Oral land contracts and proprietary estoppel: Thandi v Saggu

The problem of oral land contracts and proprietary estoppel

England’s Law of Property (Miscellaneous Provisions) Act 1989 (‘LPMPA’) requires land contracts to be in writing and signed by both parties. Failure to comply results in the invalidity of the contract (LPMPA, s. 2(1)).

The LPMPA abolishes the doctrine of part performance since the doctrine presupposes the validity, but unenforceability, of oral land contracts. The LPMPA, s. 2(8) repeals section 40 of the Law of Property Act 1925 (‘LPA’) which rendered oral land contracts unenforceable but did not deny their existence as contracts. Also repealed then is section 40(2) of the LPA which provided for the continuing operation of part performance.

The LPMPA does, however, say that section 2 does not affect the creation or operation of resulting, implied or constructive trusts. This leaves some space for equity to give effect to oral land contracts (LPMPA, s. 2(5)). But where does this leave proprietary estoppel?

The courts worry that invoking proprietary estoppel in relation to oral land contracts undermines the LPMPA’s formalities requirements. So too, it might be said, does the use of the common intention constructive trust in relation to oral agreements relating to land. This, however, is expressly permitted by LPMPA s. 2(8). The lack of a similar saving provision for proprietary estoppel deepens the suspicion that its use in the land contract context should not be allowed.

Potential responses to the problem

The possible approaches to the use of proprietary estoppel in relation to land contracts seem to be:

Approach 1

To refuse to allow proprietary estoppel claims arising out of promises given in oral land contracts which ought to satisfy the LPMPA formalities rules. This would be the fullest recognition of a conflict between the formalities rules and the equitable doctrine. It would leave the common intention constructive trust as the principal ‘equitable safety valve’ to deal with cases where insistence on the LPMPA rules would be unconscionable.

Approach 2

To give free rein to proprietary estoppel claims even in the oral land contract context. The conflict between this and the formalities rules would be seen as an illusion: proprietary estoppel is seen as satisfying an equity that has arisen, rather than enforcing a contract.

Approach 3

To allow proprietary estoppel claims in relation to oral land contracts provided that the same facts could also give rise to a common intention constructive trust claim (which would seem to cover all, or the vast majority, of active encouragement cases) (Yaxley v Gotts).

The only problem with this is that it seems rather pointless. If a common intention constructive trust claim can succeed, what is the point of the proprietary estoppel claim? The answer to this may lie in the remedial discretion of the courts in proprietary estoppel.

Approach 4

To allow proprietary estoppel claims to succeed only where there is a ‘double assurance’ or ‘something more’ which estops promissor’s from pleading the formalities rules (Actionstrength; Cobbe; Kinane).

One problem here is that it is difficult to know what would amount to such a double assurance. Is the requirement satisfied by an oral assurance that is clearly intended to be immediately binding? But how is this different from the normal understanding of an assurance?

Approach 5

To allow proprietary estoppel claims to succeed where the claimant does not seek enforcement of the contract but is satisfied, for example, with a licence (Howe v Gossop).

This might, in effect, be a recognition of approach 2 above (that proprietary estoppel is not an enforcement of the contract).

If approach 5 is a version of approach 2, why not enforce the contract if that is what is needed to prevent unconscionability? If it is not a version of approach 2, it is not easy to understand the principle that justifies approach 5.

Thandi v Saggu

Thandi v Saggu ([2023] EWHC 2631) concerned a proprietary estoppel claim arising out of an oral agreement for the sale and purchase of land. The LPMPA formalities requirement was not satisfied.

The claimant relied on proprietary estoppel not to enforce the contract but to recover financial losses arising from the failure to enter into the contract. The oral contract, and the price payable under it, arose from an attempt to settle a separate commercial dispute.

The seller’s failure to go ahead with the transaction meant that her indebtedness arising from that dispute continued and that the buyer incurred wasted legal fees.

The proprietary estoppel claim succeeded. The judge, Hugh Sims KC sitting as a Deputy Judge of the High Court, took approach (2): proprietary estoppel was not being used to enforce a contract but to prevent unconscionability ([137]).

It seems, however, that he thought that this would have been a problem if the claimant had sought enforcement of the contract ([139]). As hinted above (point 5 in the previous section) I doubt the logic of this.

The relief granted was:

1. Recovery of the deposits paid to the seller; and
2. Reimbursement of the legal costs related to the aborted transaction (but not those incurred in relation to the broader commercial dispute).

The purchaser’s claim for relief in respect of the difference between the purchase price and the market value of the property failed because, on the facts of the case, it would have given the claimant more than he bargained for ([144]).

Michael Lower

Guest v Guest – summing up (for now)

I’ve posted a contribution with some interim conclusions on Guest v Guest in CUHK’s Issues in Property Law blog. Here is the link.

Michael Lower

Guest v Guest: Aims of proprietary estoppel and principles governing relief: the detriment-focused approach in the minority judgment (3)

Introduction

An earlier blog post outlined the facts and the judgment of the majority of the UK Supreme Court in Guest v Guest ([2022] UKSC 27).  A second blog post described the majority judgment in more detail.

