Archive for the ‘Unconscionability’ Category

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

October 26, 2020

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

Proprietary estoppel and co-habitation

January 12, 2017

In Southwell v Blackburn ([2014] EWCA Civ 1347, CA (Eng)) B and S began to co-habit in 2002. S bought a house in his name and he alone made the mortgage payments. He did not envisage marriage precisely because he knew that B might then have a claim against the house. Several years later, the relationship came to an end and S excluded B from the house. B’s claim that they had a common intention to be equal beneficial owners failed. In the alternative she relied on proprietary estoppel.

There was no specific assurance that B would have any right to the home. S did, however, assure B that he was making a long term commitment to provide B with a secure home. S’s assurance was that B would ‘have the sort of security that a wife would have, in terms of accommodation at the house, and income.’ ([16])

Before moving in with S, B had accommodation rented from a housing association. She spent GBP20,000 fitting and furnishing the house. Relying on S’s assurances, B left that accommodation. Although her income was much less than S’s, B did contribute to the couple’s joint expenses.

The first issue was whether the assurances were enough for proprietary estoppel purposes. It is clear that the assurance must be clear and unequivocal and relate to the property. An assurance that B would be provided with a secure home was sufficient to give rise to an equity (Greasley v Cooke). S’s assurance was not, in substance, conditional on the continuation of the relationship ([7]).

The fact that the common intention constructive trust claim to an equal beneficial share had failed did not mean that there could not be an assurance as to the security of B’s right to accommodation ([10]).

Then there was the question of detriment. B had enjoyed rent-free accommodation and had been able to take a degree that enhanced her earning capacity. Did this mean that the detriment had been dissipated over the course of the relationship?

First, it is true that ‘detriment has to be assessed over the course of the relationship’ ([13]). It was right to have regard to the benefits that had accrued to B as a result of the relationship ([14]). But S had also benefited from B’s contributions ([15]).

There are cases where, looking at the course of the relationship from the point at which the promisor reneges on his promise, the benefit has been dissipated. That said, ‘cases involving couples living together lend themselves .. less readily to an arithmetical accounting exercise’ ([17]). Benefits flowed both ways and were incidents of the relationship ([18]).

As for unconscionability, S contended that the relationship was not a marriage and was not expected to be permanent. Thus, there was no unconscionability about withdrawing the security of accommodation. This failed. The point was that B had incurred detriment in reliance on the assurances:

‘It is the detrimental reliance which makes the promise irrevocable and leads to the conclusion, at the end of a broad inquiry, that repudiation of the assurance is unconscionable.’ ([20]).

The relief that was awarded was a payment to reimburse her for the money that she had spent on the home that she had left and on S’s property.

Michael Lower

 

 

Proprietary estoppel: detriment and proportion

August 23, 2012

In Suggitt v Suggitt ([2012] EWCA Civ 1140, CA (Eng)) a father promised his son that he would give his son the farm that the father owned and a place to live. In his will, the father gave all of his estate to his daughter with a power (but no trust) to transfer the farm to her brother if she decided that he had the ability to farm it. The father died and the son sought to enforce the lifetime promise, relying on proprietary estoppel.

The daughter contended that her brother had incurred no detriment in reliance on the promise. The father had provided him with food, a home, money and business opportunities well into adult life. However, the son had returned to the farm and had done at least some work. The first instance judge thought that this did amount to ‘real and substantial detriment’ and this finding could not be said to be perverse ([39]).

Was it unconscionable for the father to go back on the promise? Arden L.J. said: ‘[U]nconscionability in this context is unconscionable conduct in failing to give effect to the assurance.’ ([41]) It is unconscionable to go back on an assurance that has resulted in detrimental reliance. There was no real issue here then.

Was the first instance award (the farm and a farmhouse) disproportionate, going beyond the minimum required to satisfy the equity? The question, after Jennings v Rice, was whether the award was ‘out of all proportion’. Was it ‘clearly wrong’? ([44]) Arden L.J. held that the award could not be criticised on this ground:

‘Since the promise was that John should have the farmland unconditionally, I do not consider that to grant him the farmland … could be said to be out of all proportion.’ ([45])

Should John simply have received a cash payment for his services? This was plainly the wrong approach:

‘That would have done the minimum … but it would not have done justice to the claimant given the assurances he had … been given and his acting to his detriment.’ ([42])

Michael Lower

Proprietary estoppel: unconscionability is all: a representation is not always necessary but encouragement is

January 12, 2012

Blue Haven Enterprises Ltd v Tully ([2006] UKPC 17) was an unjust enrichment claim but the Privy Council stated that the relevant principles were the same as for a claim in proprietary estoppel. In 1985, T entered into a contract to sell to R land in Jamaica that was suitable for development as a coffee plantation. There was a dispute and T purported to terminate the contract. In 1988, she agreed to sell the land to Blue Haven and allowed Blue Haven into possession. R knew of the sale. In January 1989, R obtained a judgment effectively requiring T to complete her contract with him and preventing her from selling to anyone else. In 1989, R visited the land and informed Blue Haven of his right to the land. Nevertheless, Blue Haven spent a lot of money to develop the land as a coffee plantation. Subsequently, R obtained an order requiring Blue Haven to give possession of the land to him and he became the registered owner of the land. Blue Haven brought an action for breach of contract against T and for unjust enrichment against R; Blue Haven had paid for development work that R would have had to pay for. This judgment is concerned with the unjust enrichment claim. The Privy Council stated that the relevant principles were the same as proprietary estoppel although no proprietary claim was being asserted.

The claim failed because R had done nothing to encourage any kind of expenditure or mistaken belief by Blue Haven. Quite the reverse was true since R had told Blue Haven of his interest before the expenditure had been incurred.

Lord Scott pointed out that the relevant representation came from T and not from R but that this was not the factor that was fatal to Blue Haven’s claim. There can be circumstances where there is no representation but there is unconscionability:

‘Enrichment of A brought about by improvement to A’s property otherwise than pursuant to some representation, express or implied, by acquiescence or encouragement for which A is responsible would not usually entitle B to an equitable remedy. But the reason would be that A’s behaviour in refusing to pay for improvement s that he had not asked for or encouraged could not, without more, be described as unconscionable.’ (para. 24).