Possession proceedings — Proprietary estoppel — Expectation of renewing leases to perpetuity — Practice of predecessor in title to renew leases — Whether practice founding proprietary estoppel — Whether freeholder required by estoppel to renew leases
The appellant owned a number of plots of land, upon each of which stood a single-storey bungalow. The two respondents had each held leases of their respective plots, with a condition that they would, on the expiry of the terms, remove all buildings erected by the tenants. The appellant’s predecessor in title had, at all material times, proceeded on the basis that the bungalow structures were owned by the tenants. After acquiring the freehold in December 1999, the appellant formed the view that the bungalow structures were part of the freehold. On the expiry of the leases, each respondent had been offered a new lease on terms that were not acceptable, and each had refused an offer to purchase the freehold. Neither respondent residentially occupied their respective bungalows.
In 2000, the appellant commenced possession proceedings against the respondents. The respondents’ defences were that they were the owners of the respective bungalow structures, which did not form part of the freehold, or, alternatively, that the claim for possession infringed their human rights. The appellant appealed the decision of the county court judge, who had decided that the respondents were entitled in equity to new leases of their respective plots at a ground rent, but were not the owners of the bungalow structures. The judge found that unconscionability arose from the long-standing practice of the appellant’s predecessor that tenants would be entitled to renew their leases in perpetuity. The appellant appealed and the respondents cross-appealed. The cross-appeal was not pursued following the appellant’s concession that the respondents were entitled to remove their bungalows within a reasonable time after the expiry of their leases.
Held: The appeal was allowed. A landlord’s long-standing practice of renewing leases at a ground rent cannot in itself justify an expectation on the part of the tenants that that practice will continue in perpetuity. The mere fact that it might be reasonable for a tenant to incur capital expenditure on the likelihood of the practice continuing could not be sufficient to convert the long-standing practice into a representation or assurance sufficient to found proprietary estoppel.
The following cases are referred to in this report.
Basham (deceased), Re [1986] 1 WLR 1498; [1987] 1 All ER 405
Elitestone Ltd v Morris [1997] 1 WLR 687; [1997] 1 All ER 513; [1997] 2 EGLR 115; [1997] 27 EG 116
Gillett v Holt [2001] Ch 201; [2000] 3 WLR 815; [2000] 2 All ER 289
Wayling v Jones (1995) 69 P&CR 170, CA
This was an appeal by the appellant, Keelwalk Properties Ltd, against a decision of Judge Barber, sitting in Hull County Court, in possession proceedings against the respondents, Mrs Betty Waller and Mrs Phyllis Griffiths.
John Furber QC and William Hanbury (instructed by Gosschalks, of Hull) appeared for the appellant; Joseph Harper QC and Timothy Hartley (instructed by Thorpe & Co, of Filey) represented the respondents. |page:80|
Giving judgment, JONATHAN PARKER LJ said:
Introduction
[1] Keelwalk Properties Ltd (Keelwalk), the claimant in two sets of proceedings heard together, appeals against an order made by Judge Barber, sitting in Kingston-upon-Hull County Court, on 12 December 2001. By his order, the judge dismissed Keelwalk’s claims for possession and mesne profits against the defendants, Mrs Betty Waller and Mrs Phyllis Griffith. Mrs Waller and Mrs Griffith are the respondents to the appeal.
[2] Keelwalk is the freehold owner of a number of plots of land forming part of the Marine Valley Estate, which is situated on the coast near Flamborough, in Yorkshire. On each plot stands a single-storey wooden bungalow.
[3] Mrs Waller is the former tenant of one of the plots owned by Keelwalk: 6 Marine Valley. She held the plot under a 15-year lease, dated 9 August 1983, granted by a predecessor in title of Keelwalk, T Herbert Kaye’s Estate Ltd (THK), to a Mr and Mrs Walker. The lease, which was at a ground rent, expired by effluxion of time on 30 June 1998. Keelwalk offered Mrs Waller a new lease, albeit at a rack-rent, but Mrs Waller (acting by her son, Mr Brian Waller, as her attorney) rejected that offer. She also rejected an offer by Keelwalk to sell her the freehold of the plot. Mrs Waller does not occupy 6 Marine Valley as her residence.
