Chapter 7: Proprietary Estoppel
In Grant v Edwards [1986] 1 Ch 638, Browne-Wilkinson VC suggested that proprietary estoppel might provide an alternative route for claiming an interest in the home, to that of the constructive trust. The two doctrines certainly are similar. Proprietary estoppel comprises three main elements:
1. An assurance;
2. Reliance; and
3. Detriment.
We shall consider each of these requirements further, later in this workbook.
The Development of Proprietary Estoppel
Proprietary Estoppel has its origins in the nineteenth century. Two main types of approach can be identified from the case law, which are each illustrated by descriptions contained in the case of Ramsden v Dyson (1866) LR 1 HL 129:
Description 1:
"If a man, under a verbal agreement with a landlord for a certain interest in land or, what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation." per Lord Kingsdown at 170.
Description 2:
"If a stranger begins to build on my land supposing it to be his own, and I, perceiving his mistake, abstain from setting him right, and leave him to persevere in his error, a Court of equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land was his own." per Lord Cranworth at 140.
The terminology commonly used to refer to the different types of estoppel envisaged by these descriptions is shown below. Which description do you think belongs with which term?
The Five Probanda
In Willmott v Barber (1880) 15 Ch 96, Fry J. identified five elements necessary to establish a claim over land by an estoppel:
1. The claimant must have made a mistake as to his legal rights;
2. The claimant must have expended some money or carried out some act on the faith of his mistaken belief;
3. The owner must know of the existence of his own right, which is inconsistent with that claimed by the claimant;
4. The owner must know of the claimant's mistaken belief that he has rights; and
5. The owner must have encouraged the claimant in his expenditure of money or in other acts which he has done, either directly or by abstaining from asserting his legal right.
1. Order requiring owner to pay money to claimant
It will not always be appropriate to grant a remedy which involves the claimant remaining in the property. For instance, where it would not be reasonable to expect the parties to share premises, or where the equity is founded on insubstantial expenditure for improvements or where the grant of such a remedy would prevent the sale of the property to the prejudice of the owner's innocent creditors.
In such cases, the court may satisfy the equity by making an award of monetary compensation to the claimant. An award may be effectively secured by coupling it with a charge over the property, and/or a right to occupy until payment is made.
2. Grant of a licence to occupy to claimant
An injunction to restrain the the owner from exercise their rights of ownership may not be sufficient protection to a claimant yet the actual grant of an interest is not warranted. In these circumstances the the claimant's occupation may be given positive protection by the grant of a licence.
3. Grant of an estate or interest to claimant
Occasionally it may happen that the only way in which an equity can be satisfied is by the transfer of an estate or interest in land. Estoppel can be used as a sword to establish a proprietary interest, as well as a defensive shield. However, the courts are generally reluctant to wield this weapon if there is another remedy that would achieve a satisfactory result.
4. Injunction restraining owner from exercising rights of ownership
Often, an injunction preventing the owner of the property from exercising rights of ownership will be a sufficient remedy. The courts generally have shown themselves more sympathetic to the use of estoppel as a defensive shield rather than an aggressive sword.
Generally the right in question will be the right to evict the claimant from the premises.
Order requiring owner to pay money to claimant
It would be inappropriate to expect the parties to continue to live with each other, particularly in the light of A's conduct, and so a remedy giving A a right of occupation would not be ideal.
The best option would seem to be to reimburse A for the expenses he has incurred in improving the property, assuming that B can afford to do so. The award could be protected by giving A a charge over the property, or a right of occupation until such time as the money had been paid see Dodsworth v Dodsworth (1973) 228 Estates Gazette 1115 and Chalmers v Pardoe [1963] 1 WLR 677.
A's misconduct in assaulting B could be taken into account by the court in deciding what (if any) remedy would be appropriate. But once the equity has been satisfied with the grant of a remedy misconduct will not be relevant save that in exceptional circumstances misconduct might revoke an equitable licence to occupy see Williams v Staite [1979] Ch 291.
Grant of a licence to occupy to claimant
This is possible, but probably not ideal.
It is unrealistic to expect the parties to continue to live with each other after A's misconduct and it seems likely that the conferring of a licence to occupy or injunction prohibiting eviction would necessitate this. Such a remedy might also render the property inalienable, a rather drastic limitation on B's rights under the circumstances.
We consider that the best option would be to reimburse A for the expenses he has incurred in improving the property. Assuming of course, firstly that A's misconduct is not sufficiently serious to rob him of any remedy (see Williams v Staite [1979] Ch 291) and secondly B had some prospect of being able to afford it. The award could be protected by giving A a charge over the property, or a right of occupation until such time as the money had been paid see Dodsworth v Dodsworth (1973) 228 Estates Gazette 1115 and Chalmers v Pardoe [1963] 1 WLR 677.
