Lease – Ground rent – Arrears – Respondent landlord claiming for arrears of ground rent and service charge – County court ruling in favour of respondent – Whether appellants entitled to rely on representations – Whether appellants in fact relying on representations – Appeal dismissed
The appellants held a 125-year lease of a flat, under which they were liable for ground rent and a service charge. The respondent landlord was a company formed by the residents’ association to acquire the previous landlord’s leasehold interest. Prior to the incorporation of the respondent, the residents’ association had circulated a newsletter indicating that one of the benefits of participating in the scheme to acquire the headlease would be that ground rent would no longer be payable. Shortly before the headlease was acquired, the respondent wrote to the residents making no reference to the ground rent but referring to “the reasons for proceeding with the purchase”.
The appellants refused to pay the service charges and ground rent due under the lease following the purchase by the respondent of the reversion. The respondent brought proceedings in the county court to recover the arrears of rent and service charges. The appellants argued that the respondent was estopped from claiming the ground rent because it was deemed to have adopted the representation by the residents’ association that the ground rent would not be payable following the acquisition of the headlease.
The appellants purported to rely on representations that, in exchange for contributing to the cost of acquiring the reversion, existing tenants would have the ground rent payable under their leases extinguished (the first representation); and the participating tenants would be granted new 999 years leases at no cost beyond a small fee (the second representation).
The county court held that the appellants had fundamentally misunderstood the effect on their existing lease of the acquisition of the freehold and they had not materially relied upon the first representation to establish a promissory estoppel binding upon the respondent. In any event, any promissory estoppel created by the first representation was suspensory only and could be withdrawn by the respondent on giving reasonable notice. The decision on promissory estoppel was treated as determinative of the counterclaim for a new lease with no ground rent. The appellants appealed.
Held: The appeal was dismissed.
(1) In order to found a promissory estoppel, the representation or promise had to be clear and unambiguous. The language had to be such as to would be reasonably understood in a particular sense by the person to whom it was addressed. The court’s usual role in construing, for example, a contract was to arrive at the legally correct meaning of the words. Their construction was a matter of law and the court’s function was to resolve any ambiguities in reaching its conclusion: Low v Bouverie [1891] 3 Ch 82 and Woodhouse AC Israel Cocoa v Nigerian Produce Marketing [1972] AC 741 considered.
In the present case, any reasonable reader of the newsletter circulated to the appellants would have regarded its contents as a statement of the potential benefits which could flow from owning the reversion rather than an unqualified promise of what the committee would do if it was successful in the purchase. In all the circumstances, it would not have been reasonable for the appellants to have relied on the representations as promising them a new lease with no ground rent even if she had done so.
(2) On the judge’s findings, there had been no real factual reliance by the appellants on either the first or second representations. They had been taken as no more than corroboration of the appellants’ understanding that they were being offered a share in the freehold. Their decision to go ahead and participate in the scheme was not the result of any desire to be rid of the ground rent and to have a new longer lease but was based on what they read as an offer of the freehold.
(3) The generally accepted view was that promissory estoppel was usually only suspensory and that the representor might resile from his promise on reasonable notice unless it would be unconscionable for him to do so. In the present case, it was clear that the permanent nature of equitable relief granted on the basis of promissory estoppel required the court to consider whether it was necessary to omit a ground rent provision from the new lease to satisfy the equity. The amount of the ground rent in this case was small and the detriment suffered by the appellants in paying to participate in the scheme did not require them to be treated as a special case different from any of the other tenants who had done so. The respondent was required to do no more than grant a new lease on its current standard terms.
Edwin Johnson QC and Piers Harrison (instructed by Ashley Wilson Solicitors LLP) appeared for the appellants; Paul Letman (instructed by Mellins Garson Law, of Pinner, Middlesex) appeared for the respondent.
Eileen O’Grady, barrister