[4] Mrs Griffith is the former tenant of another of the plots owned by Keelwalk: 2 David Lane, Marine Valley. She held that plot under a five-year lease dated 15 June 1995, granted to her by THK, also at a ground rent, which expired by effluxion of time on 30 June 2000. Like Mrs Waller, Mrs Griffith rejected offers by Keelwalk to grant her a new lease, at a rack-rent, or to sell her the freehold. Mrs Griffith does not occupy 2 David Lane as her residence.
[5] In or about October 2000, Keelwalk commenced possession proceedings against Mrs Waller and Mrs Griffith on the ground that their leases had expired. Mrs Waller and Mrs Griffith each delivered a defence and counterclaim in similar terms. By way of defence, each contended, first, that the structure of the bungalow standing on her plot was her property, and did not form part of the freehold title; alternatively, that Keelwalk’s claim to possession infringed her human rights. Paragraph 8 of the defence and counterclaim in each case was in the following terms:
Yet further and in the alternative it will be contended for the Defendant that the Claimant is, by reason of the matters hereinbefore set out, estopped from denying that the Defendant owns the said dwelling [that is to say, the bungalow], its structure and the materials of which it is made.
[6] By way of counterclaim, each sought a declaration that she was entitled to retain and use the bungalow, subject to the payment of a fair market rent for the plot, together with injunctive relief against Keelwalk. Neither claimed in terms to be entitled to a new lease at a ground rent. By its reply, Keelwalk contended that the bungalows formed part of the freehold title, denied any infringement of human rights, and denied the allegation of estoppel. In response to a request by Keelwalk for further information as to what type of estoppel was relied upon, and what facts or matters were relied upon as raising the estoppel, Mrs Waller and Mrs Griffith each pleaded as follows:
As is pleaded the facts and matters set out in the earlier paragraphs of the Defence are relied upon in support of the estoppel raised. It is contended that the Claimant is estopped by the conduct of the Claimant and/or its predecessors in title in entering into leases in the terms of these leases, in encouraging building at the expense of the Defendant’s predecessors in title of dwellings on the land so leased and by reason of the other matters set out in the Defence.
[7] The judge dismissed Keelwalk’s claims for possession, holding that Mrs Waller and Mrs Griffith were entitled in equity to new leases of their respective plots at a ground rent, but he rejected their contention that they owned the structure of the bungalows, and he granted an injunction restraining them from entering onto the plots and removing the bungalows.
[8] The judge refused Keelwalk permission to appeal, but permission was granted by Dyson LJ on the papers on 5 February 2002.
[9] Mrs Waller and Mrs Griffith sought permission to cross-appeal against the judge’s finding that they do not own the structure of the bungalows, and permission was granted by Tuckey LJ on 17 April 2002. However, in this court, Keelwalk has conceded that, under the terms of the leases under which Mrs Waller and Mrs Griffiths formerly held their respective plots, each of them is entitled to remove the structure of the bungalow standing on her plot within a reasonable time after the expiry of the lease. Hence, the cross-appeal as to the ownership of the structure of the bungalows has not been pursued.
[10] Neither Mrs Waller nor Mrs Griffith asserts any right to protection under the Rent Acts, since, as already noted, neither occupies the bungalow as her residence.
Factual background
[11] The Marine Valley Estate is a development consisting of some 73 plots. Keelwalk owns the freehold of 23 of those plots. The bungalows, which were erected in the 1930s, are in the nature of permanent structures attached to the land. The plots were originally let as empty plots (that is to say, with no buildings on them) on leases for 15 years or thereabouts at a ground rent. The tenants subsequently erected bungalows on the plots.
