Archive for the ‘Proprietary estoppel’ Category

Satisfying the equity in proprietary estoppel

January 12, 2019

Moore v Moore

In Moore v Moore ([2018] EWCA Civ 2669) a father (Roger) and son (Stephen) carried on a farming business in partnership; each owned one half of the business. Roger assured Stephen that Stephen would inherit Roger’s share in the business. Relations between the two broke down and Roger sought to dissolve the partnership.

In the ensuing litigation, Stephen relied on proprietary estoppel. He was able to establish the elements of a proprietary estoppel claim. The question then arose as to the approach to be taken to the relief to be granted.

Relief in proprietary estoppel: expectations, detriment or somewhere in between?

When the elements of a proprietary estoppel claim are established, deciding how to satisfy the equity ‘is a retrospective exercise looking backwards from the moment when the promise falls due to be performed’ (Davies v Davies [2016] EWCA Civ 463 at [38] per Lewison J). There is debate as to whether expectations or detriment ought to provide the measure for relief in proprietary estoppel cases (Davies v Davies at [39]) and often each of these factors will have a part to play.

In Jennings v Rice ([2002] EWCA Civ 159) Robert Walker LJ referred to a category of cases where ‘the assurances, and the claimant’s reliance on them, have a consensual character falling not far short of an enforceable contract’. Here, expectations are more likely to set the measure of equitable relief (Jennings v Rice at [45]). These cases are referred to below as ‘consensus’ cases).

Where, however, expectations are uncertain or incommensurate with the assurances given then expectations are no more than a starting point and the court is more likely to search for ‘the minimum equity to do justice to the plaintiff’ (Crabb v Arun District Council [1976] Ch. 179 at 198 per Scarman LJ).

In an important passage in Jennings v Rice, Robert Walker LJ said:

‘It would be unwise to attempt any comprehensive enumeration of the factors relevant to the exercise of the court’s discretion, or to suggest any hierarchy of factors. In my view they include, but are not limited to… misconduct of the claimant… or particularly oppressive conduct on the part of the defendant… To these can safely be added the court’s recognition that it cannot compel people who have fallen out to live peaceably together, so that there may be a need for a clean break; alterations in the benefactor’s assets and circumstances, especially where the benefactor’s assurances have been given, and the claimant’s detriment has been suffered, over a long period of years; the likely effect of taxation; and (to a limited degree) the other claims (legal or moral) on the benefactor or his or her estate. No doubt there are many other factors which it may be right for the court to take into account in particular factual situations.’ (Jennings v Rice at [52])

Application of the principles to Moore v Moore

At first instance

The first instance judge decided that the right approach was for Stephen to take over the farming business and assets (including houses on the farm) immediately. This would give effect to the clear intention that Stephen should be sole owner of the farm on his father’s death (to keep the farm in family ownership). He thought this meant that Roger and his wife should continue to receive what they had expected to receive from the farm during their lifetimes.

Specifically:

  1. Roger’s interest in the farm was to be transferred to Stephen immediately;
  2. Roger and his wife were to be granted irrevocable licences to live free of charge in one of the houses on the farm for the rest of their lives;
  3. Stephen was to make a weekly payment of GBP200 to Roger and his wife for the rest of their lives;
  4.  Stephen was to pay the reasonable costs of residential care for Roger and / or his wife should the need arise.

In the English Court of Appeal

Henderson LJ, with whom the other members of the English Court of Appeal agreed, thought that there were serious difficulties both with the first instance approach and with the scheme to which it gave rise ([90]):

  1. Roger (as Stephen must have appreciated) intended his wife to be the beneficial owner of his half share in the farm, with access to capital and income, during her life ([91]);
  2. Roger’s assurances to Stephen assumed that the partnership between them would remain a harmonious relationship. This was no longer the case so that the need for a ‘clean break’ became a paramount consideration. The first instance order, however, created an ongoing state of financial dependence on Stephen ([93]);
  3. It was a dangerous over-simplification to regard this case as a paradigmatic example of a consensus case. Referring back to paragraph 52 of Jennings v Rice (see above), there had been ‘alterations in the benefactor’s assets and circumstances’. The personal and commercial relationship had broken down. Roger’s health had broken down; he had Alzheimer’s disease and lived in a care home ([94]);
  4. The first instance judge had taken a minimalist view as to the provision to be made for Roger and his wife. The judge should, rather, have considered the minimum award to satisfy the equity. The decision to order an immediate transfer to Stephen made it all the more important ‘to provide full and generous protection for Roger and Pamela during the remainder of their lives, and to reflect as far as possible the provision that Roger would have wished to make for Pamela on his death’ ([95]);
  5. The judge had also failed to take account of ‘the likely effect of taxation’ (Jennings v Rice [52]). The first instance judge had been provided with no guidance on this issue: ‘this should be as unacceptable in a substantial proprietary estoppel
    case as it would be in a big money divorce case’ ([96]). The order made at first instance would have seriously adverse taxation consequences.
  6. The judge had failed to consider the effect of any costs order on the financial arrangements he had provided for. Where, for example, was Roger to find the money to meet any such order once he had transferred his assets to Stephen and had only the weekly payment from Stephen to call on ([97]).

