Almacantar (Marble Ach) SARL and another v Railway Pension Exempt Unit Trust (acting by its trustee BNY Mellon Trust & Depository (UK) Ltd – Sale of land – Indemnity – Estoppel by convention – Claimants entering agreement to purchase property interests from defendant – Agreement containing indemnity whereby defendant agreed to pay half of any stamp duty land tax (SDLT) arising from transaction – Claimant seeking to enforce indemnity – Defendant applying for summary judgment – Whether indemnity expressly subject to contractual time limits – Whether defendant estopped from denying liability – Application granted
On 12 May 2011, the parties entered into an agreement for the sale of certain property interests from the defendant to the claimants. The agreement contained an indemnity concerning the stamp duty land tax (SDLT) which the parties anticipated might be payable to Her Majesty’s Revenue and Customs (HMRC) on the transaction to which the agreement related. Under the indemnity, the defendant agreed to pay a half of any SDLT arising up to a maximum of £1.6 million. HMRC subsequently assessed a tax liability in the sum of £3.2 million, together with accrued interest, on the claimants which sought to enforce the indemnity.
The defendant applied for summary judgment on the basis that the claim had no reasonable prospects of success. It contended that the indemnity was expressly subject to contractual time limits which had not been met so that the claim failed. The time limits were that: (i) no claim to an indemnity might be made unless a notice of claim was given within seven years after the completion date of the agreement (here 23 June 2018); and (ii) any claim made would be deemed to have been waived or withdrawn on the expiration of six months after the date it was made unless court proceedings were issued and served within that period.
Relying on the concept of “estoppel by convention”, the claimant argued that the defendant’s actions led to the conclusion that it remained liable for half of any SDLT payable once the agreed process of engagement with HMRC reached a conclusion.
Held: The application was granted.
(1) On an application for summary judgment, the court had to consider whether the claimant had a “realistic” as opposed to a “fanciful” prospect of success, a realistic claim being one which was more than merely arguable. In reaching its conclusion the court should not conduct a mini-trial. The overall burden of proof rested on the applicant to establish that there were grounds to believe that the respondent had no real prospect of success and that there was no other reason for a trial. If the applicant for summary judgment adduced credible evidence in support of their application, the respondent became subject to an evidential burden of proving some real prospect of success or some other reason for a trial. The standard of proof required of the respondent was not high. It sufficed merely to rebut the applicant’s statement of belief. The language of CPR 24.2 (“no real prospect … no other reason …”) indicated that, in determining the question, the court had to apply a negative test: Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) and AC Ward Ltd v Catlin (Five) Ltd [2009] EWCA Civ 1098 applied.
(2) The person raising estoppel by convention (the claimants) had to know that the person against whom the estoppel was raised (the defendant) shared the common assumption and had to be strengthened, or influenced, in its reliance on that common assumption by that knowledge; and defendant had to objectively intend, or expect, that that would be the effect on the claimant of its conduct crossing the line so that one could say that the defendant had assumed some element of responsibility for the claimant’s reliance on the common assumption.
It was not enough that the common assumption upon which the estoppel was based was merely understood by the parties in the same way. It had to be expressly shared between them. The crossing of the line between the parties might consist either of words or conduct from which the necessary sharing could properly be inferred. The expression of the common assumption by the party alleged to be estopped had to be such that he might properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the other party to rely upon it. The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter. That reliance had to have occurred in connection with some subsequent mutual dealing between the parties. Some detriment must thereby have been suffered by the person alleging the estoppel or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal or factual position: Tinkler v Commissioners for Her Majesty’s Revenue and Customs [2021] UKSC 39 applied.
In the present case, there was no crossing of the line through the defendant’s words or conduct, including silence, sufficient to manifest a sharing of any assumption which the claimant might have had. No necessary sharing of a common assumption could properly be inferred to base an estoppel.
(3) The dealings between the parties were expressly contemplated in the agreement. There was nothing to indicate that there was a shared assumption that the notice provisions and time limits in the agreement would not apply. Nor was there evidence that the claimant knew that the defendant shared the common assumption, or was strengthened, or influenced, in its reliance on that common assumption by that knowledge. Still less was there any evidence that the defendant intended or expected, even in an objective sense, that it had assumed some element of responsibility for the claimant’s reliance on any common assumption in subsequent dealings between the parties.
Essentially, there were a series of submissions to HMRC and the back and forth of how best to advance arguments for HMRC’s consideration and how to respond to its views. There was nothing explicit or implicit about the defendant’s indemnity or the limitations of its operation.
The agreement imposed time limits, to the defendant’s advantage, at the same time as obliging the claimant to incorporate reasonable suggestions from the defendant. Those terms were no doubt a negotiated compromise flowing from the defendant’s providing an indemnity for any tax liability.
Zia Bhaloo QC and Rupert Cohen (instructed by Hogan Lovells International LLP) appeared for the claimants; David Head QC (instructed by Mills Reeve LLP) appeared for the defendant.
Eileen O’Grady, barrister
