Satisfying the equity

Basic principle

Jennings v Rice

[2002] EWCA 159

Facts

C worked for many years for an elderly lady for nothing on a promise that "he would be alright" and "this will all be yours one day". On the full facts the judge found that there was an estoppel and awarded him £200,000 based on the cost of care. He refused to award the full value of the house and furniture (£435,000) because he thought that would be excessive. C appealed.

Decision

In dismissing the appeal the CA discussed the principles to be applied when deciding how to satisfy the equity. In particular, the principle of proportionality applies. The end result must be a just one having regard to the assumption made by the party asserting the estoppel and the detriment which he has experience.

    "The essence of the doctrine of proprietary estoppel is to do what is necessary to avoid an unconscionable result, and a disproportionate remedy cannot be the right way of going about that". (Robert Walker J, para 56)

 

Remedial discretion

Bargain and non-bargain cases

Powell v Benney

[2007] EWCA Civ 1283

Summary

In exercising its discretion in this case, where the claimants alleged a constructive trust, the court ordered the return of the money expended by them rather than an interest in the property.

Facts

1992: The Claimants (C's) befriend the deceased (when he was alive!). He owns two properties. 1993: C's look after the deceased and take care of his day to day affairs. Deceased says he will leave his properties to the C's 1994: Deceased offers C's the use of his properties. They were untidy and run-down and Claimants had to de-clutter them. 2000: Deceased writes out a note saying that he is leaving his properties to Claimants. They do some further work to the properties 2003: Deceased dies. C's invite his personal representative to transfer the properties to them, but after taking legal advice she refuses 2004: C's commence legal proceedings claiming that the properties were held in trust for them by way of constructive trust/proprietary estoppel.

First instance

The trial judge considered Yaxley v Gotts [2000] Ch 162; Gillet v Holt [2001] Ch 210 and Jennings v Rice (above)and considered that not only was detriment an essential ingredient of proprietary estoppel but that there had to be a causal link between the assurance relied on and the detriment asserted and that the detriment alleged must be pleaded and proved. On the facts he considered that to receive the two properties worth £280,000 was out of all proportion to the detriment the Claimants had suffered, and that justice would be done if the Claimants were recompensed £20,000 to reflect the monies they expended and the time they spent in the properties. The Claimants appealed.

Held on appeal

The judge had clearly rejected the constructive trust claim, and had not misdirected himself on detriment. Although it was not particularly clear how he had arrived at the figure of £20,000, the Court would not interfere. The case principally involved the scope of the remedial discretion in proprietary estoppel. In Jennings v Rice it was noted that Robert Walker LJ had divided the range of possible situations into two classes:

    (1) the bargain category, in which the relief should vindicate the claimant's expectation, and (2) the non-bargain category, in which relief is arrived at by the exercise of a wider judgmental discretion, influenced by a number of factors including the claimant's expectation, but also proportionality with his detriment.

Here, insofar as it was contended that the claim fell within the bargain category, it required that the claimant's expectations and the element of detriment be defined with reasonable clarity. That was not the case. There was no bargain or consensual arrangement and the deceased did not require the Claimants to do the detrimental acts upon which they now rely. That was a matter for them.

Comment

In short, what this case serves to highlight is the nexus between assurance and detriment where the claimant's case turns on bargain. If the claimant expects the relief to vindicate his bargain he will need to prove expectation and detriment. Otherwise, he will be left to the general discretion of the court in finding the minimum equity to do justice.

 

Statement of principles

Assurance relied upon and detriment relationship

Davies v Davies

[2016] EWCA Civ 463

Summary

The Court of Appeal allowed an appeal in relation to the extent of the equitable relief to be granted to a daughter following the success of her proprietary estoppel claim against her parents, the owners of a farm.

Background

This was an appeal against the second trial in relation to an issue between the parties. The first case related to the threshold question of whether the daughter was entitled to some equitable relief by virtue of a proprietary estoppel claim. The Court of Appeal held that she was so entitled (First Case). This present case concerned the question of how that equity should be satisfied.

Facts

The parents (P) owned and ran a substantial dairy farm consisting of the business and land. They wished the farm to remain in the family but the daughter (D) was the only one of their children interested in running it. She lived on the farm for many years and worked on it for low pay. There were a number of disagreements over the years, especially when D married a man the parents disapproved of and D stopped living and working at the farm at various points, finally leaving and stopping work there in 2012. P changed their wills on several occasions. D claimed an equity against P by virtue of proprietary estoppel which was decided in principal in her favour by the First Case.