This third blog post in the series looks at the minority judgment of Lord Leggatt (with whom Lord Stephens agreed). The majority judgment emphasized enforcement of the promise as the starting point in proprietary estoppel cases involving a promise of the future acquisition of property rights.

The minority judgment, by contrast, argues very strongly that preventing detriment is the central aim of proprietary estoppel and also provides the yardstick for the design of relief in successful cases.

This difference in approach can lead to very different outcomes, as a comparison of the majority and minority judgments illustrates.

This blog post will explain how the minority judgment read the major cases in the development of proprietary estoppel and the statement of principles that this reading generated. This statement will be compared and contrasted with the statement of principles in the majority judgment.

It is tempting to focus exclusively on the majority judgment. This temptation should be resisted since the minority judgment contains ideas that may prove influential in the future development of this area of the law.

Comparing and contrasting the statements of principles to emerge from the minority judgment sheds light on the choices made by the majority.

Differences in outcome

The relief awarded by the majority, applying an expectations-based approach is valued at GBP 1.3 million (less the value of the parents’ life interest) ([131]). The minority, taking a detriment-based approach would have awarded GBP 610,000 (more than half of which was interest on the detriment as determined by the minority).

These very different outcomes illustrate the practical significance of adopting one approach to equitable relief over another.

Different model of proprietary estoppel

Lord Leggatt’s reading of the development of proprietary estoppel led him to see the Court of Appeal decision in Crabbe v Arun District Council as a watershed moment.

Until then, proprietary estoppel operated defensively as a species of estoppel:

‘the equitable doctrine operated as an estoppel properly so called. The doctrine was not treated as an independent basis for acquiring legal rights, let alone one which might justify compelling A to transfer an interest in land to B. It operated negatively and defensively to prevent A (or A’s successors in title) from exercising a pre-existing property right against B. Where the relevant conditions were satisfied, A was estopped from asserting this right against B.’ ([146])

The distinctive feature of Crabbe was that a promise to confer a proprietary right (an easement in this case) created a new right. Proprietary estoppel became a positive cause of action ([147] – [148]) ‘valid against other persons generally’ ([154]).

The House of Lords decision in Thorner v Major ‘established beyond question’ the status of proprietary estoppel ‘as an independent cause of action and basis for acquiring new property rights’ ([151]). Thorner also established the essential features of this cause of action.

Lord Leggatt was of the view that this new type of proprietary estoppel is so different in its operation and effects that it should have a name which properly reflects its nature. He suggests that this type of claim should be called a ‘property expectation claim’ ([155]).

The purpose of proprietary estoppel

Clearly, proprietary estoppel is a response to a certain type of unconscionable behaviour, so that it is uncontroversial to say, as the majority judgment does, that the purpose of proprietary estoppel is to undo unconscionability.

The minority judgment is more specific as to what this means: ‘The equity is to be protected from detriment that B will suffer if the promise is not kept’ ([190]).

The focus on detriment is clear.

What this means for the approach to equitable relief

Lord Leggatt points out that there are two ways of undoing detriment: either enforce the promise (or order payment of the financial equivalent) or provide a remedy which compensates for reliance loss ([193]).

If the focus is on protecting from detriment, then the question arises as to why compensation for reliance loss should not always be the preferred approach. Why should enforcement of the promise be considered at all?

First, difficulty in quantifying the detriment may be a reason to prefer enforcement of the promise (or its monetary equivalent) ([200]).  Even then, care should be taken to ensure that the remedy is not out of proportion to the detriment ([204]).

Second, there are cases where the promise is given in an exchange that is ‘something like a contract’. For example, A may promise B that B will inherit some property of A in return for providing caring services for the rest of A’s life.

Here, the parties have agreed that the expectation (that the promise will be kept / enforced) and the detriment are well-aligned ([220]). Cases involving family members are unlikely to fall into this category ([221])

Enforcing conditional promises and promises subject to unspoken qualifications

Lord Leggatt pointed to two situations which pose significant difficulties where the court proposes to take an expectations-based approach to equitable relief. The first is that there are cases where the promise is that B will inherit A’s property on A’s death and A is still alive. A successful claim in these circumstances interferes with A’s testamentary freedom.  

Enforcing the promise also raises the issue of ‘acceleration’ that was, logically enough, a major feature of the majority Supreme Court judgment in Guest ([238]). A backward-looking detriment-based approach is free of this problem since the detriment has already been incurred at the time of the claim.

Promises of a future inheritance are often ‘subject to unspoken and ill-defined qualifications’ (Walton v Walton [19], Hoffman LJ). It may be implicitly understood, for example, that the relevant property might be wholly or partly used up to pay for medical or care expenses.

Lord Leggatt points out that this consideration also gives rise to issues where the court proposes to enforce a promise before the due date for performance:

‘Any such assessment must in principle seek to take account of such “unspoken and ill-defined qualifications” as were implicit in the promise made and how they bear on what might happen in the future (or on what might have happened in the future in a counterfactual world in which the promise had not been revoked when it was). That may be a difficult and speculative exercise to attempt to undertake, potentially more so than quantifying the claimant’s reliance loss’ ([244]).

