A Primer on Proprietary Estoppel

January 15, 2015 Hull & Hull LLP General Interest, In the News, Joint Accounts, Litigation 0 Comments

When undertaking legal research, I often look to recent case law as a way to obtain an overview of the seminal cases on any given topic.  The recent Ontario Court of Appeal decision in Clarke v. Johnson, 2014 ONCA 237 provides just that on proprietary estoppel.

Briefly, the case involves a camp located on Lake Panage, near Sudbury, Ontario, and whether the respondent has an equitable right to use the camp during his lifetime.  While the trial judge found that a claim for proprietary estoppel had been established (thereby granting the respondent a right to occupy the camp), on appeal the appellant submitted that the trial judge erred in his application of the test of proprietary estoppel, specifically with respect to the requirement of unconscionability.

Put simply, proprietary estoppel arises where: (i) there has been a representation or assurance by one person, (ii) that has been relied upon to the detriment of another, and (iii) an equitable Court must intervene to prevent an unjust or unconscionable result.

In Clarke, the Court of Appeal firstly considered the historic 1880 UK decision in Willmott v. Barber which established a five-part test for proprietary estoppel.  Often referred to as the “5 Probanda Approach”, the test is as follows: (1) the plaintiff must have made a mistake as to the legal rights to a property; (2) the plaintiff spent money on the faith of the mistake; (3) the owner (and possessor of the legal right) knows their rights and that they are inconsistent with the plaintiff’s rights; (4) the owner is aware of the plaintiff’s mistaken belief of their rights; and (5) the owner encouraged the plaintiff to spend money or perform other acts.

The Court of Appeal secondly considered the influential decision of Schwark v. Cutting which identifies three elements necessary to establish a claim for proprietary estoppel.  This is referred to as the “Modern Approach”.  Although the decision in Schwark describes the three part test in different language at different parts of the decision, and the interpretation of this in Tiny (Township), the Modern Approach is as follows:

(1) the owner of the land induces, encourages or allows the claimant to believe that he has or will enjoy some right or benefit over the property;

(2) in reliance upon his belief, the claimant acts to his detriment to the knowledge of the owner; and

(3) the owner then seeks to take unconscionable advantage of the claimant by denying him the right or benefit which he expected to receive.

In determining which approach to take, the Court concludes that it is now preferable to adopt the Modern Approach to proprietary estoppel.

Noah Weisberg

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