Assurance and reliance - Thorner

Nature of assurance and reliance

Thorner v Major

[2009] UKHL 18

Summary

In this claim by a nephew in respect of his uncle's estate the nephew has established that he was entitled to his uncle's farm on the basis of a proprietary estoppel.

Basic facts

The claim was based on the grounds that the uncle had made assurances to the nephew that the farm would be left to him after his death. The nephew had relied on those assurances by working for a period of some 28 years on the farm and thereby suffering a detriment. The trial judge had found that there was a sufficient assurance to give rise to the estoppel. The CA had overturned that decision on the ground that the judge had not found that the assurance was intended to be relied upon and that there was no material upon which he could have made such a finding.

House of Lords

The CA was wrong to overturn the decision of the first instance judge. He was entitled to come to the conclusion that he reached.

Yeomans Row v Cobbe distinguished

The other recent decision of the HL on proprietary estoppel, Yeomans Row v Cobbe, was distinguished. In Cobbe there was no doubt about the physical identity of the property. However, there was total uncertainty as to the nature or terms of any benefit (property interest, contractual right, or money), and, if a property interest, as to the nature of that interest (freehold, leasehold, or charge), to be accorded to Mr Cobbe. In this case, the extent of the farm might change, but there was no doubt as to what was the subject of the assurance, namely the farm as it existed from time to time. Accordingly, the nature of the interest to be received by the nephew was clear: it was the farm as it existed on the uncle's death.

Further, in Cobbe the relationship between the parties was at arm's length and commercial, and the person raising the estoppel was a highly experienced businessman and the parties had consciously chosen not to enter into a contract. Each party knew they were not bound by a legal relationship. (Lord Neuberger, paras 94-97).

No proprietary estoppel

Tenant carrying out works

Haq v (1) Island Homes Housing Association and (2) London Borough of Tower Hamlets

[2011] EWCA Civ 805

Summary

There was in this case no proprietary estoppel in circumstances where the existing tenant carried out major works to the property with the knowledge of the landlord prior to the execution of the agreement for a new lease.

Facts

The Claimant Tenant (T) leased a property from D2 which was run as a convenience store. T wanted to enlarge the store and obtained planning permission with D2’s support. After the expiry of the contractual term negotiations started for the new lease of the larger premises. The negotiations focused on preparing:

  • a licence to carry out the works
  • a surrender of the old lease and agreement for a new lease, and
  • the terms of the new lease.

T was represented by solicitors at all times. Agreement was reached on all material aspects of these agreements. There was to be a new lease for 30 years.

The draft documents were incomplete at the time the works commenced.

D2 cleared the part of the premises to make way for the expansion and the keys were handed over for that part. The works started without the agreements having been executed. The works were expected to take 20 weeks but took almost a year. No attention was paid to executing the agreements. Eventually T reopened the shop. D2 then transferred its interest in the property to D1 who refused to execute the lease. T was a statutorily protected tenant but was not entitled to a 30 year term on renewal. T brought a claim arguing that D1, by virtue of D2’s actions was estopped from denying her right to the lease as agreed with D2.

Court of Appeal

The County Court was wrong to find that there was an estoppel preventing D1 denying T’s right to a lease on the terms of the draft lease between D2 and T. D2 had done nothing more than grant T a temporary licence, implied from its conduct, to start the work. It did not, by the same conduct, waive the requirement that the documents should eventually be signed and exchanged. D2 had not said or done anything that could amount to a clear and unequivocal representation either that it would not require the intended formal legal documents to be finalised and executed or that it would in no circumstances withdraw before that stage.

D2 did not waive the subject to contract status of the negotiations by allowing T to start work without the licence to carry out the works or the agreement for the lease having first been signed and exchanged. If negotiations are proceeding on an explicitly subject to contract basis, it is not open to one party alone to convert their status from being ‘subject to contract’, so that if agreement has been reached it may be regarded as binding even if the formal documents contemplated has not yet been signed and exchanged. That process must itself require agreement, so it has to be bilateral, and not unilateral. Although D2 acted in a sporadic and dilatory fashion in attempting to finalise the documents, there was nothing in its conduct on which T could fairly or reasonably rely as precluding D2 from insisting on its legal rights, so as to confine T to the statutory renewal rights as extended, once the works had been done, to the enlarged holding.

