Landlord and tenant — Order 14 proceedings — Plaintiff landlords’ application for summary judgment against tenant in respect of arrears of rent and other charges — Application for summary judgment fails and unconditional leave to defend granted — The present litigation followed a lengthy period of negotiations between the parties, most of the time on a ‘subject to contract’ basis, with a view to arriving at an agreement under which the defendant tenants would in the first instance surrender part (and subsequently the whole) of the demised premises and be granted a new lease of other premises in refurbished property — Part of the arrangement was that the defendants should vacate a portion of their premises at an intermediate stage, in return for a financial inducement, in order to facilitate the development — Defendants claimed that they did so, encouraged by representations on the part of the plaintiffs that there would be no difficulty about reaching a final agreement — It was submitted by defendants that a proprietary estoppel had accordingly arisen entitling them in equity to relief — Held, after considering various authorities on promissory estoppel, that the defendants had put forward an arguable case for relief and that in the circumstances there was an issue to be tried — The application by the plaintiff for summary judgment therefore failed and unconditional leave to defend would be granted
The following cases are referred to in this report.
Crabb v Arun District Council [1976] Ch 179; [1975] 3 WLR 847; [1975] 3 All ER 865; (1975) 32 P&CR 70, CA
Moorgate Mercantile Co Ltd v Twitchings [1976] QB 225; [1975] 3 WLR 286; [1975] 3 All ER 314, CA
Ramsden v Dyson (1866) LR 1 HL 129
Swallow Securities Ltd v Isenberg [1985] 1 EGLR 132; (1985) 274 EG 1028, CA
Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1981] 2 WLR 576; [1981] 1 All ER 897; (1979) 251 EG 159, [1979] 2 EGLR 54
This was an application by the plaintiff landlords, Central Street Properties Ltd, for summary judgment under RSC, Order 14, on the ground of arrears of rent, insurance rent and service charges, by the defendant tenants, Mansbrook Rudd & Co Ltd, in respect of premises at 80 City Road, London ECI.
E Prince (instructed by Nabarro Nathanson) appeared on behalf of the plaintiffs; G Hill (instructed by Dibb Lupton & Co, of Leeds) represented the defendants.
Giving judgment, JUDGE FINLAY QC said: This is an application by the plaintiff landlords for summary judgment against the defendant tenant in respect of arrears of rent. The demised premises comprise parts of the property called Sophia House in City Road, London, demised under two different leases, one of March 12 1981 and the other of August 29 1978, the term of years demised by the first lease being vested in the defendants under that lease, and the defendants being the assignees of the term created by the second lease.
The plaintiffs claim at the commencement of the action that the defendants are indebted in respect of arrears of rent, insurance rent and service charges to the plaintiff landlords in a sum of £54,101.26. The defendants’ defence to that — that being a straightforward claim for moneys due under the lease — arises in these circumstances. There were negotiations between the parties with a view to arriving at an agreement under which the defendants would in the first place surrender part, and eventually the whole, of these premises and eventually be granted a new lease of other premises in refurbished property. These negotiations began in the summer of 1984 and proceeded over a long period, and always being subject to contract, a matter which is I think common ground, until they broke down in about August 1985. But it was part of the terms contemplated in these ‘subject to contract’ negotiations that the defendants would vacate a certain part of the premises at an intermediate stage in order to enable the development to take place. Furthermore, there was to be a financial inducement to facilitate that vacation (the defendants say that it was to be £52,000) to be satisfied in part by a rent holiday, which is the way it has been put — and that would be a period in respect of which rent would not be payable in respect of the balance of the demised premises — and in further part in some other way. It is accepted by the plaintiffs that there was to be an inducement in the sum of £52,000, and what it amounts to is that it is common ground that a financial inducement was to be available to the defendants as compensation for their vacating part of the premises prior to the stage at which the newly furbished premises could be made available for their occupation.
These ‘subject to contract’ negotiations proceeded to a point when in January 1985 the parties had reached what I might call a degree of ‘subject to contract’ finality, there being of course no formal exchange of contracts, but agreement on a great many of the details as to the proposal; and it is contended by the defendants, in effect, agreement on all matters of substance. There was a meeting in January 1985 at which, according to the evidence in opposition to this Order 14 application put in by the defendants, and contained in an affidavit of Mr Mansbrook, it was said by Mr Coon, the principal acting on behalf of the plaintiffs, ‘Do we have an agreement?’ and Mr Mansbrook, who was the principal acting on behalf of the defendants, answered that they did. That seems to have been followed up by a letter at the end of January 1985 from the architects acting for the plaintiffs to Mr Mansbrook and to the defendant company, in which it was said:
I was pleased to hear from Mr Philip Coon that agreement has been reached over the details of the tenancy and refurbishment of this building, and as you know, arrangements are being made to commence upon the work forthwith. Although the formal agreement has yet to be signed I would be glad if you would take this letter as formal notice to vacate the first floor area (coloured pink on the relative plan) within seven days so that my client’s contractors can commence on the division wall as soon as possible.