Remedial offers

One of the interesting features of the minority judgment is its brief exploration of the role of remedial offers.

Lord Leggatt explains:

‘Where A, for whatever reason, decides to revoke a promise on which B has relied that A will transfer property to B on A’s death (or some other event) before the event has occurred, A may satisfy such equity as has arisen by making a gift or offer of compensation to B sufficient to prevent B’s change of position from operating as a detriment’ ([249]).

The significance of such an offer is explained:

‘provided the prospective benefactor has endeavoured to treat the promisee fairly and has made a genuine and reasonable alternative arrangement or offer of amends, a court should be slow to find fault with it and to order more extensive relief’ ([252])

Lord Leggatt suggests that B’s rejection of a fair remedial offer might provide A with some protection against an adverse order for costs ([252]).

Summary of principles

Just as Lord Briggs and the majority had done, Lord Leggatt crystallises his approach to the design of equitable relief into a summary of principles:

1. The prevention of detriment is the core aim of equitable relief in proprietary estoppel (or ‘property expectation claims’ as Lord Leggatt would have it) ([255]);
2. This could be achieved either by enforcing the promise or by compensating for reliance loss ([256]);
3. If both are practicable ‘the court should adopt whichever method results in the minimum award necessary to achieve that aim’ ([256]);
4. Enforcement of the promise is often appropriate where the date for performance of the promise has passed AND where (a) reliance loss is difficult to quantify; and (b) enforcement of the promise is not clearly disproportionate to the reliance loss ([258]);
5. Where the performance date has not passed and a fair offer for compensation has been made (a ‘remedial offer’) then relief should rarely exceed the offer ([259]);
6. Otherwise, the relief should be calculated by reference: (a) to the prospective future gift (a discount may be necessary to deal with acceleration, unspoken qualifications and so on); or (b) to the reliance loss ([260]);
7. The guiding principle is always that ‘the aim is to award a remedy which does all that is necessary, but no more than is necessary, to prevent B from suffering detriment as a result of having relied on a promise of a gift of property which A no longer intends to make’ ([261]).

Applying the principles to the facts of this case

The promise made to the son, Andrew, in this case was that he would inherit enough of his parents’ farm to allow him to carry on a farming business. This was no longer possible since the family break-up, and the fact that Andrew’s brother had an equal claim to the farm, meant that Andrew could no longer go back to the farm itself.

The financial award envisaged at first instance might well not be enough to set up elsewhere, even if Andrew should want to do so at his stage in life. So it was, in any event, impossible to give effect to the promise made to Andrew ([272]).

More important, from the minority perspective, is the fact that there was no evidence to indicate that the first instance award was even roughly proportionate to the reliance loss ([273]).

The only possible approach, then, was ‘to make an award of compensation calculated to put Andrew, so far as money can do it, in as good a position as if he had not built his career on those promises’ ([276]).

Unlike the majority, Lord Leggatt thought that it was possible to quantify the reliance loss and he does so in an Appendix to his judgment. This approach has the benefit that there is no need to deal with issues such as acceleration or to take into account the unspoken conditions to which the parents’ promise was subject ([277]).

Lord Leggatt thought that it was fair to assume that, but for the promise, Andrew would have pursued an alternative career in the dairy business ([278]).

The detriment-based relief in this case was the difference between the wages that Andrew would have worked if he had been employed elsewhere and the wages he earned working on his parents’ farm. This, including a sum for the interest that Andrew would have earned on the excess wages, came to GBP 610,000 (Appendix [30]).

Comparison of the majority and minority approaches

Both Lord Briggs (for the majority) and Lord Leggatt (for the minority) articulated a statement of principles concerning the award of equitable relief. The minority statement is set out in this blog post. That of the majority is described in my previous blog post on this case. It is instructive to compare and contrast these two statements.

1. The aim of proprietary estoppel

Lord Briggs said that the aim of proprietary estoppel is to undo unconscionability ([94]). No-one would dispute this. Lord Leggatt, however, thought that this was not clear enough. He said that ‘The equity is to be protected from detriment that B will suffer if the promise is not kept’ ([190])

2. When enforcement of the promise is appropriate

Lord Briggs thought that enforcement of the promise (or its monetary equivalent) is the starting point when considering the appropriate relief ([5]).

This is subject to the caveats that this must not be disproportionate to detriment ([72]) and that other factors such as changed personal circumstances of the promisor or the acceleration of a promise due to be performed in the future need to be taken into account ([6]).

Lord Leggatt did not see enforcement as a starting point but as something that may be appropriate where: (a) the date for performance of the promise has passed; (b) reliance loss is difficult to quantify; and (c) enforcement is not clearly disproportionate to the reliance loss ([258]).

It may be appropriate where the date for performance is in the future, the court will need to decide whether to enforce the promise or to compensate for reliance loss ([260]). Enforcement of the promise is a possibility, not a starting point.

Even if enforcement seems appropriate there may need to be adjustments to take account of unspoken qualifications and acceleration ([260]).