[12] The original leases appear to have been in more or less standard form. It was accepted in argument that Mrs Waller’s lease (that is to say, the 15-year lease dated 9 August 1983 and made between THK and Mr and Mrs Walker) was in substantially the same terms as the original leases, and I shall proceed on that basis. Mrs Waller’s lease demises the plot of land that is now known as 6 Marine Valley, defining it as “the said Plot”. The rent is a ground rent, the amount of which is subject to five-year upward reviews. The rent review provisions are contained in the schedule to the lease. The schedule provides that the rent for the review periods shall be the initial rent or (if higher) “a reasonable rent for the said plot”, with no account being taken of the capital value of any buildings erected on any part of the plot, and that a “reasonable rent” for this purpose shall mean:
the annual ground rent at which the said plot of land if vacant and unbuilt upon at the end of the relevant period could be let at that time on the open market by a willing landlord to a willing tenant taking a lease for the residue then unexpired of the term of this Lease but otherwise on the terms and conditions of this Lease BUT there shall be disregarded the fact that the Tenant or his successors in title have been in occupation of the demised premises.
[13] By clause 2(q) of the lease, the tenant covenants with the landlord:
to use the said plot as the site for a dwellinghouse or bungalow to be used for holiday purposes or as a private residence on retirement only and not to use or permit the same to be used for commercial letting or any other purpose whatsoever.
[14] Clause 3(5)(ii) of the lease contains a landlord’s covenant in the following terms:
The [landlord] hereby covenants with the Tenant that the Tenant paying the rent hereby reserved and performing and observing all the covenants by the Tenant herein contained shall and may:
(i)…
(ii) on the expiration hereof remove all buildings erected by the Tenant on the said plot subject to leaving the surface of the land in good and clean condition and to the satisfaction of the [landlord] and all drainpipes water pipes manholes grates and all other things used in connection therewith in good working order and condition.
[15] It is accepted that subsequent leases of the plots were in substantially the same terms, save that, in some cases, shorter terms were granted. In particular, it is accepted that the five-year lease, dated 15 June 1995, to Mrs Griffith contains (by incorporation) a user covenant, and a covenant by the landlord to allow the tenant to remove all buildings erected by the tenant on the expiry |page:81| of the term, in the same terms as clauses 2(q) and 3(5)(ii) of Mrs Waller’s lease.
[16] Prior to 1997, it was THK’s practice, on the expiry of a lease, to offer the former tenant a new lease at a ground rent without taking a premium, or, alternatively, to offer to sell the freehold of the plot at a price that took no account of the capital value of the bungalow. This practice derived from THK’s belief that the bungalows had never formed part of the freehold title to the plots upon which they stood, but, rather, that they were owned initially by the tenants who erected them, and that they accordingly devolved separately from the freehold title to the plots themselves. Over the years, a number of tenants purchased the freehold of their plots from THK on this basis. Others chose to accept new leases at a ground rent. Assignments of leases also took place in consideration of a capital sum.
[17] The evidence also reveals one case, in 1980, in which the landlord purported to purchase a bungalow from an outgoing tenant for a sum of £6,500. The bungalow in question was situated at 10 David Lane. This, again, is consistent with the belief that the bungalows did not form part of the freehold title. It is accepted that other similar transactions occurred, although not in relation to 6 Marine Valley or to 2 David Lane.
[18] On 28 July 1975, THK granted a 15-year lease of 2 David Lane to a Mrs Veale, at a ground rent, subject to five-year reviews. In 1977, Mrs Veale assigned the lease to Mrs Griffith and her late husband for £5,000.
[19] In about 1979, THK was taken over by Town Centre Securities plc (TCS), but the freehold of those plots on the estate that had not been sold off remained vested in THK. Thenceforth, until Keelwalk bought out THK in 1999, the managing agent of the estate was Mr John Leadbeater, the estates manager of TCS.
[20] On 9 August 1983, THK granted a lease of 6 Marine Valley to Mr and Mrs Walker. On 10 August 1984 (when the lease still had some 14 years to run), Mrs Waller and her late husband took an assignment of the lease from Mr and Mrs Walker, at a price of £10,500. The lease expired on 30 June 1998, leading to the possession proceedings against Mrs Waller.
