Doctrine of proprietary estoppel – is it always a shield or can it be used as a sword?

What is proprietary estoppel?

The concept of proprietary estoppel is to provide a person (person A) with rights in land that they were led to believe they had by another party (person B), where denying said rights would be unjust or inequitable. Proprietary estoppel, therefore, can be used to circumvent certain procedures typically required to establish a proprietary interest.

The recent proprietary estoppel case of Earl of Plymouth v Rees [2021] (Rees) is another classic example of where this doctrine has been used as a shield (i.e. as a defence to an action) rather than a sword (i.e. as a claim or cause of action).

This article aims to explore the main elements required to establish proprietary estoppel, and how the defendants in Rees failed to fulfil the requirements, before delving into the question of whether proprietary estoppel is always used as a shield and never as a sword.

Earl of Plymouth v Rees – a summary

In Rees, the defendants (the late Mr Rees (by his representative) and the son of the late Mr Rees) had been tenants on a farm for many years. The claimants, who were their landlords, were subsequently granted planning permission for a housing development on the farmland. The claimants then served eviction notices on the tenants to free up the farmland for development.

The landlords brought a claim against the tenants to recover possession of the farm. The defendants defended the claim on the basis of proprietary estoppel, which was defeated at the first hurdle.

What is required to establish proprietary estoppel?

According to one of the leading judgments in this area, Thorner v Major [2009], this equitable doctrine requires three key components to be successfully made out – assurance, reliance and detriment.

However, it is important to note that these three elements cannot always be compartmentalised into three “watertight” categories, as one will often influence another (Gillett v Holt [2001]).

1. 1. Assurance

The first requirement for a proprietary estoppel claim is to show that a representation or promise has been made by person A to person B. The representations must refer to identified property and it must be “clear enough” that the representations relate to such property. What is considered “clear enough” will always be a question of fact.

A promise of “financial security” (Layton v Martin [1986]) would fail this test as it does not relate to an identified asset. However, in Thorner, it was ‘clear enough’ from the representation of handing over assurance policies to the representee by the representor for “[his] death duties”, along with other remarks made over the years, that the representor intended the representee to inherit the farm on his death.

It is also possible for the representor’s failure to correct the representee’s mistaken belief as to their rights to surmount this requirement, as was the case in Holiday Inns Inc v Broadhead [1974]. Here, the representee incurred expense in obtaining planning permission as they believed, and the representor knew they believed, that the representor would enter into an agreement with them if they obtained said planning permission. However, the representor entered into an agreement with another company. The court held the representor had encouraged the representee to act to their detriment by failing to correct their mistaken belief.

In Rees, it was at this initial stage where the defendants’ proprietary estoppel defence failed. On the facts of Rees, it was held that the assurances made to the defendants were not ‘clear enough’. The defendants alleged that the claimant’s agents said the farm would only be taken back when required to be built on, at which point the defendants may be offered alternative land on the estate (if available). If no land was available, then it would be a matter of negotiation between the parties.

Although the defendants had been promised alternative land on the estate (if available), no such land had been earmarked and identified. Secondly, as was the case in Cobbe v Yeoman’s Management Limited [2008], a promise to negotiate is not ‘clear enough’ to establish a proprietary estoppel claim.

2. Reliance

Reliance is often interlinked with the final requirement of detriment. In Gillett there needed to be a “sufficient link” between the two. This link is typically established where person A has encouraged person B to rely on the assurance and act to their detriment, such as by spending money.

Despite failing at the first hurdle, Judge Jarman QC in Rees went on to consider whether there would have been detrimental reliance. He ultimately reached the conclusion that the defendants would have failed to establish this (for reasons explained below).

3. Detriment

Whilst money is the most common form of detriment, it is not necessary for the representee to incur expense to satisfy this requirement – all that matters is the detriment is “substantial”.

In Rees, whilst the defendants had farmed the land in a “good manner”, this was no more than what was expected of them under the tenancy agreement. When asked why he did not pursue options other than farming, the Defendant replied that farming was all he had ever known. Therefore, the detriments relied on by the defendants were not substantial enough, meaning their claim would still have failed had it got to this stage.

If the equity is successfully established, it then falls to the court to satisfy the equity. The court has a wide discretion but the key requirement is to ensure the remedy granted is proportionate.

Is proprietary estoppel always a shield and never a sword?

Typically, equitable doctrines are used as shield rather than a sword, as estoppels are often raised to defend an action rather than to found one. However, there are instances where proprietary estoppel has been used to “give rise to a cause of action” (Crabb v Arun District Council [1976]).

The case of Holiday Inns mentioned above is an excellent illustration of where proprietary estoppel gave rise to a cause of action. In this case, it was the claimant who detrimentally relied on the belief that they would contract with the representor if they obtained the necessary planning permission and the representor knew that the Claimant had that belief and did not seek to tell the Claimant of their true intention.

Crabb provides another example of proprietary estoppel being used as a sword. Here, the claimant relied on proprietary estoppel to establish and enforce an interest over the defendant’s land. In this case, the defendant council caused the claimant to believe he would have a right of access to his land through the council’s access point. This led the claimant to sell part of his land. The defendant council was estopped from denying the claimant access via their land as, by building a gate for him, they had encouraged the claimant to sell his land.

Finally, in Guest v Guest [2020], it was the representee (the son of farm owners) who brought a claim against the representor (his parents) when he was effectively disinherited after his parents changed their wills. The claim was based on proprietary estoppel, as the son was led by his parents to believe he would inherit the farm, and it succeeded at Court.

From the above three cases, proprietary estoppel is clearly not always used as a shield and can be used as a sword.

Conclusion

This doctrine can be relied on by claimant and defendant alike. However, any representee trying to establish an action or defend a claim based on proprietary estoppel should be aware that this doctrine is highly fact sensitive.

In Rees, the defence failed at the first hurdle as it was not ‘clear enough’ from the assurances that the defendants were to have an interest in any identified land whilst in Thorner, the claim succeeded despite the apparent lack of direct reference to the representor’s farm in his assurances.

This article was co-written by Simon Tucker, property litigation lawyer and Stephanie Price, legal administrator.