Archive for the ‘Proprietary estoppel’ Category

Seminar about proprietary estoppel and the family home at CUHK Faculty of Law

October 6, 2017

We will run a seminar about the English Court of Appeal decision in Liden v Burton. Details are as follows:

Session A:
Date: 17 October 2017 (Tuesday)
Time: 1:00 – 3:00 pm
Venue: Classroom 3, CUHK Graduate Law Centre, 2/F., Bank of America Tower, Central
Speaker: Professor Michael Lower

Session B:
Date: 1 November 2017 (Wednesday)
Time: 1:30 – 3:30 pm
Venue: Breakout Room 510, 5/F, Lee Shau Kee Building, CUHK, Shatin
Speaker: Professor Michael Lower

 

(Same seminar in two different venues) 

 
All are welcome!
Please register at: www.law.cuhk.edu.hk/propertylawseminar
For enquiry, please contact Ms Vivian Chen at vivianc@cuhk.edu.hk.

 

ABSTRACT

Proprietary estoppel comes into play where: (1) a landowner (A) gives a third party (R) an assurance that R has or will have an interest in A’s land; (2) R incurs detriment; (3) in reliance on A’s assurance; and (4) in these circumstances it would be unconscionable for A to go back on the assurance given. In these circumstances, R can apply for relief and the court has a discretion to order the relief that it decides would undo the unconscionability arising from A’s attempt to resile from the assurance given.
Proprietary estoppel has a part to play where A and R are a couple in a stable relationship and the property to which the assurance refers is their family home. The courts have developed an approach to proprietary estoppel that is tailored to the family context and that surmounts potential obstacles to the use of proprietary estoppel here. Thus, the assurance may be couched in vague terms but still be clear enough in its context. The concept of detriment is wide enough to include the normal incidents of forming and maintaining a family. If claimants had to show that the assurance was the only factor inducing them to incur detriment it would be difficult for a proprietary estoppel claim to succeed; A would be able to defeat the claim by pointing to R’s mixed motives since the family relationship will often provide a convincing explanation for R’s actions. The courts have developed an approach to reliance that keeps alive the realistic prospect of a successful claim.
The decision of the English Court of Appeal in Liden v Burton ([2016] EWCA Civ 275) illustrates the ways in which the law of proprietary estoppel has been adapted by the courts for use in the family home context. Arguably, the decision represents a further stage in this process of adaptation. Here the assurance was that ‘we would be together for the future, that this would be our home and that he would look after me forever’. This might appear to be an assurance that A regarded the relationship as being for the long term. In its context, it was understood as an assurance that R would have an interest in A’s property.
Proprietary estoppel and the common intention constructive trust overlap; there is no obvious reason why Ms Liden could not have relied on the common intention constructive trust. It is, however, well-established that the fact that a property has been acquired as the family home of a couple who are married or in a long term stable relationship does not lead the courts to infer the existence of a common intention constructive trust. Arguably, there is a discrepancy here between the approach taken in Liden and that taken in common intention constructive trust cases.

 

 

Advertisements

Variation of an express trust or a common intention constructive trust

September 24, 2017

In Insol Funding Company Ltd v Cowlam ([2017] EWHC 1822 (Ch)) Ms Cowlam and Mr Cowey began to co-habit in 1994 and had a son in 1995. They lived in a property owned by Ms Cowlam. They sold it and in 1998 they bought a new property to be the family home (‘the property’). The transfer of the property into their joint names recorded that they held it as beneficial joint tenants. They did not sign the transfer form.

The purchase of the property was funded by the proceeds of sale of Ms Cowlam’s home and by a mortgage. Initially, they each contributed to the repayment of the mortgage. Ms. Cowlam later injected further substantial capital sums into the property helping to pay off the mortgage and to finance improvement works.

In November 2001 the couple agreed that, in the light of Ms Cowlam’s greater contributions to the property, she had an 80% share and Mr Cowey had a 20% share.

Mr Cowey received GBP85,000 as a severance payment from his employers. He used this to finance his new business. He refused to use any part of it towards the property. He also made it clear that he did not intend to marry Ms Cowlam. From 2006, Ms Cowlam made nearly all of the mortgage payments. From 2007 onwards she made all of the payments.

