In a case that shatters the dream of the rural idyll and illustrates the vagaries of friendship, the Court of Appeal has reviewed the scope of the equitable doctrine of proprietary estoppel
One of the circumstances in which a court will take notice of an agreement about land, even if that agreement is not in writing and not signed by the parties to it, is if that agreement gives rise to a “proprietary estoppel”. The scope of this doctrine has recently been reviewed by the Court of Appeal in Gillett v Holt [0] 2 All ER 289.
An everyday story of country folk
In 1952 a 12-year-old boy, Geoffrey Gillett, and a 38-year-old gentleman farmer (and bachelor), Ken Holt, formed a friendship that lasted for more than 40 years. The boy left school at 15 despite the doubts of his teachers and his parents, who wanted him to gain formal qualifications. He accepted an invitation to work for Ken Holt on his farm, gradually learning the business. He finally became the manager. When he married, his wife and sons became a surrogate family for Mr Holt. They became closely involved in the farm’s complex financial arrangements and in Mr Holt’s landed estate. Indeed, they sold their own home to live on the estate.
Mr Gillett was an efficient farm manager and the business prospered. He was treated like a son by Mr Holt, who, at one point, proposed to adopt him so that he could inherit the agricultural tenancy. He involved him fully, throughout this lengthy period, in his social life and various sporting activities.
Mr Holt’s promise
On many occasions, Mr Holt assured Mr Gillett that he, and his family, would benefit from the estate. He even drafted various wills under which Mr Gillett and his family stood to gain. Mr Gillett became anxious about the degree to which he had enmeshed his life and prospects, and those of his family, in the affairs of Mr Holt. As wills (even if properly signed and witnessed) can always be revoked during the lifetime of the testator, he sought formal assurances from Mr Holt that he would, indeed, receive the benefits he had been promised.
Mr Holt never put the arrangement on a more formal footing, and Mr Gillett, believing him to be a man whose word could be trusted, tolerated this situation.
End of the friendship
Mr Gillett’s fears were not without foundation. In 1992 the relationship between Mr Holt and the Gilletts deteriorated suddenly and rapidly. The cause of this breakdown was the fact that Mr Holt had transferred his loyalty to a trainee solicitor, a Mr Wood. The position changed so dramatically that, by 1994, Mr Wood had replaced Mr Gillett as the principal beneficiary in Mr Holt’s will and, in 1995, Mr Gillett was summarily dismissed from his job as farm manager. A police investigation was instigated against him. This came to nothing.
The effect of this breakdown in family relations was to jeopardise the Gillett family home, livelihood and good name. They were left with none of the benefits that they had believed they would be receiving under Mr Holt’s will, and felt that, in committing themselves, without reservation, to the interests of Mr Holt, they had relied upon such prospects to their detriment.
With little left to lose, they started a legal action against both Mr Holt and Mr Wood, who, by this time, had become the legal and beneficial owner of a large portion of the estate. (Unlike many previous cases involving promises to make a will, the litigation did not arise upon the death of the promisor, but was commenced during his lifetime.)
The basis of the original action was twofold. The first cause of action was in contract, but this was abandoned at the trial. The lack of a written agreement was, no doubt, a considerable barrier to the success of such a claim, given that land was involved. The second cause of action was the doctrine of proprietary estoppel (see box opposite).
Relaxing the requirements
The extent to which the five basic criteria of proprietary estoppel have been followed has varied. In some cases, all the requirements have been insisted upon (Matharu v Matharu (1994) 68 P&CR 93); in other cases, some of the requirements have been ignored (Inwards v Baker [5] 2 QB 29). In Inwards, the defendant had built a bungalow on his father’s land on the understanding that he would be allowed to live there. This was no unilateral mistake; both knew the state of the title. The court allowed the claim to succeed on the basis that expenditure had been incurred based upon an expectation. It was felt that equity must intervene to prevent an injustice.
A similar result ensued in ER Ives Investment Ltd v High [7] 2 QB 379, where, again, both parties were aware of the state of the title. One of the parties acquiesced in the encroachment under his land of foundations from the neighbouring building in return for the right to an easement over his neighbour’s land. As a result of the agreement, he built a garage for his car, which could only be reached by making use of the easement. The court held that the acquiescence, reliance and expenditure involved in the construction of the garage were enough for the court to allow an equity to arise as a result of a proprietary estoppel.
