Preedy & Anor v Dunne & Ors

An estoppel by convention requires an expressly shared assumption for which the party said to be estopped has assumed some responsibility. The claimant must have relied on that shared assumption in subsequent mutual dealings and suffered sufficient detriment, or conferred sufficient benefit, to make departure from it unjust or unconscionable.

Parallel but uncommunicated misunderstandings do not create an estoppel. Nor can expenditure which appears deserving of reimbursement replace proof of the required shared assumption, responsibility and reliance. Estoppel gives effect to justice through established legal principles, rather than through a general assessment of fairness.

The trustees of a will trust sought possession of a public house. One beneficiary and two associated companies resisted the claim on the basis that substantial renovation expenditure should be repaid. At trial, Master Matthews rejected claims founded on proprietary estoppel and contractual licence. He found that the expenditure constituted loans to the pub business, rather than to the trustees.

On a direct appeal under the applicable civil procedure, the appellants advanced a new case of estoppel by convention. They alleged a common assumption that the trustees owned half of the pub business and were jointly and severally liable for its renovation loans. The issues were whether the new case could be advanced on appeal and, if so, whether the necessary common assumption and reliance were established.

1. Appeal dismissed. The Court unanimously permitted the appellants to advance the new case of estoppel by convention, but held that the case failed on its merits.

2. The new case could fairly be considered because its basic allegation of a mutual understanding had appeared in the defence, although it had not been developed or determined at trial. The appellants sought no material additional factual findings. Permission to advance the case had also been granted when permission to appeal was given.

3. An estoppel by convention requires more than parties independently understanding a matter in the same way. The assumption must be expressly shared. The party alleged to be estopped must assume responsibility for it by conveying an expectation that the other party will rely on it. There must then be actual reliance in subsequent mutual dealings and sufficient resulting detriment or benefit to make departure from the assumption unjust or unconscionable.

4. The contemporary correspondence and the trial judge’s findings were inconsistent with any shared assumption that the trustees were partners in the pub business or liable for its loans. Jonathan’s accountant described the loans as being made to the trading business. Mr Shilson understood during the material period that the business was run by Bruce, and later by Bruce and Jonathan. Mr Preedy’s different understanding was not shared with Jonathan, his accountant or Mr Shilson.

5. Mr Shilson did not adopt the view that the trustees had acquired a half share in the business until February 2003, after the renovation costs had been committed. There was no evidence that Jonathan relied upon any shared assumption when undertaking either set of renovations. The estoppel therefore failed at the first hurdle.

6. The fact that the renovations benefited the trust property did not supply the missing legal elements. Estoppel must rest on legal principle, rather than a general sense that expenditure for a worthy purpose should be reimbursed. Because no relevant shared assumption existed, the court did not decide whether one trustee had authority to bind the other.

1. Court of Appeal (Civil Division): The appellants were permitted to argue their new case of estoppel by convention. The appeal was nevertheless dismissed because no relevant shared assumption or reliance was established: [2016] EWCA Civ 805.

2. High Court, Chancery Division: Master Matthews rejected the defences and counterclaim based on proprietary estoppel and contractual licence. He found that the renovation expenditure was lent to the pub business, not to the trustees. The judgment was delivered on 2 October 2015; no citation is stated.