By Law Teacher
THE LAW ESSAY PROFESSIONAL
9.2.1 Licences and Proprietary Estoppel – Introduction
Welcome to the ninth topic in this module guide – Licences and Proprietary Estoppel! Licences are considered the lowermost ranking rights in terms of property rights. They occur when a business or individual occupies a property they do not have a legal right of occupation in. This usually occurs only for a short time period and gives the licensee permission to use a property for a specified reason, thus making their occupation lawful and the effect of which prevents the licensee from trespassing. There exists four types of licences in English law; bare licences, contractual licences, licences coupled with an equity and licences coupled with an interest.
The equitable doctrine of proprietary estoppel ‘estops’ a landowner from denying rights to a third party, where that same third party has come to rely on a belief in those rights. The law states that this would be unconscionable behaviour on the part of the landowner and as such, can prevent a person from insisting on their strict legal rights. For a claim of proprietary estoppel to be successful, the third person claiming must be able to satisfy the three requirements in Thorner v Major; representation, reliance and detriment.
Goals for this section:
- To understand the difference between a bare licence, a contractual licence, a licence coupled with an equity and a licence coupled with an interest.
- To recognise the essential elements under a claim of proprietary estoppel, namely representation, reliance and detriment.
Objectives for this section:
- To be able to identify which type of licence is the most advantageous for the licence holder.
- To be able to distinguish whether a licence of proprietary estoppel is of greater assistance in favour of or against a third party.
- To be able to appreciate the overlap between proprietary estoppel and constructive trusts.
- To be able to appreciate that proprietary estoppel is merely a personal right and therefore incapable of assignment to a third party.
9.2.2 Licences and Proprietary Estoppel Lecture
LICENCES
Licences are certainly the lowest-ranking category of property rights. There are four kinds of licences which exist in English law.
Bare licences
A bare licence is simply the giving of personal permission by the landowner for the licensee to enter and remain on the land. A licensee may not transfer what few rights they have to another party.
Creation
A bare licence may be created orally and be express or implied. Given their somewhat informal nature, they often arise by circumstances or conduct (R (Beresford) v Sunderland CC [2003] UKHL 60). It is by this means that a trespass may shift into a bare licence, where the landowner has knowledge of the trespass and gives no objection to it (Canadian Railway Co v The King [1931] UKPC 18).
Bare licences and trespass
The threshold between a licence and trespass is small and easily transgressed. Thus, the licensor retains the right of arbitrary exclusion, meaning they can choose to exclude the licensee at any time for any duration.
Contractual licence
A contractual licence is similar to a bare licence insofar as it grants the licensee permission to access the land. Where the two kinds of licences differ is that the contractual licence includes the giving of consideration by the licensee for the benefit of the licence (Horrocks v Forray [1976] 1 WLR 230). The underlying contract may be either express or implied.
A contractual licence is terminable upon the end of a fixed term, without any requirement of notice (Sandhu v Farooqi [2003] EWCA Civ 531).
Licences coupled with an equity
A licence coupled with an equity may not be terminated simply upon the wish of the licensor. These sorts of licences are found in situations where the landowner ‘grants a licence to another [person] to go upon land and occupy it for a specific period or a prescribed purpose, and on the faith of that authority the licensee enters into occupation and does work, or in some other way alters his position to his detriment’ (National Provincial Bank Ltd v Hastings Car Mart Ltd [1965] UKHL 1).
Licences and proprietary estoppel
As you will see, this concept of a licence coupled with an equity is very similar to the framework of rights granted in proprietary estoppel. Those latter rights have come to accommodate a binding effect on third parties (Land Registration Act 2002, s.116(a)). We can see the overlap between the two doctrines in the case below:
Case in focus: Tanner v Tanner [1975] 1 WLR 1346
Licences coupled with the grant of an interest
This type of licence confers upon the licensee the right to go on another person’s land for the sole purpose of removing something from the land. This license therefore includes the rights granted under profits à prendre to access an interest, coupled with the right to enter land in order to exploit the interest.
Licences and third parties
For licenses, the real dilemma lies with contractual licences given their close similarity to proprietary estoppel.
