13

Proprietary Estoppel

WE HAVE ALREADY encountered the doctrine of proprietary estoppel as one of the devices employed to regulate property rights on the breakdown of intimate relationships.1 This chapter examines the development and conceptual

structure of the doctrine and asks to what extent it is “remedial” in a sense that is apt to provoke anxiety.

I. RULE OF EVIDENCE OR SUBSTANTIVE DOCTRINE?

Strictly speaking, an estoppel is an evidential device that prevents people asserting their strict legal rights without formally qualifying those rights. Provided it performs this limited function, estoppel can only be “a shield and not a sword”:2 it is not a cause of action in itself.3 There are several reasons why it has proved tempting to conceptualise the outcomes in question as resulting from the operation of rules of evidence alone. First, if estoppel generated substantive rights, it would be difficult to reconcile with the principle that representations of intention are not actionable.4 Secondly, emphasising the evidential dimension of estoppel has allowed it to be viewed as less of a threat to the notion that promises must be supported by consideration to be legally enforceable.5 Thirdly, the characterisation of proprietary estoppel as part of the law of evidence downplays the extent to which the doctrine appears to disregard the formality requirements that the law demands for transfers of interests in land.6 Finally, and most importantly for the purposes of this study, this mode of conceptualisation serves to obscure the reality that in some instances proprietary estoppel operates to redistribute property rights without the consent of owners.

Early last century, Spencer Bower argued that proprietary estoppel is not a special rule but an example of the general law of estoppel.7 Moreover, he was unequivocally of the view that estoppel was a rule of evidence and nothing more. Thus, he argued:

1Supra, ch. 10.II.

2Coombe v. Coombe [1951] 2 KB 215 at 219 per Denning LJ.

3Seton Laing Co. v. Lafone (1887) 19 QBD 68; Re Otto Kopje Diamond Mines Ltd. [1893] 1 Ch. 618 at 628 per Bowen LJ.

4Jordan v. Money (1854) 5 HLC 185.

5See, e.g., Coombe v. Coombe [1951] 2 KB 215 at 220 per Denning LJ.

6See LJ Priestly J, “Estoppel: Liability and Remedy?” in Youdan (ed.), Equity, Fiduciaries and Trusts (Toronto, Carswell, 1989) 273 at 290.

7G Spencer Bower, Estoppel by Representation (London, Sweet & Maxwell, 1923) 13.

292 Redistributive Proprietary Remedies

Emphatically it is not a cause of action in itself, it does not create one, though the application of this, as of any other rule of evidence in the course of litigation, may result in a total or partial establishment, or disestablishment of the case.8

The claim that proprietary estoppel cannot provide a cause of action is implausible.9 It may be argued that in some cases plaintiffs could rely on possessory rights to provide the basis of an action and seek to use estoppel as a shield to prevent owners’ asserting their rights. However, it is clear that the remedy afforded in proprietary estoppel does not result merely from the fact that owners are prevented from relying on their rights. For the appropriate remedy would still have to be determined, as the courts have a discretion to tailor a remedy that will do justice in the circumstances.10 Moreover, where plaintiffs are seeking to exercise either lesser proprietary rights that can arise only by grant or prescription or mere licences to use land, proprietary estoppel must provide a substantive right if they are to be able to bring an action. Finally, it is difficult to see that estoppel can be merely an evidential device if it binds, not only the party that made an assurance or acquiesced in a plaintiff’s mistake, but also any successors in title.11

Nonetheless, the notion that estoppel functions merely as a rule of evidence persists. Thus, relatively recently in Commonwealth of Australia v. Verwayen,12 Deane J described the doctrine in such terms, arguing that it could not provide a cause of action in itself.13 This characterisation of estoppel as evidentiary may have assuaged concerns Deane J had that his conclusion that the remedy granted by the court should generally fulfil plaintiffs’ expectations posed a threat to the doctrine of consideration in contract. In contrast, other members of the court made it clear that they viewed the developing principle of equitable estoppel as performing a substantive role and providing a cause of action in some circumstances.14 Unsurprisingly, they took the position that it was necessary to limit the remedy for estoppel to that which was needed to relieve plaintiffs’ detriment in order to ensure that the doctrine of consideration was not unduly undermined.15

8G Spencer Bower, Estoppel by Representation (London, Sweet & Maxwell, 1923) 13 at 2.

9See also S Wilken and T Villiers, Waiver, Variation and Estoppel (Chichester, John Wiley & Sons, 1998) 104–8.

10The extent of this discretion remains a matter of some controversy. See infra, text accompanying nn. 39–80.

11For a clear statement that estoppel, as a rule of evidence, affects the rights only of those who were parties to the statement in question see Simm v. Anglo-American Telegraph Co. (1879) 5 QBD 188 at 206–7 per Brett LJ.

12(1990) 170 CLR 394.

13Ibid. at 445–7. See Priestly, supra n. 6 at 288.

14Ibid. at 416–7 per Mason CJ, 454 per Dawson J, and 501 per McHugh J. See Priestly, supra n. 13 at

289.This view was recently endorsed by the High Court in Giumelli v. Giumelli (1999) 196 CLR 101.

15See, e.g., (1990) 170 CLR 394 at 454 per Dawson J.

Proprietary Estoppel 293

II. THE BASIS FOR INTERVENTION: IS PROPRIETARY ESTOPPEL LIMITED TO THE

ENFORCEMENT OF CONSENSUAL ARRANGEMENTS?

Another way in which judges and scholars attempt to reconcile proprietary estoppel with the orthodoxy that the law does not redistribute property without the consent of owners is to depict the doctrine as involving the enforcement of informal agreements to confer an interest in land.16 The burden of this section is to demonstrate that this analysis does not stand up to close examination.

1. Enforcing Informal Transfers

Certainly the relief given in estoppel cases often has the effect of enforcing informal agreements. In Ramsden v. Dyson,17 one of the seminal cases in the development of proprietary estoppel, Lord Kingsdown described the doctrine in the following terms:

If a man under a verbal agreement with a landlord for a certain interest in land, or what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a Court of Equity will compel the landlord to give effect to such promise or expectation.18

Thus, estoppel is used to confer proprietary rights where owners have made promises that would have conferred a property interest had the requisite formalities been fulfilled.19 Similarly, the doctrine can also be used to enforce promises to transfer property in the future.20 This conception of proprietary estoppel is consistent with the approach of English courts to resulting and constructive trusts, whereby the basis for intervention is explained in terms of the parties’ intentions.21

2. Estoppel in Unilateral Mistake Cases

There are, however, other cases in which estoppel is employed that cannot easily be said to involve the enforcement of agreements. These cases essentially involve

16See, e.g., S Moriarty, “Licences and Land Law: Legal Principles and Public Policies” (1984) 100 LQR 376; M Howard and J Hill, “The Informal Creation of Interests in Land” [1995] LS 356.

17(1866) LR 1 HL 129.

18Ibid. at 170.

19See, e.g., Dillwyn v. Llewellyn (1862) 4 De GF & J 517; ER Ives Investment v. High [1967] 2 QB 379; Pascoe v. Turner [1979] 1 WLR 431; Yaxley v. Gotts [1999] 2 FLR 941.

20See, e.g., Gillett v. Holt [2001] Ch. 210; Re Basham [1986] 1 WLR 1498. See also the doctrine that is at least closely akin to proprietary estoppel, whereby a constructive trust may be awarded to prevent one party unconscionably reneging on a joint venture to acquire specific property. See Banner Homes Group Plc v. Luff Developments Ltd. [2000] Ch. 372; Pallant v. Morgan [1953] Ch. 43.

21See supra, ch. 10.II.1.

294 Redistributive Proprietary Remedies

the attempt by one party to take advantage of a mistake. Lord Cranworth analysed one type of such a case in Ramsden v. Dyson. In his view:

If a stranger begins to build on my land supposing it to be his own, and I, perceiving his mistake, abstain from setting him right, and leave him to persevere in his error, a Court of equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land was his own. It considers that, when I saw the mistake into which he had fallen, it was my duty to be active and to state my adverse title; and that it would be dishonest in me to remain wilfully passive on such an occasion, in order afterwards to profit from the mistake I might have prevented.22

In Lord Cranworth’s view, the basis for judicial intervention is not a breach of promise but fault in failing to act. Despite the apparent focus on equitable fraud in the judicial analysis of proprietary estoppel cases involving mistake, an effort has been made to characterise such cases as involving the enforcement of informal agreements. This view is taken by Mark Howard and Jonathan Hill, who conclude that proprietary estoppel is consistent with the “general principle that interests in property are transferred consensually”.23 They argue that, because defendants must have knowledge both of the plaintiff’s mistaken belief and of their own rights, it is “possible to say that there is a representation or understanding (albeit an imputed one)”.24 That these writers feel it important enough to resort to ambiguous notions of imputed agreement to force estoppel by acquiescence within the understanding that a proprietary interest can be transferred only with the owner’s consent is a testament to the continuing force of this axiom. However, mistake cases cannot always be readily characterised as involving the enforcement of an agreement or understanding. After all, if plaintiffs already believed they enjoyed the rights in question, they can hardly have believed they were acquiring them. Thus, the basis of judicial intervention in unilateral mistake cases is not agreement—for there is no meeting of minds—but the unconscionable opportunism involved in the defendant’s attempt to exploit the plaintiff’s error.

3. Estoppel in Common Mistake Cases

(a) Fry J’s Probanda in Willmott v. Barber

A further problem with explaining proprietary estoppel as enforcing informal consensual transfers results from recent developments that, contrary to Howard and Hill’s suggestion, mean that defendants may be liable even when they were not aware of their legal rights. This represents a reversal of Willmott v. Barber,25 where Fry J took the position that the courts would prevent owners asserting their strict legal rights only if they had, from the outset, been conscious of the error under

22(1866) LR 1 HL 129 at 140–1.

23Supra n. 16 at 356.

24Ibid. at 367.

25(1880) 15 Ch. D 96.