3. Should the award be proportionate to the detriment?

This is an area of agreement between the majority and the minority (at least on the face of it); each accepts that enforcement is only appropriate where it is not disproportionate to detriment ([76] and [258]).

4. When are the consequences of reliance ‘incalculable’?

This may be one of the most significant areas of divergence between the majority and minority approaches.

Lord Briggs, as we saw in the previous blog post, thought that a central aspect of the harm suffered by Andrew was the ‘gut-wrenching’ realisation that the promise he had relied on was to be repudiated. This could not be calculated with any reliability ([11]). This pointed to the need to enforce the promise ([12] and [51]).

Lord Leggatt accepted that it might be appropriate to compensate Andrew for the emotional harm ‘from having built his life on an expectation of inheriting Trump Farm which has been disappointed’? (Appendix [34])

He thought, however, that it would be possible to assign a monetary value to this harm. In this case, he decided against doing so, partly because ‘it is inherently difficult to separate feelings of dislocation and distress at having to rebuild his life from other harm for which no compensation can be recovered – for example, the anger and sense of betrayal’ ([37]).

We see in the minority approach a much greater willingness to assume that harm, even psychological harm and emotional distress, can be compensated for financially.

Applying the minority principles, this makes compensating for the reliance loss a much more feasible option.

Michael Lower

Guest v Guest: Aims of proprietary estoppel and principles governing relief (2)

Introduction

An earlier blog post outlined the facts and the judgment of the majority of the UK Supreme Court in Guest v Guest ([2022] UKSC 27).  

One of the distinctive features of proprietary estoppel, in comparison with the common intention constructive trust for example, is the judicial discretion as to the relief to be awarded. This discretion gives judges some flexibility and an ability to seek solutions that are fair to all concerned in the circumstances of a particular case.

It is desirable, however, that there should be a conceptual framework to guide the exercise of judicial discretion. Judges can then draw on this framework as they exercise their discretion and can use it to give reasons for their decision.

Judges will then be helped to focus on, and properly assess, the facts of the case that are of most importance in the light of the guiding principles.  Clarity of exposition as to the relative importance of these facts and the part they played in designing the relief will help appeal courts to assess whether a first instance award was soundly based.

This clarity must also be helpful to the parties and their advisers when negotiating a potential settlement, surely a good thing.

This blog post outlines the approach taken by the majority in Guest v Guest which proposed an expectations-based model for relief. This approach gave rise to the outcome described in the earlier blog post. A minority of the Supreme Court advocated a different approach placing a heavier emphasis on detriment.

Guest v Guest concerned the promise of a future right

Lord Briggs made the point that Guest v Guest concerned the promise of a future interest, rather than an assurance of a supposed existing right. The same doctrine applies, he thought, but he implies that the relevant considerations might differ ([8]).

Expectation v detriment

A description of the detriment-based approach of the minority in the Supreme Court in Guest v Guest can help us to understand why the difference in approach can have very significant practical consequences.

The majority took the plaintiff’s expectation (of sufficient land to run a viable farming business) as the starting point, modified so that accelerated receipt of the award did not mean that the plaintiff got more than his expectation.

The minority took the plaintiff’s detriment as the guiding principle. It thought that the detriment was easy to identify and quantify. The plaintiff worked for many years at low wages on his father’s farm because of the assurance. The detriment was the difference between market-level wages for the work he did and the wages he actually received ([278]).

This could be identified with certainty (GBP 267,748). The plaintiff was also entitled to interest on the sum at 2% above base rate (GBP 342,162). Rounded up, he total relief that the minority would have awarded was, thus, GBP  610,000.

The value of the majority’s award is not specified in the judgment but it is presumably much more valuable than the sum arrived at by the minority’s detriment-based approach.

Proprietary estoppel seeks to undo unconscionability

While the main focus of the judgments is on the principles governing equitable relief in proprietary estoppel, some attention is paid to the broader question of the aim of proprietary estoppel.

Giving the majority judgment, Lord Briggs said:

‘neither expectation fulfilment nor detriment compensation is the aim of the remedy. The aim remains what it has always been, namely the prevention or undoing of unconscionable conduct’ ([94]).

Fulfilling expectations while avoiding an award that is out of all proportion to the detriment

Lord Briggs’ review of the authorities led him to the conclusion that expectation fulfillment has always been the starting point for equitable relief ([5]).

But specific enforcement of the promise might sometimes be disproportionate to the detriment and so be much more than is required to undo the unconscionability ([6] and [10]).

So ‘the concept of a proportionality test does appear to have taken root in England, as part of the assessment of whether a proposed remedy to deal with the proven unconscionability based on satisfying the claimant’s expectation works substantial justice between the parties’ ([72]).

And ‘the best summary of the proportionality test is that the remedy should not, without some good reason, be out of all proportion to the detriment, if that can readily be identified. If it cannot, then the proportionality test is unlikely to be of much use’ ([72]).

Lord Briggs close his discussion of proportionality by observing that, ‘the question of proportionality is not to be carried out on the basis of a purely financial comparison’ ([73]).