T commenced the works prior to the handing over to him of the keys. Therefore he did not act in reliance on the hand-over of the keys in commencing the works or committing himself to the expenditure. There was no reliance despite the fact that had D2 insisted on the documents being in place before the start of the works T may well have deferred the start of the works. Attorney-General of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] AC 114 followed.

Comment

This case shows the importance of properly identifying the reliance alleged and the nature of the estoppel in proprietary estoppel cases.

At first instance the judge failed correctly to identify a valid reliance by T on D2’s representations. On a correct interpretation T had relied on what his solicitors told him about D2’s intentions. Looked at objectively T was represented by solicitors and D2 at no stage made any representations that could have led T’s solicitors to hold a belief that D2 had waived its entitlement to enforce its legal rights. The fact that T may have believed that the agreement had been finalised was the relevant consideration.

The claim that an estoppel had arisen was founded on D2’s representations by its conduct in letting T into occupation to carry out the works. This was held to be wrong and the waiver of the right to insist that the licence to carry out the works was signed did not extend to a waiver of the legal right to insist that negotiations were subject to contract until the documents were executed. This finding is consistent with the dicta of Lord Walker in Stack v Dowden [paragraph 37] that: “proprietary estoppel operates as the assertion of an equitable claim against the conscience of the 'true' owner. It is satisfied by the minimum award”. In this case the minimum equity needed was that D2 was estopped from requiring a written licence to carry out the works. D2, and therefore D1, was not estopped from withdrawing from the subject to contract negotiations.

It is clear from this case that the strict approach to analysing proprietary estoppel claims following Cobbe v Yeomans Row Management Limited [2008] 1 WLR 1752 is being put into practice.

Detrimental reliance

Funds provided by a third party

O'Neill v Holland

(2020) EWCA Civ 1583

Summary

Successful second appeal to the Court of Appeal, overturning a County Court appeal decision and re-instating the first instance decision (albeit on slightly different reasons). The Circuit Judge had been wrong to hold that, following the transfer of the property into the Defendant’s sole name, the District Judge had been wrong in taking the view that detrimental reliance had not been pleaded sufficiently or at all in the Claimant’s statement of case. 

Facts

The Ms O’Neill (the Claimant) had lived with Mr Holland (the Defendant) and their children at 53 Worsley Road (“the Property”) between 2000 – 2012. It had been bought by her father 1999. In July 2012 the relationship came to an end. The claimant left the Property with the children and the defendant continued to live there.

 In 2008, the Claimant's father had transferred the legal interest in the Property into the Defendant's sole name for no consideration. From the available evidence it appeared that it had originally been intended that the Property be transferred into the parties’ joint names, but a mortgage offer had only been taken out in the Defendant's name, because on her evidence he said that she was not able to get a mortgage and thus it should be transferred into his sole name.

In February 2016, the Claimant commenced proceedings, seeking (amongst other relief) a declaration that the Defendant held the beneficial interest in the Property on trust for the two of them in equal shares.

She also sought similar declarations in relation to a portfolio of 12 buy-to-let properties, which had been acquired in the sole name of the Defendant  (or, in one case, in the name of a company of his) on various dates between 2002 and 2010; and  a further property at 30 Broadway Street, Worsley, Manchester (“30 Broadway”), which she alleged had been bought by them jointly as a future family home, although again it had been acquired in the Defendant’s sole name.

In support of her case that she had a 50% beneficial interest in the 12 buy-to-let properties, the Claimant alleged that she and the Defendant had established a joint property business, to which she had materially contributed in various ways, or in the alternative that there had been a partnership at will between them. The Claimant’s father had passed away in 2009.

Issues

Whether the claimant/appellant, on the second appeal had established that, on the basis of the facts found by the District Judge at the trial in 2017, she had a 50% beneficial interest as an equitable co-owner in a Property which she co-habited with the defendant/respondent between late 2000 and July 2012.