Proprietary Estoppel 295

which the plaintiff laboured. He laid down a restrictive approach to the doctrine, setting out what were to long stand as the definitive “probanda” that had to be satisfied before relief would be granted. According to this approach, before he could be prevented from insisting on his legal rights, “the defendant . . . must know of the plaintiff’s mistaken belief as to his own rights”.26 Furthermore, Fry J insisted that “the defendant . . . must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff”.27

(b) The Relaxation of the Grounds for Relief in Taylors Fashions

The watershed case in the relaxation of Fry J’s requirements for proprietary estoppel was Taylors Fashions Ltd. v. Liverpool Victoria Trustees Co. Ltd.28 Oliver J heard two related cases together. The plaintiff in the first case, Taylors Fashions Ltd., purchased the residue of a 28-year lease over 22 Westover Road in Bournemouth. It purchased the property in the belief that it was acquiring a valid option to renew the lease for a period of 14 years that would be exercisable in the event that it installed a lift on the premises. Liverpool Victoria Trustees, the defendants in both actions, acquired the freehold of the property shortly after the commencement of the lease. In addition, the defendants granted the plaintiff in the second action, Old & Campbell Ltd., a 42-year lease over an adjacent property, number 21. This lease agreement reserved for the landlord a right to bring the relationship to an end after 28 years if the tenant of number 22 failed to exercise its option to renew. Fourteen years later, Old & Campbell negotiated a lease over another adjacent property, number 20, that was to run for 14 years, with an option to renew for an additional 14 years that was dependent, once again, on the tenant of number 22 exercising its option to renew its lease.

The plaintiffs and the defendants had shared the misconception that the option to renew the lease of number 22 did not have to be registered to be enforceable against a purchaser of the reversion—a misconception that reflected the received wisdom of practising lawyers at the time.29 In the first action, Taylors Fashions argued that it was encouraged by this mistaken belief to install a lift on its premises. Subsequently, when Taylors Fashions sought to renew its lease over number 22, the defendants became aware that the option to renew was void

26Ibid. at 105.

27Ibid.

28[1982] QB 133. Oliver J’s test was subsequently approved by both the Court of Appeal in

Amalgamated Investment & Property Co. Ltd. v. Texas Commerce International Bank Ltd. [1982] QB 84 and the Privy Council in AG of Hong Kong v. Humphrey’s Estate (Queen’s Gardens) Ltd. [1987] AC 114. A similarly broad approach has been favoured in Australia Waltons Stores (Interstate) v. Maher (1988) 164 CLR 387 and Commonwealth of Australia v. Verwayen (1990) 170 CLR 394. The Canadian judiciary had already favoured a liberal approach in Canadian Superior Oil Ltd. v. Paddon-Hughes Development Co. Ltd. (1970) 12 DLR (3d) 247. Finally, the approach in Taylors Fashions influenced the New Zealand Court of Appeal in its relaxation of the requirements for estoppel in New Zealand in Burbery Finance

v.Hindsbank Ltd. [1989] 1 NZLR 356; Gillies v. Keogh [1989] 2 NZLR 327.

29The need to register these interests was established in Beesly v. Hallwood Estates [1960] 1 WLR

296 Redistributive Proprietary Remedies

against them for want of registration and refused to allow the renewal. The defendants then used the unenforceability of the option to renew as a basis for exercising its right to end Old & Campbell’s lease of number 21 after 28 years. Similarly, they argued that the same logic dictated that Old & Campbell was also unable to exercise its right to renew its lease of number 20.

The cases largely turned on whether it was necessary that the defendants knew that the plaintiffs were mistaken about their legal rights at the time that they encouraged or acquiesced in the plaintiff’s reliance on this mistake. Oliver J took the view that the conditions that Fry J adumbrated in Willmott v. Barber should not be regarded as definitive. Instead, he favoured “a very much broader approach which is directed . . . at ascertaining whether . . . 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 his detriment . . .”.30

Oliver J accepted that, in cases of pure acquiescence, plaintiffs might have to demonstrate that defendants knew of their legal rights.31 However, he concluded that there was no such requirement in cases where defendants had actively encouraged plaintiffs to act to their detriment.32

Ultimately, Oliver J decided the first case against Taylors Fashions. Given that the defendants had not been involved in negotiating the lease, but rather acquired the reversion from an earlier landlord, it was difficult to say that they had encouraged the first plaintiff to act in reliance on the term in question. As the defendants had merely acquiesced in the first plaintiff’s expenditure, without knowledge of the mistake that motivated the plaintiff’s actions, they came under no duty to disabuse the plaintiff of its error.33 Moreover, because, even without the option, the lease was a relatively long one, Oliver J concluded that it was quite plausible that the tenant might have undertaken the work in any event.34

On the other hand, the plaintiff in the second action succeeded. The defendants’ involvement in negotiating the two leases in question meant that they had actively encouraged Old & Campbell to believe that it would be able to rely on the option.35 The effect of the estoppel in this instance was to prevent the defendants relying on the fact that, strictly speaking, the conditions that would have enabled their tenant to exercise its option were not and indeed could not be fulfilled.

(c) Can These Cases be Characterised in Terms of the Consensual Transfer of Proprietary Rights?

There is a tendency to elide mistake cases with cases based on informal promises— a tendency apparent in Lord Kingsdown’s suggestion in Ramsden v. Dyson that an

30[1982] QB 133 at 151–2.

31Although he suggested that even “this must now be open to doubt”: ibid. at 147.

32Ibid. at 147–52.

33Ibid. at 155.

34Ibid. at 156.

35Ibid. at 157–8.

Proprietary Estoppel 297

expectation encouraged by the defendant “amounts to the same thing” as an agreement.36 Could the decision in favour of Old & Campbell Ltd. be characterised in terms of the consensual transfer of a property right? Because of a common mistake about the validity of a right enjoyed by a third party, the plaintiff and the defendant had bargained for a property right that turned out to be unexercisable. While the remedy had the effect of fulfilling the spirit of the agreement in question, it achieved this only by effectively granting the plaintiff a new right that was not contemplated by the parties. Thus, proprietary estoppel in this context is not enforcing promises; rather, it provides a remedy for reliance upon expectations caused by an error that the defendant had encouraged the plaintiff to share.

The departure from orthodoxy is most apparent in cases involving a common mistake in which the defendants’ encouragement of the plaintiff’s reliance on the shared error was less active than the Liverpool Victoria Trustees’ actions in inducing Old & Campbell Ltd. into signing the leases in question. In Stiles v. Cowper,37 for example, a remainderman attempted to rely on the invalidity of a lease granted by a deceased life tenant only after having accepted rent for a period of time during which the tenant expended money on the property. It is not suggested in the report that the remainderman knew of the invalidity of the lease at the time of encouraging the tenant’s belief by accepting the rent. Nonetheless, he was prevented from enforcing his rights. It seems that the remainderman promised the tenant nothing and the fact that he had accepted rent was regarded as sufficient encouragement to give the tenant a right to relief. Apparently it was thought unconscionable that the remainderman should attempt to enforce his legal rights after having unknowingly encouraged the tenant to act in reliance on a mistaken understanding of his legal position.

On closer examination, it becomes clear that only some instances of proprietary estoppel can be characterised as effecting a consensual transfer of property rights. The rationale for the relief given in estoppel actions in cases of unilateral and common mistake is best explained in terms of a duty to ensure the reliability of expectations encouraged in others.38 Where proprietary relief is awarded in the context of such claims, the effect is to redistribute property rights without the owner’s consent.

III. REMEDIAL DISCRETION

It is said that proprietary estoppel gives rise to an equity, and it is for the court to decide how this equity is to be satisfied.39 There is some support in the older cases

36(1866) LR 1 HL 129 at 170. See supra, text accompanying n. 18.

37(1748) 3 Atk. 692.

38See M Spence, Protecting Reliance: The Emergent Doctrine of Equitable Estoppel (Oxford, Hart Publishing, 1999) 1–14; A Robertson, “Situating Equitable Estoppel Within the Law of Obligations” (1997) 19 Sydney LR 32 at 56.

39This terminology appears to have originated in Plimmer v. Mayor of Wellington (1884) 9 App. Cas. 699 at 714.

298 Redistributive Proprietary Remedies

for the view that the court should “compel the [party estopped] to give effect to

. . . [the relevant] promise or expectation”.40 However, the modern orthodoxy is framed in the terms that, having satisfied itself that an equity has arisen, the court must conduct a separate inquiry to determine “the extent of the equity” and “the relief needed to satisfy it”.41

According to Goff LJ in Griffith v. Williams42:

If [the court] finds that there is an equity, then it must determine the nature of it, and then, guided by that nature and exercising discretion in all the circumstances, it has to determine what is the fair order to make between the parties for the protection of the claimant.43

On this analysis, the courts exercise considerable discretion in making a choice between the extent and type of remedy awarded. Two principal issues emerge: the first concerns the proper measure of relief; the second turns on whether relief should be personal or take the form of a proprietary interest.

1. The Measure of Relief

(a) A Detriment-Focused Approach?

Generally, the courts have apparently felt little need to reduce their discretion to rules that would determine whether they should tailor the remedy to fulfilling plaintiffs’ expectations or whether it should instead be limited to repairing any detriment suffered. If the matter at issue is the “minimum equity to do justice”,44 this may suggest that the remedy need not generally involve the fulfilment of plaintiffs’ expectations. Such a view has its attractions. On the one hand, a focus on the relief of detriment would ensure that proprietary estoppel posed less of a threat to the requirement of consideration in contract. In addition, if relief were typically given by way of damages rather than rights in land, the doctrine would be less in tension with the formalities requirements for transfers of such interests. Finally, the fact that proprietary estoppel has extended beyond the enforcement of promises suggests that the fulfilment of expectations may not be the appropriate remedy. Certainly, where the doctrine is used to provide relief in the wake of a common mistake or in circumstances in which an owner was merely at fault in not becoming aware of the plaintiff’s expectations, there is a case for limiting the remedy to that which is necessary to relieve the detriment suffered by the plaintiff.

40Ramsden v. Dyson (1866) LR 1 HL 129 at 170 per Lord Kingsdown. See also Moriarty, supra n. 16.

41See, for instance, Crabb v. Arun DC [1976] Ch. 179 at 193 per Scarman LJ.

42[1977] 248 EG 947.

43Ibid. at 949.

