The family home. Types of constructive trust. The end of detrimental reliance?

Archibald v Alexander: the facts

In Archibald v Alexander ([2020] EWHC 1621) a mother and her three children (Patsy, Brenda and John) orally agreed that a house would be purchased in the name of the mother and one of the siblings. It was to be held on trust for the mother for life and then for the three children equally.

This was for tax-planning reasons and to protect the property from any claim by the mother’s husband should she re-marry. The assumption was that there was no need to take excessive care to formalise the trust given the loving family context.

The property was transferred to the mother and Patsy as joint tenants, neither Brenda nor John was available to attend the solicitor’s office at the time of the purchase.

When the mother died, there was a dispute as to whether Patsy was the sole owner of the property or held it on the terms of the oral trust.

Was there reliance?

If this was a common intention constructive trust, then Brenda and John needed to show detrimental reliance. Fancourt J. held that there was reliance: ‘the non-signing siblings were self-evidently relying on the word and promise of those who did become owners’ ([14]).

Was there detriment?

Given the finding of reliance, the detriment was the decision of Brenda and John not to take steps to legally protect their ownership interest in the house; this was a sufficient change of position ([30]).

Not a common intention constructive trust?

The findings on detrimental reliance were obiter:

‘the instant case is of a different kind, in which a property is transferred (gratuitously) into the name of the owner on the basis of their express agreement to hold the property on trust for another. The owner only obtains the property on the terms of the agreement and equity does not permit them unconscionably to refuse to give effect to the terms. The trust arises from the terms on which the property was transferred, not from detrimental reliance on the agreement by the beneficiary.’ ([32]).

The essential elements of this constructive trust are: ‘property had been transferred to a volunteer on the basis of his promise to hold it on certain terms, and would not otherwise have been so transferred’ ([37]).

Fancourt J. referred to Rochefoucauld v Boustead; Bannister v Bannister and De Bruyne v De Bruyne.

There is no need to establish detrimental reliance for constructive trusts like this.

Michael Lower

 

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Proprietary estoppel: reliance and detriment

In Cheung Pak Chuen v Au Yeung Wing Chi ([2013] HKEC 721, CFI) C moved to Hong Kong to be with his father and step-mother. Encouraged by them, he brought his family to live in the property owned by the step-mother. He spent some money on the property and on the upkeep of his parents. In part, this was because of their assurance that the property would pass to him on their death provided he looked after them. Also at their suggestion, he gave up his employment and started his own business at the property. His father died. In her will, the step-mother left the property to her nephew rather than to C. After his step-mother’s death, C claimed that he had an interest in the property and he relied on proprietary estoppel.

The nephew argued that there was no reliance since all of C’s actions alleged to be the result of a reliance on the assurances were things that he would have done anyway as a good son. This failed since the assurances had been at least a partial cause of C’s actions (expenditure of money on the property and on looking after his parents).

The nephew also argued that there was no detriment since C had derived considerable advantages from being able to live at, and carry on his business from, the property. On balance, however, the court found that there was not merely a change of position but also detriment.

There is a summary of the law on proprietary estoppel at [72] – [81].

There was the necessary detrimental reliance in this case:

‘Looked at only in this way the detriment suffered by the Plaintiff is said by the Defendant not to be very substantial. Nevertheless, in my view, it is sufficient. He has spent money on the establishment of a business which, although no doubt primarily of benefit to himself and his own family, provided a basis on which he was able to reside with the Parents and, in due course, take care of them. He has provided financial support to the Parents via the “pocket money” some of which might well have been given in any event, but on the Plaintiff’s unchallenged evidence some not.’ ([86], Recorder Anthony Houghton SC)

When it came to the relief, the fact that there had been a clear assurance that the property would belong to C resulted in his being awarded outright ownership of the property ([93]).

Michael Lower

When is a statement clear and unambiguous for the purposes of equitable estoppel?