First instance

D claimed that she had worked hard for a low wage for many years on P’s substantial dairy farm as they had repeatedly assured her she would eventually take over the business (and own the land). She was the only one of their three children that wanted to continue the business. P argued that D was paid a fair wage and had free board and lodgings, and should only receive a third equal share of the farm with her two sisters. At the trial the judge rejected the parents' offer to pay £350,000 in respect of the claim and awarded her £1.3 million. P appealed to the Court of Appeal.

Decision on appeal

The Court of Appeal allowed the appeal and reduced the judge's award of £1.3 million to £500,000. (It was common ground at the appeal that the eventual award would be purely monetary and the farm and business would not be transferred to D.)

The Court of Appeal held that the judge had applied far too broad a brush and failed to analyse the facts that he found with sufficient rigour. Nor did he explain why he reached the conclusion that he did. Although he said that he took “expectation” as an appropriate starting point, he did not explain which expectation out of the many he found that he regarded as the starting point.

This was far removed from a case where the same unambiguous testamentary assurance was repeated many times publicly over a long period of years. The judge recognised that the expectations were changing and uncertain but his conclusions did not take into account his findings about the changing nature of P’s wills, which left their estate to all three sisters and then to a discretionary trust. Nor did it reflect his finding that everyone knew that the company did not own the land. The Judge had identified two broad strands in the detriment suffered:

  • That she had worked for long hours on the farm without full payment; and
  • That had she not worked on the farm she would have been able to work shorter hours in a working environment of her choosing, and she would have been free of the difficult working relationship she had with her parents.

This meant placing a money value on both financial and non-financial aspects of the detriment suffered, as well as on the expectations that were aroused. The judge had made no finding that any of what she gave up was irretrievable as he found expressly that this was not a case in which D’s whole life was positioned on the representations made to her. P had offered £350,000 but the judge had failed properly to analyse the offer and in particular he had failed to appreciate that the offer itself already contained much that went towards satisfying the expectations raised on the facts of the case.

The Court pointed out that any case based on proprietary estoppel was fact sensitive but set out a number of relevant legal propositions in these cases, as follows (see para 38):

    1. The question of whether an equity has been raised and, if so, how to satisfy it, must be considered retrospectively from when the promise is due to be performed; and asking whether it would be unconscionable for a promise not to be kept either wholly or in part.
    2. The ingredients necessary to raise an equity are
    • An assurance of sufficient clarity;
    • Reliance by the claimant on that assurance; and
    • Detriment to the claimant in consequence of his reasonable reliance
    3. No claim based on proprietary estoppel can be divided into distinct compartments. So, the quality of the assurances may influence the issue of reliance. Further, reliance and detriment are often intertwined, and, “whether there is a distinct need for a "mutual understanding" may depend on how the other elements are formulated and understood”.
    4. Detriment need not consist of a quantifiable financial detriment so long as it is something substantial. This issue must be approached as part of a “broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances”
    5. There must be a sufficient link between the assurance relied on and the detriment asserted. The question is whether (and if so to what extent) it would be unjust to allow the person who has given the assurance to go back on it.
    6. The essence is to do what is necessary to avoid an unconscionable result.
    7. The court must weigh the detriment suffered against any benefits enjoyed as a consequence of the reliance.
    8. Proportionality lies at the heart of the doctrine of proprietary estoppel so that if the expectation is disproportionate to the detriment, the court should satisfy the equity in a more limited way.
    9. In deciding how to satisfy the equity the court has to exercise a broad judgmental discretion but the discretion is not unfettered and it must be exercised on a principled basis.

Comment

This case was far removed from a case like Gillett v Holt [2001] Ch 210 where the same unambiguous testamentary assurance was repeated many times publicly over a long period of years; or a case like Thorner v Major [2009] UKHL 18, which followed the same pattern. In this case there was a series of different and sometimes mutually incompatible expectations, some of which had been repudiated by the daughter herself, others of which had been superseded by later expectations. Although this was not one of them, in some cases it may well be that the impossibility of evaluating the extent of imponderable and speculative non-financial detriment (for example life-changing choices) may lead the court to decide that relief in specie should be given.

This case also demonstrates expectations/reliance/detriment can also be quite low.

 

Proportionality of the award

Payment of cash sum rather than transfer of the property

Habberfield v Habberfield

[2019] EWCA Civ 890

Summary

Proprietary estoppel case concerning a family run farming business. In satisfying the equity the court refused to transfer the farm to the claimant but instead ordered the payment of a cash sum.  In deciding whether the award made by the judge was proportionate the relevant comparison was between the detriment and the remedy.  Expectation is not determinative of the relief to be granted. The correct question to ask was whether the award was out of all proportion to the detriment?