44Crabb v. Arun DC [1976] Ch. 179 at 188.

Proprietary Estoppel 299

(b) The Approach of English Courts

Recently, in Gillett v. Holt,45 Robert Walker LJ indicated that, in determining the proper remedy for proprietary estoppel, the court should determine “the maximum extent of the equity” by identifying the nature and content of the expectation engendered by the owner’s representation or encouragement. Thereafter, he argued, “[t]he court’s aim is, having identified the maximum, to form a view as to what is the minimum required to satisfy it [i.e. the equity] and do justice in all the circumstances . . .”.46

The potential of such a flexible attitude had been realised a few years earlier in the Court of Appeal’s decision in Sledmore v. Dalby.47 The case involved an attempt by the plaintiff to take possession of a property left to her in her mother’s will. The defendant resisted the action on the basis that the testator, his mother in law, had promised him the property in question and he had done considerable work on the premises in reliance on this assurance. The court accepted that the detrimental reliance on the testator’s representation or encouragement might have initially given rise to a right to relief. However, it concluded that this right could be lost if the defendant had received counterveiling benefits in the meantime so that, by the time relief was sought, the defendant had not suffered any net detriment.48 It would be possible to distinguish decisions of this kind on the basis that they do not involve a judgement about the appropriate level of relief but rather a conclusion that no detriment was suffered and therefore no remedy was appropriate. However, even where they are not sufficient completely to negate any detriment suffered, it is difficult to see why countervailing benefits received should not be equally relevant in the determination of the level of relief.49 And, indeed, in Sledmore v. Dalby, Hobhouse LJ approvingly cited dicta from the Australian High Court to support the view that relief in this area should be focused on relieving plaintiffs’ detriment.50

Sledmore v. Dalby provides a further indication of the extent of judicial discretion in this context in its recognition that the court may legitimately take into account considerations beyond the encouragement, the expectation it generated and the extent of detriment suffered. Thus, the Court of Appeal was influenced by the fact that the need of the successor in title against whom the rights said to arise by proprietary estoppel were asserted was greater than that of the defendant.51

In practice, despite the wide discretion to tailor relief and regardless of the attractions of an approach that focuses on detriment, English courts have tended

45[2001] Ch. 210.

46Ibid. at 237.

47(1996) P & CR 196.

48For a similar approach see E & L Berg Homes Ltd. v. Grey [1980] 253 EG 473; Lee-Parker v. Izzet (No 2) [1972] 1 WLR 775; Watts & Ready v. Storey (1984) 134 NLJ 631; Lovett v. Fairclough (1990) 61 P & CR 385. See Campbell v. Griffin [2001] EWCA Civ 990 at 32–35 per Walker LJ.

49See also Jackson v. Crosby (No 2) (1979) 21 SASR 280.

50(1996) P & CR 196 at 208–9.

51See especially ibid. at 205 per Roch LJ.

300 Redistributive Proprietary Remedies

to fulfil expectations in proprietary estoppel cases.52 Thus, by and large, it seems that the courts’ discretion in this context is principally directed at the question of how the plaintiff’s expectations may best be fulfilled. The often vague nature of the expectations of the parties in these cases may mean that a certain amount of judicial creativity is demanded. However, where the plaintiff is limited to a monetary award, it is likely to be because the fulfilment of the expectation would be impossible, inequitable or inconvenient.53 This is likely to be the case where the expectation at issue involves a right of shared occupation but the exercise of this right is rendered infeasible because the parties are no longer on amicable terms.54 Alternatively, damages may be appropriate because the property in question has been transferred to a third party without notice. Yet, even in these circumstances, the measure of damages will in all likelihood be calculated with reference to plaintiffs’ expectation loss rather than the extent of their detrimental reliance.55 The court is likely to apply a more restrictive level of relief only where plaintiffs are claiming rights not against the owner who encouraged their expectations of an interest in land but against an innocent successor in title and the relief claimed is disproportionate to the detriment they have suffered.56

(c) Australian Developments

It may be that the approach of the English courts in this regard largely corresponds to judicial practice elsewhere. Some of the dicta in Walton Stores v. Maher57 and Commonwealth of Australia v. Verwayen,58 the seminal decisions in the Australian High Court’s development of an integrated doctrine of equitable estoppel suggested that the proper role of the doctrine was limited to the relief of detriment. On the other hand, other interpretations suggest a more flexible approach.59

Recently, in Giumelli v. Giumelli,60 the Australian High Court blurred the distinction between the measures of relief altogether. In that case, the plaintiff built a house on land owned by his parents in reliance on their promise that they would subdivide the land and transfer a portion of it to him. However, when the plaintiff made a marriage of which they did not approve, the parents declined to make good their promise. The judge at first instance had limited the plaintiff’s relief to compensation for the loss he suffered in relying on his parents’ undertaking. On appeal, the Supreme Court of Western Australia declared that the defendants held

52E Cooke, “Estoppel and the Protection of Expectations” [1997] LS 258; S Gardner, “The Remedial Discretion in Proprietary Estoppel” (1999) 115 LQR 438.

53See, e.g., Burrows & Burrows v. Sharpe (1989) 23 HLR 82 at 92 per Dillon LJ: “It is often appropriate to satisfy the equity by granting the plaintiff the interest he or she was intended to have. If that is not practicable, however, the court has to do the best it can”.

54See, e.g., Dodsworth v. Dodsworth [1973] 228 EG 1115.

55See, e.g., Baker v. Baker (1993) 25 HLR 408; Holiday Inns Inc v. Broadhead [1974] 232 EG 951.

56See, e.g., Sledmore v. Dolby (1996) P & CR 196; Campbell v. Griffin [2001] EWCA Civ 990.

57(1988) 164 CLR 387 at 427 per Brennan J.

58(1990) 170 CLR 394. See, e.g., Mason J at 412–16; Brennan J at 429.

59See, in particular, Commonwealth of Australia v. Verwayen (1990) 170 CLR 394 at 445–7 per Deane J.

60(1999) 161 ALR 473.

Proprietary Estoppel 301

the relevant portion of the property on trust for the plaintiff. The parents appealed, arguing that this remedy was inappropriate because it went beyond compensating the plaintiff for his reliance loss. The High Court approved the view taken by the majority of the court immediately below that, “even if it be conceded that [the plaintiff] had not suffered an appreciable loss of income by remaining in the partnership, the detriment suffered by him was the loss of the property which he worked to improve . . .”.61 This is difficult to accept. The detriment to which the court referred is nothing other than the plaintiff’s disappointment at not having his expectations fulfilled. On this analysis, any disappointed expectation could be characterised in terms of reliance loss. Thus, while speaking of detriment, the court was clearly focusing upon expectations.

It seems then that the Australian courts are moving away from the more restrictive approach apparently favoured by some members of the High Court in Walton Stores and Verwayen and toward the more generous interpretation favoured by Deane J in the latter case. In his view:

Prima facie, the operation of an estoppel by conduct is to preclude departure from the assumed state of affairs. It is only where relief framed on the basis of that assumed state of affairs would be inequitably harsh, that some lesser form of relief should be awarded.62

Thus, it appears that Australian courts are likely to hesitate to award relief that fulfils the plaintiff’s expectations only where doing so would provide a remedy that is manifestly disproportionate to the plaintiff’s reliance loss.63

(d) The Practice in the United States

The position in the United States is less clear. The reporters for the first Restatement of Contract took the view that the proper measure of relief for promissory estoppel was the plaintiff’s expectation loss.64 In contrast, some courts65 and, more particularly, academics66 favoured a detriment-focused approach. A compromise was reached in the second Restatement, which indicated that “[t]he remedy granted for breach may be limited as justice requires”.67

Nonetheless, the view that had more recently come to be accepted among scholars was that the judiciary showed little interest in limiting relief to reliance loss. Scholars argued that American courts were willing to employ promissory estoppel without requiring detrimental reliance and that they consistently based relief on

61Ibid. at 479. More convincingly the court also focused on the opportunity costs suffered by the plaintiff: ibid. at 480.

62(1990) 170 CLR 394 at 445.

63A Robertson, “Satisfying the Minimum Equity: Equitable Estoppel Remedies after Verwayen” (1996) 20 MULR 805; and “Reliance and Expectation in Estoppel Remedies” [1998] LS 360 at 368.

64Restatement of Contract (St Paul, Minn., American Law Institute Publishers, 1932), § 90(1).

65See, e.g., Hoffman v. Red Owl Stores 133 NW 2d 267 (Wis., 1965).

66See, e.g., S Henderson, “Promissory Estoppel and Traditional Contract Doctrine” (1969) 78 Yale LJ 343; C Knapp, “Reliance in the Revised Restatement: The Proliferation of Promissory Estoppel” (1981) 81 Colum. L Rev. 52.

67Restatement of Contract 2d (St Paul, Minn., American Law Institute Publishers, 1979) § 90(1).

302 Redistributive Proprietary Remedies

plaintiffs’ expectation loss.68 However, this “new consensus” has recently been brought into question in a study by Robert Hillman that provides a more rigorous statistical analysis of judicial outcomes than has prior research.69 Hillman concludes that the courts do indeed generally require a degree of detrimental reliance before they will give a remedy for promissory estoppel. In addition, Hillman argues that the courts take a flexible approach toward the quantification of relief.70 On the other hand, American law has long had a single substantive doctrine of promissory estoppel that performs the work done by several disparate doctrines in English law. It is possible that, in the type of case in which proprietary estoppel is employed in English law, American courts will also typically give effect to plaintiffs’ expectations.

(e) The Case for Current Judicial Practice

If the typical judicial response in a proprietary estoppel case does indeed involve giving effect to plaintiffs’ expectations, there is certainly something to be said for this position. First, the fulfilment of plaintiffs’ expectations is arguably the best way of ensuring that plaintiffs are compensated for their reliance on a representation or misunderstanding.71 After all, plaintiffs’ losses will not necessarily be limited to financial or physical expenditure. Plaintiffs are likely to have incurred opportunity costs and to have suffered disappointment as a result of not having their expectations fulfilled. The sense of loss associated with that disappointment is likely to be acute given the endowment effect: the high value attached to rights that one presently enjoys or at least believed one enjoyed.72 Moreover, the judicial willingness to grant a right in specie where possible is consistent with the understanding that plaintiffs are liable to form a pyschological attachment to the land in question so that the interest at issue has a significance for them that goes beyond its exchange value.73

68E Yorio and S Thel, “The Promissory Basis of Section 90” (1991) 101 Yale LJ 111; D Farber and J Matheson, “Beyond Promissory Estoppel: Contract Law and the ‘Invisible Handshake’” (1985) 52 Chi. L Rev. 903.

