Hillingdon v ARC Ltd

Convention estoppel requires a shared assumption that is mutually communicated by words or conduct and on which the parties regulate their dealings. Continuing to negotiate after a limitation period has expired is insufficient without more. In particular, a generally held but mistaken view of the law does not communicate an assumption that a party will not rely on a limitation defence.

Promissory estoppel requires a clear and unequivocal representation. Any estoppel capable of preventing reliance on a limitation defence may be ended by reasonable notice. The claimant must then commence proceedings within a reasonable time.

The local authority compulsorily acquired land occupied by ARC for highway works. ARC pursued compensation but did not refer its claim to the Lands Tribunal until 1995. An earlier ruling had held that the phase I claim was subject to the six-year limitation period in section 9 of the Limitation Act 1980.

HH Judge Pryor QC held that the authority was estopped by convention from relying on limitation, principally because the parties had continued to deal with the compensation claim as valid. He also considered that promissory estoppel or waiver might arise. His decision is reported at [1999] 3 EGLR 125.

The authority appealed. The central questions were whether a communicated shared assumption or clear representation prevented reliance on limitation, and whether the authority's March 1994 letter ended any estoppel.

Appeal allowed. Mrs Justice Arden, giving the judgment of the court, held that ARC had not established convention estoppel, promissory estoppel or a basis for preventing the authority from relying on limitation.

1. Convention estoppel required more than continued negotiations conducted against a widely held but mistaken understanding of the law. A shared assumption had to be communicated between the parties. It also had to extend to the authority not relying on a statutory limitation defence, rather than merely to ARC having a compensation claim. The evidence showed that the authority consistently considered the claim insufficiently substantiated. Its requests for particulars and its agreement to pay surveyors' fees did not communicate that it would forgo limitation or other available defences.

2. The court applied the requirement for mutually manifested conduct found in the convention-estoppel authorities, including [1982] 1 QB 84, [1985] 2 Lloyd's Rep 28 and [1988] AC 878. The facts differed from [1998] EGCS 76, where the acquiring authority had treated the claim as one entitling the claimant to compensation.

3. Even if an estoppel had arisen, the authority's letter of 18 March 1994 effectively warned ARC that it might rely on limitation. ARC was then entitled only to a reasonable time to commence proceedings. That period could be weeks rather than days, but not months. Once the position was clarified in October 1994, about two months was sufficient. ARC's further eleven-month delay was excessive.

4. No promissory estoppel arose. There was no clear and unequivocal representation that the claim was valid and that the authority would not rely on limitation. The March 1994 notice would in any event have had the same terminating effect.

5. Although unnecessary to the result, the court added that reliance and causation are material to unconscionability. ARC had acted on its own understanding of the law, not on a communicated assumption induced by the authority. The court declined to impose a condition requiring payment of ARC's surveyors' fees.

• Court of Appeal (Civil Division): Allowed the authority's appeal and set aside the finding of estoppel.
• Chancery Division: HH Judge Pryor QC held that the authority was estopped by convention from relying on section 9 of the Limitation Act 1980: [1999] 3 EGLR 125.
• Earlier limitation ruling: Mr Stanley Burnton QC held that the compensation claim was time-barred unless the authority was precluded by its conduct from relying on limitation. An appeal from that ruling was dismissed by the Court of Appeal: [1999] Ch 139.