Broadly, the case law says that ‘a contractual licence does not create a property interest’, meaning it is not binding against third parties (Ashburn Anstalt v Arnold [1988] EWCA Civ 14; Lloyd v Dugdale [2001] EWCA Civ 1754).
This view was not universally held, however. It is highly unlikely that, in registered land, a contractual licence will be deemed capable of so affecting a third party purchase that the third party is bound by the licence (Habermann v Koehler and another [2000] All ER (D) 1739).
Licences and constructive trusts: overlap?
For contractual licences and unregistered land, there may be instances in which they are enforceable by means of a constructive trust. Usually, a contractual licence is not necessarily capable of binding a third party purchaser. Although it had once been said to be possible as such (Binion v Evans [1972] EWCA Civ 6), subsequent case law has determined that a third party purchaser will only be bound by a contractual licence where the circumstances amount to a constructive trust. Such a trust would arise where:
- A third party has of their own volition ‘burdened their own title’ upon making their own obligation to the contractual licensee (Bahr v Nicolay (No. 2)[1988] HCA 16); and/or
- The transfer of the property to the third party was based in part on the sale of the property at a lower than market value, with such sale given on the understanding that the terms of the contractual licence would be upheld (Ashburn Anstalt v Arnold [1988]).
With all that said, there is an exception in contractual licences, according to which the licence may be binding against third parties where the licence is protected by way of a register entry.
Further, it appears that some licensees may actually be acquiring some proprietary interests against third parties by way of possession: a contractual licensee may sue in trespass if he has exclusive possession (Hounslow LBC v Twickenham Garden Developments Ltd [1971]), and where there is a licence coupled with an interest (meaning to enter land and remove certain products such as timber from the land), the licensee has rights against parties that trespass on the land and prevent the licensee from carrying on their activity (Manchester Airport v Dutton [1999] EWCA Civ 844).
PROPRIETARY ESTOPPEL
The doctrine of proprietary estoppel is based on ‘the first principle upon which all courts of equity proceed… [which is] to prevent a person from insisting on his strict legal rights – whether arising under a contract, or on his title deeds, or by statute – when it would be inequitable for him to do so having regard to the dealings which take place between the parties’ (Crabb v Arun DC [1975] EWCA Civ 7 per Lord Denning MR).
The purpose of proprietary estoppel is to refrain, or ‘estop’, any attempt by a legal owner to inequitably go back on guarantees made by them in the course of dealing with another party regarding the owner’s land.
The advantage of proprietary estoppel is that it can help to make sense of, and thereby enforce, the sorts of arrangements that are entered into by laypersons, particularly licences.
In order for a landowner to be “estopped” from carrying on a certain act, it must be shown that in the ‘particular individual circumstances, it would be unconscionable for a party to be permitted to deny that which, knowingly or unknowingly, he has allowed or encouraged another to assume to [the denying party’s] detriment’ (Taylors Fashions Ltd v Liverpool Victoria Trustees Ltd [1982] QB 133 per Oliver J). Relief will thus be granted if to do so would be ‘just’ (Sledmore v Dalby(1996) 72 P & CR 196 CA (Eng) per Hobhouse LJ).
Essential Elements
A claim of proprietary estoppel depends on the person claiming the benefit being able to prove three elements (Thorner v Major [2009] UKHL 18 per Lord Walker of Gesingthorpe and Lord Neuberger of Abbotsbury):
- Representation
Representation is shown where the representor intended for their assurances to the representee to be relied upon (Matharu v Matharu(1994) 26 H.L.R. 648, CA (Eng)). A representation is essential: a mere expectation of rights is not enough, and a long-standing practice will not suffice (Keelwalk Properties Ltd v Waller [2002] EWCA Civ 1076).
Subject matter
The subject of the representation can take the form of almost any property right, so long as the assurance made was ‘clear and unequivocal’ (Thorner v Major [2009]).
Case in focus: Pascoe v Turner [1979]
Unclear representations
If the representations are not of a ‘sufficiently concrete character’, the claimant is not reasonably entitled to expect the alleged rights flowing from the representation (Orgee v Orgee [1997] EWCA Civ 2650). Even if the representor’s resiling from the representation is unconscionable, the detriment may be so uncertain in nature and extent ‘that even equity may not be able to devise an appropriate remedy for it… There are parts that sometimes even equity cannot reach’ (Willis v Hoare (1999) 77 P & CR D42).
