Proprietary Licences

Proprietary Estoppel

Proprietary estoppel, arises in the context of property rights, generally with reference to land and buildings, but also in the context of other types of property. It is wider in scope than promissory estoppel and is not necessarily limited to being a defence.

Where an assurance  is given in relation to property or property rights and the person to whom it is given, acts to his detriment in consequence, an equity arises in his favour. The holder of the property rights will not be allowed to insist on his strict legal rights, to the extent that it would be inequitable in the circumstances.

The assurance or representation given may be stated or implied. The person making the representation must have intended, or at least known, that it  would be relied on. There will often be encouragement by acts or deeds. In many cases, the arrangements just fall short of a contract or fail to satisfy the strict legal requirements for creating a property and trust.

Basis

The basis of estoppel is the prevention of injustice that would apply if the legal owner was to take unconscionable advantage of another by encouraging him to act to his detriment by spending money, abandoning rights or working without payment or otherwise in the expectation that he would be granted certain rights.

Equitable estoppel is flexible. The extent of the remedy will depend on the extent of unconscionability. The court is flexible as to the appropriate relief which may be granted.

This is in contrast to the position with strict legal rights. Where rights are established, remedies automatically follow in most case. . However, with proprietary estoppel there is no automatic entitlement or right. It is a matter within the discretion of the court.

Sometimes the courts express proprietary estoppel in terms of a constructive trust. The trust is applied in relation to property to yield an equitable outcome. Similar concepts underlie both remedies.

Requirements

Acquiescence or deliberate silence might suffice, but it is not clear if this is so. The majority view is that some type of express or implied promise or representation is required. Merely standing back and permitting something to happen is not generally enough.

Where an assurance is given which is intended to be relied on and is in fact relied on, it is not necessary to show that there has been an irrevocable, legally binding promise. The fact that the  party to whom it is addressed, has acted on it  to his detriment is sufficient in itself.

Reliance may be presumed where it is shown that a promise has been made expressly or by conduct and the  plaintiff/claimant’s acts follow from it. There must be a sufficient link between what is relied on and the conduct by which the plaintiff acts to his detriment.

Detriment is what would be suffered, if the other party is allowed to rely on a strict legal right. It may involve changing legal position, incurring expenditure, building of premises on another’s land. It may involve providing labour and services for another for a length or period of time.The detriment must be significant in nature. The extent of the equity granted to the plaintiff will depend on the extent of the detriment suffered.

Estoppel Licences

Principles of estoppel may apply in connection with consents or licenses to use land, which thereby acquires a permanent or semi-permanent characteristic. See our chapter in relation to so-called promissory estoppel. In the context of property, the principle of estoppel has been taken a step further to come near to creating a permanent long-term interest where it would be highly unjust for the strict legal rights to be asserted. This is sometimes referred to as proprietary estoppel.

Generally, the following factors are present.

• The owner of property encourages or promises another person knowing or intending that he will rely on this assurance.
• The non-owner to whom the representation is made thereby expect a property interest in the land
• In reliance on that belief, he acts to his detriment and changes his position. This may involve giving up something valuable or following the course of action he would not otherwise have taken.

If the strict legal position is reasserted, the person concerned would suffer detriment. The detriment must be such that it may be adequately remediated only by the grant of a proprietary interest rather than compensation.

It must be judged unconscionable for the person to assert his strict legal rights having regard to the detriment incurred. The person who acts to his detriment must do so reasonably and must have been induced by the statement acts or omissions of the person who has the legal rights concerned.

Instances

Proprietary estoppel claims tend to fall into a number of broad categories. The  categories mentioned are in no way exhaustive and do not preclude the possibility of the principles applying in other contexts. In each of the cases the person who has acted to his detriment has no obvious legal remedy. The other party may or may not suffer a windfall, but the crux of the issue is the inequity of acting to his detriment in reliance on the assurance.

Many cases of proprietary estoppel involve a gift which is not completed. It is general principle that equity will not aid a volunteer. This means that where a person receives a gift and the relevant formalities for transfer of that type of property have not been complied with the donee will not be in a position to compel completion of the gift.

If the supposed donee acts to his detriment in reliance on the failed gift, then the donor may be estopped from denying the effectiveness  of the gift where the donee has relied to his detriment on the apparent gift or apparent promise to give the gift.

Promise to Give Property Interest

A classic situation is where a parent or other relation promises particular land or buildings and the donee incurs substantial expenditure or incurs substantial detrimental in reliance. If for some reason the property is not legally transferred due to a change of mind, neglect, death, or other circumstances proprietary estoppel may require that the gift is made effective.