[21] On 18 July 1990, THK granted a five-year lease of 2 David Lane to Mr and Mrs Griffith, at a ground rent. On 15 June 1995, the lease was renewed for a further five years (this time in Mrs Griffith’s name alone, Mr Griffith having died). The expiry of this lease on 30 June 2000 led to the possession proceedings against Mrs Griffith.
[22] In 1997, Elitestone Ltd v Morris [1997] 1 WLR 687* was decided by the House of Lords. The plaintiff in Elitestone was the freehold owner of land upon which stood a wooden bungalow, the structure of which rested on concrete pillars that were attached to the ground. The bungalow was occupied by the defendants under an agreement that permitted them to enter onto the land and “to keep thereon a bungalow and to reside” in it. The plaintiff claimed possession. The defendants contended that they were protected tenants under the Rent Acts. The judge at first instance upheld that contention. The Court of Appeal allowed the plaintiff’s appeal, holding that the ownership of the land was vested in the plaintiff, and that it was accordingly entitled to possession, but that the bungalow was a chattel that was owned by the defendants. The House of Lords allowed the defendants’ appeal, holding that the answer to the question of whether a structure became part and parcel of the land itself depended upon the degree and object of annexation to the land, and that, given that removal of the bungalow would involve its destruction, it could not have been intended to remain a chattel and must have been intended to form part of the land.
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* Editor’s note: Also reported at [1997] 2 EGLR 115
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[23] This decision in Elitestone caused THK to think again about the ownership of the bungalows. Mr Leadbeater regarded the decision as establishing that, contrary to his earlier belief, the bungalows formed part of the freehold title. This led him to write to all THK’s tenants in the following terms (I quote from the only example of the letter in evidence, being a letter dated 30 October 1997 addressed to the tenant of 9 Marine Valley):
You may be aware that some of the tenants on the Estate who were seeking to dispose of their properties have experienced unforeseen difficulties which arose from a recent decision of the House of Lords and which has tended to discourage prospective purchasers from paying the prices sought by the tenants for their leasehold interest. Others have written to enquire whether the case affects them in other ways.
I am not in a position to advise you on the full implications of the decision, which is something best left to your Solicitors as and when the need arises, but I felt I should write to alleviate any concern you may have over our intentions.
Firstly, let me reassure you of the Company’s policy to continue renewing the leases of those tenants who have honoured their obligations to us although it may be necessary, upon clarification of the application of the House of Lords’ decision to the Flamborough tenancies, to vary the detailed terms.
Secondly, but most importantly for those tenants who envisage selling their properties in the foreseeable future, the Board have authorised me to take steps in appropriate cases to help restore tenants as far as possible to their former position.
If you feel that the latter circumstances might apply to you, and you would like to discuss the alternatives with us, or you would like your Solicitor, a member of your family or a friend to attend a meeting on your behalf, then please telephone my secretary, Lesley Kitching on…, and she will make the arrangements.
[24] On 17 December 1999, Keelwalk bought out THK’s remaining interest in the estate, purchasing the freehold of 6 Marine Valley and 2 David Lane, together with the freehold of 23 other plots (two of which had since been sold off), for a total purchase price of £400,000. The two plots that have since been sold off were, it appears, derelict. Thenceforth, the managing agent of the estate was Mr John Chambers, a chartered surveyor and a local estate agent.
[25] On the previous day, 16 December 1999, Mr Leadbeater wrote once again to all THK’s tenants. The letter was in the following terms, so far as material (again, I quote from the letter written to the tenant of 9 Marine Valley):
After an association with Flamborough which I believe originated more than 70 years ago, [THK] has disposed of its remaining property interests, including that in the property you held from us, to Keelwalk Properties Limited. The new owner has appointed Messrs Chambers Chartered Surveyors as its managing agent…
My own connection with the Flamborough properties has lasted for some 20 years and during that time I have come to know many of the residents personally. It is not without some sadness that Mr Donkin and I will be handing over the management of the Estate. From what I know of [Keelwalk], I believe they are likely to continue to administer the holdings in a commercial yet sensitive manner and their policics may not be dissimilar to those we had adopted…
[26]. In the event, Keelwalk did not adopt the policies that THK had adopted, in that, upon the expiry of current leases, it offered new leases of the relevant plots, not at a ground rent but at a rack-rent. Further, it offered to sell the freehold of the plots at a price that reflected the market value of the plot, including the bungalow.