The upshot of that letter was that the defendants did vacate the part of the premises indicated in it, and it is said on behalf of the defendants that having acted in that way (and in some other respects in which their action is relied upon, but that I think is the main one), there arises a proprietary estoppel. This, it is said, is not only a good defence to the plaintiffs’ claim but gives rise to a counterclaim for such relief as is appropriate in the discretion of the court to give|page:34| effect, putting it shortly, to the equity which is claimed on behalf of the defendants. This claim is that they had by reason of their having, in reliance upon the representation by the plaintiffs, the nature of which I shall return to in a moment, acted thus to their detriment. In various other respects it has also been said that they acted to their detriment in expending money on the premises and by making financial arrangements to their detriment and in diverse other ways, but I approach the matter simply on the footing that the main thing that they did was to vacate part of their demised premises, as they were given formal notice to do by the letter of January 30 1985.
Mr Price submits that it is by no means enough for the defendants to show an arguable case that there was some kind of representation on the part of the plaintiffs to the effect that there would be no difficulty in reaching a final agreement, that representation being made in the course of the ‘subject to contract’ negotiations; and that the defendants must show a representation by or on behalf of the plaintiffs that the negotiations were no longer subject to contract.
I have been referred to three cases, none of which on the facts are anything like precisely similar to the present case, but I have been asked to refer to these authorities, not simply by looking at them so that I can find a case with similar facts and decide this one in the same way, but on the footing that they indicate that there is a principle which should be applied in dealing with this type of matter. The first one to which I will refer is a case reported at [1985] 1 EGLR 132;* Swallow Securities Ltd v Isenberg, a decision of the Court of Appeal. Cumming-Bruce LJ, having referred to Ramsden v Dyson (1866) LR 1 HL 129, noting that that latter decision was followed by the Court of Appeal in Crabb v Arun District Council, and to the judgment of Oliver J (as he then was) in Taylor’s Fashions v Liverpool Victoria Trustees, said:
The principles can now be precisely comprehended in the words of Oliver J in Taylor’s Fashions Ltd v Liverpool Victoria Trustees [1981] 2 WLR 576 at p 596, where the learned judge said, ‘The inquiry which I have to make therefore, as it seems to me, is simply whether, in all the circumstances of this case, it was unconscionable for the defendants to seek to take advantage of the mistake which, at the material time, everybody shared, and, in approaching that, I must consider the cases of the two plaintiffs separately because it may be that quite different considerations apply to each.’
*Editor’s Note: Also reported at (1985) 274 EG 1028.
It is submitted by Mr Hill (and I am disposed to accept his submission) that although that formulation refers to a mistake made by the plaintiffs, which in this case means the claimant, the defendant company, that mistake is not an essential element where it is sought to set up a proprietary estoppel. I think that is one way of putting it. Another way is that any misapprehension about the reality of the facts is the basis upon which an estoppel arises, because if both parties know exactly what the facts are then estoppel has no place.
In Crabb v Arun District Council [1976] Ch 179 I find Scarman LJ quoting what was said by Lord Kingsdown in Ramsden v Dyson, and agreeing with Lord Denning MR that the point of dissent in Ramsden v Dyson was not on the law but on the facts, so that he accepts Lord Kingsdown’s dissenting speech stating the proper principle and quotes it in these words at p 194:
The rule of law applicable to the case appears to me to be this: 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
[my italics]
that he shall have a certain interest, takes possession of such land with the consent of the landlord, and upon the face of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money for the land, a court of equity will compel the landlord to give effect to such promise or expectation.
The present case, of course, is the converse of that case. Here the tenant gives up part of the land that he holds as such in, it is said, an expectation created or encouraged by the landlord and spends money upon part of the property in that expectation.
In the same case of Crabb v Arun District Council Lord Denning MR says at p 187:
When Mr Millett, for the plaintiff, said that he put his case on an estoppel, it shook me a little: because it is commonly supposed that estoppel is not itself a cause of action. But that is because there are estoppels and estoppels. Some do give rise to a cause of action. Some do not. In the species of estoppel called proprietary estoppel, it does give rise to a cause of action. We had occasion to consider it a month ago in Moorgate Mercantile Co Ltd v Twitchings [1976] QB 225, where I said, at p 242, that the effect of estoppel on the true owner may be that ‘his own title to the property, be it land or goods, has been held to be limited or extinguished, and new rights and interests have been created therein. And this operates by reason of his conduct — what he has led the other to believe — even though he never intended it.’
Mr Hill relies upon those words, ‘even though he never intended it.’
The manner in which Mr Hill puts his case, as I understand it, is that the defendants were encouraged to vacate the property, and thus to carry out what was going to be one of the terms of the agreement once it was finalised, by the representation made upon the part of the plaintiffs that there would be no difficulty in reaching final agreement. I think it possibly goes further than that, but I do not propose in this judgment to formulate the manner in which I think that the defendants’ case might be put upon the facts which I have outlined. What I am satisfied about is that there is an arguable case set up by the defence (which has been delivered before the application for summary judgment was made by the plaintiffs) that a proprietary estoppel arises and that the defendants are entitled consequently to such relief as is appropriate in the discretion of the court in all the circumstances. Accordingly, being satisfied as I am, that there is an issue or question in dispute which ought to be tried, I come to the conclusion that this application for summary judgment fails, and as there is also an issue as to the precise quantum of the financial inducement or financial compensation to which the defendants are entitled it does not appear to me to be a case where it is appropriate to grant that leave otherwise than unconditionally. There will accordingly be unconditional leave to the defendants to defend.