The court had now to consider the extent of the respective beneficial interests of Ms Cowlam and Mr Cowie (since Mr Cowie’s charge was subject to an equitable charge in favour of Insol Funding Company Ltd).

The declaration in the 1998 transfer of the property to the couple would have been decisive had it been signed by the couple ([76]). It could not have been displaced by a common intention constructive trust ([77] – [79]). It could have been affected by proprietary estoppel ([79]).

The declaration was not enforceable, however, since it was not manifested and proved in writing signed by the parties as required by section 53(1)(b) of the Law of Property Act 1925 (cf Conveyancing and Property Ordinance, s. 5(1)(b)).

There was, however, a presumption of a beneficial joint tenancy under a common intention constructive trust given the domestic context and the fact that the title was in joint names ([86]). There was nothing here to rebut the presumption. The presumption reflected the reality that in 1997 Ms Cowlam and Mr Cowie were a mutually committed couple ([89]).

It is, however, possible for a common intention constructive trust to be varied where the later emergence of a different common intention can be proved.

Such a variation could be shown here. The principal evidence of this was the express agreement between the parties in 2001 that Ms Cowlam had an 80% share. The variation was confirmed by Mr Cowey’s refusal to apply the severance pay to the property and by Ms Cowlam’s assumption of sole responsibility, in fact, for the mortgage payments.

This latter fact was also the necessary detrimental reliance on the changed common intention. Detrimental reliance remains an essential element of the common intention constructive trust ([99]). The fact that Ms Cowlam was also motivated by a concern to maintain a home for her son did not affect this conclusion ([102]).

Ms Cowlam had an 80% beneficial share in the property. Master Bowles would have been prepared to reach the same conclusion had he relied on the principles of proprietary estoppel ([109] – [110]).

Michael Lower

Family ownership disputes: when does Jones v Kernott apply?

March 4, 2017

In Wodzicki v Wodzicki ([2017] EWCA Civ 95, CA (Eng)) G and his wife (‘W’) bought a house intending that it should be a permanent home for G’s daughter (‘D’) and her children. Title to the house was in G and W’s name as legal joint tenants.

G died intestate. W began possession proceedings. D counterclaimed that she was the sole beneficial owner of the property.

The first instance judge was of the view that G’s beneficial ownership share belonged to D. He ordered an account to be taken of W and D’s respective contributions to the purchase price, maintenance and outgoings. Their ownership shares would correspond to their contributions.

D appealed. She argued that this resulting trust approach was inappropriate in this domestic context. This argument failed. The first instance judge found that G and W intended  the property to be D’s long-term home. They did not, however, intend D to be the sole beneficial owner. There were no grounds for departing from this finding of fact.

D argued that Jones v Kernott applied and that the intention that she was to be the sole beneficial owner should be imputed as a matter of fairness. This could not succeed given the judge’s finding as to the parties’ actual intentions.

In any event, this was not a context akin to that of co-habitees. D and W were not close. The use of a resulting trust approach was not precluded here.

Even if G had intended D to be sole beneficial owner, this intention could have no effect on W. D sought to rely on Hammersmith & Fulham LBC v Monk and to argue that W was bound by the intention of her joint tenant. This was a misapplication of Monk. That decision has no relevance to a purported disposal of a beneficial interest ([27]).

The finding as to G’s actual intention also meant that D’s claim to sole beneficial ownership based on proprietary estoppel had to fail.

A strange feature of the proceedings was that W presented no evidence when the account was taken. The result was that D was found to be sole beneficial owner.

Michael Lower

Common intention constructive trust: when is the agreement ‘subject to contract’?

December 10, 2016

In Ely v Robson [2016] EWCA Civ 774 (CA, Eng) E and R co-habited in a property the title to which was in E’s name. When the relationship between E and R broke down, E began possession proceedings and R counterclaimed that she had a beneficial interest in the property under the terms of a common intention constructive trust. The couple met and orally agreed a relatively complex settlement under the terms of which E would hold the property for himself for life with the remainder interest belonging 80% to his children and 20% to R. There were terms governing the payment of outgoings, the right to occupy the property and the compromise of E’s claims to other properties owned by R. It was accepted that the terms of the arrangement would be reflected in a trust deed and that the precise form of the agreement was provisional since, amongst other things, the tax implications of the way in which the deal was structured would need to be considered. E did not pursue the proceedings any further given R’s acceptance of the settlement.