In Kim v Chasewood Park Residents Ltd ([2013] EWCA Civ 239, CA (Eng)) K was one of the flat owners at an estate called Chasewood Park (holding under the terms of a 125 year lease). The reversion (a much longer lease) came up for sale. Chasewood Park Residents Ltd was set up by the Residents’ Association to acquire the reversion. On 24th August 2006, the committee of the Residents’ Association sent out a circular letter to residents inviting them to contribute to the cost of acquisition. The letter summarised the benefits of the scheme and these were said to include the fact that those who participated would no longer need to pay the ground rent (then GBP100 annually) and that the 125 year terms could be extended to much longer terms at minimal extra cost.

K, believing that Chasewood Park would acquire the freehold and that a commonhold scheme would be established, agreed to participate. In fact, the reversion was a leasehold and what was proposed was an extension of the leases. Chasewood Park acquired the reversion and those who had agreed to participate were offered longer terms (as promised) but Chasewood Park said that a ground rent of GBP 100 would continue to be payable under the new leases.

K refused to pay the ground rent. In her defence to Chasewood Park’s claim for the rent arrears, she  argued that Chasewood Park was estopped from including a ground rent in the new leases since the circular letter contained statements that:

1. there would be no ground rent to pay following the purchase of the reversion; and

2. that participating residents would be able to extend their leases at no additional cost except a small fee.

The first, and as it happened determinative, issue was whether there had been a clear and unambiguous representation that participants would not have to pay a ground rent. On this, Patten L.J. said:

‘There is no doubt that in order to found a promissory estoppel (in the same way as any other estoppel based on a representation of fact) the representation or promise must be clear and unambiguous. But this principle raises a number of subsidiary questions. Does it mean that the estoppel cannot arise unless there is only one possible meaning of the words used or is the existence of other possible (but perhaps less probable) meanings not fatal to the creation of an estoppel where the Court can say that it was reasonable for the representee to have interpreted the words used in the way he did? There is also an issue about the test to be adopted by the Court. Few, if any, statements are not capable of being interpreted in more than one way. The Court’s usual role in construing, for example, a contract is to arrive at the legally correct meaning of the words. Their construction is a matter of law and the Court’s function is to resolve any ambiguities in reaching its conclusion. But it is arguable that in the case of estoppel it should not go any further than to identify the existence of any real ambiguities in the language. If the statement is open to more than one reasonable interpretation (one of which is fatal to the estoppel defence) then the representee was not entitled to rely on what was said without further clarification and there is no basis for an estoppel.’ ([23])

There was no clear and unambiguous statement here. The circular letter was simply a list of potential benefits. The suggestions were conditional and set out in an early stage in the scheme. They did not amount to the assurance contended for ([31] and [34]).

Nor had there been the necessary reliance since K had misunderstood the nature of the scheme. She had relied on her understanding that there would be a commonhold scheme and that she would not be a tenant at all. This was not merely a question of the legal mechanism to be put in place to give effect to an assurance. She had relied on an assurance that had not been made ([38] – [40]).

Patten LJ considered whether, had there been a promissory estoppel defence, its effect would have been merely suspensory. Would it have been unconscionable to withdraw any assurance that no ground rent was payable? It would not have been unconscionable. There was nothing to lead to such a conclusion. Chasewood Park had offered to reimburse K’s contribution but she had declined the offer. While Chasewood Park’s offer to reimburse K was not determinative, it reinforced the conclusion that it was not unconscionable to withdraw any assurance that no ground rent was payable ([42]).

Similar reasoning applied if one looked at the matter as a claim based on proprietary estoppel. The conclusion that any promissory estoppel would only be suspensory suggested that relief in proprietary estoppel should not take a form that would result in the permanent removal of a liability to pay ground rent. It would be inappropriate to grant relief in the form of a lease with no ground rent ([45]).