First Instance

The District Judge rejected the Claimant’s claim that there had been a business agreement between her and the Defendant (or a partnership at will) in relation to the buy-to-let properties and found that any assistance which she had given him in relation to his business was explicable on the basis of their personal relationship.

As regards the Property the District Judge found it had been purchased by the Claimant’s father, John O'Neill, using money from identified and unidentified sources to be a family home for his daughter and her family. The circumstances were such as to give rise to a common intention constructive trust in favour of the Claimant, and that her beneficial interest in the Property was a half share.

In relation to 30 Broadway the Claimant would have a beneficial interest in it as there was clearly an intention that it would be a family home and rejected the evidence of the Defendant that he purchased it with his own funds as an investment property.

First Appeal in the County Court

Permission was granted to the Defendant on two areas:

The first group, grounds 1 and 3, challenged the District Judge's findings that the Claimant had a beneficial interest in the Property and 30 Broadway respectively, relying particularly upon the absence of any finding that she had acted to her detriment in reliance on any common intention, or on any other circumstances justifying the imposition of a constructive trust.

The second group consisted of three grounds challenging various aspects of the way in which the District Judge had dealt with the equitable accounting issues.

The Circuit Judge allowed the appeal on the basis the District Judge had misdirected herself and as a consequence failed to identify the need to find the Claimant had acted to her detriment in reliance upon the common intention. That requirement was fundamental.

Second Appeal to the Court of Appeal

The Claimant was granted limited permission to appeal by Lewison LJ on 30 July 2019. The two grounds for which Lewison LJ granted permission both related to the Property and permission was granted as it raised “an important point of principle, namely whether the fact that the Appellant's father provided the funds for the purchase of 53 Worsley Road amounts to detriment upon which the Appellant can rely”.

In overview the Claimant sought to uphold the District Judge's finding of a constructive trust of the Property in equal shares as being a justified exercise of her discretion in the light of her findings that:

a.     the parties intended to share the beneficial interest in the Property;

b.     John O'Neill (the Claimant’s father) provided the money required to purchase the Property;

c.     but for the Defendant’s assertion that the Claimant could not obtain a mortgage, the Property would have been transferred from John O'Neill to the Claimant and the Defendant as joint owners;

d.     the parties' intention (deduced objectively from their conduct) was that the parties were each to have a 50% share of the beneficial interest in the Property; and

e.     it would be unconscionable for the Defendant to deny or renege on the parties' agreement that the Claimant had a beneficial share in the Property.

Decision of the Court of Appeal

The mere fact that the Claimant’s father, having purchased the property intended it to be a family home for her could not, by itself, have given rise to a constructive trust in her favour.

Judge Pelling on the first appeal was right to hold that detrimental reliance remained an essential ingredient of a successful claim to a beneficial interest in a residential property under a common intention constructive trust, in the class of case where the legal estate is in the sole name of the other party.

The requirement tracing back to Gissing v Gissing [1971] AC 886, Grant v Edwards [1986] Ch 638 (CA) and confirmed in Curran v Collins [2015] EWCA Civ 404. However, Judge Pelling adopted too narrow a view of the District Judge's findings of fact, and he was also wrong to take the view that detrimental reliance had not been pleaded sufficiently or at all by the Claimant.

The Claimant had pleaded that she had only agreed for the Property to be transferred into the sole name of the Defendant because he had falsely represented that he would have otherwise been unable to obtain a mortgage over the Property. The Claimant had pleaded that she had been given assurances by the Defendant that he would then hold the Property on trust for himself and her in equal shares. It had been implicit in those allegations that but for the representations made by him, the Claimant’s father would have transferred the Property into her sole name, or into their joint names.

Thus on the Claimant’s pleadings, there had been clear detriment to her. She had exchanged a situation in which the Property had been in the sole beneficial ownership of her father, and she had been able to occupy it rent-free for the foreseeable future, for a situation in which the beneficial and legal interest had been vested in the Defendant alone.

Comment

Detrimental reliance needs to be identified and pleaded in a statement of case as relying on unconscionability. Detrimental reliance does not necessarily require out-of-pocket expenditure on the property as being tricked or misled into being left off the registered legal title can be sufficient. 

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