69R Hillman, “Questioning the ‘New Consensus’ on Promissory Estoppel: An Empirical and Theoretical Study” (1998) 98 Colum. L Rev. 580.

70In a number of the cases the courts explicitly favour reliance loss over expectation loss as the proper measure of relief. Hillman notes that the cases are not conclusive on this point, largely because very often the expectancy and reliance measures of relief coincide in a particular case. Nonetheless, it is difficult to argue with the conclusion that Hillman tentatively offers that the data show “that courts take seriously the admonition of the second Restatement to award damages as justice requires”: ibid. at

71LL Fuller and W Purdue, “The Reliance Interest in Contract Damages” (1936) 46 Yale LJ 52 at 60; Robertson, “Reliance and Expectation in Estoppel Remedies”, supra n. 63 at 366.

72See supra, ch. 4.III.1.

73Ibid.

Proprietary Estoppel 303

2. Personal or Proprietary Relief?

In satisfying a proprietary estoppel claim, a court may award a proprietary interest or a personal right to use the land or even limit the plaintiff to damages.74 That the courts have a discretion in determining whether or not to give a proprietary remedy may be thought surprising when it is remembered that discretion has at times been identified as the quality that makes proprietary relief “remedial” in an objectionable way.75 Indeed, when a constructive trust is granted as a remedy in proprietary estoppel cases, can this be regarded as anything other than an instance of the much-maligned “remedial constructive trust”?

It seems that, in most cases, the courts will not find the decision to award or deny proprietary rights difficult. The nature of the plaintiff’s expectations, the circumstances in which these expectations were induced and the extent of the plaintiff’s detrimental reliance may make it obvious that these expectations should be fulfilled through the recognition of a particular proprietary right. Thus, when proprietary estoppel is used in the context of intimate relationships, it often operates to enforce informal agreements in the same way as the “common intention” constructive trust.76 Indeed, the two doctrines were not clearly differentiated in the landmark cases of Pettitt v. Pettitt77 and Gissing v. Gissing78 and have tended to be used interchangeably since.79

However, in some cases, the courts may decline to fulfil a plaintiff’s expectations. This is liable to be so in situations where plaintiffs are relying on promises that are so vague that some thought is needed in order to decide how they may best be realised. Similarly, a real degree of discretion is likely to be exercised where the detrimental reliance upon which a plaintiff relies is so slight that to give effect to the defendant’s promise would result in an unwarrantedly generous remedy. This is illustrated by Pascoe v. Turner,80 where Turner relied upon an informal assurance by Pascoe that the property in question should belong to her but could point only to relatively minor acts of detrimental reliance. The Court of Appeal indicated that it would have been inclined to have limited her remedy to a licence but concluded that, because Pascoe was liable to attempt to undermine such a right, it was appropriate to give an order that he should transfer the fee simple to her.

Its decision in Giumelli v. Giumelli81 suggests that the Australian High Court viewed itself as having considerable discretion in determining the form of remedy

74See, e.g., Dodsworth v. Dodsworth [1973] 228 EG 1115.

75See supra, ch. 1.III.4.

76On the interrelationship of these doctrines: see D Hayton, “Equitable Rights of Cohabitees” [1990] Conv. 370; P Ferguson, “Constructive Trusts—A Note of Caution” (1993) 109 LQR 109.

77[1970] AC 777 at 815 and 818 per Lord Upjohn.

78[1971] AC 886. Much of Lord Diplock’s influential judgment is phrased in estoppel terms, although elsewhere he suggests that common intention is a prerequisite for relief: ibid. at 905.

79See, e.g., Austin v. Keele (1987) 61 ALJR 605 at 609 per Lord Oliver; Lloyds Bank plc v. Rosset [1990] AC 105 at 132 per Lord Bridge.

80[1979] 1 WLR 431.

81(1999) 161 ALR 473.

304 Redistributive Proprietary Remedies

in proprietary estoppel cases. Ultimately, the court took the view that it would have been improper to order specific relief, given that the plaintiff’s younger brother, in particular, had done considerable work on the property in question. In its view, the proper remedy in the circumstances was a monetary sum reflecting the value of the interest in land that the plaintiff had been promised. In addition, this view could be supported because the award of a constructive trust would have required partitioning the property in question. The arrangement agreed between the parties was made in circumstances in which they formed a functional family and it only really made sense while that continued to be the case. Given that the plaintiff was estranged from his family, it made more sense to limit his relief to a monetary award designed to compensate him for his frustrated expectations.

IV. THE PROPRIETARY STATUS AND EFFECT OF THESE REMEDIES

At the heart of the issue of the proprietary status of rights generated by proprietary estoppel are two questions that are perhaps seen as more closely related than they should be. First, it must be asked whether, prior to any judicial declaration, rights arising in this context may be asserted against third parties who have acquired an interest in the property in question from the former owner whose conduct gave rise to the estoppel. The practical implications of this are obvious. Secondly, it is sometimes asked whether, even prior to their recognition by the courts, rights to relief arising from estoppel amount to fully-fledged proprietary interests. It is less clear what should turn on this latter question.

1. Proprietary Estoppel and Third Parties

(a) Licences

If the fulfilment of a plaintiff’s expectation would result or has resulted in a right of occupation short of exclusive possession, it is unlikely that third parties will be bound by the plaintiff’s rights, whether inchoate or crystallised. However, the issue is far from resolved. In Inwards v. Baker,82 the Court of Appeal held that a successor in title was bound by an estoppel licence. However, this decision is perhaps best understood in the light of the state of the law of contractual licences at the time. In a number of decisions in this period, the Court of Appeal displayed a willingness to enforce contractual licences against third parties.83 Subsequently, in Ashburn Anstalt v. Arnold,84 the Court of Appeal largely restored the traditional

82[1965] 2 QB 29. See also Williams v. Staite [1979] Ch. 291.

83See, e.g., Errington v. Errington and Woods [1952] 1 KB 290 at 298 per Denning LJ; Binions v. Evans

[1972] Ch. 359 at 367–9 per Lord Denning MR.

84[1989] 1 Ch. 1. See K Gray and SF Gray, Elements of Land Law (London, Butterworths, 2001)

1017.

Proprietary Estoppel 305

line between contract and property in reasserting the conventional judicial wisdom that contractual licences cannot bind third parties.85 Given this view, it seems illogical to give proprietary effect to estoppel licences that arise out of less formal arrangements than do contractual licences.86 It now seems improbable that courts will hold that estoppel licences bind successors in title.87

(b) Conventional Interests in Land Awarded in Estoppel Cases

On the other hand, the courts are often prepared to award a proprietary interest in land to fulfil the minimum equity required to do justice. This may be done in various ways. Parties against whom estoppel is raised may be required to transfer their entire interest in a property to the other party.88 Alternatively, the court may declare that the plaintiff is an equitable co-owner under a constructive trust.89 Finally, the court may recognise a lesser interest, such as an easement.90 While these are fully-fledged proprietary interests, the question remains whether, prior to their declaration, they will bind third parties.

One objection to the suggestion that rights arising from proprietary estoppel should bind third parties prior to their declaration is the fact that the courts have a degree of discretion in determining the appropriate form of relief. It has been suggested that, as a result, prior to any curial resolution of the matter, the plaintiff cannot be said to have anything more than an inchoate interest, as opposed to a crystallised property right. Moreover, it is said to follow from this that the plaintiff’s rights cannot bind third parties.91 However, this does not necessarily follow. Rights arising in this context may be treated in a similar way to equities to rescind or trace—rights that clearly bind third parties even though the person enjoying those rights may not elect to exploit them. A more serious objection is that the interest that the plaintiff will ultimately be granted is not predictable enough to be said to be sufficiently “identifiable by third parties”92 to safeguard potential purchasers from the danger of unpredictable claims. The contrary view is that the discretion exercised by the courts in proprietary estoppel is sufficiently constrained

85See, e.g., King v. David & Allen Sons, Billposting [1916] 2 AC 54.

86See G Battersby, “Contractual and Estoppel Licences as Proprietary Interests in Land” [1991]

Conv. 36.

87Some dicta from the Court of Appeal suggest that estoppel licences are likely to be brought in line with contractual licences in this regard: Canadian Imperial Bank of Commerce v. Bello (1992) 64 P & CR

48 at 52 per Dillon LJ; United Bank of Kuwait plc v. Sahib [1997] Ch. 107 at 142 per Peter Gibson LJ. The point was noted but left unresolved in recent Court of Appeal decisions in Habermann v. Koehler

(1996) 73 P & CR 515 and Birmingham Midshires Mortgage Services Ltd. v. Sabherwal (2000) 80 P & CR 256 at 262 per Walker LJ.

88See, e.g., Pascoe v. Turner [1979] 1 WLR 431.

89See, e.g., the discussion in Grant v. Edwards [1986] Ch. 638; Lloyds Bank plc v. Rosset [1990] AC

90See, e.g., ER Ives. Investment v. High [1967] 2 QB 379.

91Hayton, supra n. 76 at 384.

92National Provincial Bank v. Ainsworth [1965] AC 1175 at 1248 per Lord Wilberforce.

306 Redistributive Proprietary Remedies

for there to be no real objection to holding third parties to be bound by rights arising in this context.93

The issue of the effect of these interests on third parties should ultimately be treated as one of policy. There is obviously something to be said for favouring the welfare of those who have informally formed expectations of proprietary rights over the interests of particular purchasers and the benefits of certainty for the conveyancing system as a whole.94 In unregistered land, these rights may be enforceable against all but bona fide purchasers for value without notice.95 However, the issue is perhaps now unlikely to be resolved. With unregistered land quickly disappearing, priorities will be dealt with according to the regime governing registered land. Two principal issues emerge in this regard: first, are these inchoate interests capable of registration; and, secondly, can these rights (coupled with actual occupation, if necessary) amount to overriding interests? The prevailing view is that both of these questions should be answered in the affirmative.

