Proprietary Estoppel

Generally, when asking a Court to find that a promise between two parties is legally enforceable, the Court will require the elements of a contract to be present. The basic elements of a contract include, among other things, offer, acceptance, and consideration. While all of the elements are vital, consideration (some benefit flowing to both parties) is important as it is an objective measure that both parties intended to enter into a legal relationship. Without these elements present between a party, generally, a Court will not enforce a contract.  However, the Supreme Court of Canada, in Cowper-Smith v Morgan (2017 SCC 61) has recently affirmed the use of proprietary estoppel in Canada. Proprietary estoppel might allow people to protect their rights and interests without consideration being exchanged between the parties.

The SCC acknowledged that proprietary estoppel is commonly concerned with interests in land but acknowledged that the constraint is arbitrary. The court noted that the BC Court of Appeal in Sabey v. von Hopffgarten Estate (2014 BCCA 360 at para 32) entertained the question but did not make a decision on the issue. The Court will consider the following elements to determine whether equitable interests arises:

  1. a representation or assurance is made to the claimant, on the basis of which the claimant expects that he will enjoy some right or benefit over property;
  2. the claimant relies on that expectation by doing or refraining from doing something, and his reliance is reasonable in all the circumstances; and
  3. the claimant suffers a detriment as a result of his reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on her word.
  • Cowper-Smith, supra, para. 15.

Unlike other forms of estoppel, proprietary estoppel can be the foundation for a lawsuit. The purpose of proprietary estoppel is to avoid unfairness or injustice that would result to one party if the other were to break their work and rely on their strict legal rights. For example, English courts have used the doctrine in relation to chattels, insurance policies, intellectual property rights, commercial assets, and other forms of property. However, the SCC did not make any decisions on this issue.

Currently, it is somewhat of an open question to determine how far Canadian Courts will extend proprietary estoppel. If you have relied on someone else’s promise to your detriment, please give us a call to discuss your possible legal remedies.

 

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