The order made at first instance could not stand and the case was remitted for a further hearing as to how the equity was to be satisfied with the benefit of the Court of Appeal’s guidance ([101] – [108]). While the order for an immediate transfer to Stephen should stand, there should be more generous provision for Roger and his wife (both in terms of capital and income) to allow for a clean break.

To this end, the order should require Stephen to pay a considerable (GBP 1 million – 2 million) lump sum to Roger and his wife. While Stephen should assume responsibility for his father’s health costs, the lump sum would allow his wife to pay for her own health care needs.

Comment

Moore v Moore offers detailed guidance as to how the court should approach equitable relief and the requirement to ‘satisfy the equity’. Paragraph [52] in Jennings v Rice emerges as a significant source detailing the factors to be borne in mind.

Moore v Moore illustrates the need for careful consideration of the nature of the expectations generated by the assurances given, the context in which they were given and any changes in that context at the time when effect is to be given to the assurance.

In general it illustrates the potential for proprietary estoppel to combine remedial flexibility with a degree of predictability as to the factors that the court will take into account when granting relief.

This approach might well, in time, give proprietary estoppel the edge over the common intention constructive trust when dealing with the property and financial aspects of a relationship breakdown. Crucially, it is possible to have regard to the state of the relationship between the parties and their circumstances both at the time that the order is made and thereafter.

Michael Lower

 

 

 

 

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Proprietary estoppel: Australian take on proving detrimental reliance in relationship cases

January 24, 2018

In Sidhu v Van Dyke ([2014] HCA 19) V was married to the brother of S’s wife. V lived with her husband in Oaks Cottage which was part of a larger lot of land (Burra Station) owned by S and his wife. V and his wife lived in a homestead which was part of the same lot. S and V began a sexual relationship. V and her husband divorced when the latter discovered the relationship.

S assured V on several occasions that he would transfer Oaks Cottage to her on the sub-division of the lot that included Oaks Cottage. S gave V a written note to confirm that he had promised to give Oaks Cottage to V.

V did not seek a property settlement in her divorce proceedings; S suggested that there was no need for her to do so since she had Oaks Cottage. V carried out substantial unpaid maintenance and renovation works on Oaks Cottage and on other parts of Burra Station. She was also actively involved in the work related to the application to sub-divide Burra Station.  V did not seek full-time employment during the years in which she lived in Oaks Cottage.

The relationship ended after nine years. V brought a proprietary estoppel claim when S and his wife refused to convey Oaks Cottage to V.

The first instance judge (Ward J) found that S made two promises to transfer Oaks Cottage to V by way of gift. These promises were, he found, conditional on the sub-division of the Burra Station lot. The claim failed. First, it would not have been reasonable for V to rely on the promises since the condition could only be satisfied with the consent of S’s wife. Second, Ward J. concluded that V had not been able to prove reliance on the promises. His reading of the evidence was that she might have incurred the detriment even in the absence of the promises.

V succeeded on appeal to the Court of Appeal of the Supreme Court of New South Wales. First, it was not objectively unreasonable for V to have relied on S’s promises. Second, the Court of Appeal relied on Greasley v Cooke: the circumstances were such as to raise a ‘presumption of reliance’. Barrett JA said:

‘Where inducement by the promise may be inferred from the claimant’s conduct, as is the case here, the onus or burden shifts to the defendant to establish that the claimant did not rely on the promise. It was therefore for [S] to rebut the presumption and establish that [V] did not rely at all on the promises in acting or refraining from acting to her detriment’ (Van Dyke v Sidhu (2013) 301 ALR 769 at 786 [83]).

The presumption of reliance was raised and had not been rebutted. Having regard to S’s wife’s interest in the property, the Court of Appeal refused to order the transfer of Oaks Cottage to V. Rather, S was ordered to pay equitable compensation by reference to the value of the disappointed expectation.