Certainly, it has long been thought that interests arising by estoppel can indeed bind third parties who have acquired an interest in the land in question prior to a judicial determination of how the equity should be satisfied. Writing in the seventeenth century, Coke took the view that estoppels bound successors in title.96 And there is nineteenth-century authority in which purchasers with notice are bound by rights arising in this way.97

Recent case law is perhaps too equivocal to regard the matter as conclusively decided. ER Ives Investment Ltd. v. High98 may be thought to favour the view that estoppel rights bind third parties in much the same way as other proprietary interests. In that case, a purchaser with express notice of the relevant facts was bound by an easement that arose as a result of the conduct of his predecessor in title.99 However, the case has also been interpreted as turning on a holding that the purchaser himself was estopped pursuant to some concept of mutual benefit and burden.100 The position seems clearer, on the other hand, where proprietary estoppel is used to generate an interest by way of constructive trust on the breakdown of intimate relationships. In this context, the courts have generally assumed that, even prior to any curial intervention, plaintiffs will have rights that, when coupled with actual occupation, amount to overriding interests. This perception was apparent in Lord Bridge’s judgment in Lloyds Bank v. Rosset,101 where he simply presumed that a mortgagee would be bound by the rights of an equitable

93See R Smith, ‘How Proprietary is Proprietary Estoppel?” in FD Rose (ed.), Consensus ad idem: Essays in the Law of Contract in Honour of Guenter Treitel (London, Sweet & Maxwell, 1996) 235 at 246.

94G Battersby, “Informally Created Interests in Land” in S Bright and J Dewar, Land Law: Themes and Perspectives (Oxford, Oxford University Press, 1998) 487.

95See, e.g., ER Ives. Investment v. High [1967] 2 QB 379.

96Co Litt 352 a, b. See Smith, supra n. 93 at 237.

97See, e.g., Duke of Beaufort v. Patrick (1853) 17 Beav. 60.

98[1967] 2 QB 379.

99The land in question was unregistered. The court held that the interest in question was not registerable as a land charge and so was not void for lack of registration.

100Ibid. at 795 per Lord Denning MR and 800 per Dankwerts LJ.

101[1990] AC 105.

Proprietary Estoppel 307

co-owner, regardless of whether those rights arose as a result of a common intention constructive trust or proprietary estoppel.102

2.The Nature of Plaintiffs’ Rights Prior to any Judicial Declaration

(a)The Notion that Any Proprietary Rights Recognised must have Arisen Prior to

their Declaration

Some attention has been focused on the question whether a court’s decision that a plaintiff has a proprietary interest is merely declaratory or actually gives rise to that interest. We may wonder why we would dwell on this issue. However, as we have seen, there is a tendency to take comfort from the characterisation of property rights as arising prior to any judicial intervention. Indeed, the notion that an interest may arise only when declared is taken to be one of the hallmarks of remedial constructive trust jurisprudence.103

The authorities lean toward the view that interests recognised by the courts in estoppel actions do indeed arise automatically prior to any judicial declaration. In a number of cases the courts have observed that they were merely recognising a right that had already arisen, even when the matter was not strictly relevant.104 At times, to support this conclusion, we encounter once again the maxim “equity looks on as done that which ought to be done” employed to transform obligation into ownership.105 This rather ignores the fact that precisely what ought to be done will not be apparent until the court has determined how the equity should be satisfied.

The fullest discussion of this question appears in Re Sharpe.106 The plaintiff had sold her home so that she could advance her nephew a loan to help him purchase a property. In return for this contribution, the nephew promised the plaintiff that she could live with him and his wife for as long as she wished. However, when the nephew became bankrupt, his trustee in bankruptcy contracted to sell the property with vacant possession. The plaintiff claimed that the trustee and the purchaser were affected by an equity that arose in her favour. The trustee in bankruptcy objected that, until the court had exercised its discretion to determine the minimum equity to do justice, the plaintiff did not enjoy an interest that was capable of binding third parties. Applying a line of authority now discredited,107 Browne-Wilkinson J concluded that a licence raised by estoppel could bind third parties because it was rather mysteriously coupled with a constructive trust.

102Ibid. at 129.

103See supra, ch. 1.III.5.

104Sen v. Headley [1991] Ch. 425 at 440 per Nourse LJ; Voyce v. Voyce (1991) 62 P & CR 290 at 294 per Dillon LJ.

105Commonwealth of Australia v. Verwayen (1990) 170 CLR 394 at 437 per Deane J. See supra, ch.

2.V.2.

106[1980] 1 WLR 219.

107See supra nn. 83–84 and accompanying text.

308 Redistributive Proprietary Remedies

Browne-Wilkinson J could have reached this decision without dwelling on the question whether the plaintiff enjoyed a fully-fledged property right prior to the court’s declaration that she was protected by a constructive trust. Neither authority nor principle dictates that third parties could not be bound by a plaintiff’s uncrystallised equity. However, Browne-Wilkinson J suggested that in all cases in which the courts recognise a proprietary interest, that interest must, as a matter of abstract principle, have arisen prior to the court’s consideration of the matter. In his view, the suggestion “that the courts can impose a constructive trust as a remedy” amounted to “a novel concept in English law”.108

(b) The Implausibility of this Assumption

Browne-Wilkinson J’s conclusion that “[t]he right must have arisen at the time of the transaction in order for the plaintiff to have any right the breach of which can be remedied”109 is misconceived. Even if a right to relief did demand the recognition of a particular proprietary right, this does not mean that the right must take effect automatically, rather than at the time of judgment. The plaintiff’s right may be treated as a mere equity to claim a proprietary interest, rather than a fullyfledged interest. The courts may legitimately conclude that it is more appropriate that remedies take effect when declared rather than on the occurrence of the events that give rise to the cause of action in question.110

In any event, the degree of judicial discretion involved in the determination of the appropriate remedy makes it difficult to conceive of any interest declared in a proprietary estoppel action as having arisen automatically. As Peter Birks argues, where a remedy is discretionary, “it cannot logically be said that the particular form of practical help which the remedy implies is part of the plaintiff’s preexisting entitlement”.111 In Re Sharpe Browne-Wilkinson J observed that “in order to provide a remedy the court must find a right which has been infringed”.112 Yet the existence of a right arising by estoppel does not necessarily mean that the court is obliged to award a particular interest. Proprietary estoppel claims do not merely involve the remedying of a breach of a right; they also involve a determination whether this remedy should take the form of the grant of a new proprietary interest.

It is particularly difficult to regard interests awarded in proprietary estoppel cases as arising automatically given the willingness of courts to decline a remedy where, after incurring detrimental reliance on an expectation encouraged by an owner of land, a party has received substantial benefits from the owner.113 Some

108Ibid. at 225.

109Ibid.

110See, e.g., Muschinski v. Dodds (1986) 160 CLR 583 at 615 per Deane J.

111P Birks, “Proprietary Rights as Remedies” in P Birks (ed.), Frontiers of Liability 214 at 217. See also Smith supra n. 93 at 244.

112[1980] 1 WLR 219 at 225.

113Sledmore v. Dalby (1996) P & CR 196. Supra, text accompanying nn. 47–50.

Proprietary Estoppel 309

commentators have objected to such a result, arguing that, if an equity has arisen, subsequent events should not affect the court’s choice of a remedy.114 If property rights arise automatically in this context, it follows that the decision to deny relief in response to counterveiling benefits represents an expropriation of a proprietary interest.

(c) The Practical Consequences of this Assumption

The conception of these interests as automatic apparently reassures the courts that they are not exceeding their proper role by creating property rights. However, this understanding is also likely to have a practical impact, in that it is likely to influence the determination of the question whether these rights bind third parties even prior to their declaration. As mentioned, the conceptualisation of a right as an inchoate interest need not entail the conclusion that third party purchasers cannot be affected by such a right. Instead, it could be held that, while an equity arising by estoppel crystallises into a substantive interest only when the court determines the minimum relief required to do justice, it nonetheless binds those who have notice of the relevant facts. On the other hand, there is a danger that the tendency to characterise rights awarded in proprietary estoppel cases as arising automatically may encourage the courts to assume that those rights bind third parties without a real consideration of the implications of this conclusion.

An indication that a more “remedial” conception of proprietary estoppel may have practical implications is provided by the Australian High Court decision in Giumelli v. Giumelli.115 The court indicated that the constructive trust imposed in proprietary estoppel cases “is a remedial response to the claim to equitable intervention made out by the plaintiff”.116 Moreover, it concluded that “[b]efore a constructive trust is imposed, the court should first decide whether, having regard to the issues in the litigation, there is an appropriate equitable remedy which falls short of the imposition of a trust”.117 While the court below had granted a constructive trust, the High Court was concerned that this remedy was rather harsh on the defendants and a younger son who had made substantial improvements to the property in question since the plaintiff had left. Consequently, it limited the plaintiff’s remedy to an award of damages.

The Australian High Court in Giumelli v. Giumelli eschewed an absolutist perspective of property rights. Instead, it favoured an approach that balanced the respective claims of the parties and gave the fairest remedy in the circumstances. It would have been difficult for the court to reach the same conclusion if it had started from the position that constructive trusts awarded in the context of proprietary estoppel arise automatically.

114JE Adams, “Is Equitable Estoppel a Wasting Asset?” [1997] Conv. 458 at 463.

115(1999) 161 ALR 473. For the facts of the case see supra, accompanying text to nn. 60–61.

116Ibid. at 475.

117Ibid. at 476 citing Bathurst City Council v. PWC Properties Pty Ltd. (1998) 195 CLR 566. See also Lord Napier & Ettrick v. Hunter [1993] AC 713.