Grant of an estate or interest to claimant
See Pascoe v.Turner [1979] 1 WLR 431.
As a remedy this seems to go far beyond what was actually promised to A by B and surely cannot be justified in the light of A's misconduct. The court can take misconduct into account in deciding how the equity should be satisfied although once a remedy has been awarded misconduct will only have any effect in exceptional circumstances eg to revoke a licence to occupy see Williams v Staite [1979] Ch 291
We consider that the best option would be to reimburse A for the expenses she has incurred in improving the property, (assuming of course, that B had some prospect of being able to afford it). The award could be protected by giving A a charge over the property, or a right of occupation until such time as the money had been paid see Dodsworth v Dodsworth (1973) 228 Estates Gazette 1115 and Chalmers v Pardoe [1963] 1 WLR 677.
Injunction restraining owner from exercising rights of ownership
This is possible, but probably not ideal.
It is unrealistic to expect the parties to continue to live with each other after A's misconduct and it seems likely that the conferring of a licence to occupy or injunction prohibiting eviction would necessitate this. Such a remedy might also render the property inalienable, a rather drastic limitation on B's rights under the circumstances.
We consider that the best option would be to reimburse A for the expenses he has incurred in improving the property. Assuming of course, firstly that A's misconduct is not sufficiently serious to rob him of any remedy (see Williams v Staite [1979] Ch 291) and secondly B had some prospect of being able to afford it. The award could be protected by giving A a charge over the property, or a right of occupation until such time as the money had been paid see Dodsworth v Dodsworth (1973) 228 Estates Gazette 1115 and Chalmers v Pardoe [1963] 1 WLR 677.
Satisfaction or Compensation?
There are evident from the cases two different approaches that the courts have adopted in deciding what remedy is appropriate to satisfy the equity raised by an estoppel.
1. Satisfaction of the expectation raised by the representation. This approach is particularly evident in earlier decisions see for instance Dillwyn v Llewelyn (1862) 4 De G F & J 517. But satisfaction of the expectation tends to fly in the face of the strict legal rules and may result in the effective enforcement of a gratuitous promise, particularly where the detriment suffered is small compared to the right promised.
2. Compensation for the detriment suffered has become more evident in recent decisions. The High Court of Australia in Commonwealth of Australia v Verwayen (1990) 95 ALR 321 at 333 identified:
"A central element of that doctrine is that there must be a proportionality between the remedy and the detriment which is its purpose to avoid. It would be wholly inequitable and unjust to insist upon a disproportionate making good of the relevant assumption."
The guiding principle is the minimum equity to do justice between the parties and whilst, in the proper case, this may necessitate satisfaction of the right promised, compensation may provide a more suitable alternative see for example Sledmore v Dalby (1996) 72 P&CR 196.
Resulting or Constructive Trust or Estoppel???
There a similarities between the three equitable doctrines we have just examined. On occasions the courts have not made it clear upon which doctrine they have relied in reaching their decision. For instance, in Gissing v Gissing [1971] AC 886 at 905B when considering implied trusts Lord Diplock though it was "unnecessary for the present purposes to distinguish between these ...classes of trust" although now there are signs that the courts are more aware of the importance of the distinctions between the three doctrines, Drake v.Whipp [1996] 1 FLR 826.
The differences are:
1. INTENTION - A resulting trust is based upon the presumed intention that arises where a person provides funds for the purchase of property. A constructive trust is founded upon a common intention that can either be express or inferred but cannot be based upon an intention that the parties never in fact had. An estoppel may be claimed where there has been either a representation or acquiescence that an interest in property is to arise. Certainly a representation could equally be interpreted as leading to an express common intention.
2. DETRIMENT - There is no separate requirement for detriment in the case of a resulting trust - the provision of funds by itself gives rise to the presumption. In a similar way there is a close, if not invisible link, between an inferred common intention and the detriment where a constructive trust is based upon financial contribution. The distinction is that a resulting trust is based upon a presumed intention at the time of acquisition but a constructive trust can arise subsequently. In the case of both a constructive trust based upon an express intention and estoppel there may be a more tenuous link between intention and detriment. It is thus perhaps not surprising that there is a broader view of what is acceptable detriment in these situations.
3. REMEDY - The clearest distinctions lie in what result will flow from each of the doctrines.
De Facto Interests
Strict rules lead to certainty but they can be overtaken by events. Where, for instance, land has been occupied or a right of way used for many years, it is impractical not to recognise that a proprietary interest has been acquired as a result. To do otherwise, might result in land becoming inalienable simply because sufficient title to it cannot be demonstrated by anyone.