S appealed to the High Court of Australia. S contended that the Court of Appeal had gone astray in speaking of a presumption of reliance and thus reversing the burden of proof. Further, equitable compensation should be calculated by reference to the loss suffered in reliance on the promises and not by reference to V’s expectation.

The High Court of Australia rejected the notion that there could be a presumption of reliance:

‘In point of principle, to speak of deploying a presumption of reliance in the context of equitable estoppel is to fail to recognise that it is the conduct of the representee induced by the representor which is the very foundation for equitable intervention. Reliance is a fact to be found; it is not to be imputed on the basis of evidence which falls short of proof of the fact. It is actual reliance by the promisee, and the state of affairs so created, which answers the concern that equitable estoppel not be allowed to outflank Jorden v Money by dispensing with the need for consideration if a promise is to be enforceable as a contract’ ([58]).

There was no shifting of the burden of proof as regards reliance; the onus remained on V ([61]). Rather, ‘[t]he real question was as to the appropriate inference to be drawn from the whole of the evidence, including the answers elicited from the respondent in the course of cross-examination’ ([64]).

Put another way, the question was ‘whether, when all the facts are in, the court is satisfied on the balance of probabilities that the promises in question contributed to the respondent’s conduct in deciding to commit to her relationship  with the appellant and adhering to that relationship (with all that that entailed) for eight and a half years’ ([66]).

Nevertheless, V was able to show reliance: ‘A review of the whole of the evidence shows that the respondent had made out a compelling case of detrimental reliance’ ([67]). It was enough that the promises contributed to the decision by V to carry out work on the property. The promises did need not to be the sole cause of the detriment, merely to have influenced the decision (Amalgamated Investment & Property Co Ltd (In Liq) v Texas Commerce International Bank Ltd [1982] QB 84 at 104 – 105). In Steria Ltd v Hutchison ([2007] ICR 448) Neuberger LJ said that the representation need only have been ‘a significant factor’. V was able to show that this was the case.

On the measure of relief, the High Court said that, ‘[t]he requirements of good conscience may mean that in some cases the value of the promise may not be the just measure of relief ([83]). ‘If the respondent had been induced to make a small, readily quantifiable outlay on the faith of the appellant’s assurances, then it might not be unconscionable for the appellant to resile from his promises to the respondent on condition that he reimburse her for her outlay’ ([84]).

This was not the right approach in this case, however, since the detriment involved ‘life-changing decisions with irreversible consequences of a profoundly personal nature’ (Donis v Donis (2007) 19 VR 577 at 588 – 589 [34] per Nettle JA).

‘[I]n the circumstances of the present case … justice will not be done by a remedy the value of which falls short of holding the appellant to his promises … [W]here the unconscionable conduct consists of resiling from a promise or assurance which has induced conduct to the other party’s detriment, the relief which is necessary in this sense is usually that which reflects the value of the promise ([85]).

There was nothing conditional about the promises. These were ‘expressed categorically so as to leave no room for doubt that he would ensure that the subdivision would proceed and that the consent of the appellant’s wife would be forthcoming’ ([86]).

Michael Lower

 

Proprietary estoppel in relationship cases: assurance or not?

January 14, 2018

Cook v Thomas ([2010] EWCA Civ 227) concerned a proprietary estoppel claim by Mr and Mrs Thomas against Mrs. Cook (Mrs Thomas’ mother). Mrs. Cook owned a farmhouse with a small amount of farmland and outbuildings (‘the property’). Mrs. Cook (‘the claimant’) allowed Mr and Mrs Thomas (‘the defendants’) to place the mobile home they lived in on the property. When that was damaged by a storm, the claimant allowed the defendants to move into the farmhouse. The defendants repaired and improved the farmhouse and farmed the land. The parties fell out and the claimant sought to evict the defendants.

The defendants relied on proprietary estoppel. They alleged that they had been given assurances that: (i) they would be allowed to remain in the property during the claimant’s life; and (ii) they would inherit the property on her death. They claimed that their work on the property was carried out in reliance on these assurances.

The first instance judge found that the claimant had given the defendants permission to live in the property and to farm the land. She had not, however, given them any assurance that they had an irrevocable permission to remain. The defendants appealed and the Court of Appeal had to consider whether the first instance judge had been entitled to reach his conclusion that there was no assurance.

The Court of Appeal (Lloyd LJ giving the principal judgment) found that the first instance judge had been entitled to decide in favour of the claimant. The evidence pointed to ‘a limited and informal family arrangement’ ([63]).

