Concept of Unconscionability in Claims involving Proprietary Interest

The concept of unconscionability in claims involving proprietary estoppel

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The Concept of Unconscionability in Claims Involving Proprietary Interest

Proprietary estoppel was defined in the case of Taylor Fashions Ltd v Liverpool Victoria Trustees Ltd[1] to have the effect that an equity arises in favor of the claimant if an assurance or representation was made to him, he relied on it and as a result of that reliance, and he suffered detriment eventually. To be precise, this kind of estoppel applies only if the subject matter of the promise is property, for instance land and other types of real estate.

Section 2(5) of the Law of Property (Miscellaneous Provisions) Act 1989 sets an overriding exception on contracts for short leases of land, contracts made during a public auction and finally regulated contracts under the Financial Services and Markets Act 2000 save for mortgage contracts; that they are not subject to the requirement of being put in writing for them to be valid.[2] Even though a clear relationship between this provision and proprietary estoppel, to a greater extent, it is intuitive that this exception was engineered to validate claims brought forth by persons under the umbrella of proprietary estoppel, least they are thwarted by other formalities in the Act.

It can also be argued there has been a mutual relationship between the two premises above. Proprietary estoppel has also played a big part in supplementing the inadequacies in the formalities of transfer of property contracts. In the case of Yeo v Wilson[3] the court noted that,  ‘proprietary estoppel is one of the oldest devices of equity for giving effect to apparent understandings about the disposition of property, which for one reason or another are not enforceable at law.’ This implies that the concept came in handy to validate contracts which would have otherwise been invalid by virtue of the fact that they have not satisfied the required formalities especially of writing.

Indeed, proprietary estoppel has been employed as a perfect antidote to cure defective contracts and other irregularities in this context. The manifestation of this is overwhelming. For instance, in the case of Flowermix Ltd v Site Development (Ferndown) Ltd[4], there was a great uncertainty in the existence of the subject matter; a state of affair which would render the contract void but nonetheless proprietary estoppel came in handy to aid the claimant.

Also, in Yaxley v Gotts,[5] the claimant, a builder entered an agreement with the defendant on the terms that if he furnished the upper floor of the building, the defendant would give him ownership of the ground floor. Relying on this, the claimant used his resources to refurbish the house but having fulfilled his obligations, Gotts refused to transfer ownership. The court held that that was an oral contract and that the claimant was entitled to ownership for 99 years. On appeal, the decision of the trial court was upheld. In order to reach this decision, the court relied heavily on the principle of proprietary estoppel.

The above cases are clear evidence that courts have previously entertained claims of persons over entitlement to a proprietary right which would ideally have been unsuccessful owing to a defect in the formalities.

The court in the case of Crabb v Arun DC[6] stated that in order to sustain a successful claim in proprietary estoppel, the following must be proved: That there was a promise or an assurance moving from the defendant which conferred a certain benefit on the plaintiff. Secondly, it has to be established that the claimant relied on this promise. The final element is that as a result of reliance on that promise, the plaintiff suffered a certain detriment or loss. This three pronged test has been the classical approach that courts have employed since the antiquity.

But there has emerged another threshold that has to be satisfied by the claimant’s assertions if the property is to be transferred to him without adhering to any formalities. That is the concept of unconscionability. Even though it is an amorphous concept and there is no unanimous or unified approach towards it by judges, it has been proclaimed over and over again that the claimant has to point out how unconscionable it is for the defendant not to have fulfilled his part of the obligation. From the submissions that prevailed in the case of Joyce v Epsom & Ewell BC[7] the Court of Appeal took the approach of looking at whether it would have been unconscionable for the Council, having prompted Mr. Holborn to think that he was being granted free easement, to wait until he acted to his detriment while relying on that promise and then turn back and demand fee accruing for the grant of the right. Davis LJ rejected the Judge’s approach by stating that there was indeed unconscionability because despite the Council having knowledge of the claimant’s actions of detriment, it never warned him of the impending consequences.

Therefore, it can be argued that the concept of unconscionability was devised to instill sanity in proprietary estoppel and curb any frivolous and vexatious attempts by unscrupulous claimants who exploit any available loopholes. This view was taken in Yeoman’s Row v Cobbe[8] where the judges intimated that unconscionability exercises oversight over proprietary estoppel such that, even if the claimant satisfactorily proves all the three elements of proprietary estoppel, it still has to be ascertained whether the conduct of the defendant was so gross as to shock the conscience of the court. If the test of unconscionability is not passed, the court needs to review the whole exercise. But even if the concept is conspicuously manifested in the facts of the case, this does not obviate the need of proving the three other elements independently.

However, the three elements, alongside the concept of unconscionability are both interdependent and interrelated. This was manifested in Gillett v Holt[9] where Robert Walker J was of the view that the detrimental reliance on the assurance of the representor is the precursor to applicability of the unconscionability principle. This is because it is only after the detrimental reliance that the representation becomes irrevocable, such that, if the claimant attempts to revoke it, this results now in unconscionability. This position was further buttressed in Bryan v Shoultz,[10] in which, since the assurance had been withdrawn before it was relied upon, the court denied that there could be any traces of unconscionability.

A controversial aspect is that the current jurisprudence on proprietary estoppel suggests that there is no correlation between unconscionability and satisfaction of the three elements. One might prove all the three elements without having necessarily proved existence of unconscionability. To start with, in Taylor Fashions Ltd. v Liverpool Victoria Trustees Co. Ltd,[11] the court observed that essentially the three elements; assurance, reliance and detriment have been efficacious tests so far but as of now they cannot exist independently without the court examining whether it would be unconscionable for the representor to go back on his promise or assurance. Therefore, the elements are only necessary but have never been sufficient.