Other factors that might mean that it is not appropriate to fulfil the plaintiff’s expectation

Proportionality is a relevant factor, then. Other factors too may mean that specific performance of the promise would be unjust:

‘The promise may be incapable of specific enforcement, for example where the underlying property is no longer in the hands of the promisor or his estate. The promised date for performance may lie so far in the future, or the date may be so unpredictable, that an order for performance on the promised date would be too insubstantial as a remedy. Or the early enforcement in full of a promise which, although repudiated, is years away from the due date for performance may give the promisee too much, or something radically different from that which was promised. The promisor may have other powerful equitable or moral claims on his bounty, so that the appropriation of the whole of the promised property to meet the claim of the promisee may be unjust to those other claimants, and be more the cause of unconscionable conduct than a remedy for it. Finally the magnitude of specific enforcement in full may be so disproportionate to the detriment undertaken by the promisee that something much less than full specific enforcement is needed to clear the conscience of the promisor ([6]).

In some cases, as in Guest v Guest itself, the need for a ‘clean break’ between the parties might also be an important factor ([64]) so that solutions that would require the parties to live or work together might be unworkable.

The majority’s principles for the design of equitable relief

Lord Briggs argued that the court should approach equitable relief in the following stages:

1. Decide whether repudiation of the promise is unconscionable in the circumstances ([74]);
2. Start with the assumption that the appropriate relief is full performance of the promise performance (or a monetary equivalent) but be aware that there may be factors which would render this disproportionate ([75];
3. The burden of proof is on the party arguing that full performance is disproportionate ([76]);
4. Full performance is likely to be appropriate in cases that fall just short of a contract ([77];
5. Just because full specific performance is inappropriate does not mean that detriment should be taken as the yardstick ([79];
6. ‘In the end the court will have to consider its provisional remedy in the round, against all the relevant circumstances, and ask itself whether it would cause injustice to third parties’ ([80]).

Appropriate to focus on detriment where it is specific and short-lived

Despite the insistence on performance of the promise as the starting point, Lord Briggs acknowledged that it might be appropriate to focus on detriment (and undoing it) ‘where the detriment is specific and short-lived, and in particular shorter than the parties are likely to have contemplated’ ([72]).

But, ‘wherever the relevant detriment has (as here) had lifelong consequences, a detrimental valuation analysis will fall upon stony ground’ ([72]).

Fulfilling expectations where the promise has had life-changing consequences: harm v detriment

Throughout his judgment, Lord Briggs distinguishes between ‘detriment’ and ‘harm’. Detriment is an essential element of a proprietary estoppel claim and, as we have seen, the court should consider whether the proposed award is proportionate given the detriment; this presupposes that detriment can always be measured in some way.

‘Harm’ seems to be a broader concept, less susceptible to being reduced to a specific sum of money. The idea seems to be that repudiation of a promise may give rise to harm that is incalculable or difficult to calculate. In such cases, it seems that the court should be more ready to give full effect to the promise.

Lord Briggs explained the harm in Guest:

‘In a case like the present, the harm consists of the soul-destroying, gut-wrenching realisation of being deprived, and then actually being deprived over the rest of a lifetime, of an expected inheritance of land upon which the promisee has spent the whole of his life and work to date and which, in due course, he expected to be able to pass on to one or more of his own children, making the same promise to them as his father made to him  … this cannot necessarily be valued with any reliability ([11]).

Specific performance recognises the inability to assign a monetary value to expectations concerning land ([12]). It also seems appropriate where the promise has induced ‘life-changing choices’ ([51]).

A detriment-based approach, ‘mistakenly treats the detriment rather than the loss of expectation as the relevant harm’ ([53]).

In Guest, the fact that the father’s promise induced the son to make decisions ‘with incalculable whole-life consequences’ ([95]) meant that it would be inadequate for relief to be based on the detriment (reduced wages over the course of a career).

Thus, it would be, ‘simply impossible to identify some monetarised value of his detriment in a way which would render a fulfilment of his expectation disproportionate’ ([95]).

Michael Lower

Guest v Guest: Aims of proprietary estoppel and principles governing relief (1)

Introduction

The judgment of the UK Supreme Court in Guest v Guest ([2022] UKSC 27) provides an authoritative review of the fundamental aims of proprietary estoppel and the principles governing equitable relief. The majority judgment was given by Lord Briggs (with whom Lady Arden and Lady Rose agreed).

This blog post provides a description of the facts and of the outcome. The next blog post looks at the account of the fundamental principles concerning equitable relief and the structured approach proposed by the majority of the Supreme Court.

Facts

A father (David) owned Trump Farm (‘the farm’) and promised one of his sons (Andrew) that on the death of his parents, Andrew would inherit enough of the farming business, and of the farm where the business was carried on, to establish a viable farming business. In response, Andrew worked for many years for low pay on the farm and did not pursue any alternative career opportunities.

Andrew and David fell out and David made it clear that Andrew would not receive the promised inheritance. Andrew brought proceedings in proprietary estoppel. The claim succeeded but there was disagreement as to the approach to be taken to the relief to be awarded.

