The Judicial Committee of the Privy Council Decisions

Background

Facts

“… a building erected by a tenant upon land comprised in his tenancy with the consent or acquiescence of the landlord and affixed to the land in such a way as to be incapable of being removed from its site without destruction;”

The tenants of such statutory leases had an option to renew the lease for a further 30 years, exercisable by notice before the end of the first 30 year term (section 4(3)) and an option to purchase the land, at a price not exceeding half the open market value of the land without the chattel house, exercisable at any time during the term of the lease (section 5(5)).

The proceedings

The High Court

The Court of Appeal

Issues in the appeal

The Rent Restriction Act

“The claimants submit that the fact of the permanence of the buildings erected on the land and the money expended by them in this regard is evidence corroborative of the existence of the agreements. I do not agree. In my opinion the nature of the buildings on the land and the rent receipts are equally applicable to a finding that the claimants were simply tenants of building land under the [1981] Act and its predecessor the Rent Restriction Act. Indeed the rationale for introducing the [1981] Act was for the protection of persons in a similar position to the claimants: tenants of building land who owned large buildings that were incapable of being removed without being destroyed.” (para 65)

Later in the judgment she came back to the Rent Restriction Act as the first part of her assessment of the “inherent implausibility or improbability” of the then claimants’ case:

“71.     Under the Rent Restriction Act there was no requirement on a landlord to clear and develop building land before renting to tenants. This was land rented to the tenant specifically for the purpose of the erection of a chattel house used as a dwelling. For such a tenancy therefore the claimants would have been required to clear and develop the lands themselves and build their houses at their own cost.

72.       Why would the Andrews bind themselves to sell land to the claimants at a price fixed at the value of the land as undeveloped in 1958 to 1963. What benefit would the Andrews have obtained from this agreement? ... Further the claimants, as tenants of building land under the Rent Restriction Act, would already have had some measure of security of tenure. Why would this agreement have been necessary?”

“Taking all these facts into consideration that is: (a) the lack of credibility on the part of the claimants, (b) that the only evidence of this agreement comes from them; (c) the lack of support of their claim by any contemporaneous documents; (d) that the evidence in support of their claim is equally relevant to the position as contended by the defendant and (e) the inherent [improbability] of the story presented by the claimants. I do not accept the evidence of the claimants as to the agreement made between them and the Andrews. In those circumstances the claimants’ claim to each be a beneficiary of a proprietary estoppel in their favor with respect to the land occupied by them fails.” (para 75 emphasis added)

“That misapprehension of the existence of statutory security of tenure at the time of entry into occupation by the appellants and construction of their permanent dwelling houses, amounted to a misdirection. As appears from the judgment, it directly influenced the trial judge’s analysis of the evidence and, in particular, the assessment of the significance of the fact that permanent houses were constructed upon the appellants’ entry into occupation of their respective parcels. That assessment in turn was a key element in her reasoning and conclusion that there had been no option granted to the appellants to purchase their respective parcels of land, on the terms alleged, or at all.” (para 31)

Proprietary Estoppel

The principles

“There is some authority for the view that the ‘clear and unequivocal’ test does not apply to proprietary estoppel. That view was expressed by Slade LJ in Jones v Watkins (unreported) 26 November 1987; [1987] CA Transcript No 1200. The same view has been expressed in at least the past three editions of Treitel, Law of Contract. The current (12th) ed (2007) by Mr Edwin Peel, in a passage comparing promissory and proprietary estoppel, states, at para 3-144:

‘promissory estoppel arises only out of a representation or promise that is “clear” or “precise and unambiguous”. Proprietary estoppel, on the other hand, can arise where there is no actual promise: eg where one party makes improvements to another’s land under a mistake and the other either knows of the mistake or seeks to take unconscionable advantage of it.’

The present appeal is not of course a case of acquiescence (or standing-by) … But if all proprietary estoppel cases (including cases of acquiescence or standing-by) are to be analysed in terms of assurance, reliance and detriment, then the landowner’s conduct in standing by in silence serves as the element of assurance. As Lord Eldon LC said over 200 years ago in Dann v Spurrier (1802) 7 Ves 231, 235-236:

‘this court will not permit a man knowingly, though but passively, to encourage another to lay out money under an erroneous opinion of title; and the circumstance of looking on is in many cases as strong as using terms of encouragement.’

