Q&A: Clearing up estoppel queries

Georgina Muskett and Nicholas Taggart answer a question on inflation, waiver and estoppel.

Question

I own a number of buy-to-let properties. I have a five-year contract with my managing agents, who manage my portfolio for a fixed fee, payable monthly. On 1 June each year, their fee automatically increases, but only by 2.5%. I have the right to end the contract on 30 June, giving two weeks’ notice. This year, the June invoice claimed a 4% increase, citing rising costs, which the contract does not permit. When the first invoice arrived, I told them I would end the contract as soon as I could because of their unjustified demand. I paid the fees, with only the permitted 2.5% increase, in June and July. I have now found another agent and I served a notice in August. The agents say their solicitors told them before they sent the invoice that I would either waive my rights or be “estopped” if I made the first payment. Can I get out of the contract?

Answer

Unfortunately, you cannot get out of the contract, at least for this year (unless there are any other provisions in the contract, beyond those mentioned, which may enable you to do so). Although you are unlikely to be estopped from exercising your right to terminate the contract, you have waived your right to do so.

Explanation

For present purposes, there are two material forms of waiver: elective waiver and estoppel waiver. The difference between them was described in Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850.

Elective waiver arises when a person is entitled to exercise alternative rights which are inconsistent with one another. If that person knows of these alternative rights and acts in a way which is consistent only with having chosen to rely on one of them, that person is then bound by that choice. This choice is often referred to as an “election” and that the right not chosen has been “waived”.

Estoppel waiver is a part of the general law of estoppel. It stops a person from raising a particular defence to a claim, either because that person has agreed with the claimant not to raise it or has acted in such a way that they are estopped from raising it.

The operation of elective waiver has been recently restated by the Privy Council in Delta Petroleum (Caribbean) Ltd v British Virgin Islands Electricity Corp [2020] UKPC 23. The facts are very different: there was a contract for the supply of fuel by Delta to the Electricity Corporation, which permitted Delta to cease supply in certain circumstances, including the closure of a specific refinery. After the refinery closed, Delta continued to supply fuel for a period before relying on its contractual right to cease supply.

The Privy Council held that elective waiver applied only where a choice had to be made between two (or more) mutually exclusive courses of action. Adopting one course of action thereby abandons the other. To make the choice binding as an election, the decision-taker must know that, as a matter of fact and law, there is a choice to be made, but there is no requirement that the decision-taker is aware the law would make their choice final and irrevocable.

The Privy Council added that the decision had to be communicated unequivocally, either in words or by conduct. Even a failure to act may amount to an unequivocal communication.

In Delta Petroleum, the Privy Council held that Delta had not waived its right to cease supply. The contract obliged Delta to take all reasonable steps to minimise any delays to supply, or damages, caused by the closure of the refinery. At the point at which the refinery closed and it continued supplying, it was still taking reasonable steps, including seeking fuel from another refinery. Delta was, therefore, not at the point of having to elect between two inconsistent courses of action.

In your case, however, the contract stipulated a time for serving the termination notice.

Unlike Delta, you did have to make a choice between continuing with the contract for another year or terminating it at the end of June. You knew of your right to terminate the contract, as you informed the agents you planned to do so. Your payments were, looked at objectively, unequivocal. You communicated an intention to end the contract. However, the intention to terminate the contract “as soon as I could” must mean as soon as you lawfully could: once the notice was not served, the next time the contract can be terminated is next June.

There is no basis for an estoppel waiver. You have not communicated that you will not contest the agents’ claim to increase the fee by 4%. More broadly, all material forms of estoppel require an unequivocal representation. You made no such representation. Further, unlike waiver, all material forms of estoppel require reliance by the person to whom the representation is made.

By unwisely revealing they had advice, in advance, that you would be estopped, the agents may struggle to prove they relied on anything you said, rather than the advice that they received from their solicitors: PCE Investors Ltd v Cancer Research UK [2012] EWHC 884 (Ch); [2012] PLSCS 84.

This article was first posted by the Estate Gazette.

Georgina Muskett is a senior associate in the real estate disputes team at Charles Russell Speechlys LLP and Nicholas Taggart is a barrister at Landmark Chambers.