R claimed that the settlement was not binding on her since it was not incorporated in a signed, written agreement satisfying section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. E argued that R was bound by the agreement on the basis of either a common intention constructive trust or proprietary estoppel.

For the purposes of the judgment, the English Court of Appeal  (Kitchin LJ giving the judgment) assumed that R, prior to the agreement, had a beneficial interest in the property under a common intention constructive trust. It reminded itself of Lord Scott’s approach in Cobbe v Yeoman’s Row to the use of proprietary estoppel in the context of agreements concerning land that did not satisfy section 2(1). Lord Kitchin also referred to the passage of Arden LJ’s judgment in Herbert v Doyle concerning such agreements. There is no common intention constructive trust where:

  1. a formal written agreement is anticipated; or
  2. further terms remain to be agreed so that the interest in property to be acquired is not clearly identified; or
  3. the parties did not expect their agreement to be immediately binding.

In these situations, if the agreement is incomplete, the parties cannot rely on constructive trust or proprietary estoppel (Herbert v Doyle, Arden LJ [57]).

The Court of Appeal rejected R’s contention that these requirements were not satisfied in the present case:

  1. although a formal written agreement was contemplated, nothing was said or written that precluded the possibility that a binding compromise had been agreed in the meeting between the parties (‘This was not a commercial transaction.’); and
  2. there were no terms still to be agreed; and
  3. the terms were sufficiently clear to constitute a binding agreement.

E relied on the agreement to his detriment by: not pursuing the possession proceedings; abandoning his claims to R’s other properties; and allowing R to remain in possession. Consequently, E held the property on constructive trust in accordance with the terms that had been agreed.

Michael Lower

Proprietary estoppel: genuine belief but no assurance

July 21, 2016

McGuiness v Preece ([2016] EWHC 1518 (Ch)) concerned a son’s claim to land owned by his parents. The parents had established a family business in which their four children worked. The parents transferred the business into a company set up for the purpose. The parents were the majority shareholders until they were bought out by the children when the father decided to retire. The parents retained in their own name the title to the land on which the business was carried on. The father died and ownership of the land passed to his wife. She then died leaving the land to her daughter. One of the sons claimed to have an interest in the land, relying on proprietary estoppel and / or a common intention constructive trust. The claim failed.

Newey J. accepted that the son had a genuine belief that he had or was to have an interest in the land. The claim failed, though, because nothing said or done by or on behalf of the father was a ‘clear enough’ (Thorner v Major) assurance. From a constructive trust perspective, there was no assurance or agreement. Newey J. was sympathetic to the argument that the sale of the business (without the land) was the subject of a contract and so there was no room for equity to play a part. For the sake of argument, however, he was prepared to assume that the contractual context did not preclude reliance on proprietary estoppel and the common intention constructive trust ([79]).

Michael Lower

Proprietary estoppel: expectations and proportionality

May 25, 2016

In Davies v Davies ([2016] EWCA Civ 643, CA (Eng)) a couple owned a farm. E, the second of three daughters, lived with the parents for much of the time up to the time of her final falling out with them. E worked for her parents for little money, although her pay increased over time. Around 1985 her parents assured E that the farmhouse would be hers one day. She later fell out with them and moved out.  E was later reconciled with her parents but left the farm a second time after another falling out. E’s father induced her to return by promising that she could live rent free in the farmhouse. During part of the time that she lived away from the farm she worked as a technician for a company that provided livestock reproduction services. She enjoyed this work and was good at it. After a third dispute with her father, he brought proceedings to evict her from the farmhouse. She relied on proprietary estoppel to claim some interest in the farmhouse and / or the business. The Court of Appeal had already considered the threshold question as to whether or not E had established a right to some form of relief and decided that she had (see here ). These proceedings were concerned with the question as to the form that the relief should take.