At first instance and in the Court of Appeal, Andrew was held to be entitled to a monetary payment equivalent to 50% of the market value of the farming business and 40% of the market value of the farm. This sum was to be reduced by the value of the parents’ entitlement to a life interest in the farmhouse (see [88] in the Supreme Court judgment).

The problems with this were that the order would probably require the parents to sell the farm during their lifetimes and it meant that Andrew would enjoy accelerated receipt of the sum, in effect giving him more than his expectation.

The Supreme Court therefore gave the parents an option either:

• The creation of a trust over the farm and business under which the parents were to have a life interest with Andrew to be entitled to 50% of the farming business and 40% of the farm only on their death, thus overcoming the accelerated receipt problem. Andrew would not be entitled to compensation for being off the farm in the meantime ([101] – [102]); or
• The original first instance award but with a sufficient discount for early receipt built in  ([103]). The first instance approach of reducing the award by the value of a notional life interest in the farmhouse could be taken as the discount if the parents agreed. This would avoid the costs of a further dispute over the discount ([105}).

It was appropriate to allow David to make the choice since:

‘Either remedy if afforded to Andrew would draw the sting of unconscionability from the outright repudiation of their promises to him. Since the aim of the remedy is to prevent or remove unconscionability, then where there are two different ways of doing so the persons against whom the equity is asserted should in principle be the ones to make that choice.’ (104)

Conclusion

This post describes the facts and the outcome in Guest. Its importance lies in its approach to the roles of expectation, detriment and other factors in the design of equitable relief. The next blog post looks at what the majority judgment had to say about these fundamental issues.

Michael Lower

Proprietary estoppel and oral land contracts: the last word?

Howe v Gossop ([2021] EWHC 637) addressed the question as to whether proprietary estoppel can be relied upon where the claim arises out of an oral agreement concerning land.

The problem is that such an agreement is only enforceable if the formalities requirements in section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 have been satisfied. There are concerns as to whether it would be legitimate to allow oral land agreements to be the basis of a successful proprietary estoppel claim. In that case, proprietary estoppel appears to undermine the formalities rules.

In Howe v Gossop, the court resolved this conundrum with the proposition that proprietary estoppel claims can arise out of oral agreements concerning land so long as the relief sought does not amount to the enforcement of the oral agreement.

Facts

Mr and Mrs Howe sold land and buildings near their farm to Mrs Gossop. The terms of the transfer required Mr and Mrs Howe to pay GBP7,000 to Mrs Gossop for road resurfacing work carried out at Mrs Gossop’s expense.

Mr and Mrs Howe and Mr and Mrs Gossop subsequently orally agreed that the Howes would transfer two parcels of land (the ‘Green land’ and the ‘Grey land’) to the Gossops in return for a waiver of the obligation to pay GBP 7,000.

The Gossops carried out work on the Green land and the Grey land. Then relations between the parties broke down. The Howes brought proceedings to recover possession of the Green land and the Grey land.

The Gossops relied on proprietary estoppel in their defence, seeking a declaration that they were entitled to an irrevocable licence to occupy and use the land. They only raised this defence in relation to the Green land because the parties had not clearly delineated the Grey land. The defence succeeded in the court below.

Appeal

The Howes argued that a proprietary estoppel claim could not succeed because the agreement was not in writing as required by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. They argued that a claim based on an oral land contract could only succeed in exceptional circumstances (relying on passages in the House of Lords decision Cobbe v Yeoman’s Rowe Management Ltd and the Court of Appeal decision in Herbert v Doyle).

Decision

Snowden J. rejected the appeal. There was no requirement that the case be exceptional before proprietary estoppel can be relied on ([65]).

He distinguished cases in which proprietary estoppel was being used, in effect, to secure specific performance of an oral contract from cases where proprietary estoppel was being used as a defence to an action for possession.

The Gossops sought an irrevocable licence rather than specific performance of the contract and so there was no clash with the formalities requirements for land contracts ([50] and [53]).

Nor did it matter that the parties attempted to arrange for the agreement to be embodied in a written contract ([79]).

Snowden J. does not appear to rule out entirely the use of proprietary estoppel to enforce an oral land agreement but this would only be possible where there was some additional (unspecified) factor:

‘if a claimant is seeking relief that amounts to enforcement of a non-compliant contract, he needs to point to something else as the basis for an estoppel based on unconscionability.’ ([66])

Kinane v Mackie-Conteh ([2005] EWCA Civ. 45) is given as an example. In these cases, ‘some additional representation or conduct by the defendant’ is needed ([70]).

The fairness of the decision

Snowden J. pointed out that the Howes could not complain of being unfairly treated; the Gossops waived the GBP7,000 debt and got only equitable relief in return ([76]).

Michael Lower

Proprietary estoppel: Does detrimental reliance need to be incurred before the death of the promisor?

In Cheung Lai Mui v Cheung Wai Shing ([2021] HKEC 2263) the Court of Final Appeal had to consider whether, in proprietary estoppel cases, detrimental reliance had to be incurred before the death of the landowner who gave the assurance. If it did, they had to consider whether this requirement was satisfied in the present case.

