edition. Oxford University Press. Read More