Emery v UCB Corporate Services Ltd (Formerly UCB Bank Plc)
Court of Appeal
Citations:  EWCA Civ 675.
The defendant was a lender who specialised in lending to nursing homes. They agreed to grant the claimants a £250,000 loan to purchase property for their nursing home business. The claimants bought the house and executed a legal charge in the defendant’s favour in July. The contract between them entitled the defendant to demand immediate full payment of the loan if any of a number of events occurred, including default.
The loan fell into arrears. The parties agreed repeatedly to restructure the loan, but the claimants could not keep up with repayments. The claimants then suggested that they be able to pay a lower amount (£700) on a weekly basis. The defendant agreed to meet with them to discuss this. Before the meeting, the claimants sent the defendant a £700 cheque. After the parties met, the defendant wrote to the claimants stating that they had banked the cheque and were prepared to accept the lower payments on a weekly basis ‘as an interim measure’.
Months later, the defendant demanded immediate full repayment of the loan. When the claimants were unable to pay, the defendant appointed receivers. These receivers managed the business badly until the property had to be sold. The sale did not fully pay off the loan. The claimants applied for a declaration that the defendant’s demand for them to pay the full loan and their subsequent appointment of receivers was invalid. They argued that they were not in default because they had complied with the final agreement to pay £700 weekly. They argued that they acted in reliance on the promise that they could pay £700 weekly, and this gave rise to promissory estoppel preventing the defendant from demanding the full loan.
- Did the defendant’s agreement to accept £700 weekly give rise to promissory estoppel?
The Court held in favour of the defendant. The act of making the lower payments did not count as the claimants altering their position. There was nothing the claimants could have done to improve their prospects, so they did not change their position by abstaining from any particular action. The requirements of proprietary estoppel were therefore not established.
This Case is Authority For…
A promissory estoppel has three requirements:
- A clear and unequivocal promise that strict legal rights will not be insisted upon;
- The promisee acting in reliance on that promise;
- It being inequitable to allow the promisor to go back on his promise.
Gibson LJ noted that ‘some commentators express the second condition in terms of the promisee altering his position to his detriment’. However, he considered this ‘controversial’. He thought that detriment was relevant to whether going back on the promise is inequitable, but not a strict requirement.
This case conflicts with the Court of Appeal decision in Collier v P & MJ Wright (Holdings) Ltd  EWCA Civ 1329. In Emery, the court held that merely making the lower payments was not sufficient change in position. However, in Collier, the Court of Appeal considered that making the lower payments was potentially sufficient change in position. Emery was not referenced by the Court in Collier.