The parents made an offer to their daughter which was calculated by reference to the detriment that she had suffered in reliance on the assurances made to her. The daughter sought a much larger sum that would reflect the expectations induced by the assurances. Lewison LJ gave the only full judgment. He set out some core propositions about the law of proprietary estoppel ([38]). He referred to the controversy as to whether expectations or detriment should govern the relief ([39]) and the proportionality test in Jennings v Rice and to the idea that in ‘bargain’ type proprietary estoppel  cases the claimant’s expectations represent a starting point([40]). But where to go from there if the expectation is only a starting point? Lewison LJ accepted the following proposition suggested by counsel as a useful working hypothesis:

‘there might be a sliding scale by which the clearer the expectation, the greater the detriment and the longer the passage of time during which the expectation was reasonably held, the greater would be the weight that should be given to the expectation.’ ([41]).

The assurances that had been given envisaged that the daughter would work long-term in the family farming business but she left the business (twice temporarily and then permanently). This was not like the decades-long arrangements in Gillet v Holt or Thorner v Major ([48]). While E had some expectation of inheriting the business, it was relatively vague and so a modest award would suffice ([64]). Modest sums were also in order in respect of the ‘non-financial detrimental reliance’ involved in giving up her work as a technician and moving from her home to the farmhouse ([65] and to reflect the delay in receiving payments relating to past expectations (such as her unmet expectation that she would be a partner in the farming business) ([68]). So a modest uplift from the payment offered by the parents was in order but this would fall far short of a payment that would reflect E’s expectations in full.

Michael Lower

 

Proprietary estoppel: co-habitees

April 13, 2016

In Liden v Burton ([2016] EWCA Civ 275) B and L co-habited in B’s home for twelve years until they broke up in 2013. B’s home was mortgaged and he was concerned that he would not be able to keep up with the mortgage payments. He asked L to contribute and she made monthly payments to him of GBP 500. She asked him to explain how this was made up and he agreed that GBP 200 of this was ‘towards the house.’ The sum of  these payments ‘towards the house’ came to GBP 28,500.  L made the payments because of her reliance on the relationship (that he would look after her forever) and because of the later assurance that the payment was ‘towards the house’ which she reasonably understood to mean that she was to have an interest in the house. At first instance, the judge found that the elements of proprietary estoppel were present. B held the house on trust under the terms of which the first GBP 32,500  (GBP 28,000 plus interest) of the equity was held on trust for L. The English Court of Appeal (Hamblen LJ giving the main  judgment) upheld the first instance decision.

The assurances about the the long-term nature of the relationship and that the house would be their joint home were confirmed by the assurance that the payments were ‘towards the house’ ([28] – [30]). There was clear reliance and the GBP 200 payments were detriment. ‘The combination of reliance and detriment leads to and justifies the conclusion of unconscionability’ ([32]). The judge had a discretion as to how to satisfy the equity and it could not be said that the trust securing the repayment of the contributions with interest was more than the minimum required to do justice.

Michael Lower

Proprietary estoppel: alleged representations made by a person who is dead at the time of the trial

March 16, 2016

In Szeto Chak Mei v Chan Lam Shan ([2016] HKEC 482) P was the adminstratrix of her deceased father’s estate. The estate included a flat in which D1, the deceased’s daughter-in-law had lived for many years (since her marriage to one of the deceased’s sons). P alleged that D1 was a bare licensee of the flat. She terminated the licence and sought an order for vacant possession when D1 continued in possession. D1 claimed that the deceased and (after his death) the deceased’s wife had made representations to her that the title to the flat would be transferred to her. Deputy Judge Cooney SC referred to Yung Shu Wu v Vivienne Sung Wu ((2011) 14 HKCFAR 39): since D1 was alleging a gift or a promise of a gift by a person who was deceased at the time of trial, the claim should be treated with suspicion ([43]). D1 had not persuaded the court that the representation had been made and the proprietary estoppel claim failed.