[27] In the case of Mrs Waller, Keelwalk offered her a new nine-year lease of 6 Marine Valley at an initial rent of £3,120 pa, reviewable every three years; alternatively, it offered to sell her the freehold of the plot at a price of £30,000. Mrs Waller did not accept either of these offers.
[28] In the case of Mrs Griffith, Keelwalk offered a new nine-year lease of 2 David Lane at an initial rent of £3,500 pa, reviewable every three years; alternatively, it offered to sell her the freehold of the plot at a price of £40,000, subject to internal inspection. Mrs Griffith responded that she wished to renew her lease at the passing rent (£1,250 pa), and enclosed a cheque for that sum. |page:82|
Evidence at trial
[29] The judge heard oral evidence on behalf of Keelwalk from Mr Chambers and Mr Leadbeater, and from Mr Brian Waller (on behalf of his mother, Mrs Waller) and Mrs Griffith.
[30] Mr Chambers was not involved in the market for plots prior to Keelwalk’s purchase in 1999, and was unable to assist the court as to the transactions that had occurred during that time. In cross-examination, he was asked about the price of £400,000 that Keelwalk had paid for the freehold in the 25 plots that they had bought from THK. Although not called as an expert witness, he was asked to give his opinion of the value of a plot in 1999, taking no account of the bungalow standing upon it. His opinion was that an empty plot would be worth around £20,000 (which would give a total value for the 25 plots of £500,000). When it was put to him that the price paid by Keelwalk (£400,000) was negotiated on the footing that it was buying the land only, and not the bungalows, Mr Chambers said that it was his understanding that the price was intended to cover both the land and the bungalows, and that the fact that it was negotiated at £400,000, and not at some higher figure, was “good purchasing”.
[31] Mr Leadbeater gave evidence that, during the time that he was employed by TCS, he became aware from time to time of the prices that were being paid for assignments of leases on the estate, and that he was “quite surprised at some of the sums involved particularly where the leases were reaching their expiry”, and that it appeared to him that assignees were paying sums that could not be justified on a normal valuation analysis for such a rapidly depreciating asset, particularly as there was no guaranteed entitlement to a renewal. He surmised that since, for many years, THK’s practice had been to renew leases, assignees were prepared to accept the risk that the lease might not be renewed. In some cases, he said, assignments were made on condition that the lease was renewed.
[32] Asked in cross-examination whether he was aware that from time to time, on an assignment of a lease, the tenant sold the structure of the bungalow to the assignee as a separate transaction, Mr Leadbeater said:
I think the sales were generally dealt with by way of assignment of the leasehold interest. Now, whether in the dealings between the assignor and the assignee they were referring to certain of the buildings or not one doesn’t know… [M]ost of the assignments that we saw, because we generally saw them after the transactions had been completed, referred to the price which had been paid for the leasehold interest.
[33] Mr Leadbeater did not know of any transactions entered into by THK whereby the bungalows were disposed of separately from the plots upon which they stood, but he accepted that his understanding was that the tenants believed that they had the right to sell the structure of the bungalows separately from the leasehold interest.
[34] Mr Leadbeater told the court that TCS sought legal advice as to the impact of Elitestone on tenancies on the estate, and that the solicitor’s advice was to the effect that the decision might mean that some of the tenancies were protected tenancies under the Rent Acts. He continued:
If that change had occurred then it meant that the nature of the tenancies changed from tenancies of a plot which were unprotected to tenancies of a plot plus bungalow which were protected, where the rent would have been calculated on an entirely different basis and, what was more important, the obligations of the landlord and tenant would not have been those expressed in the lease itself but would have been those covered by statute, so there would have been significant changes.
[35] Later in his oral evidence, Mr Leadbeater said that his own belief was that Elitestone had converted the tenancies into protected tenancies.
