Proprietary estoppel and constructive trust

ly, constructive trust is a device which was derived from equity and certain component instruments must be fulfilled before it can be operational. It is operational both in the domestic and commercial context. The components for the working of a constructive trust are (i) common intention, (ii) detrimental reliance by the claimant and (iii) unconscionable denial of rights by the defendant or in other words, the owner of the said land. In more precise terms, the constructive trust is invoked where the owner has sought to evade liability as a fiduciary where obligations were imposed. This can be portrayed that the role of conscience is inevitably extremely important in the workings of a constructive trust. In a more in-depth view, there is a heavy presumption which ought to be proven and this was the kernel of the decision laid down by the authority of Stack v Dowden 3 where it was held that whenever a property is transferred into joint names, it will give rise to a presumption that the beneficial interest is to be the equivalent of a legal interest. 4 Baroness Hale as one of the leading judges delivered a speech regarding constructive trust in the case of Stack v Dowden where certain criteria and elements were laid down above mainly regarding common intention was supported. Her leading judgment held that the preferred approach now is that the court cannot in any sense adjourn to its own act where it considers them to be fair and not try to discover what the parties have intended. 5 In addition, her Lordship in Stack has held that the element of intention is to be inferred from the entire course of conduct in relation to the said property which is in contention. Since Stack, the yardstick for future cases ought to be the express or inferred intention of the parties. In furtherance, regarding the element of detrimental reliance, it must be proven that the claimant has made a material sacrifice in order to obtain a beneficial entitlement. Generally, the issue of material sacrifice must be in a form of financial contribution towards the acquisition of the property and not anything else such as towards the decoration of the communal area of the house, refurbishment of the kitchen and the list goes on. 6 Today, the trust concept is commonly viewed upon as a form of asset management by one individual for the benefit of another. 7

Moving on to proprietary estoppel, it was generally illustrated by the authority of Midland Bank v Farmpride Hatcheries [8] as mentioned earlier on. It is a mechanism derived from equity and its major development was applauded by the leading authority of Yeoman’s Row Management v Cobbe [9] . Moreover, its development was held to be a jurisprudential milestone. [10] Generally, proprietary estoppel can be used both in the domestic and commercial context. On the other hand, it must firstly be briefly stated that the essential elements which must be fulfilled before proprietary estoppel can be invoked are (i) representation made by the owner of the said land in contention, (ii) reliance by the claimant and (iii) detriment incurred by the claimant. There are countless leading speeches, articles and judgments regarding the issue of proprietary estoppel. Lord Scott in Yeoman’s has described it to be analogous to that of promissory estoppel and his Lordship has further held that ‘promises made as part of an incomplete oral agreement cannot give rise to proprietary estoppel’. [11] This seems to be that the issue regarding promises or future promises are not to be dealt with by proprietary estoppel and this principle is upheld by Lord Scott in Thorner v Major that instances involving promises of future interest are to be dealt with through the application of elements or principles of a constructive trust as it was in his opinion that proprietary estoppel is better off confined to instances involving unconditional representations regarding the said property in contention. [12] In relation to the first element of representation mentioned above, the Court of Appeal has held that in Thorner v Major [13] , there must be a clear and unequivocal promise whether express or implied for proprietary estoppel to suffice. [14] It must be noted that proprietary estoppel worked as a single source of rights and it can never be invoked merely based on hopes. [15] The other elements such as reliance made by the claimant and detriment caused are easily proven as it is similar to that of the principles of a constructive trust. In accordance to the element of reliance or in other words, expectation of a beneficial entitlement, the claimant had to believe that the representation or promise made to him was both binding and irrevocable and this issue has already been dealt by Lord Walker in Yeoman’s. [16] One might question what may attribute to irrevocability of a representation; it is where the claimant suffered a detriment in relying to the representation made to him by the defendant. In addition, it was held that there is also another element to proprietary estoppel, it is unconscionability and it is viewed upon as a necessity to establish a claim for estoppel alongside the other earlier mentioned elements [17] . In a more constructive approach, proprietary estoppel is viewed upon as remedying unconscionability where the distress claimant is not just being compensated for his expectation or detriment incurred. [18] 

Taking both constructive trust and proprietary estoppel into account, there are a number of common grounds between the two as according to legal decisions and arguments by academic commentators. Firstly, the ground of conduct which the both operate coincides as it can be deemed that they create a proprietary interest in land where there is not any binding and enforceable contract between the parties. [19] In addition, in the case of Lloyds Bank Plc v Rosset [20] , Lord Bridge delivered a leading speech where his Lordship has held that there are similarities between both the constructive trust and proprietary estoppel where he is of the opinion that the both operates only where there is a finding of ‘agreement, arrangement or understanding’ between the parties that the property is to be shared beneficially before subsequent elements such as reliance and detriment are taken into consideration. [21] On the other hand, Yaxley v Gotts [22] is another essential authority regarding this area of law where Robert Walker LJ had observed that there are numerous grounds of similarities between the two doctrines since both are derived from equity’s intervention to provide relief. [23] His Lordship also held that at a high level of generality, there is much similarity where they coincide in the area of a joint enterprise for the acquisition of land. [24] There is another opinion of a great legal mind which has appeared to be suggesting that there is a degree of assimilation between the two doctrines, Sir Nicholas Browne-Wilkinson in Grant v Edwards [25] has held that the elements and principles of proprietary estoppels is ‘closely akin’ to that of constructive trust. [26] It is not surprising that there are many legal judgments and academic commentator who supported this point of view that there are common grounds in between the two doctrines. Not forgetting the writings of Mark Pawlowski, he has held that in both the cases of Gissing and Edwards, ‘equity acts on the conscience of the legal owner to prevent him from acting in an unconscionable manner by defeating the claimant’s belief.’ In other words, it can be viewed upon that the similarity envisaged within the two is that they are derived from equity [27] ; this is concurrent to the opinion of Robert Walker LJ in Yaxley as mentioned earlier.

As the common grounds of the two doctrines have already been mentioned above, there are indeed a number of contradicting grounds between the two. A more scrutinising view and study ought to be worked through the elements of the two doctrines to try to pinpoint the differences between them. It was held that the non-necessity to prove detrimental reliance marks a significant point of departure from proprietary estoppel and a potential enlargement of the constructive trust [28] , thus, it can be inferred that detrimental reliance is not a significant element to be proven in order to establish proprietary estoppel. However, the major difference between the two doctrines is that an equitable interest which is created under a constructive trust will suffice on the date of its creation and on the other hand, proprietary estoppel comes into existence from the date of the court’s ruling. [29] In accordance to the point mentioned earlier, P. Ferguson observes that ‘the difference is between a means of creating a right and a claim to a discretionary remedy’. [30] Moreover, common understanding is the basis for the establishment of constructive trust whereas estoppel emphasises on the inducement by the parties and this principle was applauded by Robert Walker LJ. [31] In furtherance, according to Mark Pawlowski, it is the element of discretion which continues to fundamentally differentiate the two doctrines. [32] 

Judging from the facts mentioned above, it may seemed to be that this is an area of law that the courts have yet to reconcile their different traits. However, the two doctrines are still distinguishable to a lengthy extent, especially by their elements of establishment and their characteristic such as certainty as a crucial factor can be achieved by means of constructive trust and the right of relief for proprietary estoppel.