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Central London Property v High Trees

[1947] KB 130; [1956] 1 All ER 256; 62 TLR 557; [1947] LJR 77; 175 LT 333

Overview

Consideration of the issue of promissory estoppel. Landlord promised to reduce rent during a period of wartime oversupply and subsequently sought to return to full rental.

High Trees House, LondonSource: Philcrbk at English Wikipedia [GFDL or CC BY-SA 3.0], via Wikimedia Commons

 

Facts

P (landlord) promised to reduce rent paid by D for flats (due to wartime oversupply). Toward the end of the war – when conditions changed – P sought full rental from mid 1945 on.

 

Held (Denning LJ)

P was entitled to the amount claimed. 

However, if P had claimed the full rental for the entire period, the claim would have failed because P would have been estopped from going back on its promise to accept the lower sum. 

A promise must be honoured if:

(a) It was made with the intention of creating legal relations

(b) The promisor knew it would be acted upon by the promisee; and

(c) It was acted upon by the promisee to the promisee’s detriment.

Estoppel in such a case could act as a defence to prevent the promisor acting inconsistently with the promise but would not found a cause of action (that is a shield from action rather than a sword with which a positive action may be founded)

Lord Denning:

... I am satisfied that that arrangement was intended simply as a temporary expedient to deal with the exceptional conditions then prevailing, under which the block of flats was only partially let. The arrangement had no reference to events in which the block of flats was wholly let, if they subsequently occurred. ...

As to estoppel, this representation with reference to reducing the rent was not a representation of existing fact, which is the essence of common law estoppel; it was a representation in effect as to the future - a representation that the rent would not be enforced at the full rate but only at the reduced rate. At common law, that would not give rise to an estoppel, because ... a representation as to the future must be embodied as a contract or be nothing. So at common law it seems to me there would be no answer to the whole claim.

What, then, is the position in view of developments in the law in recent years? The law has not been standing still ... There has been a series of decisions over the last fifty years which, although said to be cases of estoppel, are not really such. They are cases of promises which were intended to create legal relations and which, in the knowledge of the person making the promise, were going to be acted on by the party to whom the promise was made, and have in fact been so acted on. In such cases the courts have said these promises must be honoured. ... these cases are not estoppel in the strict sense. They are cases of promises which were intended to be binding, which the parties making them knew would be acted on and which the parties to whom they were made did act on. .... In each case the court held the promise to be binding on the party making it, even though under the old common law it might be said to be difficult to find any consideration for it. The courts have not gone so far as to give a cause of action in damages for breach of such promises, but they have refused to allow the party making them to act inconsistently with them. It is in that sense, and in that sense only, that such a promise gives rise to an estoppel. The cases are a natural result of the fusion of law and equity ... The time has now come for the validity of such a promise to be recognised. The logical consequence, no doubt, is that a promise to accept a smaller sum in discharge of a larger sum, if acted on, is binding, notwithstanding the absence of consideration, and if the fusion of law and equity leads to that result, so much the better. At this time of day it is not helpful to try to draw a distinction between law and equity. They have been joined together now for over seventy years, and the problems have to be approached in a combined sense.

... I am satisfied that such a promise is binding in law, and the only question is the scope of the promise in the present case. I am satisfied on the evidence that the promise was that the ground rent should be reduced to £1,250 a year as a temporary expedient, while the block of flats was not fully or substantially fully let owing to the conditions prevailing. That means that this reduction of rent applied up to the end of 1944. But early in 1945 the flats were fully let and the rents received from them ... had been increased more than originally anticipated. At all events the revenue from them must have been very considerable. The conditions prevailing when the reduction was made had completely passed away, as I find, by the early months of 1945. I am satisfied that the promise was understood by all parties only to apply in the conditions prevailing at the time of the flats being partially let, and the promise did not extend any further than that. When the flats became fully let early in 1945 the reduction ceased to apply.

.... If it had been a case of estoppel, it might have been said that the estoppel in any event would end with the ending of the conditions to which the representation applied, or alternatively only on notice. But in either case it is only a way of asking what is the scope of the representation. I prefer to apply the principle that the promise, intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly apply. ...