310 Redistributive Proprietary Remedies

V. CONCLUSION

The growing pains that proprietary estoppel has endured in recent years have in large part been due to the difficulties that we face in reconciling the emerging remedy with axiomatic notions of property and contract. There is a temptation to conceptualise the doctrine so as to suppress the extent of the difficulties that we face in this regard. The characterisation of proprietary estoppel as an evidential device obscures the significance of the doctrine by suggesting that it is not part of the substantive law. A second strategy involves the depiction of proprietary estoppel as involving nothing more than the enforcement of agreements and promises, thereby suggesting that it does not threaten the understanding that property rights can be redistributed only with consent. Finally, the view that the rights that are recognised by the courts arise prior to their declaration assuages our fears of discretionary proprietary remedies. Ultimately, none of these strategies should be permitted to obscure the possibilities for the judicial redistribution of property underlined by proprietary estoppel.

312 Redistributive Proprietary Remedies

some influence on domestic law. And, indeed, from time to time, there are efforts to explain existing common law norms or to create new norms by analogy with principles found in maritime law.

The principal maritime liens recognised under the general law of the sea arise in the context of salvage, bottomry (the provision of necessaries), seamen’s wages and damage.2 The right that masters have to a lien to secure their rights to be indemnified for disbursements and liabilities may be compared with the rights that trustees enjoy over trust property.3 It is more difficult to identify any common law equivalent to other instances of maritime liens. Liens securing masters’ and seamen’s rights to wages reflect a decision to make employees preferential creditors in a manner similar to that found in domestic insolvency legislation. The recognition of these rights perhaps reflects the fact that it is difficult to treat a seaman’s decision to continue to provide services when unpaid as voluntary given that the realities of life at sea mean that there will often be practical and moral difficulties in withdrawing such services.

Perhaps the strangest of maritime liens is that arising in favour of the owner of a ship wrongfully damaged by a collision with another vessel. The owner’s personal right to compensation may be enforced against the defendant’s vessel and will bind innocent purchasers of the vessel.4 It is difficult both to identify the origins of this lien and to justify its existence. Its recognition probably owed something to the same instinct that gave rise to the law of deodands that existed at common law until its abolition in the middle of the nineteenth century.5 Chattels that were the instrument of the death of a person could be seized as “deodands” by the courts and used for charitable purposes, such as providing for the welfare of the deceased’s dependants. This seems to reflect a primitive tendency to endow inanimate objects with personality and therefore responsibility.6 Whatever its origins, the survival of this property right is no doubt largely due to its usefulness as a means of circumventing practical difficulties that arise in attempting to obtain redress for accidents that occur on the high seas. Nonetheless, it is difficult to see why, in the event of shipowners becoming bankrupt, these victims should have priority over their contract creditors and the rights of tortfeasors whose claims arise under domestic law.7

2Liens in respect of masters’ wages and disbursements and liabilities were added by statute in the 19th century.

3See infra, text accompanying nn. 30–34.

4The Bold Buccleugh (1851) 7 Moo. PC 267; Currie v. M’Knight [1897] AC 97.

5See, e.g., JH Baker, An Introduction to English Legal History (3rd edn., London, Butterworths, 1990) 437.

6O Wendell Holmes, The Common Law (Boston, Mass., Little, Brown, & Co, 1881) 26–28.

7There is some suggestion that a damage lien will take priority over prior mortgages and other liens. See K McGuffie, Admiralty Practice (London, Stevens, 1964) 1574. Certainly there are cases in which a damage lien has taken priority over prior charges: see, e.g., The Aline (1839) 1 Wm. Rob. 111 at 118 per Dr Lushington (contest with the holder of a bottomry bond); The Benares (1850) 14 Jur. 581 (contest with wages claimants). However, in The Inna [1938] P 148 it was held that a salvage lien had priority over an earlier damage lien. Moreover, there is considerable support for the view that there is a significant degree of discretion involved in determining priority between competing charges: see DR Thomas, Maritime Liens (London, Stevens, 1980) 234; The Ruta [2000] 1 WLR 2068 at 2075–6 per David Steel J.

Liens Arising from the Aquisition, Preservation or Improvement of Assets 313

The most important lien for the purposes of this study is that arising over salvaged property. The right allows salvors to have such property sold to provide security for their claims for remuneration for their services. While it is difficult to regard the salvor as an involuntary creditor, it may be thought unreal and inappropriate to require potential salvors to pause either to negotiate for secured rights or to evaluate the risks that they would assume as unsecured creditors. Moreover, given that a salvor’s claim is limited by the value of the property saved, this can be said to be part of a defendant’s estate that would not be available for distribution amongst creditors were it not for the salvor’s intervention. It is presumably for this same reason that the salvor’s lien is given priority over prior liens8 and, perhaps, even over earlier mortgages.9

2. The Nature of the Maritime Lien

Rather controversially, the House of Lords concluded in The Halcyon Isle10 that a repairer’s maritime lien granted under US law was a mere remedy rather than a substantive right. The issue arose for the purposes of determining the applicable law for resolving which of two competing charges had priority in the context of the distribution of the proceeds of sale of a ship arrested and sold in Singapore. The competition was between a lienee (a US ship repairer) and a mortagee (an English bank). While the repairer would have had priority under US law, the mortgagee would have had priority under Singaporean (and English) law. The House of Lords concluded that the matter was to be determined by the law of the forum deciding the matter, rather than the law of the jurisdiction in which the events that gave rise to the lien occurred. This was explained on the basis that the determination of priorities was a question of procedure rather than substantive property rights.11 Moreover, the majority made much of the fact that, in their view, a potential lienee’s right could only be charactertised as inchoate prior to any judicial intervention.12

There is much to be said for the view of the minority that these remedies are available as of right and that, as a consequence, they are properly regarded as substantive rights.13 More importantly, the reasoning of the minority implicitly recognises that the difficulties raised by the inter-jurisdictional enforcement of proprietary remedies cannot be adequately addressed by formalistically focusing

8See, e.g., The Inna [1938] P 148 (earlier damage lien); The Veritas [1901] P 304 (earlier salvage

lien).

9The Veritas [1901] P 304 at 313 per Gorell Barnes J (obiter).

10[1981] AC 221. See also supra n. 7.

11Ibid. at 234 per Lord Diplock.

12This may be compared with the tendency of English courts to ignore this issue elsewhere—a tendency that is especially apparent in the law of proprietary estoppel. See supra, ch. 13.IV.2.

13Ibid. at 250 per Lords Salmon and Scarman. See also D Jackson, Enforcement of Maritime Claims (2nd edn., London, LLP, 1996) 221–3; W Tetley, Maritime Liens and Claims (London, Business Law Communications, 1985) 541.

314 Redistributive Proprietary Remedies

on the juridical nature of the right in question. The minority accepted that such questions of priority would inevitably give rise to acutely difficult conflict of laws issues if maritime nations did not adopt a harmonious approach to the issue. Nonetheless, they noted that the priority afforded to the repairer’s lien under US law was defensible, given that “these repairs must have added to the value of the ship and therefore to the value of the security of the appellant mortgagees”.14 In addition, they observed that, had the ship-repairers not believed that their rights would be determined by US law, “they would never have allowed the ship to leave their yard without payment”.15 Supporting this conclusion was the fact that in England, where such a lien is not available, ship-repairers “rarely allow the ship to leave their yard until they are paid, or have arranged other security for the repairs”.16

II. EQUITABLE LIENS: “A THEMELESS RAGBAG”?17

1. Introduction

The term “equitable lien” is generally used to describe a right that gives the holder a charge over a particular asset to secure a liability incurred by the owner of that asset. Unlike a common law lien, an equitable lien does not generally require that the lienee have possession of the asset. The right binds subsequent purchasers of the asset and is enforceable in bankruptcy.

Equitable liens arise in a number of specific instances, many of which have little in common. At times it is used as a remedy in the context of quite broad-reaching doctrines. We have already seen how those who are able to trace the proceeds of their property in equity have the right to choose between a constructive trust and a lien.18 Similarly, the lien is often used as a remedy in the context of doctrines that provide for the distribution of proprietary rights on the breakdown of intimate relationships.19

Elsewhere, the lien is employed in a more ad hoc fashion. Thus, as we have also seen, the lien is used along with the constructive trust to distribute rights and obligations between vendors and purchasers in the transitional stages of specifically enforceable arrangements to assign property.20

Finally, the remedy is used in certain circumstances that have in common the fact that the plaintiff has contributed to the acquisition, salvage, maintenance or

14Ibid. at 246.

15Ibid.

16Ibid.

17D Waters, “Where is Equity Going?” (1988) 18 UWALR 3 at 24.

18Re Hallett’s Estate (1880) 13 Ch. D 696 at 709 per Jessel MR . See supra, ch. 5.

19See supra, ch. 10.V.3.

20See supra, ch. 8.II.

Liens Arising from the Aquisition, Preservation or Improvement of Assets 315

improvement of the defendant’s property. These liens arise where, although the plaintiff cannot be said to be an involuntary creditor, the award of a proprietary interest can be defended on the basis that it encourages those in the position of the plaintiff to contribute their services.

2. A General Right to a Lien over Salvaged Property?

From time to time it is suggested that English law may provide for a general right to a lien over property salvaged or preserved through a plaintiff’s efforts. Thus, the lien that solicitors have over property recovered for their clients to secure sums due for their services is sometimes explained by analogy to the salvor’s lien.21 Nonetheless, the courts have generally resisted the suggestion that a general salvor’s lien should be recognised in domestic law.22

In cases where one beneficiary of a life assurance arrangement has, by paying premiums, kept the policy alive, thereby profiting another who has a beneficial interest in the policy, the courts have refused a right to contribution, let alone given a lien. Thus, in Falke v. Scottish Imperial Insurance Company,23 Bowen LJ rejected the suggestion that principles applicable to salvage in maritime law had any application in English domestic law.24 In Re Leslie,25 Fry LJ concluded that such a lien would arise only: (a) “[b]y contract with a beneficial owner of the policy”; (b) “[b]y reason of the right of trustees to an indemnity out of . . . trust property for money expended by them in its preservation”; (c) “[b]y subrogation to this right of trustees of some person who may at their request have advanced money for the preservation of the property”; and (d) “[b]y reason of the right vested in mortgagees, or other persons having a charge upon the policy, to add to their charge any moneys which have been paid by them to preserve the property”.26 This amounts simply to an enumeration of different cases in which a lien arises rather than an effort to explain why the right should be available in these cases and why it should be denied in others. For example, no explanation is provided for the right of creditors dealing with a trustee to enjoy the trustee’s rights to a lien over trust property. Similarly, the right of anyone with a charge on the policy to “add” sums spent on the policy to their charge remains unexplained. Why should a co-owner not equally be allowed to add money spent on the policy to his or her interest under the policy? It may be objected that such co-owners are volunteers or that their contribution is motivated by a desire to preserve their own property. Yet, where those with a partial interest in land repay a secured debt

21Scholey v. Peck [1893] 1 Ch. 709 at 711 per Romer J.