The law recognises the existence of de facto interests in terms of:
1. the doctrine of adverse possession; and
2. prescriptive easements.
1. An assurance;
2. Reliance; and
3. Detriment.
We shall consider each of these requirements further, later in this workbook.
The Development of Proprietary Estoppel
Proprietary Estoppel has its origins in the nineteenth century. Two main types of approach can be identified from the case law, which are each illustrated by descriptions contained in the case of Ramsden v Dyson (1866) LR 1 HL 129:
Description 1:
"If a man, under a verbal agreement with a landlord for a certain interest in land or, what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation." per Lord Kingsdown at 170.
Description 2:
"If a stranger begins to build on my land supposing it to be his own, and I, perceiving his mistake, abstain from setting him right, and leave him to persevere in his error, a Court of equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land was his own." per Lord Cranworth at 140.
The terminology commonly used to refer to the different types of estoppel envisaged by these descriptions is shown below. Which description do you think belongs with which term?
The Five Probanda
In Willmott v Barber (1880) 15 Ch 96, Fry J. identified five elements necessary to establish a claim over land by an estoppel:
1. The claimant must have made a mistake as to his legal rights;
2. The claimant must have expended some money or carried out some act on the faith of his mistaken belief;
3. The owner must know of the existence of his own right, which is inconsistent with that claimed by the claimant;
4. The owner must know of the claimant's mistaken belief that he has rights; and
5. The owner must have encouraged the claimant in his expenditure of money or in other acts which he has done, either directly or by abstaining from asserting his legal right.
1. Order requiring owner to pay money to claimant
It will not always be appropriate to grant a remedy which involves the claimant remaining in the property. For instance, where it would not be reasonable to expect the parties to share premises, or where the equity is founded on insubstantial expenditure for improvements or where the grant of such a remedy would prevent the sale of the property to the prejudice of the owner's innocent creditors.
In such cases, the court may satisfy the equity by making an award of monetary compensation to the claimant. An award may be effectively secured by coupling it with a charge over the property, and/or a right to occupy until payment is made.
2. Grant of a licence to occupy to claimant
An injunction to restrain the the owner from exercise their rights of ownership may not be sufficient protection to a claimant yet the actual grant of an interest is not warranted. In these circumstances the the claimant's occupation may be given positive protection by the grant of a licence.
3. Grant of an estate or interest to claimant
Occasionally it may happen that the only way in which an equity can be satisfied is by the transfer of an estate or interest in land. Estoppel can be used as a sword to establish a proprietary interest, as well as a defensive shield. However, the courts are generally reluctant to wield this weapon if there is another remedy that would achieve a satisfactory result.
4. Injunction restraining owner from exercising rights of ownership
Often, an injunction preventing the owner of the property from exercising rights of ownership will be a sufficient remedy. The courts generally have shown themselves more sympathetic to the use of estoppel as a defensive shield rather than an aggressive sword.
Generally the right in question will be the right to evict the claimant from the premises.
Order requiring owner to pay money to claimant
It would be inappropriate to expect the parties to continue to live with each other, particularly in the light of A's conduct, and so a remedy giving A a right of occupation would not be ideal.
The best option would seem to be to reimburse A for the expenses he has incurred in improving the property, assuming that B can afford to do so. The award could be protected by giving A a charge over the property, or a right of occupation until such time as the money had been paid see Dodsworth v Dodsworth (1973) 228 Estates Gazette 1115 and Chalmers v Pardoe [1963] 1 WLR 677.
A's misconduct in assaulting B could be taken into account by the court in deciding what (if any) remedy would be appropriate. But once the equity has been satisfied with the grant of a remedy misconduct will not be relevant save that in exceptional circumstances misconduct might revoke an equitable licence to occupy see Williams v Staite [1979] Ch 291.
Grant of a licence to occupy to claimant
This is possible, but probably not ideal.
It is unrealistic to expect the parties to continue to live with each other after A's misconduct and it seems likely that the conferring of a licence to occupy or injunction prohibiting eviction would necessitate this. Such a remedy might also render the property inalienable, a rather drastic limitation on B's rights under the circumstances.
We consider that the best option would be to reimburse A for the expenses he has incurred in improving the property. Assuming of course, firstly that A's misconduct is not sufficiently serious to rob him of any remedy (see Williams v Staite [1979] Ch 291) and secondly B had some prospect of being able to afford it. The award could be protected by giving A a charge over the property, or a right of occupation until such time as the money had been paid see Dodsworth v Dodsworth (1973) 228 Estates Gazette 1115 and Chalmers v Pardoe [1963] 1 WLR 677.