Facts

In 1975 a Mother and Father started a farming partnership which consisted of a farmhouse and over 200 acres of farmland, together with farm buildings. The couple had four children. One of them, Lucy, began working full time on the farm after leaving school. It was her enthusiasm for dairy farming that made it the cornerstone of the business. The farming business for most of the relevant period until 2015 concentrated on dairy farming. Although others worked on the farm, without Lucy's work there would have been no dairy farming but they also raised beef cattle and did some arable farming. Since 2015 the business had been based on beef cattle and arable.

The Father made assurances to Lucy, that began in about 1983, and again in 1985, and during the late 1980s and 1992 that if she continued to work on the farm, then, after he could not run it any more, the farming business would be passed to her; subject to three qualifications. The first was that some land would be made available for her brother; the second was that some provision would be made for her sisters and the third was that title to the farm and the farmhouse (in which he and the Mother lived) would not be conveyed to Lucy in their lifetimes.

In reliance on these assurances, Lucy acted to her detriment e.g. her work on the farm, rejecting setting up a dairy farm elsewhere, long hours, low pay and few holidays. By 2006 Lucy and her partner were running the dairy side of the business. From 2007 he worked on the farm full time. From 2006 onward Lucy’s sister became more involved in running the beef cattle on the farm which led to tensions between the sisters.

In 2008 the Mother and Father made an offer to Lucy that there would be a new limited liability partnership to run the farm, in which all three of them would be the partners, with Lucy’s partner being taken on as an employee on a two-year trial basis; and after that they would consider bringing him into the partnership. Lucy rejected that offer.

In 2013 there was an argument between Lucy and her sister which resulted in Lucy resigning from the business. The Father died in 2014 and the dairy farm element to the business ceased in 2015.

In 2016, Lucy commenced proceedings, seeking an order for the transfer of the farm and the assets of the farming partnership. She was content that any order should make provision for her Mother to live at the farmhouse for her life, and for adequate provision for her reasonable needs to be ordered.

First instance

The judge held that Lucy should receive a cash payment of £1,170,000 rather than a transfer of the land because it would be tax inefficient to separate the farmhouse from the farmland and it would be undesirable to order a transfer that would 'inevitably' force the Mother to leave her home.

Her claim for the transfer of the land and the assets of the business therefore failed.

The Mother appealed, and Lucy cross-appealed.

Issues

  1. Once Lucy had rejected the 2008 offer whether it was no longer unconscionable for the Mother and Father to resile from their previous assurances to her that she would receive the farming business.
  2. Whether the post-2008 reliance/detriment should have been taken into account by the judge.
  3. Whether the judge's award had been disproportionate to the damage suffered by Lucy?
  4. Whether the judge's award had been wrong in principle.

Decision on appeal

  1. Whether an equity has been raised is a retrospective exercise undertaken from the time when the promisor goes back on the promise and it is wrong to concentrate on one event only in the course of a long history of dealing. Furthermore the 2008 offer had not offered Lucy control of a viable dairy unit; the Mother and Father were to be partners in the proposed partnership. So even if Lucy had accepted the offer it would not have fulfilled her expectation. Neither had the 2008 offer been made on the basis of “all or nothing”. Thus, the first instance judge was entitled to conclude that the making of the offer did not amount to a complete defence to Lucy's claim. If Lucy was to have been taken to have waived whatever rights she might have had by 2008, it would have been necessary for her to have known that she had such rights; and to have communicated the fact that she was giving them up. None of that happened on the facts and the first instance judge made no finding that the Mother and Father thought that Lucy had abandoned her expectations.
  2. The first instance judge had found that reliance on the assurances made in and before the 2008 partnership offer continued until Lucy left the farm in 2013. The Mother and Father had not put the partnership offer to Lucy on the basis that by refusing the offer she would forfeit her inheritance. Further had it not been for the assurances from the Father and Mother, Lucy would have sought a farming tenancy elsewhere and would not have given 30 years of her life to the farming business. It was not possible to go behind those findings of fact.
  3. The relevant comparison for the purposes of proportionality was a comparison between detriment and remedy. Expectation was not determinative of the relief to be granted as the correct question to ask was whether the award was out of all proportion to the detriment. The first instance judge had been entitled to regard the claimant's expectation as an important factor as there must be proportionality between the remedy and the detriment which is its purpose to avoid. Save in the most exceptional circumstances, it could not be equitable to award a claimant more than their expectation, and the judge had been right to scale down the award as he did to a cash sum.
  4. In order to raise the cash sum for Lucy, the farm would have to be sold, including the farmhouse where the Mother lived so whilst that the order would deprive the Mother of a place to live the first instance judge had been entitled to make that order. On the evidence, the first instance judge had been entitled to conclude that, even after the sale, the Mother would have had enough left over both to house herself and to make up the shortfall in her income.

 

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