Modern approach
Oliver J gave a key judgment in Taylors Fashion Ltd v Liverpool Victoria Trustees Co Ltd [2] QB 133. He held that: the strict fivefold test was not absolute; the doctrine of estoppel required a broader approach; and each case should be examined on its facts:
The more recent cases indicate that the application of the Ramsden v Dyson principle – whether you call it proprietary estoppel, estoppel by acquiescence, or estoppel by encouragement is really immaterial – requires a very much broader approach which is directed rather at ascertaining whether, in particular circumstances, it would be unconscionable for a party to be permitted to deny that which, knowingly or unknowingly, he has allowed or encouraged another to assume to his detriment, than to enquiring whether the circumstances can be fitted within the confines of some preconceived formula serving as a universal yardstick for every form of unconscionable behaviour.
Notwithstanding this dicta, key elements must still be established, albeit ones that are not formulated in the restrictive way of the earlier case law. First, there must be unconscionability. In other words, the defendant’s action (in denying the claimant his expectation) must shock the conscience of the court. Second, this unconscionable conduct must rest on the actions of the claimant, who must show encouragement given to him and detrimental reliance suffered by him.
Gillett v Holt
In Gillett, the relevant circumstances were considered by the Court of Appeal. The court took the view that the circumstances were sufficiently compelling for Mr Gillett to benefit from equity’s intervention. Mr Holt was estopped from reneging on his various promises to Mr Gillett “to see that he was all right” and “all this will be yours”. Mr Gillett’s actions in forgoing a formal further education, in giving up his own home, in devoting himself for 40 years to his friend and employer constituted sufficient detrimental reliance upon these promises.
Satisfying the equity
In Gillett, the complex financial arrangements surrounding ownership of the farms was such that the court made a broad order transferring part of the estate to Mr Gillett, together with £100,000 compensation. The precise disposition of the property, which was necessary to accomplish this, was left to the parties themselves (with a right to return to the court if they could not agree). The equity is satisfied either by transferring the freehold of the estate to the claimant; by granting a life interest; or by monetary compensation.
Thus, this unhappy, modern tale of a family at war was resolved in Solomon fashion by the Court of Appeal, using that very ancient weapon – equity.
Rosalind Malcolm is director in law at the University of Surrey
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Future wills: difficulties of relying upon a promise Clearly, one of the difficulties in cases such as that of Geoffrey Gillett and Ken Holt is that the promise – to leave property by will – related to an action that might not be carried out or (if carried out) might be revoked. A will is effective only on the death of the testator. A testator can write as many wills as he chooses and revoke them all, one by one. However, the fact that a will has been revoked, or that a promised will has never been made, will not affect the equity of the situation if the promisee has acted, to his detriment, upon a promise, to the knowledge of the promisor. At that point, the promise (as opposed to the will itself) becomes irrevocable. Promises in cases of this sort, whether they are to leave property by will (as is often the case) or to transfer property during the promisor’s lifetime, are revocable. If they are embedded in a contractual agreement or executed as a deed, they become enforceable. They can result in damages for breach of contract (or breach of covenant) or to specific performance of the promise. If, therefore, there is no equity to address, the matter can be safely left to the common law. It is precisely where the promise is revocable and has not been fulfilled that the problem arises, as in the case of Geoffrey Gillett and Ken Holt. Equity, a creation of the middle ages, remains as relevant in the 21st century as it ever was. |
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Proprietary estoppel: the five basic requirements Proprietary estoppel is an equitable doctrine and, as such, is subject to the discretion of the court. Nevertheless, certain elements must be established before a claim can succeed. These elements have changed over the years. In early cases, five requirements needed to be satisfied. Failure to prove any one of these requirements would prove fatal to the claim: 1 the claimant must have made a mistake as to his legal rights; 2 the claimant must have spent money, or done some act, based upon his mistaken belief; 3 the defendant, as holder of the legal right, must be aware of the existence of his own right and that it is inconsistent with the right claimed by the claimant; 4 the defendant must know of the claimant’s mistaken belief; and 5 the defendant must have encouraged the claimant in his expenditure of money or in the other acts that the claimant performed – either directly or by abstaining from asserting his own legal rights. These strict tests (which imply a unilateral mistake on the part of the claimant) come from Willmott v Barber (1880) 15 ChD 96. This case followed the reference to the equitable doctrine of “encouragement and acquiescence” in the dissenting opinion of Lord Kingsdown in Ramsden v Dyson (1866) LR 1 HL 129. The object of establishing these criteria was to show that it would be tantamount to fraud for the defendant to assert his own legal rights. |