Michael Lower

Pregnancy can be detrimental reliance for proprietary estoppel

In Li Yuk Ying v Wong Yuet Kam ([2013] HKEC 92, CFI) P was married to D3 and they had two daughters. D1 and D2 were D3’s parents. They wanted P and D3 to try for a son and so they bought a property next to theirs and assured P that it was intended that she should have a half share in it. In reliance on this, P allowed herself to become pregnant on two occasions (each pregnancy ending in a miscarriage). P and D3 divorced and the property was sold to a third party. P relied on proprietary estoppel to claim an interest in the property (or the proceeds of sale). The question was whether pregnancy could constitute detrimental reliance. The judge found that it could ([61]) and P was awarded a half share in the net proceeds of sale.

Other events that P sought to rely on as detrimental reliance (looking after daughters, giving up a promotion opportunity and giving up her job) were not detrimental reliance on the facts of the case because they were not causally linked to the assurance given to her. The same was true of normal household expenditure and doing the normal things that a daughter-in-law would do to help her in-laws.

Proprietary estoppel: expectation or reliance?

In Baker v Baker ((1993) 25 H.L.R. 408, CA (Eng)) a father gave his son and daughter-in-law a large part of the purchase price of a house. Part of the arrangement was that he would have a room in the house to live in for the rest of his life. The father and son fell out and the father left the house. Return was out of the question. The father’s proprietary estoppel claim succeeded. At first instance, the son and his wife were ordered to repay the gift. The son and wife appealed the size of the award. The Court of Appeal agreed that the wrong approach to relief had been taken. The father had clearly intended a gift of the money. The relief should focus on the frustrated expectation (accommodation for life). The case was remitted to the first instance court for it to decide on the size of the monetary award needed to compensate for the frustrated expectation.

The father had, in the meantime, been given public sector housing at no cost to himself. There was discussion as to whether it would be appropriate to reduce the size of the eventual award to reflect this.

Proprietary estoppel: when reliance on an assurance is presumed

When a representation is made that is intended to influence the mind of the recipient and would have influenced the mind of a reasonable person, there is a presumption that any possible detrimental actions were performed in reliance on the representation. The burden of proof shifts to the defendant to show that there is no causal link between the representation and the alleged detrimental reliance.

In Greasley v Cooke ([1980] 1 WLR 1306, CA (Eng)) Miss Cooke had started to work as a live-in maid for a Mr Greasley. After 10 years she began to cohabit with one of the sons. She lived at the property for many years and looked after both the son and his mentally-ill sister. She had received assurances that she would be able to live at the property for the rest of her life. She sought a declaration that she was entitled to live at the property rent-free for the rest of her life. She succeeded in the Court of Appeal. The question was whether there was a causal link between the promises made to her and her actions in staying at the property. Would she have done so anyway? The English Court of Appeal held that once it is shown that the promises were intended to influence the judgment of a reasonable person then the causal link is presumed to exist. The onus is then on the defence to show that there had been no causal link.

Michael Lower

The burden of proving reliance in proprietary estoppel

The plaintiff in a proprietary estoppel claim has to show reliance on the belief / promise / assurance. Where there has been conduct from which reliance can be inferred the burden of showing that there has been no reliance shifts to the defendant.

In Wayling v Jones ((1995) 69 P & C.R. 170 CA (Eng)) the plaintiff had lived with a Mr Jones for many years in a homosexual relationship. He also worked for Mr Jones. In return he received just pocket-money and living expenses. Mr. Jones made repeated assurances that when Mr Jones (much older then Mr. Wayling) died, Mr. Wayling would inherit his business. Mr. Jones died but without having altered his will to leave the business to Mr. Wayling. At first instance, Mr. Wayling’s proprietary estoppel claim failed. The problem area was that of reliance on the promise. The Court of Appeal was satisfied that he had relied on the promise. It held that once there was evidence of conduct from which reliance could be inferred (working without pay for many years) then the defendant had to prove that there had been no reliance.