- Reliance
Reliance occurs where the representee has changed their position and suffered a detriment because of the assurances received from the representor.
It is not necessary that the representation be the only inducement to cause the representee to change their position, so long as the representation was among the causes (Campbell v Griffin [2001] EWCA Civ 990, CA (Eng)).
Knowledge
The person claiming proprietary estoppel cannot do so unless the representor had knowledge, either actual or constructive, of the representee acting in reliance on the expectation of a benefit following the representor’s representation (Barclays Bank plc v Zaroovabli [1997] Ch 321).
Change of position
There has to be evidence of a “relevant” disadvantage incurred by the claimant when they act upon the representation made by the representor. The usual method by which change of position is demonstrated is where the claimant expends money or resources in improving or maintaining the landowner’s property (Dillwyn v Llewelyn [1862] EWHC Ch J67).
Case in focus: Gillett v Holt [2001]
- Detriment
Detriment is shown when the representation, once made and relied upon, has been unconscionably withdrawn. The unconscionable withdrawal is key to this step: no actionable disadvantage is deemed to accrue until the original representation is withdrawn or revoked (Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58). The test for the claimant is to demonstrate that the withdrawal of the representation causes such ‘prejudice… that it would be inequitable to allow the party who made the relevant representation to go back on it’ (Watts and Ready v Storey(1984) NLJ 631 301).
Standard of unconscionability
When the representor insists on enforcing their solely legal right, they must do so in a manner and in such timing that they are ‘taking advantage of [the representee] in a way which is unconscionable, inequitable or unjust’ (Crabb v Arun DC [1975]). The unconscionability is in part measured by the material detriment suffered by the claimant.
Duration of equity
The courts have been willing to keep the doctrine of proprietary estoppel flexible insofar as its timing is concerned. So long as the detriment is not removed or that the claimant’s inequitable loss is not compensated, the claimant retains a claim in proprietary estoppel (Commonwealth of Australia v Verwayen(1990)170 CLR 394).
Case in focus: Sledmore v Dalby (1996)
Proprietary estoppel and third parties
The earliest case law which considered whether a benefit or burden can be transferred to a third party indicated that proprietary estoppel was merely a personal right and therefore incapable of assignment to a third party (Jones (AE) v Jones (FW) [1977]). However, the case law has changed somewhat.
The benefit of a proprietary estoppel is capable of assignment, not just by the original party relying on the assurance, but also by a successor in title to the original party (Cameron v Murdoch (1986) 63 A.L.R. 575).
Transmitting the burden of a proprietary estoppel has also seen a similar evolution. Prior to the enactment of the Land Registration Act (LRA) 2002, the court had seen in estoppel a sufficiently proprietary character that made it possible for the burden of a proprietary estoppel to be assigned from the original representor to successors in title (Lloyd v Dugdale [2001]). Subsequently, the LRA 2002 provides that an ‘equity by estoppel’ takes effect ‘from the time the equity arises an interest capable of binding successors in title’ (LRA 2002, s.116(a)).
Proprietary estoppel and constructive trusts: overlap?
Some have suggested that the overlap between proprietary estoppel and constructive trusts is so strong that the two concepts are effectively interchangeable (Birmingham Midshires Mortgage Services Ltd v Sabherwal [2000] 80 P & CR 256). One distinction between the two concepts is the notion of bargaining, or lack thereof. Constructive trusts require a bargaining between the two parties, whereas proprietary estoppel merely requires that the representor has observed the representee incur disadvantage by relying on the representor’s previous statement(s) (Yaxley v Gotts [2000] Ch 162).
9.2.3 Licences and Proprietary Estoppel Lecture – Hands on Examples
Given that we have been examining two discrete areas of property law, it makes sense to separate the elements that guide the application of each of these forms of property rights. Thus, when analysing a problem question pertaining to these areas, we can summarise the steps taken as follows:
Licences
(Establishing that the right is a licence):
- Is the person claiming a right of occupation?
- Has the landowner granted permission to remain on the land but has not granted any further rights e.g. the right to possess the land?
- If yes, go to steps 4 and following below.
