Law Essay: Proprietary Estoppel And Property Rights

Discuss about the Law for Proprietary Estoppel and Property Rights.

Contract is an agreement binding by law. There are certain elements of contract necessary for its valid application. According to the common legal rule, in every contract, there must be certain offers and free acceptance to the offer. When an offer has been accepted, a contract has been incorporated. Further, there are certain other essentials in the contract. There should be certain considerations as the subject matter of the contract and the contracted parties should have to attain the age of majority. There are two kinds of contract such as written and oral contract. The terms and conditions of the written contracts are quite valid and reliable. However, problems are cropped up in case of oral contract. It has been observed that in oral contract, the terms are inserted orally. There are certain challenges in oral contract, as the parties have to face great dilemma to establish the validity of a contractual term. There are certain issues cropped up where it has been observed that the innocent people are affected by the oral contracts and they are deprived of their legitimate rights and the rogue people are taking the undue advantages from the same. Therefore, the natural justice has been affected through this malpractice and it becomes necessary to amend certain provisions to make an effective change to this regard. Doctrines like proprietary estoppels and constructive trusts are required to be included under this system. Both the principles are based on the doctrine of equity and a wide application of these two doctrines is required.

After the incorporation of a contract, the parties are bound to maintain all the terms and conditions of the contract. However, to certain extent, it has been observed that either of the parties are getting certain privileges that they are not entitled to get. Therefore, they are enjoying the benefits by depriving the other party. Such benefits are illegal in nature. There are certain principles that help the affected parties to get rid of the problems. Considering the situations, it has been stated that the poor people are affected by this problems. Further, it is to be stated that equitable principles are required to be adopted by the jurists to avoid the problems and for that reasons, it becomes essential to include certain provisions on equity. Considering the situation, doctrine of proprietary estoppels and constructive notice has been included in the oral form of contract. It is therefore, necessary to discuss about the concept of both the principles.

Proprietary Estoppels

There are certain legal claims that that crops up from the relative rights of the parties regarding any property. The term proprietary estoppels are a legal claim that transfers the rights in a property from one person to another. This term is effective in case of a disputed property. However, there are certain conditions where the rights in a property transferred. If in a contract regarding the sale of a property, one party has given an assurance acquiring a right over a particular property and the party has done certain substantial things to rely reasonably on that statement, they are entitled to get the rights; otherwise, the consequence will be detrimental to them. This right has been confirmed by the proprietary estoppels. Considering the above named elements, it can therefore, be stated that proprietary estoppels mean creating certain interest in the land if there is no correct formalities are mentioned. If in a contract, whether written or oral, any of the parties have accrued unjustified benefits by depriving the other party and if that affected party has faced serious dilemma due to this, proprietary estoppels help the affected party by securing the rights of the party on that contractual subject. It operates the unconscionable behaviour of one party and generates certain remedies to the affected parties on this behalf. This can be stated that the entire principle is based on the principle of equity. It has been decided in Crabb v Arun DC that the amount of remedies are depending on the discretionary power of the court and they will decide the case based on the equity. This mentality of the court has been re-established in the case of Yaxley v Gotts. According to this case, before pronouncing judgment on the proprietary estoppels and provide remedies to the affected parties, the court should have to decide whether there is the four elements are present in the case or not. The elements are assertion, reliance on the assertion, detrimental cause due to non-performance of the promise and unconscionable acts of the parties. In Willmott v Barber, court had decided that in a case of proprietary estoppels, five elements must be present in the contract and the affected parties are obliged to show the elements. According to Justice Edward Fry, the affected party should have to show that certain mistakes have been taken place regarding the legal rights of the parties as against the contractual subject. The claimant has to prove that he has done something believing the fact that he has occupied certain rights over that matter. There should be certain evidences that can prove that defendant has all the knowledge that the claimant has mistakenly claimed the rights and he has not informed the claimant regarding this. Rather, he has let the claimant do such things with an intention to gain certain profits over the property. If all these elements are met, the claimant could get rights over the property by way of proprietary estoppels. In Waltons Stores Ltd v Maher, it has been stated that the principle of proprietary estoppels is based on the doctrine of equity.