22See, e.g., Nicholson v. Chapman (1793) 2 H Bl 254 at 258–9 per Eyre CJ; Falke v. Scottish Imperial Insurance Co. (1886) 34 Ch. 234.

23Ibid.

24Ibid. at 248–9.

25(1883) 23 Ch. 552.

26Ibid. at 560.

316 Redistributive Proprietary Remedies

in order to protect their own interest, such considerations do not prevent their subrogation to the position of the creditor, thereby allowing them to exercise rights of security against others who have an interest in the property.27

Recently, denying that principles applicable to salvage in maritime law have any role to play in domestic English law, the House of Lords refused to recognise a right of remuneration for services provided in salvaging a vessel on the Thames.28 Ultimately, their Lordships concluded that such a fundamental change of the law was a matter for the legislature.29

3.Particular Equitable Liens arising from the Acquisition, Preservation or Improvement of Assets

(a) The Trustee’s Lien

As Lindley LJ explained in Re Beddoe30:

a trustee is entitled as of right to full indemnity out of his trust estate against all his costs, charges, and expenses properly incurred: such an indemnity is the price paid by cestuis que trust for the gratuitous and onerous services of trustees; and in all cases of doubt, costs incurred by a trustee ought to be borne by the trust estate and not by him personally.31

Thus, trustees who incur expenses in performing their trust duties are entitled to a lien over trust assets that will bind the receiver or trustee in bankruptcy. For example, trustees who properly bring or defend an action on behalf of the trust have a lien over the trust’s assets for the costs incurred.32 Similarly, before accounting for rents received from trust property, trustees may set off any expenses incurred in discharging their duties.33 In addition, debts incurred by trustees running the business of a deceased for the benefit of the deceased’s beneficiaries will be secured by a lien over the business’s assets.34

The lien that arises in these circumstances provides an effective mechanism for ensuring that trustees are not left out of pocket and thereby gives an incentive for people to accept the office. It makes sense that trustees are not left to do so. There would often be difficulties with a rule that requires them to do so. It may be awkward to gain the fully informed consent of beneficiaries, who will not always have much understanding of the business in question. Moreover,

27See e.g., Countess of Shrewsbury v. Earl of Shrewsbury (1790) 1 Ves. Jun. 227. See supra, ch. 11.

28The Goring [1988] AC 831.

29Ibid. at 857 per Lord Brandon.

30[1893] 1 Ch. 547.

31Ibid. at 558.

32Cf. Re Beddoe [1893] 1 Ch. 547 (where the trustee’s resistance of a beneficiary’s claim was unwarranted).

33Stott v. Milne (1884) 25 Ch. D 710.

34Benett v. Wyndham (1862) 4 De GF & J 259; Re Johnson (1880) 15 Ch. D 548. For creditors’ rights to acquire these rights by subrogation see supra, ch. 11.IV.3.

Liens Arising from the Aquisition, Preservation or Improvement of Assets 317

beneficiaries will not always be sui juris and it would be cumbersome to seek the leave of the court to allow trustees to act in these circumstances.

(b)The Solicitor’s Lien

(i)The Nature of Solicitors’ Rights over Property They Have Helped to Recover or Preserve

Solicitors are entitled to a lien over property, other than real estate,35 recovered or preserved in litigation, arbitration or even by way of compromise36 to secure payment of their costs.37 While the lien is sometimes described as a common law lien, it seems in truth to be a creature of equity and differs from common law liens in that it does not depend upon possession and may be actively enforced.38

Presumably, the rationale for the right lies in the notion that, without it, impecunious litigants would have trouble obtaining representation. The lien has been equated with rights arising from salvage.39 However, compared with the salvage situation, it is not clear why solicitors are not required to bargain for such a right, should they think it necessary to protect themselves against the risks of clients’ bankruptcy. Perhaps, then, it is best explained as a sui generis privilege extracted by an interest group that is in a particularly good position to convince the courts of its need for special protection.

What is the nature of the interest that solicitors have in the proceeds of a judgment secured through their efforts? The issue was addressed in Mercer v. Graves,40 where a defendant was ordered to pay the plaintiff’s costs after a case in Ireland was nonsuited. The defendant responded that the plaintiff was still indebted to him for a similar sum for various unsatisfied judgments in the Irish courts and claimed the right to set this off against the plaintiff’s claim. However, the plaintiff’s solicitor responded that set-off ought not be allowed because it would undermine the solicitor’s right to a lien over the sum that the defendant was liable to pay to the plaintiff. Moreover, the plaintiff’s solicitor claimed that the plaintiff was a trustee for his solicitor of his right to the money due under the judgment.

The court rejected the plaintiff’s solicitor’s contention. Blackburn J analysed the matter as follows:

I do not think the attorney, when he has conducted an action to judgment, for which costs are owing to him, stands in the position of a cestui que trust, having an equitable interest in the proceeds of the judgment. The attorney having successfully brought a suit

35Shaw v. Neale (1885) 6 HL Cas. 581.

36Ross v. Buxton (1889) 42 Ch. D 190. However, the lien does not arise in respect of property recovered by mere negotiation: Meguerditchian v. Lightbound [1917] 1 KB 298.

37Bozon v. Bolland (1839) 4 My. Ch. 354; Mackenzie v. Mackintosh (1891) 64 LT 706; Lann v. Church

(1820) 4 Madd. 491; Stephens v. Weston (1824) 3 B & C 535; Watson v. Maskell (1834) 1 Bing. NC 366.

38Barker v. St Quintin (1844) 12 M & W 441; Fairfold Properties Ltd. v. Exmouth Docks [1993] Ch. 196.

39Scholey v. Peck [1893] 1 Ch. 709 at 711 per Romer J.

40(1872) LR 7 QB 499.

318 Redistributive Proprietary Remedies

to judgment, has a right to retain any documents in his hands, and the effect is that the money, the fruits of the judgment, passes through his hands, and then he has a right to retain his costs, and any other costs due to him. To some extent the Courts, both of law and equity, will protect the attorney’s interests, so as not to deprive him of his costs. But the protection the Courts afford to the attorney stops very far short of putting him in the position of cestui que trust to his client.41

While the conclusion that solicitors are not beneficiaries with respect to assets recovered by their efforts is surely correct, it hardly follows that they have no equitable interest in those assets. The real issue is whether, before the client actually receives any money, a solicitor entitled to a “lien” has a more contingent proprietary interest in the nature of a charge.

Rather strangely, courts have often asserted that the solicitor’s entitlement in these circumstances amounts to nothing more than a right to apply to the court to impose a charge, and that, until such an application is made, the solicitor has no proprietary interest.42 This view and its implications are apparent in the decision of the divisional court of King’s Bench in James Bibby Ltd. v. Woods and Howard.43 There, judgment creditors of the plaintiff solicitor’s client obtained a garnishee order in respect of money that the garnishee had agreed to pay to the client under a compromise of actions between the parties. While this obviously undermined the solicitor’s own claim to the money due to their client pursuant to the compromise, the Court showed little sympathy. Goddard CJ remarked of the solicitor’s claim:

It was said that he had a lien or charge on it because he had a right to apply to the court for a charging order. . . . But until he got the charging order he only had at the most an inchoate right to apply for one; he had not a lien on the money. That is clear if the nature of his so-called “lien” is understood. A “lien,” in the strict sense of the word, can only exist where the person claiming the lien has the property which he claims to be subject to the lien in his possession.

(ii) Are Liens Limited to Possessory Rights?

Goddard CJ’s suggestion that, properly speaking, liens exist only where a claimant has possession of the property in question reflects a widely held misconception.44 Thus, it was largely on the basis of this understanding that, in Shaw v. Neale,45 the House of Lords held that a lien does not arise in respect of real estate recovered through a solicitor’s efforts. In the view of Chelmsford LC, solicitors could not enjoy a lien over real estate because they never took possession of it: at the most, they could have a lien over documents of title.46 However this perception is plainly

41(1872) LR 7 QB 499 at 504.

42Barker v. St Quintin (1844) 12 M. & W. at 451; Mercer v. Graves (1872) LR 7 QB 499; James Bibby Ltd. v. Woods and Howard [1949] 2 KB 449.

43Ibid.

44For observations to the same effect see Mercer v. Graves (1872) LR 7 QB 499 at 503 per Cockburn

CJ.

45(1885) 6 HL Cas. 581.

46Ibid. at 601–2.

Liens Arising from the Aquisition, Preservation or Improvement of Assets 319

wrong. In part, it results from the understanding that these liens were a product of the courts of common law rather than equity—a view that has long since been rejected. In addition, this misunderstanding reflects a view that only possessory liens are worthy of the term and that equitable liens are a lesser right. Thus, in Brunsdon v. Allard,47 Erle J remarked that the word, “ ‘[l]ien’ properly applies to a chattel, and saying an attorney has a lien is only metaphorical, and the words ‘equitable lien’ are intensely undefined”.48

In fact, non-possessory equitable liens represent an important form of proprietary right conferring rights in assets that are enforceable against third parties in a wide range of circumstances. An example is the purchaser’s right to a lien over land to secure the repayment of any deposit held by the vendor in the event that the conveyance should not be completed through no fault of the purchaser.49 In principle, there is no reason why solicitors’ rights should not equally be treated as being enforceable in the absence of possession.

(iii) Are a Solicitor’s Rights “Inchoate” and Does it Matter?