Grant of an estate or interest to claimant
See Pascoe v.Turner [1979] 1 WLR 431.
As a remedy this seems to go far beyond what was actually promised to A by B and surely cannot be justified in the light of A's misconduct. The court can take misconduct into account in deciding how the equity should be satisfied although once a remedy has been awarded misconduct will only have any effect in exceptional circumstances eg to revoke a licence to occupy see Williams v Staite [1979] Ch 291
We consider that the best option would be to reimburse A for the expenses she has incurred in improving the property, (assuming of course, that B had some prospect of being able to afford it). The award could be protected by giving A a charge over the property, or a right of occupation until such time as the money had been paid see Dodsworth v Dodsworth (1973) 228 Estates Gazette 1115 and Chalmers v Pardoe [1963] 1 WLR 677.
Injunction restraining owner from exercising rights of ownership
This is possible, but probably not ideal.
It is unrealistic to expect the parties to continue to live with each other after A's misconduct and it seems likely that the conferring of a licence to occupy or injunction prohibiting eviction would necessitate this. Such a remedy might also render the property inalienable, a rather drastic limitation on B's rights under the circumstances.
We consider that the best option would be to reimburse A for the expenses he has incurred in improving the property. Assuming of course, firstly that A's misconduct is not sufficiently serious to rob him of any remedy (see Williams v Staite [1979] Ch 291) and secondly B had some prospect of being able to afford it. The award could be protected by giving A a charge over the property, or a right of occupation until such time as the money had been paid see Dodsworth v Dodsworth (1973) 228 Estates Gazette 1115 and Chalmers v Pardoe [1963] 1 WLR 677.
Satisfaction or Compensation?
There are evident from the cases two different approaches that the courts have adopted in deciding what remedy is appropriate to satisfy the equity raised by an estoppel.
1. Satisfaction of the expectation raised by the representation. This approach is particularly evident in earlier decisions see for instance Dillwyn v Llewelyn (1862) 4 De G F & J 517. But satisfaction of the expectation tends to fly in the face of the strict legal rules and may result in the effective enforcement of a gratuitous promise, particularly where the detriment suffered is small compared to the right promised.
2. Compensation for the detriment suffered has become more evident in recent decisions. The High Court of Australia in Commonwealth of Australia v Verwayen (1990) 95 ALR 321 at 333 identified:
"A central element of that doctrine is that there must be a proportionality between the remedy and the detriment which is its purpose to avoid. It would be wholly inequitable and unjust to insist upon a disproportionate making good of the relevant assumption."
The guiding principle is the minimum equity to do justice between the parties and whilst, in the proper case, this may necessitate satisfaction of the right promised, compensation may provide a more suitable alternative see for example Sledmore v Dalby (1996) 72 P&CR 196.
Resulting or Constructive Trust or Estoppel???
There a similarities between the three equitable doctrines we have just examined. On occasions the courts have not made it clear upon which doctrine they have relied in reaching their decision. For instance, in Gissing v Gissing [1971] AC 886 at 905B when considering implied trusts Lord Diplock though it was "unnecessary for the present purposes to distinguish between these ...classes of trust" although now there are signs that the courts are more aware of the importance of the distinctions between the three doctrines, Drake v.Whipp [1996] 1 FLR 826.
The differences are:
1. INTENTION - A resulting trust is based upon the presumed intention that arises where a person provides funds for the purchase of property. A constructive trust is founded upon a common intention that can either be express or inferred but cannot be based upon an intention that the parties never in fact had. An estoppel may be claimed where there has been either a representation or acquiescence that an interest in property is to arise. Certainly a representation could equally be interpreted as leading to an express common intention.
2. DETRIMENT - There is no separate requirement for detriment in the case of a resulting trust - the provision of funds by itself gives rise to the presumption. In a similar way there is a close, if not invisible link, between an inferred common intention and the detriment where a constructive trust is based upon financial contribution. The distinction is that a resulting trust is based upon a presumed intention at the time of acquisition but a constructive trust can arise subsequently. In the case of both a constructive trust based upon an express intention and estoppel there may be a more tenuous link between intention and detriment. It is thus perhaps not surprising that there is a broader view of what is acceptable detriment in these situations.
3. REMEDY - The clearest distinctions lie in what result will flow from each of the doctrines.
De Facto Interests
Strict rules lead to certainty but they can be overtaken by events. Where, for instance, land has been occupied or a right of way used for many years, it is impractical not to recognise that a proprietary interest has been acquired as a result. To do otherwise, might result in land becoming inalienable simply because sufficient title to it cannot be demonstrated by anyone.
The law recognises the existence of de facto interests in terms of:
1. the doctrine of adverse possession; and
2. prescriptive easements.
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