Elements of Proprietary Estoppels

According to the Coombes v Smith, the main elements of proprietary estoppels is to acquire certain rights over the property. In case where the parties are affected by the unconscionable acts of the other parties, proprietary estoppels establish that rights. However, this principle is applied on the oral contract, where there is no mention of written rules. The court will analyse all the facts of the claimant and it will be decided whether all the elements of the proprietary estoppels have been met in that case or not. In Sledmore v Dalby, the court has decided that both the principle of proprietary estoppels and promissory estoppels are quite similar in nature. In Cobbe v Yeoman’s Row Management Ltd, it has been decided by the court that the concept of proprietary estoppels are sub-species of the promissory estoppels. It must be showed by the claimant that he has believed that he has accrued certain legal rights over the legitimate subject matter of the contract or over the property. The object of reliance should be mentioned and established in this case. According to Lord Hoffmann, if a prudent person would believe that such rights could be accrued from the subject, the legal rights will be established in this case. In the absence of any clear context in the contract, the parties may claim for the proprietary estoppels and they have all the chances to get justice for the belief and reliance. This principle has been approved in Thorner v Major. However, the modern approach of proprietary estoppels is three folded and this principle has been established in the case of Taylors Fashion Ltd v Liverpool Victoria Trustees. According to this case, the affected party should have to establish three elements such the assurance of certain interest over the contractual subject, reliance over the assurance and the claimant has done certain things for the assured property or for the contractual subject. After the establishment of all these three elements, the court could pronounce its judgment over the same and the amount of remedy will be depended on the same. However, under the modern approach, the court has divided the assurance in two parts such as active assurance and negative assurance. The concept of active assurance has been established in the case of Inwards v Baker. In Shaw v Applegate, it has been observed that when the parties to the contract has by mistaken facts believe that he has occupied certain rights over the property, this will be known as passive assurance. In this case, the claimant has to establish that the defendant has not stopped him in spite of knowing that he is in a mistaken condition. Therefore, it can be stated that this principle has been established to protect the interest of the weaker section to the contract and help them to get certain remedies for their losses. According to the judgment made in the Jennings v Rice, it can be stated that the principle of proprietary estoppels has maintained the proportionality among the parties and satisfy the equity so that no one could be affected in a contract. 

Modern Approach of Proprietary Estoppels

Like proprietary estoppels, constructive trust is another kind of equitable remedy. There are certain situations where it has been observed that in a contract, a party has gained certain benefits by depriving others from their legal rights and for that, the affected party has to face certain detrimental effects. Further, it has to be established that the rights and interest gained by the benefitted party is wrong and in ordinary sense, he must not enjoy all these rights. Such illegal process of occupation is known as the unjust enrichment. In The Principles of Law of Restitution, Virgo has stated that such enrichment could be regarded as the breach of fiduciary duty from the perspective of the contractual parties. If the claimant in this case proves the fact that he has been deprived of his rights illegally, court will order the benefitted party to give remedy for their losses by maintaining the concept of constructive trust. In the contract, such situations are quite frequent and in most of the cases, the parties of the contract are forgetting their limits regarding fiduciary duties. It has been mentioned in the Attorney General for Hong Kong v Reid, if any of the parties to  the contract has forgotten their duties and earned certain illegal rights over the property or the contractual subject, he will be get punished under the principle of constructive trust. Certain exceptions are also mentioned in this case. It has been observed in the Regal Ltd v Gulliver if it has been observed that no interference has been made regarding the profit-making opportunity, the principle of constructive notice will not be applicable in that cases. However, it has been established in the case of Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd that after the establishment of the existence of the constructive trust, the claimant could get back the rights over the subject and the defendant will provide certain remedies to the affected parties for the losses incurred to him. It has been observed in the Foskett v Mckeown that when the original property of the claimant acquires certain interest regarding the trust fund, they could receive certain remedies from the trust in the form of constructive trust. Further, if any party obtained certain illegal profit over the property of others, and the other party has been affected by keeping certain trust over the benefitted party, the court can pronounce order in favour of the affected party under the principle of constructive trust. This principle has been ruled out in the case of Chase Manhattan Bank NA v Israel-British Bank (London) Ltd. The principle of constructive trust has been regarded as the remedial institution that intends to establish the equity and protects the affected parties from the ill motive of the benefitted parties and certain rights of the affected parties are established through the concept of constructive trust. Justice Deane has verified this judgment in the case of Muschinski v Dodds.