[36] When the judge asked him whether the position was that, whereas pre-Elitestone THK considered that it did not own the chalets, post-Elitestone it thought that it did, Mr Leadbeater replied:
Yes, there was a small element of doubt but on balance we felt the case was as you described.
[37] Asked about the circular letter dated 30 October 1997, Mr Leadbeater said that its intended meaning was that TCS was prepared to continue the freehold sales on the same basis as before, irrespective of any change in the status of the parties; that is to say, that it intended to continue its policy of offering to sell freeholds at a price based upon the value of the empty plot.
[38] As to the price of £400,000 paid by Keelwalk, Mr Leadbeater said:
I [advised] the board [of TCS] on the sale. The board accepted my recommendation. My advice to them was that the sale price was a market value, therefore we were unlikely to achieve more to a single purchaser and I advised them of my concerns in relation to the nature of the tenancies and the obligations which would probably become important very, very quickly.
[39] Mr Waller said that his understanding was that, in August 1984, his mother and his late father had paid Mr and Mrs Walker £10,500 for the bungalow, and that his impression was that his mother owned the bungalow separately from the plot. He also referred to improvements that his parents had made to the bungalow, in the form of retiling and the installation of central heating. He confirmed that, due to ill health, his mother was currently unable to occupy the bungalow as her residence.
[40] Mrs Griffith said that she and her late husband had spent all their spare money on the bungalow “with the view that it would be our home for our lives”. She referred in particular to renewing the roof and installing central heating. She accepted in cross-examination that she was in no doubt that her lease expired at the end of the term, but said that she understood that the lease would be renewed because she had complied with its terms. She, too, confirmed that, due to ill health, she was currently unable to occupy the bungalow as her residence, although she continued to regard it as her home.
Judgment
[41] As to the ownership of the bungalows, the judge held, citing Elitestone, that they formed part of the realty, and he granted Keelwalk injunctive relief accordingly. The judge did not deal expressly with the effect of the provision in the respective leases giving the tenant the right, on the expiry of the term, to remove all buildings erected by the tenant on the plot, but it is implicit in his judgment that he must have concluded that that provision was unenforceable.
[42] The judge then went on to pose the question, at p2F of the judgment: “Can the defendants obtain any form of equitable relief [against] the claimants?” After referring to the two circular letters (one dated 30 October 1997, the other dated 16 December 1999), and to the evidence of Mr Chambers and Mr Leadbeater, the judge continued, at p4G of the judgment:
I cannot conceive that the claimant firm were not aware of the practice which had developed of lessees receiving a new lease on the same terms or, alternatively, being bought out of their interest that they thought they had in their bungalows, particularly bearing in mind [Mr Leadbeater’s evidence].
[43] The judge then commented that the improvements to their chalets made by Mr and Mrs Waller and Mr and Mrs Griffith were “substantial”, in the context of the instant case. He continued, at p5C:
I am satisfied that Keelwalk did know of this course of conduct; of people bettering their property in accordance with the expectations which they had.
[44] The judge continued, at p5E:
In my judgment, the claimants knew of the historical expenditure by lessees on their property, including these two defendants, and that that money was spent in the expectation of a new lease being granted or their interest in the bungalow, as opposed to the land, being purchased, and that was an understanding and expectation of the landlords who knew that expenditure was being made on that basis; that this course of conduct was one that had been in operation on the estate for many years.
In my judgment, that gives rise to an equity. It would be unconscionable for the claimant to rely on his strict legal rights and the defendants, in my judgment, have an interest in the land to the extent of the interest that they have in the bungalows. This equity will be satisfied by adhering to the previous practice |page:83| and that was either the granting of a new lease or the purchase of the value of the structure as opposed to the land.
As a rider to this, it is worthwhile noting that the claimants bought the land in 1999, some 25 plots. The freehold for each plot of land was worth £20,000 per plot. 25 plots collectively would be worth something in the region of £500,000. Even allowing for inflation, £400,000 being the purchase price looks to me remarkably like a price that was paid for the value of the plots of land alone, and not for the structures…
[45] Accordingly, by his order dated 12 December 2001, the judge dismissed Keelwalk’s claims for possession and mesne profits. Paragraph 4 of the order, which is plainly designed to give effect to the equity that the judge found to exist, provides as follows:
The Defendants are to pay rent and arrears of rent based on the value of the land itself.
