Emery & Anor v UCB Corporate Services Ltd

Promissory estoppel requires: (1) a clear and unequivocal promise that strict legal rights will not be insisted upon; (2) reliance on that promise; and (3) circumstances making it inequitable for the promisor to resume those rights.

Payments which the promisee was already obliged to make, and inaction which caused no practical disadvantage, may not amount to sufficient reliance. A promise to give notice before enforcing contractual rights will not ordinarily create an estoppel where the notice would have made no real difference to the promisee’s position. The absence of inequity is fatal to the estoppel.

UCB lent money to Mr and Mrs Emery secured by a legal charge over their nursing home. After arrears accrued, UCB’s officer wrote that he would accept weekly payments as an interim measure and would contact them again after an accountants’ report.

Before doing so, UCB demanded repayment and appointed receivers. The Deputy High Court Judge held that the letter created a representation, that the Emerys relied on it, and that UCB was estopped from enforcing its contractual rights. He consequently held the demand and receivership steps ineffective, while entering judgment for UCB for the outstanding debt.

UCB appealed the estoppel and related findings. The Emerys cross-appealed against the monetary judgment. The central issue was whether the circumstances made it inequitable for UCB to withdraw the representation and enforce the legal charge.

1. UCB’s appeal allowed. The Court of Appeal unanimously held that the promissory estoppel case arising from the letter failed. The Emerys’ appeal against the monetary judgment was dismissed because it depended on the rejected estoppel case.
2. A promissory estoppel arises where there is a clear and unequivocal promise that strict legal rights will not be insisted upon, the promisee acts in reliance on it, and it would be inequitable for the promisor to go back on it. Whether the promisee altered position to detriment may be controversial, but the absence of such alteration is highly material to the question of inequity.
3. The weekly payments did not materially alter the Emerys’ position. They were already obliged to pay current interest and arrears. Their failure to seek refinancing or other protection also did not establish practical reliance, since the evidence supported the finding that refinancing was impossible and there was no real possibility of repaying the arrears or the whole indebtedness.
4. The representation could have been honoured by a telephone call immediately before the demand. Such a warning would have been a mere formality because it would have left the Emerys no practical opportunity to meet the demand. In those circumstances, it was not inequitable for UCB to resume reliance on its contractual rights. UCB was therefore entitled to demand repayment, and the demand was valid and effective under the legal charge.
5. The findings concerning the appointment and powers of the receivers, the sale of the business, and liability under issue 13 were set aside. The Court did not determine the separate question whether UCB would be liable for acts or defaults of receivers following an invalid appointment. The observations that the Deputy Judge’s conclusion on that issue was open to question were unnecessary to the disposition.

• Court of Appeal (Civil Division): allowed UCB’s appeal from the preliminary-issue order of the Deputy High Court Judge, set aside the relevant findings, and dismissed the Emerys’ appeal against the monetary judgment.
• Chancery Division: held that UCB was estopped from demanding repayment and appointing receivers, but entered judgment for UCB for £328,649.12.