Considering the cases and rules regarding the constructive trust, it can be stated that the principle of constructive trust does not created in the places where there is an express mention about the creation of trust; rather, this principle has been established in the cases where certain property or anything has been gained or acquired by unconscionable conduct. According to the views of the court, constructive notice is a remedial device that helps the affected parties to protect their interest and compels the defendant to give certain remedies to the affected parties. This principle has been established in the case of Gissing v Gissing. Under this case, two phrases of foundation regarding the constructive trust has been established. It has been observed that the parties to the contract must show that there is an inducement regarding the subject matter of the property and the claimant has developed certain believe that he will gain certain profit from the property or the contractual subjects and the claimant has act certain things to his detriment. However, this doctrine has been modified by Lord Denning in the case of Eves v Eves. In this case, it has been held that the recognition over the property must be fair and clear. Further, it has been observed by Lord Denning that certain inequitable happening must be taken into place. In addition to all these rules, certain methods of common concept regarding the recognitions have been established in the case of Lloyds Bank v Rosset. In this case, it has been held that if the parties to the contract has believed that he can acquire certain interest over the contractual subject and he has done certain thing significantly to his detriment, principle of constructive trust could be established in this case. 

Conclusion:

It is therefore, be stated that both the principle of proprietary estoppels and constructive trust is based on the doctrine of equity and the primary intention of both the principles is to protect the interest of the affected parties in a contract. Considering the cases mentioned above, it could be stated that there are many situations where the parties become affected by the unconscionable acts of the other parties. The main problem in both cases is that certain classes of people are deprived of their benefits and legal rights and other parties have gained certain illegal opportunities from that. These problems are quite common in the oral contracts where the terms and conditions are not mentioned specifically. However, oral contracts are also valid form and both the principles are required to be added or inserted to protect the interest of the weak people or any of the parties to the contract. Robert Walker (2014) has supported that decision of insertion. 

Reference:

Attorney General for Hong Kong v Reid [1994] 1 AC 324

Bright, Susan, and B. E. N. McFARLANE. "Proprietary estoppel and property rights." The Cambridge Law Journal64.2 (2014): 449-480.

Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1980] 2 WLR 202

Cobbe v Yeoman’s Row Management Ltd [2008] UKHL 55

Coombes v Smith [1986] 1 WLR 808

Crabb v Arun DC [1976] Ch 179

Eves v Eves [1975] 1 WLR 1338

Foskett v Mckeown [2000] UKHL 29

Gissing v Gissing [1971] AC 881

Inwards v Baker [1965] 2 QB 29

Jennings v Rice [2003] 1 P & CR 8

Lloyds Bank v Rosset [1991] 1 AC 107

Muschinski v Dodds (1985) 160 CLR 583

Pawlowski, Mark, and James Brown. "Proprietary estoppel and competing equities." Conveyancer and Property Lawyer82.2 (2018): 145-156.

Regal Ltd v Gulliver [1942] UKHL 1

Rothschild, William L. "How to Treat Constructive Trust Claims in Bankruptcy." American Bankruptcy Institute Journal 35.11 (2016): 24.

Shaw v Applegate [1977] 1 WLR 970

Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2010] EWHC 1614

Sledmore v Dalby (1996) 72 P & CR 196

Taylors Fashion Ltd v Liverpool Victoria Trustees [1982] QB 133

Tee, Louise. "A merry-go-round for the millennium." The Cambridge Law Journal 59.1 (2000): 23-25.

Thorner v Major [2009] UKHL 18

Waltons Stores Ltd v Maher [1988] 164 CLR 387

Willmott v Barber [1880] 15 Ch D 96

Yaxley v Gotts [2000] Ch 162