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Essential Cases: Equity & Trusts

Essential Cases: Equity & Trusts (4th edn)

Derek Whayman
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date: 20 May 2022

Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130, King’s Bench Divisionfree

Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130, King’s Bench Divisionfree

  • Derek WhaymanDerek WhaymanLecturer in Law, Newcastle University

Abstract

Essential Cases: Equity & Trusts provides a bridge between course textbooks and key case judgments. This case document summarizes the facts and decision in Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130, King’s Bench Division. The document also includes supporting commentary from author Derek Whayman.

Full case judgment: The reported judgment, cited as [1947] KB 130, is available from the ICLR. Alternatively, you can view the full judgment for this case, cited as [1946] EWHC KB 1, on the open-access BAILII website, http://www.bailii.org/ew/cases/EWHC/KB/1946/1.html

Other perspectives: Use the Law Trove search tools to read other authors’ accounts and commentaries on this case.

Facts

This case is regarded as a significant step in developing the modern doctrine of promissory estoppel. It raises questions of whether its birth was legitimate and the extent of its operation.

In 1937, the claimant let a block of flats in Clapham, South London, to the defendant for a ground rent of £2,500 per year. In the early part of the Second World War, the individual flats were mostly unlet due to war conditions. Given the difficulties in meeting the ground rent, it was agreed in 1940 that it should be reduced to £1,250 as from the outset of the lease. The defendants began to pay the reduced rent. By the beginning of 1945 (as the war was being won), the flats were all let. In September 1945, the claimants sent a notice to the defendants stating the rent was £2,500 and initiated legal proceedings to recover the difference for the rent periods ending in September and December 1945. The defendants argued that the rent reduction applied for the whole term of the lease.

The legal issue was that the promise to accept a reduced payment was made without consideration and not made in a deed, which meant it was unenforceable in the common law of contract (Foakes v Beer (1884) 9 App Cas 605 (HL)).

Decision

Denning J, in an ex tempore judgment, held that the reduction agreement was binding on the defendants until the prevailing conditions were no longer in place. This meant that while the full rent could be recovered for the present and future rent periods, the lost past rent could not be.

His reasoning is significant as it heralded an expansion of estoppel, where (in general terms) a party who makes a representation that is relied on by the other party cannot go back on the representation and rely on her strict legal rights. This covers the facts of the present case. However, in the established doctrine of estoppel by representation, the facts of the present case would not have made out an estoppel because the representation was one of intention and it had been held that estoppel by representation requires a representation of fact (Jorden v Money (1854) 5 HL Cas 185, 10 ER 868 (PC)). Moreover, estoppel by representation requires detrimental reliance, where here the tenant had suffered no detriment nor changed its position in reliance of the representation.

Denning J steered around this problem by relying on Hughes v Metropolitan Railway (1877) 2 App Cas 439 (HL), a hitherto obscure case on promissory estoppel. In this case, a landlord was temporarily estopped from using his right to terminate a lease. The landlord and tenant had entered negotiations for the landlord to buy back the lease, which ultimately proved fruitless, but the tenant had indicated he would not begin the repairs until the negotiations ended. It was held that the landlord had impliedly promised not to enforce his right to terminate accordingly, and this meant that a reasonable time, six months, had to elapse before the lease could be terminated.

This, held Denning J, also applied to the promise to accept a smaller sum in satisfaction of a debt. The principle was that where there was a promise intended to be binding, intended to be acted on, and was in fact acted on, the promise was binding insofar as its terms applied (at 136). On the facts, the promise was understood by all to apply during war conditions.

Comment

High Trees is a practical solution to a very real problem in the law of contract: how to vary a contract where the doctrine of consideration would preclude it. Criticism has focused around the evasion of Foakes v Beer, decided only seven years after Hughes. This might suggest, because Hughes was not applied in Foakes, that estoppel does not apply to debts. Alternatively, if one wishes to reconcile these cases, the conclusion is that promissory estoppel is only suspensory, such that the promise can be resiled from and the debt demanded for future obligations. Ultimately, however, Hughes was not cited in Foakes, so it is not clear whether Hughes was considered unimportant, not relevant, or was merely forgotten.

However, this would not fully explain the present case, where the past debt was not suspended, but extinguished. That promissory estoppel extinguishes past obligations but only suspends future obligations appears to be the position in the later case of Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 1 WLR 761 (HL). Denning J’s significant changes to the law were therefore that: (i) promissory estoppel operates to extinguish past obligations; and (ii) only reliance, not detrimental reliance is required.

Wider Questions

The big conceptual question of whether such ‘workarounds’ to the doctrine of consideration are tinkering around the edges, where what is really needed is a reconsideration of the doctrine itself is more to do with contract law and as such is outside the scope of this note.

From the perspective of equity, the big conceptual question is whether promissory estoppel should be a cause of action. It is clear that in England it cannot and operates only to restrain a party from exercising her strict legal rights (at 134 and see the later case of Combe v Combe [1951] 2 KB 215 (CA)). It is a ‘shield and not a sword’. Contrast this with the position in Australia, where promissory estoppel can be a cause of action: Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (HCA). There, Walton Stores had behaved unconscionably by inducing the Mahers to continue building work after deciding not to conclude the anticipated contract with them. The High Court held this could be a cause of action in promissory estoppel. If the purpose of estoppel is to restrain unconscionable behaviour, it is hard to see why promissory estoppel is limited in this way where promissory estoppel is not. See, e.g., Cobbe v Yeoman’s Row [2008] UKHL 55, [2008] 1 WLR 1752, noted in Essential Cases (and where remarks were made suggesting the two estoppels are ultimately the same) and other commentary, e.g., Duthie (1998) 104 LQR 362; Lunney [1992] Conv 239; and Halson [1999] LMCLQ 256.