Scholars have also argued passionately that there is a need to dissociate the two different concepts i.e. unconscionability and the three elements. The argument is that if it is loosely construed that unconscionability is found as a result of the existence of assurance, reliance, and detriment; then this defeats the whole purpose of having an exception to formalities in the name of proprietary estoppel. Other views that have been advanced indicate that it is absolutely superfluous to define unconscionability as a corollary to the three preconditions of proprietary estoppel because that would not establish a vice which can occasion the courts to circumvent the tough rules of formality.

On the other hand, there are other types of cases that cannot be dispensed with by following the classical model of assurance, reliance, and detriment. Therefore, in these cases, it is impossible for unconscionability to be pegged on the three elements.[12] These are dealings which the parties enter under the premise that their agreement is subject to another contract. This was exhibited in Attorney-General of Hong Kong v Humphrey’s Estate (Queen’s Gardens) Ltd[13] in which it was stated that unconscionability cannot be founded if the original agreement was never intended to be formal. This position was further affirmed in subsequent decisions such as Edwin Shirely Productions Ltd v Workspace Management Ltd.[14]

Another the argument that has been advanced with respect to the concept of unconscionability is that a claim in estoppel should easily succeed if there was a ‘double assurance’ in the sense that the representor makes the first promise that the claimant will enjoy certain rights over the property which is the subject matter of the agreement. The second assurance then should be that the representor further promises that the right will still exist even in absence of any of the required formalities. In light of this premise, it is only after the second assurance has been made that if the representor withdraws the right, then unconscionability is founded and subsequently, a claim in estoppel will suffice.

The second assurance can take any form. It could either be express or implied. For example in Yaxley, the promise by the representor that a gentleman’s agreement was sufficient to confer a right on the claimant was taken to be an express intimation of the second assurance. On the other hand, such an expression can still be deciphered from the facts of the case. In Gillet v Holt the repeated assurance by the representor that Mr. Gillet would inherit a certain parcel of land since 40 years before the suit was construed by the court to have sufficiently satisfied the double assurance principle.

It is noteworthy that the principle of proprietary estoppel has been consistently used by judicial authorities to obviate the need for formalities in a transfer of property contract or otherwise cure a defective transfer. This paper has also discussed the significance of proving unconscionability in order to found a tacit claim in estoppel. However, it must be underscored that proprietary estoppel is just and equitable principle and the judges have all the discretion either to provide a remedy or decline. In Yeo v Wilson[15]the court asserted that even if the claimant would have proven all ingredients of proprietary estoppel, it still had the discretion not to provide a remedy on an additional ground that the representor had been under persistent coercion by his cruel wife, an aspect which caused him psychological distraught.

In conclusion, there seems to be a lacuna with respect to a few aspects touching on unconscionability. It is uncertain, in the first place what the concept means. Nonetheless, the concept has been widely applied by courts that have employed different interpretations on a case-by-case basis. However, there is a need to adopt a unified approach which at least gives a direction on the definition and circumstances which may constitute unconscionability. Also, in as much as the doctrine of proprietary estoppel has come in handy to curb the vagaries of formalities, it is incumbent upon the legal regime to allow for a degree of discretion on judges so that not every claim under this premise is successful.

 

 

 

 

 

 

 

 

                                                                         REFERENCES

v  Helewitz, J. A. (2010). Basic contract law for paralegals. Austin [Tex.: Wolters Kluwer Law & Business.

v  Blum, B. A. (2007). Contracts: Examples & explanations. Austin: Wolters Kluwer Law & Business.

v  Wilken, S., Ghaly, K., & Wilken, S. (2012). The law of waiver, variation, and estoppel. Oxford: Oxford University Press.

v  Cooke, E., & University of Reading. (2003). Modern studies in property law: Volume II. Oxford: Hart Pub.

v  Davies, P. S., Virgo, G., In Burn, E. H., Virgo, G., & Virgo, G. (2013). Equity & trusts: Text, cases, and materials.

v  Ghaly, K., & Wilken, S. (2012). The law of waiver, variation, and estoppel. Oxford, Oxford University Press.

v  Mcfarlane, B., Hopkins, N. S., & Nield, S. (2012). Land law: text, cases, and materials. Oxford, U.K., Oxford University Press.

v  Burn, E. H., Cartwright, J., & Maudsley, R. H. (2009). Maudsley & Burn's land law: cases & materials. Oxford, Oxford University Press.

v  Clarke, S., (2014). Land law. Oxford, Oxford University Press.

v  Erickson, R. L. (1900). The collateral estoppel effect of an arbitration award. [Minneapolis], [publisher not identified].

v  Cooke, E. (2012). Land law. Oxford, U.K., Oxford University Press.

v  Mackenzie, J.-A., & Phillips, M. (2014). Textbook on land law.

v  Deutch, S. (1977). Unfair contracts: the doctrine of unconscionability. Lexington, Mass, Lexington Books.

v  Priestley, L. J. (1986). Unconscionability as a restriction on the exercise of contractual rights.

 

 

 



[1] [1982] QB 133 (Ch). d

[2] The last exception on contracts under the Financial Services Act has since been substituted by the Art 1 of the Land Registration Act 2002.

[3] Case no. CH 1997 Y 4026, Dictum of Jonathan Sumption QC

[4] Case no. HC 1997 06474

[5]  [2000] Ch 162

[6] [1976] 1 Ch 179

[7][2012] EWCA Civ 1398

[8]

[9] [2000] 3 WLR 815

[10] [1999] 2 QB 234

[11] [1982] QB 133

[12] Proprietary Estoppel and Formalities in Land Law and the Land Registration Act 2002: A Theory of Unconscionability

[13] [1987] 1 AC 114.

[14] (2001) 23 EG 158,

[15]  Case Ref: CH 1997 Y 4026

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