Michael Lower

Promissory estoppel: Hong Kong Hua Qiao in the Court of Appeal

November 18, 2015

In Hong Kong Hua Qiao Co Ltd v Cham Ka Tai ([2015] HKEC 394, CA) L co-habited with C from 1992 or 993 until L’s death in 1997. They had been in an intimate relationship from 1988 or 1989. L gave C very clear assurances that she would be the owner of two flats and that she would have 300 shares in Hong Kong Hua Qiao Co Ltd (‘the Company’). The Company was to be used as the vehicle for investment in small houses by L, C and another investor. L gave C the title deeds to one of the properties (‘the Property’) but there was no formal transfer to her. Title to the property was in the name of the Company, not in L’s name. At L’s request, draft share transfer documents were sent to C but L died before any further action could be taken.

At first instance, the Court ordered title to the Property and the 300 shares to be transferred to C. This was on the basis that C had established the essential elements of a promissory estoppel claim, applying the law in Luo Xing Juan v Estate of Hui Shee See. The Court of Appeal (Kwan JA delivering the judgment) upheld the first instance decision. In the process, it commented on some of the essential elements of this type of ‘hybrid’ proprietary / promissory estoppel claim.

There was no doubt that the relevant assurances had been given clearly and repeatedly. The substance of what L intended was perfectly plain ([26]).

On the question of reliance, there was no ‘but for’ test. It is enough for the assurances to be among the factors that C relied upon in her later conduct. If the promises were made, and there was conduct by C of such a nature that inducement may be inferred, then a rebuttable presumption arises that C relied on the promises ([30] referring to Wayling v Jones).

Reliance and detriment are often intertwined ([31]). At first instance, the court pointed to the fact that C left her husband and co-habited with L. She contributed a substantial sum of money to the maintenance of the Property and their joint living expenses. She had also worked for the Company without any salary. There were clear acts of detrimental reliance. Some of these acts straddled the periods before and after the making of the promises but this did not mean that they were not acts of detrimental reliance when they continued after the making of the promises ([42]). Nor did this fact mean that the relief should be reduced; after the assurances had been given, continuing with the same course of conduct could amount to detrimental reliance ([44]).

On the approach to be taken to the design of the relief:

‘Whilst the court does not grant relief beyond the minimum necessary to do justice, this does not require the court to be parsimonious although it recognises justice must be done to the defendant. Where the equity is raised by promissory estoppel in relation to a clear-cut promise that can readily be given effect, the court’s natural response is to fulfil the claimant’s expectations, subject to the remedy not being disproportionate to the detriment which its purpose is to avoid. If realising the claimant’s expectations in full would result in such a disproportion, the court will seek to satisfy the equity in a more limited way, while not abandoning its attempt to fulfil those expectations to an appropriate degree.’ ([44] referring to Luo Xing Juan v Estate of Hui Shee See at [70]).

Here it was appropriate to give full effect to the clear promises that had been made ([44]).

There was an attempt to argue that C had enjoyed the ‘countervailing benefit’ of living in the Property. This was held to be a circular argument, presumably on the basis that she was living there because she already had some kind of equitable right to do so (perhaps by analogy with an equitable interest under a common intention constructive trust).

Michael Lower

Agreement to transfer beneficial interest: proprietary estoppel as a way of circumventing a failure to satisfy the formalities

July 1, 2015

In Sum Fan Hung v Chum Mei Diu ([2015] HKEC 1100, CFI) the plaintiff and the defendant were sisters. The plaintiff bought a flat in 1997. Title was in the defendant’s name but there was no dispute that the property was held on trust (presumably a common intention constructive trust) for the plaintiff. In 2000, the plaintiff found she could no longer meet the mortgage payments. She orally agreed with the defendant that the defendant was to become the sole legal and beneficial owner of the property. In return, the defendant would take on all liabilities relating to the property without any right of recourse to the plaintiff.  This agreement was not recorded in writing signed by the plaintiff. This was a problem since section 5(1)(a) of the Conveyancing and Property Ordinance requires assignments of equitable interests in land to be in writing and signed by the assignor or an authorized agent. This problem was circumvented by dealing with it as a proprietary estoppel case. The agreement provided the assurance and the plaintiff’s later payments (of mortgage payments and so on) provided the detrimental reliance. The court declared that the defendant became the sole legal and beneficial owner from the time of the agreement. Proprietary estoppel circumvented the failure to satisfy the formality requirements.

Michael Lower