The dispute concerned land in a village in the New Territories. The landowners in question were three brothers, each with a one third share in the land. D3 was the only grandson of the three brothers’ father.

There was a common understanding between the brothers, from the 1970s onwards, that D3 would inherit the land.

Knowing of this, D3, a building contractor, began building a wall around the property in the 1980s. D3 did further work in the early 1990s.

The death of the last of the brothers was in 1999. D3 erected two buildings and did improvement work at the property after 1999.

D3 inherited a one third share of the land. P was the executrix / administratrix of the other two thirds. She sought an order for sale of the land under the Partition Ordinance.

There were two questions:

(1) Did D3’s detrimental reliance have to have been incurred before the death of the brothers?

(2) If so, was the work that he did in the 1980s and early 1990s substantial enough to amount to detrimental reliance?

The Court of Final Appeal held that the detriment had to be incurred before the death of the landowner ([31]).

Where there were co-owners, the detriment had to be incurred before the last of the co-owners who gave the assurance ([33]).

Post-death events might be relevant to the form that the relief should take ([32]).

Implicitly, the Court of Final Appeal accepted that D3’s work before 1999 was detrimental reliance.

D3’s claim succeeded.

P held the two-thirds share on constructive trust for D3 who became, therefore, the sole beneficial owner ([38]).

Michael Lower

Informal land contracts: overlapping equitable doctrines

Introduction

The judgment in Ng Yuk Pui Kelly v Dung Wai Man [2019] HKCFI 210, shows that part performance, common intention constructive trust and proprietary estoppel are each available to plaintiffs seeking to enforce oral land contracts. The court also decided that a belief that one is in possession as owner by virtue of a valid contract (even when this belief is correct), is no bar to a successful adverse possession defence / claim.

Facts

Kelly (P) and Kuen were brothers. Kuen provided the finance to acquire two flats but legal title was assigned to his wife (D). D held the flats on resulting trust for Kuen.

In 1985, Kuen was in financial difficulty and orally agreed to sell the flats to P for HK$1 million (‘the 1985 agreement’). P paid the HK$ 1 million to Kuen but agreed not to press D to assign the legal title to P.

Kuen died and D and her children denied that P was the beneficial owner pursuant to the 1985 agreement.

P relied on part performance, common intention constructive trust and proprietary estoppel. Alternatively P argued that his adverse possession since 1985 meant that D’s title was extinguished.

P was successful under each heading except for part performance (where the problem may have been technical rather than substantive).

Part performance

P argued that payment of the HK$ 1 million to Kuen was an act of part performance of the 1985 agreement. P’s claim failed because he had not shown that payment of the money was referable to the agreement ([460]).

Common intention constructive trust

This succeeded. The 1985 agreement provided the common intention and the payment of the HK$1 million was the detrimental reliance ([466]).

D’s attempt to rely on Luo Xing Juan (to argue that the fact that D was not a party to the common intention was fatal to P’s claim) failed. Kuen did own the beneficial interest and the common intention can refer to a beneficial interest ([468]).

D’s attempt to rely on CPO s. 3(1) also failed. Cobbe v Yeoman’s Row was distinguished on the basis that in that case there was no valid agreement while in this case there was ([469]).

Proprietary estoppel

P could also succeed in proprietary estoppel. The lack of written formality for the disposal of an equitable interest in land (CPO s. 5(1)) was not a problem ‘where constructive trust and proprietary estoppel overlap’ ([471]).

The 1985 agreement was the assurance and payment of the HK$ 1 million was the detrimental reliance ([473]).

Adverse possession

As mentioned above, the alternative adverse possession claim also succeeded ([488]).

Michael Lower

Cheung Lai Mui v Cheung Wai Shing (Hong Kong Court of Appeal)

Introduction

Cheung Lai Mui v Cheung Wai Shing ([2020] 2 HKLRD 15) concerned a claim based on common intention constructive trust and proprietary estoppel. Where the landowner (the maker of the relevant assurance) has died, does detrimental reliance need to take place before the death? What kind of knowledge of the detrimental reliance must the maker of an assurance have for a proprietary estoppel claim to succeed.

Facts

Three brothers (W, K and F) were tenants in common in equal shares of land in a village near Sai Kung. From the late 1970s onwards, they reached a common understanding (‘the common understanding’) that D3 (W’s grandson and the sole surviving male descendant of the Cheung family) would own the land when he became an adult.

P was K’s daughter. When he died, she became the executrix of his estate. F died intestate and letters of administration of his estate were granted to P. She thus became the legal owner of K and F’s shares and the beneficial owner of K’s share and beneficial co-owner of F’s share.

W was the last of the brothers to die (he passed away in 1999). His share in the tenancy in common passed to his son and daughter (D1 and D2). D3 was D1’s son.

In 2002, D3 built a one-storey structure on the land and in 2003 he created a second one-storey structure to which he added a second storey. D3 and his family began to live in these buildings in 2002 or 2003.

P lived near D3’s home and visited it on various occasions. She knew that D3 carried out work on the land and raised no objections.