A contract in relation to land would require a written agreement with offer  acceptance and consideration. Something requested and  given in return. In many of the above cases there would be a failure of consideration because the latter’s behaviour is not a result of the request and in return for the promise. It happens more as a consequence than as a bargained arrangement.

Many instances of this category of cases involve a person moving in with another and  a promise made to give make a gift on death. One common example is where a person, sometimes a relative moves into a property and then works for the owner or looks after him on the expectation that the property (may be a farm or house) will be transferred to him on the other party’s death.

Another variant is where cohabiting couples move in together and the non-owning partner incurs capital expenditure and repairs on the expectation of the title being placed in joint names. Another example is where a person is given an assurance that property will be transferred to him and he proceeds to construct for example a dwelling house on it in reliance on the assurance or promise.

Another variation is where parties rely on a shared assumption that one or other will obtain rights in the land and act accordingly. Another example might be where a tenant with a very short term interest who has been promised an extended term by his landlord spends money on the  expectation that he will be granted a long-term interest.

Incurring Expenditure on Land

The principle will apply most strongly where the person is requested to incur the expenditure. Where he is encouraged to incur expenditure, the principle will also apply. The expectation must result from the land titleholder’s action.

Where a person has made an error as to his rights to the knowledge of the titleholder and incurs expenditure in reliance,  then the title owner may be precluded from asserting a strict legal right. A classic instance of this is where a person commences to build on another’s land and that other stands by, allows him to expend money knowing that they believe the land to be theirs. It is essential that the title owner knows that the other person is mistaken.

Generally if someone builds on one’s land the building belongs to the land owner and the person who has built the land, he has no claim for the benefit conferred. The above principle only applies if the third party believed he had rights to do so and the true owner stood by and let him act to his detriment in reliance on this mistake.

The title owner in each of these cases must either encourage the person incurring expenditure to do so either by words or actions or in the latter case by refraining from asserting his legal right.

Mistake as to Legal Rights

Another category of a case is where a person makes a mistake as to his rights. In this case, the legal owner need not necessarily have positively encouraged the person to act to his detriment. The extent to which the owner must have encouraged the claimant or allowed him to act to his detriment is unclear. It appears necessary that there must be something more than passive inaction.

It may be enough that the owner contributes slightly to the other’s mistake where the detriment or expense incurred by the claimant on foot of the mistake is relatively significant.

Constructive Trusts

See our chapter on constructive trusts. Constructive trusts are imposed by the courts by way of a remedy in order to prevent injustice. The obligation is imposed on a person equivalent that they imposed by on a trustee, by reason of the circumstances. They will not be readily imposed.

One category of constructive trust involves cases where a trustee or a person in a fiduciary relationship benefit from it. This applies to executors, guardians of minors, tenants in common, mortgages, partners, solicitors and agents versus persons who may obtain benefits by reason of their fiduciary role. They may be obliged to hold additional benefits on trust for the persons with respect to whom they stand in a fiduciary relationship.

The courts may also impose a constructive trust, where a party has acted to his detriment in reliance on a common intention that he would have an interest in a property. This may happen when persons contribute towards the purchase or acquisition of property. See generally the chapters on family, property and trusts.

The modern cases emphasise unconscionability. This will depend on the  degree of assurance, reliance and detriment in the circumsstances. The overall unconscionability will determine the, whether the remedy proprietary estoppel is available, and if so the particular remedies.

Classic and Recent Approach

The above criteria have been applied less rigidly in more recent years. The classic approach requires the following key elements.

• That the claimant has made a mistake regarding his legal rights.
• That he has expended money or done some act unsought of his mistaken belief.
• That the owner knew of his inconsistent rights and of the claimant’s mistaken belief as to his rights.
• That the owner must have encouraged the claimant in relation to the expenditure incurred either directly or indirectly by refraining to assert his legal rights.

In the last 40 years the courts have taken a broader approach. It seeks to ascertain whether in the circumstances it would be unconscionable for a party to be permitted to deny that which knowingly or unknowingly he has allowed or encouraged another to assume to his detriment.

Different courts have taken slightly different views as to the extent to which the above principles are fixed or have elements of flexibility at the margin.

The view has been expressed that courts should at a minimum do justice having regard to the extent to which a person has altered their position and acted to his detriment. In some cases it may be required that title to property is transferred. In other cases, some lesser intermediate position may suffice.

In recent years an emphasis has been placed on proportionality. The court may make an award of a certain amount proportionate to the expectation. The award is that which is sufficient to meet the minimum necessary to satisfy the equity.

This approach is more flexible than the all-or-nothing approach, which may be involved for example in cases where a person expects to inherit an entire property.The approach is based on fulfilling expectations and compensating for detrimental reliance. The court will take a flexible view as to what is required to do justice to the parties in all the circumstances having regard to the need for proportionality between the expectations and the detriment.