Proprietary Estoppel

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Proprietary estoppel will operate to restrict the unconscionable assertion of legal title. It is based on the inducement of an assumption by the legal title holder, which leads to the relying party suffering detrimental reliance. For proprietary estoppel to arise, the following conditions must be fulfilled (: Inwards v Baker[1]):

  1. The legal title owner must have requested or allowed the relying party to expend money on the land;
  2. The legal title owner must have created or encouraged an assumption that the relying party would be entitled to remain in the land; and
  3. The relying party must have suffered a detriment from relying on this assumption.

There is clearly some overlap between proprietary estoppel and constructive trusts, as they are both based on the notion of the unconscionable assertion of legal title.

  • Constructive trusts are a more severe form of remedy, and should be used sparingly. Equity is supposed to do the minimum necessary to achieve fairness: Crabb v Arun District Council[2]
  • Thus, if proprietary estoppel is enough, there is no reason to use constructive trusts: Inwards v Baker.[3]

This article is a topic within the subject Property, Equity and Trusts 1.

Contents

Required Reading

Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008, pp. 384-392 [4.121-1.131].

Introduction

Proprietary estoppel seeks to prevent a party from unconscionably asserting legal rights over property. It does not require a contract to be in place, and usually arises when the legal title holder induced a belief in other party (which caused detrimental reliance).

  • Note that the doctrine of proprietary estoppel operates on a similar basis to the constructive trust - the concept of unconscionability underpins both concepts.
  • The distinction is not clear. They are often argued as alternate grounds.

Proprietary estoppel was discussed in Inwards v Baker:

  • If the owner of land requests or allows another to expend money on the land under an expectation created by the landlord that he will be able to remain there, that raises an equity in the licensee such as to entitle him to stay.
  • A court should use proprietary estoppel rather than impose a constructive trust if the situation doesn't necessitate such an extreme remedy as a constructive trust.

This was also discussed in Dillwyn v Llewelyn.[4]

  • Facts: A father signed a memorandum letting his son could build a house on his farm which the son did. He forgot to include that house in the will, and the son sought conveyance of that house to him.
  • Held: if a donee relies upon a donor’s promise with the donor’s knowledge, expending money in furtherance, the donee acquires a right to call upon the donor to complete the imperfect donation. The son was just just given a life estate, but a fee simple.

The Inwards v Baker principle has been approved in Australia in Olsson v Dyson, although it was not actually put to use there:[5]

  • Facts: a husband had not satisfied the legal requirements for assigning a debt, owed to him, to his wife before his death. The widow argued that she had not taken certain money in reliance on the assignment, and therefore the Inwards v Baker principle applied.
  • Held: The High Court recognised the principle as a part of Australian law, but refused to apply it in this case. There was no evidence that the husband thought the wife would not take money in reliance on the assignment. Further, she could not establish that she acted in detrimental reliance on her expectation of the effectiveness of the gift. Thus, the High Court decided against her.

Lastly, proprietary estoppel was discussed in Crabb v Arun District Council:

  • By erecting the gates and failing to correct his belief, the Defendants encouraged the Plaintiff to act to his detriment in selling part of his land without reservation over it, giving rise to an equity in the Plaintiff’s favour.

End

This is the end of this topic. Click here to go back to the main subject page for Property, Equity and Trusts 1.

References

Property Textbook refers to Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008.

Equity Textbook refers to Evans, Equity and Trusts, 3rd edition, Lexis Nexis, 2012.

  1. (1965) 2 QB 29.
  2. .(1976) Ch 197.
  3. (1965) 2 QB 29.
  4. (1862) 45 ER 1285; C/B p. 387.
  5. (1969) 120 CLR 365.
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