The claimant told the defendants that ‘you know this is all going to be yours when I am gone anyway’ ([72]). This did not give rise to a proprietary estoppel: (a) because it was not taken as an assurance but as an indicator of current intent; and (b) because there was no detrimental reliance upon it ([72]).

There was no room to make use of the Greasley v Cook presumption of reliance: ‘In the present case, there is no need for a presumption. The matter was fully investigated in evidence … A presumption is only relevant in the absence of the relevant evidence’ ([77]).

Lloyd LJ acknowledged that, in assessing the defendant’s case, the facts had to be looked at as a whole as at the time when the claimant sought to act inconsistently with the alleged assurances. The judge had to ‘come to a view as to whether the combined effect of what the Claimant had said and done, on the one hand, and the overall conduct of the Defendants on the other, meant that the Claimant could not turn the Defendants out’ ([97]).

There was no evidence to show that the judge had failed to take account of any relevant conduct ([99]): ‘Nothing had been done which was relevant in support of the Defendants’ case, unlike the history in Thorner v Majors [2009] UKHL 18 where the claimant had been helping the deceased voluntarily for years before anything was said to him that could amount to a promise or representation’ ([99]).

The relevant assurances were said to have been contained in four promises alleged to have been given by the claimant to the defendants. The defendants criticised the first judgment for assessing the evidence in relation to each but for not giving a separate analysis of the cumulative effect of the promises. Lloyd LJ rejected this criticism: ‘It was not necessary for the judge, having dealt carefully and at length with the relevant conduct in making his findings as to the sequence of events, to set out any extended analysis of the matter looked at as a whole’ ([101]).

It was legitimate for the judge to have regard to the lapse of time between the alleged representations and the conduct said to amount to detrimental reliance: ‘If there is a noticeable delay, it may be capable of explanation, such as for reasons of lack of funds or otherwise, but absent such a reason given in evidence, a significant delay may well point to a lack of connection between the representation and the acts said to have been done in reliance on it’ ([103]).

Alternative claims for an interest under a common intention constructive trust and in unjust enrichment failed. There was no common intention and the defendants had done the repair and improvement works for their own benefit, to make the house habitable for themselves.

Michael Lower

Proprietary estoppel and co-habitees: assurance must relate to a specific property

January 3, 2018

Lissimore v Downing ([2003] EWHC B1 (Ch)) concerned the proprietary estoppel claim brought by L on the break-down of her relationship with D, a rock star and the owner of Astbury hall, a large estate in England. The relationship began in 1993 and lasted for seven years. There was an ‘engagement’ but neither party expected to marry.

D was heavily invested in Astbury Hall, both in financial and in psychological terms. Astbury Hall represented the fruits of many years of hard work. Even before the relationship with L deteriorated, D consulted his solicitors as to the steps to be taken to ensure that L would have no claim to an interest in it.

HH Judge Norris QC outlined the law on proprietary estoppel. He emphasised the basic rule that a representation or assurance must relate either to some specific property ([12]) or to the whole of the representor’s property ([15]).

As regards detriment, the judge said, ‘the conduct must be in some sense prejudicial to the party relying on it, or of such a nature that it raises the inference that it must have been induced by some sort of promise.’ ([20]).

The claim failed because there was no representation; it was understood that L could live at Astbury Hall while the relationship lasted. Commenting on the legal effect of the relationship, HH Judge Norris QC said:

‘The fact that that state of affairs happened to endure for several years cannot of itself impose on Mr Downing an obligation to transfer some of his property when he did not undertake such an obligation at the outset. There may be a promissory estoppel (eg a defence to a claim to leave the property before reasonable notice of the change in the nature of the arrangements has expired): but proprietary estoppel is different’ ([37]).

He went on to note the problems that arise in this type of claim:

‘The advancing of a proprietary claim tends to require the claimant to list how much (s)he did, endowing small acts with a great significance whilst at the same time not recording that party’s true contribution to the relationship.’ ([47]).

L’s proprietary estoppel claim failed. D made no statement that would lead her to believe that she was to have a share in Astbury Hall. Nor did L believe that she had any such share ([51]). D’s statements ‘relate almost entirely to the currency of the relationship’ ([53]).

Nor was there any overall detriment: ‘looking at the matter in the round, balancing the burdens assumed in the relationship against the benefits derived from it, and making the assessment after the breakdown of the relationship, no substantial detriment had been suffered’ ([54]).

There is a distinction between property law and family law claims:

‘What I am being invited to do is to make a property adjustment order on the termination of the relationship, not to define what property rights were created during the relationship’ ([55]).

Michael Lower

 

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.

 

 

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