(Establishing the type of licence):
- Is the licence a bare licence?
- Alternatively, is it a licence coupled either with an equity or an interest?
- If neither of the above, the licence is a contractual licence.
If you answer “yes” to 4, the licensee may be excluded at any time (remember: arbitrary exclusion). If you answer “yes” to 5, the licensee can remain on the land for a set duration and may have rights against third parties. If you answer “yes” to 6, the licensee’s rights of occupation will last only according to the term set by the agreement.
Proprietary estoppel
(Establishing that the right is a proprietary estoppel):
- Has there been a clear and unequivocal statement relating to a promise of a specific asset, or assets, in exchange for a certain act or acts? If not, go to step 5.
- If “yes”, has the person to whom the statement was made altered their position to their own detriment? If not, go to step 5.
- If “yes”, has the person who made the statement since revoked that statement in a manner which disadvantages the representee and is done in a time and manner which is unconscionable? If not, go to step 5.
- If “yes” to all the above, there is a right of proprietary estoppel.
- If “no” to any of 1-3, there is no proprietary estoppel.
Q1. Albus and Bertha purchase a house and they allow their son-in-law, Charlie, to live with them. Charlie offers to improve some of the roof tiles and construct a conservatory at his own expense. Albus agrees to this and says Charlie can live in the house rent-free for the rest of his, Charlie’s, life if he does so. Bertha is aware of the arrangement, and does not expressly agree or disagree to it/ Charlie thus conducts those works. Some years later, Albus has died and Bertha needs to adapt the house for her own needs. She needs to have Charlie excluded from the property.
Advise Bertha.
Q2. Dangerous Productions (DP) are hoping to stage a risqué political event at an events centre in Ealing for five consecutive nights. Ealing Borough Council, owners of the centre, agree to let DP stage the event upon payment. DP duly make the required payment. After the first night, Ealing Council receive complaints about the language used in the production, and decide to “uphold the morals of the community” by forbidding DP from entering the centre again to stage the subsequent events.
Advise DP.
Q3. Frank is the owner of Blackacre. He invites Geoff over to the property, and upon seeing his guest says Geoff can “stay for as long as he likes.” No money changes hands. Geoff stays for several weeks. The two get into an argument and Frank tells Geoff that Geoff has to leave. Geoff refuses, saying he was entitled to stay.
Advise Frank.
Q4. Zack owns Whiteacre, a large plot of farmland. He invites an acquaintance, Yasmin to the farmland. She tells Zack that she has long wanted to work on a farm, and starts to do so without payment. Zack is impressed by the quality of her work and amends his will to say that Yasmin would be entitled to a portion of the farmland. As she continues to work on the farm, Zack further amends his will, increasing the size of Yasmin’s portion of the farmland. Zack and Yasmin fall out, and Zack amends his will in such manner that Yasmin would not be entitled to any part of Whiteacre.
Advise Yasmin.
A1. This case follows the precedent set by Sledmore v Dalby. As you will recall from that case, the passage of time and the changing needs and priorities of the parties was such that the equity, which had validly arisen, was now extinguished. Following this precedent, Bertha is free to exclude Charlie from the property without needing to compensate him.
A2. This is a contractual licence situation: payment has been made for temporary occupation of space owned by the landowner for a fixed duration. Given that Ealing have attempted to interfere with the exercise of the contract by prematurely revoking the right of access and occupation, DP are entitled to continue staging their event for the duration stated in the licence, and to force Ealing to let them stage the event (see Verrall v Great Yarmouth BC).
A3. The situation here is that of a bare licence. This is because there is no exchange of money. As the owner, Frank is at liberty to revoke permission for occupation of the property at any time. There does not appear to be any grounds of necessity or public purpose, therefore Frank can lawfully arbitrarily exclude Geoff from the property.
A4. The facts in this case resemble the facts in Gillett v Holt. As you will recall, in that case all of the elements of proprietary estoppel were found to subsist, such that they overcame the usually revocable effect of a will to make the representations ‘tantamount to a promise.’ We see that in this case: unpaid work, promises of land being made for ever-increasing size, and then a resiling from those statements. Therefore, Yasmin is entitled to compensation and, following Gillett, the plot of land heretofore promised to her.