56.       I would prefer to say (while conscious that it is a thoroughly question-begging formulation) that to establish a proprietary estoppel the relevant assurance must be clear enough. What amounts to sufficient clarity, in a case of this sort, is hugely dependent on context …” (paras 54-55)

“The need to search for the right principles cannot be avoided. But it is unlikely to be a short or simple search, because (as appears from both the English and the Australian authorities) proprietary estoppel can apply in a wide variety of factual situations, and any summary formula is likely to prove to be an over-simplification. The cases show a wide range of variation in both of the main elements, that is the quality of the assurances which give rise to the claimant’s expectations and the extent of the claimant’s detrimental reliance on the assurances. The doctrine applies only if these elements, in combination, make it unconscionable for the person giving the assurances (whom I will call the benefactor, although that may not always be an appropriate label) to go back on them.” (para 44)

Later in the same judgment he explained why the uncertainty of any assurances will not be fatal to the claim but may affect the appropriate remedy:

“If the claimant’s expectations are uncertain (as will be the case with many honest claimants) then their specific vindication cannot be the appropriate test. A similar problem arises if the court, although satisfied that the claimant has a genuine claim, is not satisfied that the high level of the claimant’s expectations is fairly derived from his deceased patron’s assurances, which may have justified only a lower level of expectation. In such cases the court may still take the claimant’s expectations (or the upper end of any range of expectations) as a starting point, but unless constrained by authority I would regard it as no more than a starting point.” (para 47)

“… an alternative case was sufficiently raised on the pleadings and moreso in the evidence that the respondent’s father and the respondent himself acquiesced in the belief by the appellants, (howsoever derived), in the permanence of, and security of their tenure.”

This argument, he thought, had been sufficiently “telegraphed” in the closing submissions and in various references in their pleaded cases which he gave (para 52). It is enough to cite one example (para 10.3 of the first respondent’s particulars of claim) in which, after a reference to the Andrews agreement, it was alleged that the appellant’s father and his daughter had -

“… encouraged and/or led [the first respondent] and her husband to believe that if she continued to rent the lands, maintain the lands and her home, that she and her husband would in the future own the lands.”

Proprietary estoppel on the facts

“The undisputed facts, namely a belief by the [respondents] in an entitlement to security of tenure by their ability to eventually purchase the land, giving rise to their erection of, and continued investment in, permanent structures in formerly undeveloped, hilly, and forested terrain, are consistent with an agreement with the Andrews on an option to purchase as contended. In fact, on a balance of probabilities, such an option to purchase is more likely than not. The substantial investments over the years in the houses such that they are now valued at $920,000.00, $295,000.00, and $1,425,000.00-respectively; can hardly be explained otherwise.

The trial judge cannot be faulted in dismissing as inherently incredible the embellishment on the price in that option to purchase alleged for the reasons, that she did, including the alleged right to purchase the land at its value at the time of the alleged agreement with the Andrews. However, shorn of the disputed term, there was still sufficient material on the [respondents’] pleaded case, and sufficient evidence, based on the undisputed facts and the actions of the appellants, to substantiate the allegation that an option to purchase had in fact been conferred on the [respondents], unembellished by the details alleged as to its price.

The misapprehension of law identified above, coupled with the [respondents’] focus and emphasis at trial on establishing the price at which it is alleged the option to purchase was to be exercised, led the trial judge to fail to fully appreciate the significance of the [respondents’] willingness and readiness (i) to immediately construct permanent structures in that difficult terrain and (ii) thereafter to expand and renovate them with (iii) the acquiescence of both the Andrews and the [appellant’s] father when he later became the owner.

While this may have been the situation of many tenants of land, who erected permanent structures on rented land in which they had a limited interest at best, in this case the parties were all related.

Their assertion that the [respondents] were the beneficiaries of an option to purchase, whatever its terms, was (a) consistent with the relationship among the parties, and (b) fortified by the actions of the [respondents] in constructing permanent homes, consistent with a belief in a security of tenure, which had not been conferred by statute at the time that they constructed their homes, and (c) consistent with the acquiescence of the Andrews, Haniff, and even to some extent the [appellant] in the expansions and renovations of the [respondents’] houses …

Further, and /or in the alternative, even in the absence of such an inference, on the undisputed facts there was sufficient to satisfy the evidential and legal requirements of proprietary estoppel by acquiescence, such as to give rise on that basis also to equitable rights in the [respondents].” (paras 19-25)

Equitable Remedy

“…·after construction of homes and occupation of premises for over 50 years the appellants are now elderly persons who should not at this stage of their lives have to be dispossessed and seeking alternative accommodation.

Further they should have the option, in accordance with the option to purchase that was, on a balance of probabilities more likely than not offered to them at the time of their entry into possession, to secure their investment in their homes within a reasonable period by purchasing the land on which they stand.

We consider that, while the appellants insisted they were not statutory tenants, in the special circumstances of this case, their situation was in practical terms, though not legal terms similar to those of persons who were, and who had renewed their statutory tenancies.” (paras 86-88)

“The respondent sought to claim possession after what he considered to be the expiration date of their alleged statutory tenancies - May 31st 2011. While the appellants were not statutory tenants, that is the date at which the value of the land should be assessed for the purpose of any option to purchase.

Accordingly in the circumstances, it would be consistent with equity to give effect to an option to purchase; giving further·effect to the security of tenure that they have enjoyed for over 50 years, and declare and quantify their interest to be a tenancy for a 15 year period commencing May 31st 2011 with an option to purchase the parcels of land on which their houses stand, by themselves, or their heirs or assigns, at any time within that period at half of the market value as at May 31st 2011.” (paras 90-91)

Conclusion