Sahota v Prior & Anor

Proprietary estoppel may prevent recovery of possession where an assurance induced a person to transfer land and incur detriment, even though the assurance was not included in a contract or tenancy document. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 prevents enforcement of a non-compliant contract for the disposition of land. It does not prevent equitable consequences arising from an assurance where the claimant is not seeking to enforce such a contract. A principal who permits an agent to arrange a transaction and relies on documents representing that agency may be bound by assurances made in connection with it, even without proof of actual knowledge of every assurance.

Mr and Mrs Prior had occupied their home for many years when financial difficulties led them to enter a sale-and-rent-back transaction arranged by Red 2 Black. They transferred the property and signed a five-year tenancy agreement after receiving assurances that they could remain for life if rent was paid. They later carried out repairs and improvements.

Ms Sahota, the transferee and landlord, sought possession under section 21 of the Housing Act 1988 after the tenancy expired. The Northampton County Court dismissed the claim on the basis of proprietary estoppel. The appeal concerned whether Red 2 Black’s assurances bound Ms Sahota and whether section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 prevented the estoppel claim.

1. Appeal dismissed. The respondents could remain in their home on the terms specified in the county court order.

2. Proprietary estoppel required an assurance of a proprietary interest, reasonable reliance and detriment caused by that reliance. The assurance had to be sufficiently clear and unequivocal and relate to identified land. Those requirements were satisfied: the respondents transferred their home at an undervalue and incurred expenditure on repairs and improvements after relying on assurances of lifelong occupation.

3. The judge was entitled to find that Red 2 Black acted as Ms Sahota’s agent. The facts included the family relationship, the arrangements made for Ms Sahota, the mortgage arrangements, and the tenancy document identifying Red 2 Black as the landlord’s agent. Ms Sahota could not rely on that document while denying the agency it recorded.

4. Even if actual knowledge of the original assurances had not been established, Ms Sahota had permitted Red 2 Black and her sister-in-law to arrange the transaction on her behalf. That conduct gave the appearance of authority. It was inequitable for her to rely on the transaction while disassociating herself from the assurance that induced it. The principles concerning ratification also supported that conclusion by analogy where a principal adopts a transaction without investigating its detailed terms.

5. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 did not bar the claim. The respondents were not enforcing a contract for the sale or disposition of land which the statute rendered void. They asserted that Ms Sahota was equitably prevented from recovering possession because an assurance had induced the transfer and later expenditure. Section 2 did not prevent legal consequences attaching to surrounding circumstances where recognising them did not enforce a non-compliant contract.

6. The transfer and tenancy were actual dispositions, rather than agreements for future dispositions. In any event, the assurance was principally relied on to induce execution of the transfer. The commercial circumstances in Cobbe v Yeoman’s Row Management Ltd were materially different from this domestic sale-and-rent-back transaction, and the reasoning in Thorner v Major supported the estoppel analysis.

• High Court (Chancery Division): appeal from the Northampton County Court dismissed. The county court’s proprietary estoppel order was upheld.