The conclusion that, before seeking judicial assistance, solicitors have merely an inchoate right is dubious. Given that solicitors are entitled to the right unless they have done something that would make it inequitable to enforce it, it is difficult to see why there is any need to characterise the right as inchoate rather than arising prior to any judicial intervention. Indeed, the analysis of the right as inchoate is odd given the insistence of English courts in other contexts that proprietary remedies pre-exist judicial intervention.50 More importantly, even if the right is “inchoate” this does not in itself indicate that it should not take priority over other claims. Thus, while the right to rescind, the right to claim traceable proceeds and rights to relief for proprietary estoppel may all be characterised as inchoate rights, they are all effective to give claimants priority over all but bona fide purchasers.51

(iv) What Makes a Right Proprietary?

What should determine whether the solicitor’s lien is properly characterised as proprietary? In Mercer v. Graves, Blackburn J relied upon an earlier dictum of Baron Parke that “[t]he lien which an attorney is said to have on a judgment (which is, perhaps, an incorrect expression), is merely a claim to the equitable interference of the Court to have that judgment held as a security for his debt”.52 This is not terribly helpful. Ultimately, a property right reflects nothing more than the fact that the courts will come to the aid of individuals in recognition of their rights to a particular asset. If, as in the context of the solicitor’s lien, the courts will

47(1859) E & E 19.

48Ibid. at 27.

49See supra, ch. 8.II.1(c).

50See, e.g., Re Sharpe [1980] 1 WLR 219 at 225 per Browne Wilkinson J. See especially supra, ch. 1.III.5 and ch. 13.IV.2.

51For a discussion of this issue in relation to proprietary estoppel see supra, ch. 13.IV.

52Barker v. St Quintin (1844) 12 M & W at 451.

320 Redistributive Proprietary Remedies

habitually uphold a right against third parties it is difficult to see that the right in question should not be termed proprietary.

(v) Protection against Third Parties

Goddard CJ’s view that the solicitor’s “lien” is not an existing property right but, rather, merely a form of judicially granted execution order, left him disinclined to accept that it might take priority over a competing garnishee order. In his view, “[g]arnishee proceedings are one form of execution and . . . it not infrequently happens that, where there are several claims, or may be several claims, against money, the person who gets in first gets the fruits of his diligence”.53 It is odd to equate the solicitor’s lien with other forms of execution such as charging orders. A charging order sought by a judgment creditor is very much treated as a remedy that lies within the discretion of the court and which may be refused if it would be unduly prejudicial to other creditors.54 In contrast, the solicitor’s lien is not dependent upon the court’s discretion in any strong sense.

It is clear from case law that, even prior to any judicial intervention, solicitors’ rights affect third parties. For one thing, if the solicitor’s lien could really be equated with charging orders given to judgment creditors, it would be unlikely that the courts would impose a lien in favour of a solicitor after his or her client has become bankrupt. However, it is well established that solicitors have the right to have a lien recognised and enforced in insolvency.55

Confusion about the relationship of liens and charging orders is apparent in the judgment of Farwell J in Re Born.56 There, solicitors acting for a private company succeeded in establishing a claim against an estate in the course of administration by the court. Before the claim had been paid, the company went into compulsory liquidation. The solicitors then applied for a charging order on the company’s share of the fund held by the court. Farwell J granted the order on the ground that, as the solicitors were already entitled to a lien, he was not giving them a new right, but merely enabling them to enforce a right they already had.57 This suggests that the solicitors had an existing proprietary right and not a mere claim to ask the court for relief. On the other hand, it is difficult to see why it was necessary to award a charging order if the plaintiff already had a proprietary right in the nature of a lien.

The suggestion that the solicitor’s lien is merely a form of execution is also difficult to reconcile with authorities holding that the rights of a solicitor who has yet to seek the assistance of a court take priority over the rights of creditor who has obtained a garnishee order nisi.58 What is it that allows a solicitor to intervene and

53Barker v. St Quintin 12 M & W at 455.

54Charging Orders Act 1979, s. 1(5). See, e.g., Rainbow v. Moorgate Properties Ltd. [1975] 2 All ER 821; Roberts Petroleum Ltd. v. Bernard Kenny Ltd. [1983] 2 AC 192; Harman v. Glencross [1986] Fam. 81.

55See, e.g., Ex parte Cleland (1867) LR 2 Ch. App. 808.

56[1900] 2 Ch. 433.

57Ibid. at 435.

58See, e.g., Sympson v. Prothero (1857) 26 LJ (Ch.) 671; Eisdell v. Coningham (1859) 28 LJ (Ex.) 213; Dallow v. Garrold (1884) 14 QBD 543; Loescher v. Dean [1950] Ch. 491.

Liens Arising from the Aquisition, Preservation or Improvement of Assets 321

ensure that any order absolute be made subject to the solicitor’s lien, if not the fact that the solicitor has a property right in the assets in question?

Moreover, even more difficult to reconcile with the notion that a solicitor has no proprietary right that pre-exists judicial intervention are cases that give a solicitor’s lien priority over mortgages. The solicitor’s lien will prevail over mortgages that were granted prior to the point in time at which the action in question was brought where that action served to preserve the interest mortgaged.59 This was the case in Scholey v. Peck.60 The beneficiary of a marriage settlement had three properties conveyed to him by way of mortgage. Subsequently, without the knowledge of his trustees, the beneficiary entered into an estate contract to convey the properties to Scholey. He in turn mortgaged his interest under the estate contract to a Miss Cardale. Subsequently, the trustees, acting as mortgagees, attempted to sell the properties by auction. Scholey then sought a remedy in respect of a property for which he had paid the purchase price. After specific performance was awarded, the question arose whether Scholey’s solicitors’ lien took priority over Cardale’s interest. Romer J concluded that it did, observing that:

Here undoubtedly the property was preserved by the action brought by these solicitors on behalf of the plaintiff [the mortgagor], and but for the proceedings taken by them the mortgagee would have lost her security. . . . [Thus] the solicitors are entitled to the charge for which they ask, not only against the plaintiff, but also against the mortgagee, who is taking the benefit of the action, and over whose mortgage they must have priority.61

Finally, the notion that, prior to seeking judicial assistance, solicitors have no proprietary interest whatsoever is difficult to square with authority that third parties may be liable for interfering with property affected by such a lien if they have notice of that interest.62 Thus in Ross v. Buxton,63 the defendant had paid £50 into court in satisfaction of all damages to which the plaintiff might have been entitled.64 However, before the trial, the defendant and his solicitors settled the matter with the plaintiff without his solicitor on the basis that the plaintiff should receive the money that had been paid into court. The plaintiff’s solicitor gave the defendant’s solicitors notice that they should not pay the plaintiff any money until his costs in the action had been paid. Nonetheless, upon obtaining payment out to themselves of the money, the defendant’s solicitors paid it over directly to the plaintiff. It was held that the defendant’s solicitors and the plaintiff were liable, given that they had express notice of the plaintiff’s solicitor’s lien. Thus, the court treated the solicitor’s rights as binding third parties despite the fact that there had been no prior judicial recognition of those rights.

59See, e.g., Faithfull v. Ewen (1878) 7 Ch. D 495.

60[1893] 1 Ch. 709.

61Ibid. at 711.

62See, for an early example, Ormerod v. Tate (1801) 1 East 464.

63(1889) 42 Ch. D 190.

64This money was viewed by the court in Ross v. Buxton as money recovered with the assistance of the solicitor and thus subject to a lien.

322 Redistributive Proprietary Remedies

(vi) Limitations on the Solicitor’s “Lien”

Mercer v. Graves illustrates one reason why there is a reluctance to describe the rights in question as proprietary. The claim that solicitors have to the proceeds of any judgment is more contingent than a typical right of security because the courts have, perhaps quite rightly, recognised that in some circumstances it is liable to be lost in a way that other property rights are not. Thus, as in Mercer v. Graves, the solicitor’s lien may be lost because another party is allowed to exercise rights of set-off enjoyed against the solicitor’s client.65 Similarly, provided that it is done in good faith, solicitors’ clients are free to compromise actions in a way that would undermine solicitors’ rights to any proceeds that might have eventuated from the action. It follows that the solicitor’s lien is vulnerable in a way in which, for example, an ordinary mortgage would not be. However, just because a particular right will not be enforced against certain third parties does not necessarily mean that it should not be regarded as a right of property. Property rights vary widely in their effect. It should be remembered that the rights arising from express and implied trusts came to be regarded as proprietary despite the fact that they are vulnerable to the claims of bona fide purchasers of the legal title.66 In the final analysis, the solicitor’s lien is enforced against a sufficiently wide class of third parties in a sufficiently predictable manner for it to be properly regarded as a proprietary right.67

(c) Liens over Mistakenly Improved Land

In Cooper v. Phibbs,68 an uncle incurred considerable expense in developing a salmon fishery. He subsequently granted a lease of the property to his nephew. When it transpired that the property had belonged to the nephew all along, the nephew understandably sought to rescind the lease. The court held that the defendant was entitled to a lien to secure his expenditure on the fisheries. While it may be tempting to subsume this decision into the law of proprietary estoppel, this would be difficult. For one thing, the uncle’s acts to his detriment in reliance on the mistake in question were not encouraged by his nephew. As a result, the uncle’s claim would not satisfy even the generous approach favoured by Oliver J in Taylors Fashions Ltd. v. Liverpool Victoria Trustees Co. Ltd.69 Moreover, while the remedies given by the court in proprietary estoppel actions are typically aimed at fulfilling claimants’ expectations, the remedy in Cooper v. Phibbs was designed merely to ensure that the nephew was not enriched by his uncle’s mistake. One thing is quite clear: this was a remedy that had the effect of redistributing the nephew’s property rights without his consent.

65However, the outcome in Mercer v. Graves is difficult to reconcile with the decision in Ex parte Cleland (1867) LR 2 Ch. App. 808, where the court refused to allow a defendant to set off a debt that the solicitor’s client owed him against costs that he had been ordered to pay to the solicitor’s client on the grounds that the solicitor enjoyed a lien on those costs.

66See supra, ch. 1.I.

67A Honoré, “Rights of Exclusion and Immunities against Divesting” (1960) 34 Tulane L Rev 453 at 466.

68(1867) LR 2 HL 149.

69[1982] QB 133. See supra, ch. 13.II.2.

Part III

Restitution and Property Rites