Relations between P and D3 started to deteriorate in 2012. P sought an order for D3 to remove the structures he had built. D3 claimed to be the sole beneficial owner of the land relying on common intention constructive trust and proprietary estoppel.

D3’s claim was based (a) on the common understanding, and (b) on P’s acquiescence in the works that D3 carried out on the land.

The common understanding: timing of the detrimental reliance

P argued that D3’s claims based on common intention constructive trust and proprietary estoppel had to fail because D3’s detrimental reliance (the building works) was incurred after the death of the brothers.

The Court of Appeal agreed that this would be fatal to a common intention constructive trust claim. The case was remitted to the first instance judge for him to determine whether there was any detrimental reliance while the brothers were still alive.

There appears to have been a difference of opinion as to whether detrimental reliance also needed to have been incurred before death for the proprietary estoppel claim to succeed.

Lam VP ([1.6] and Cheung JA ([6.35 and 6.38]) agreed that for common intention constructive trust purposes the detrimental reliance needed to take place before death.

If it had then the brothers’ estates were subject to the equity that had arisen. If not then the property would pass according to their wills or under the intestacy rules, unencumbered by any equity ([1.20] and [6.36]).

Lam VP thought that, in this respect, the law of proprietary estoppel might be different from that of the common intention constructive trust ([1.28]) and that D3’s proprietary estoppel claim based on the common understanding succeeded ([1.35]).

The assurance was that D3 would become the owner of the land when he became an adult. It was not a promise that he would inherit the property on the death of the brothers.

Cheung JA, on the other hand, thought that the requirement for detrimental reliance before the death of the brothers was the same both for proprietary estoppel and the common intention constructive trust ([6.38]).

Could D3 succeed even if there were no detrimental reliance before the death of the brothers? Estoppel by silence.

Cheung JA thought that D3 might still succeed in proprietary estoppel even if D3 only incurred detrimental reliance after the death of the brothers.

It might be possible to argue that she was a party to the common understanding ([6.39]).

Alternatively, there might be an estoppel by acquiescence or standing by ([6.40]). Cheung JA referred to the outline of the relevant law in Mo Ying ([5.6]). P stood by and allowed D3 to carry out the building works in (possibly mistaken) reliance on the common understanding. The case was being remitted to the Court of First Instance and this aspect of the matter would also need to be re-appraised.

Does the maker of the assurance need to know about the detrimental reliance?

It is not normally necessary for the maker of the assurance (the brothers) to know about the detrimental reliance ( Lam VP at [1.34]). Cheung JA addresses this issue at some length in his judgment.

Cheung JA tied his discussion of a knowledge requirement into the ‘narrow’ concept of unconscionability which is concerned with the state of mind of the person giving the assurance ([6.46]). The emphasis is on the quality of the words used not on knowledge of any actual detrimental reliance (Thorner v Major Lord Hoffmann at [5]).

In active encouragement cases (express words of encouragement or assurance) there is not usually any need for the maker of the assurance to have actual knowledge that there was detrimental reliance or the form it took. This knowledge is necessary in the case of estoppel by silence or acquiescence ([6.59] – [6.60]).

Comparison of the common intention constructive trust and proprietary estoppel

Lam V-P thought that the outcome was different in the case of proprietary estoppel when compared with common intention constructive trust. It is not surprising, then, that he draws attention to their differences ([1.4]).

Equitable estoppel ‘is the more flexible tool’ and the court looks backwards from the time when the promise falls to be performed([1.10] referring to Lord Hoffmann’s words in Walton v Walton at [105]).

Michael Lower

When does the proprietary estoppel right arise?

In Walden v Atkins ([2013] EWHC 1387) the court held that a proprietary estoppel claim arises when there is promise, reliance and detriment and not when the maker of the representation goes back on it.

C sold property to DW and MW at a substantial discount to market value. He did so in reliance on DW and MW’s promise that they would ensure that the ownership of the property would revert to him on the death of the survivor of DW and MW.

DW died first and then MW died. MW left the property to E. C brought a claim in proprietary estoppel.

E argued that C had no standing to bring the claim. C had gone into bankruptcy and the effect was to vest C’s property in the trustee in bankruptcy. Did C have a proprietary right at that time?

C argued that the equity did not arise until MW died without giving effect to his promise and this was long after C’s bankruptcy.

The argument failed:

‘On the assumed facts, what happened was that by the sale of 37 Archery to DW and MW in January 1976 at a discount greater than 50% on the then market value, C acted to his detriment in reliance on the promise the subject of the 1975 Agreement. The promise thereby became irrevocable and the estoppel arose’ (at [35] per HHJ Simon Barker QC).

A little later:

‘The equity comes into existence, if at all, as the result of a promise being made to and relied upon by and a detriment being suffered by a promisee. It is at that point that the promise becomes irrevocable, the equity is recognised, and it is this equity to which the definition of property at s.436 IA 1986 is to be applied.’ [(48)]

This is so even though the question of unconscionability, and what may be necessary to undo it, is not considered until the later time when the promise falls to be performed ([45]).

Michael Lower