Arguments on the appeal
[46] Mr John Furber QC, for Keelwalk, points out (correctly) that in the light of Keelwalk’s concession, first made in a written skeleton argument delivered in response to the respondent’s notice, that the provision in the respective leases entitling the tenant, on the expiry of the term, to remove all buildings erected by the tenant on the plot is fully enforceable, no issue arises as to the ownership of the structure of the bungalows. Mr Furber accepts that, in the light of that concession, the injunctive relief granted by the judge must be discharged.
[47] On the other hand, Mr Furber submits that the defendants have no right at law or in equity to new leases of their respective plots, still less to new leases at a ground rent.
[48] Mr Furber criticises the judgment in that it fails to indicate the nature and extent of the equity that the judge found to exist, or to identify sufficiently the factual basis for that finding. If and in so far as the judge may have had in mind the principles of proprietary estoppel, Mr Furber points out that an estoppel entitling the defendants to new leases at a ground rent was never pleaded. The defence and counterclaim does not plead any representation or assurance to that effect, nor any detrimental reliance upon such a representation or assurance. In any event, he submits that neither of these necessary ingredients for proprietary estoppel exist in the instant case.
[49] Mr Furber does not seek to contend that Keelwalk is in any better position, so far as any estoppel is concerned, than its predecessor in title, THK; rather, he contends that there is no evidence of any representation or assurance by THK that the current leases of Mrs Waller and Mrs Griffith would be renewed at a ground rent. Put at its highest, there was merely a long-standing practice by THK of renewing leases at a ground rent. That, he submits, cannot amount to an assurance that the practice will continue in perpetuity.
[50] As to the circular letter dated 30 October 1997, Mr Furber submits that it does no more than indicate that THK proposed to continue its current practice, notwithstanding the decision in Elitestone. He further points out that the letter comes at a relatively late stage in the history of the matter, and that there is no evidence that any expenditure was incurred by Mrs Waller or Mrs Griffith in reliance upon it.
[51] Mr Furber comments that the judgment does not condescend to details of the new leases that (according to para 4 of the order) are to be granted to the respondents, save that the rent is to be a ground rent. In particular, no term is specified and no figure for the rent is given; nor is there any indication as to whether the rent is to be reviewable, and, if so, at what intervals. Mr Furber submits that the judge’s failure to deal with these matters is an indication that he did not address his mind sufficiently to the requirements of the doctrine of proprietary estoppel.
[52] Mr Joseph Harper QC, for the respondents, submits that, on the evidence before the judge, the necessary elements of proprietary estoppel are present in the instant case. He submits that it is open to the court to spell out of THK’s long-standing practice of renewing leases at a ground rent a representation or assurance, on the part of THK, that the practice would continue in perpetuity as (as he put it) an open-ended commitment by the landlord. He submits that the history of what he described as “automatic” renewals indicates that the renewals were, in substance, no more than occasions upon which the amount of the ground rent could be reviewed, and that they are to be treated as if they were no more, in substance, than rent reviews under a continuing lease.
[53] Mr Harper also relies upon the evidence that, on occasion, the bungalows were dealt with by the landlord as if they were the absolute property of the tenants, and were not included in the freehold title.
[54] Mr Harper does not rely upon the circular letter, dated 30 October 1997, as containing a representation or assurance sufficient in itself to found a case in proprietary estoppel; rather, he cites it as being entirely consistent with what had been happening on the estate since it was first developed in the 1930s.
[55] As to the appropriate remedy, Mr Harper submits that there is no difficulty in formulating a remedy to give effect to the equity that the judge found to exist. He submits that the remedy should be a grant of 15-year leases at a ground rent, and otherwise in the terms of the leases hitherto granted.
[56] In the alternative to his submissions in relation to proprietary estoppel, Mr Harper submits that Keelwalk’s refusal to grant new leases at a ground rent infringes the respondents’ human rights. However, he did not elaborate on this submission in oral argument.
