Back in 1998, the House of Lords (in the case of Republic of India v India Steam Ship Company Ltd) concluded that a party to a transaction may be prevented from denying assumed facts or law if it would be unjust to allow them to go back on that assumption.
This concept is commonly known as "estoppel by convention" and may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by both of them or made by one and acquiesced to by the other.
The concept of estoppel by convention was discussed again in the recent case of Admiralty Park Management Company Limited v Ojo. In that case, a management company commenced proceedings against a tenant for non-payment of service charge. To the surprise of both parties, the tribunal realised during the course of proceedings that the management company had applied a different method of apportionment from that prescribed by the lease. It had therefore not complied with the express terms of the lease when apportioning the sums due.
In deciding whether the tenant was prevented from objecting to the manner in which the service charge had been apportioned in the past, the tribunal held that a conventional mode of dealing existed between the management company and tenant, under which it was understood that the service charge was to be apportioned by a different method from that set out in express terms in the lease.
Practical lessons to be learnt:
- Read your leases, understand the mechanics of the express terms and ensure that they are being applied correctly.
- If you have concerns about how lease terms are being applied, address that concern sooner rather than later. Acquiescence for a number of years without objection may result in estoppel by convention.