Conclusions
Proprietary estoppel
[57] In Re Basham (deceased) [1986] 1 WLR 1498, Mr Edward Nugee QC, at p1503H, formulated the principle underlying the doctrine of proprietary estoppel in the following terms:
where one person, A, has acted to his detriment on the faith of a belief, which was known to and encouraged by another person, B, that he either has or is going to be given a right in or over B’s property, B cannot insist on his strict legal rights if to do so would be inconsistent with A’s belief.
[58] Further, there must be “a sufficient link between the promises relied upon and the conduct which constitutes the detriment”: see Wayling v Jones (1995) 69 P&CR 170 at p173 per Balcombe LJ.
[59] In Gillett v Holt [2001] Ch 210, Robert Walker LJ emphasised the flexibility of the doctrine, saying, at p225D-E, that “the fundamental principle that equity is concerned to prevent unconscionable conduct permeates all the elements of the doctrine,” and that “[i]n the end the court must look at the matter in the round”.
[60] So far as the instant case is concerned, given that Keelwalk does not contend that it is in any better position, so far as any estoppel is concerned, than its predecessor in title, THK, the broad question is whether it would, in all the circumstances, have been unconscionable for THK to refuse to renew the respondent’s leases at a ground rent.
[61] The unconscionability in the instant case is said to arise from THK’s long-standing practice of renewing leases of plots at a ground rent. That, it is said, created an expectation on the part of tenants, of which THK was aware, that they would be entitled to renew their leases in perpetuity. The judge concluded that that was sufficient to create an equity in the respondents that, in effect, entitled them to new leases at a ground rent.
[62] With respect to the judge, I am unable to accept that proposition. In my judgment, a long-standing practice by a landlord of renewing leases at a ground rent cannot in itself justify an expectation on the part of the tenants that that practice will continue in perpetuity. Something more is, in my judgment, required before any question of unconscionability can arise. The mere fact that it may have been reasonable for a tenant to incur capital expenditure, on the basis that the likelihood was that the practice would continue into the future, cannot, in my judgment, be sufficient to convert the long-standing practice into a representation or assurance sufficient to found a proprietary estoppel.
[63] The position may be different in the case of a tenant who can establish that he or she paid THK or TCS a capital sum to purchase a bungalow (as opposed to merely paying a premium on the grant of a new lease), and I express no view as to such a case. Neither of the respondents falls into that category. Mr and Mrs Waller paid £10,500 on taking an assignment of their lease from Mr and Mrs Walker, but, at the time, the lease still had 14 years to run and it was not suggested that there was any separate transaction in respect of the bungalow. The same |page:84| applies in the case of Mr and Mrs Griffith, who paid £5,000 for the assignment of a 15-year lease in 1977, at a time when the lease still had some 13 years to run.
[64] Equally, I express no view as to whether, in the light of Elitestone, a tenant occupying a bungalow as his or her residence may be entitled to protection under the Rent Acts. Once again, neither of the respondents falls within that category.
Human rights
[65] I can, for my part, see nothing in either Article 8 of the European Convention on Human Rights (the ECHR) or Article 1 of the First Protocol to the ECHR to support the proposition that a tenant is entitled to the renewal of his lease in circumstances where such an entitlement does not exist under domestic law. In any event, the argument based upon human rights was originally raised in the context of the issue as to the ownership of the structure of the bungalows: an issue that, in the event, was not pursued.
Result
[66] In the result, I would allow this appeal, set aside the judge’s order, and make possession orders against each of the respondents, coupled with an inquiry as to mesne profits.
[67] However, it seems to me appropriate in the circumstances to suspend the possession orders, so as to enable the respondents to reconsider their position in the light of this judgment, and (should they see fit to do so) to discuss the matter with Keelwalk in the hope of arriving at an amicable solution to this unfortunate dispute. I would accordingly suspend the possession orders for a period of three months, for that purpose.
SIR ANDREW MORRITT V-C and RIX LJ agreed and did not add anything.
Appeal allowed.
