Equitable estoppel–Difficult questions of law arising out of executors’ action for possession of a house–House left by testatrix to granddaughter, although daughter had lived in it most of her life, had been assured by testatrix that it was her home for life, and had spent money on improvements–Clear equitable right in favour of daughter–How to implement it?–A right to occupy rent free for life might create a settlement under Settled Land Act 1925 with statutory powers of a tenant for life–Court relieved of need to solve ‘serious problem’ by consent of parties to lease to daughter determinable on death at nominal rent
This was an
appeal by Phyllis Gordon Williams from a decision by Sir Frederick Corfield QC,
sitting as a deputy circuit judge at Hereford County Court, in favour of David
Anthony Griffiths and Pamela Mary Gordon Griffiths, who sued as executors of
Rosa Mary Cole deceased. They claimed possession of a house at 21 Green Street,
Hereford, on the ground that it had been left by the testatrix to Mrs Griffiths
absolutely and that Mrs Williams was in occupation merely as a licensee whose
licence had been determined.
C G Heath
(instructed by Beaumont, Smith & Davies, of Hereford) appeared on behalf of
the appellant; D McCarthy (instructed by Whatley, Weston & Fox, of
Hereford) represented the respondents.
Giving the
first judgment at the invitation of Megaw LJ, GOFF LJ said: This is one of
those unfortunate and tragic cases, which come before the court all too
frequently, when mother and daughter (as it is in this case), or son, find
themselves in litigation. The case comes before us on appeal from an order made
by Sir Frederick Corfield QC, sitting as deputy circuit judge at the Hereford
County Court. By that order, which was made on September 29 1976, he ordered
the defendant Mrs Williams (who is the mother in this case) to deliver up to
the plaintiffs possession of the dwelling-house where she was living, 21 Green
Street, Hereford, a small semi-detached house, sometimes also known as 1 Gordon
Villa.
The plaintiffs
are Mr David Anthony Griffiths and Mrs Pamela Mary Gordon Griffiths, she being
the daughter of the defendant. They sue as personal representatives of the
defendant’s mother, Rosa Mary Cole deceased.
The
circumstances which have given rise to the dispute are as follows. The
defendant, Mrs Williams, who is a school-teacher and who was born in 1911, has
lived most of her life at her parents’ home, the property I have mentioned. Her
teaching duties took her away on occasions, but she returned to that home, I
think in 1950, and she has lived there ever since. It was also at one time the
home of the daughter, but she married in 1955. She was divorced and remarried,
but nothing turns on that. She was born in 1932.
The
grandmother at one time certainly intended to make a testamentary gift to Mrs
Williams of a life interest in the house, and she made a will to that effect on
November 24 1971, giving the property, after the death of Mrs Williams, to the
testatrix’s granddaughter, Mrs Griffiths. But in 1974 she revoked that will and
made another one, dated October 21 1974, whereby she bequeathed the property
absolutely to the granddaughter, leaving Mrs Williams no interest therein at
all. The grandfather died in 1968, but the grandmother, the testatrix, lived
till December 29 1975. During the latter part of her life the grandmother was
often ill and suffered a great deal of pain. Mrs Williams looked after her, and
in that she was quite clearly assisted by the granddaughter, who came to the house
frequently for that purpose.
The
grandmother having died, and her will having been
merely a licensee, and on March 26 1976 they served notice determining, or
purporting to determine, that licence. Having obtained probate of the will on
May 5 of that year, they commenced the possession proceedings on July 13. Mrs
Williams retired at about the same time, presumably at the end of the summer
term.
Mrs Williams’
advisers on her behalf, before proceedings were commenced, set up that she had
a statutory tenancy, presumably under the Rent Acts; and that contention was
again urged before the learned deputy circuit judge. But it was an untenable
proposition, the real answer, if any, to the claim being that the conduct of
the parties had raised an equity in favour of Mrs Williams enabling her to
remain in the property. But I think the fact that the argument for a tenancy
was maintained, although the equity was also set up at the trial, served to
mislead the learned deputy circuit judge and caused him to concentrate on
looking to see if he could find a tenancy, rather than considering the position
with regard to the alleged equity. That equity is said to arise because the
grandmother had repeatedly assured Mrs Williams that she would be allowed to
live in the house for the whole of her life, and because, on the faith of those
assurances, Mrs Williams had expended money upon the property which otherwise
she would not have done. It emerged at the trial that she had spent in all, out
of her own moneys, a sum of £2,000. Part of that was spent upon improvements to
the property which consisted of putting in a bathroom and an indoors toilet,
rewiring for electricity, concreting the yard, and repairs to one of the walls;
but part of it had been spent in paying outgoings. In so far as the expenditure
was of the latter character, I doubt whether it would raise an equity in Mrs
Williams’ favour, because it could be regarded simply as current payment for the
benefits which she was enjoying by being allowed to live in the house. But in
so far as money was spent upon permanent improvements such as I have mentioned,
it would be capable of creating what is known as a promissory estoppel. It
seems that a grant in aid towards the improvements was obtained from the local
authority; but, even so, as I read the evidence Mrs Williams did incur
expenditure out of her own money on improvements. But the evidence does not
show how the £2,000 should be broken down between expenditure of that character
and expenditure on current repairs.
In these
circumstances, in my judgment, we have to determine three questions, which were
propounded by Scarman LJ in his judgment in the case of Crabb v Arun
District Council [1976] Ch 179, the relevant passage being at page 193/A. I
will read them from another case where they were cited, namely, Jones (AE)
v Jones (FW) [1977] 1 WLR 438, because there Roskill LJ answered those
questions–of course, on the facts of the case before him, but the answers I
think throw light on the nature of the questions and what the approach to
answering them should be. I cite from the judgment of Roskill LJ at page 443/D,
where his Lordship said:
As for the
rest, Lord Denning MR has referred to the decision of this court, consisting of
himself and Lawton and Scarman LJJ, in Crabb v Arun District Council
[1976] Ch 179. I would refer to the three questions, posed by Scarman LJ at the
beginning of his judgment, which the court has to ask in relation to the now
well settled law of estoppel, at p 193. ‘First, is there an equity
established?’ The answer here is
unquestionably Yes. ‘Secondly, what is the extent of the equity, if one is
established?’–and the answer, shortly, is that the equity is of a possessory
nature entitling the defendant to remain in this house–
and then
(though not relevant for present purposes)
but it would
not, in my judgment, extend to the defendant’s wife. ‘And, thirdly, what is the
relief appropriate to satisfy the equity?’
Then he went
on to answer that question, saying:
All the
members of the court in Crabb v Arun District Council thought
that in some circumstances a court might impose the making of payment of some
form or another as a condition of giving effect to the equity, but in the
present case it seems to me that it would be wrong to impose as a condition of
protecting the equity that the defendant should pay rent to the plaintiff for
the following reasons. . . .
which he then
set out.
That indicates
to my mind that the third question is one upon which the court has to exercise
a discretion. If it finds that there is an equity, then it must determine the
nature of it, and then, guided by that nature and exercising discretion in all
the circumstances, it has to determine what is the fair order to make between
the parties for the protection of the claimant.
So I direct my
mind to the first question: Was there here an equity? Mr McCarthy says that there was not, because
the defendant failed to prove, and the learned judge did not find, that the
grandmother at the time the improvements were effected knew that Mrs Williams
was making a mistake as to her position. He relies on the passage in Snell’s
Equity, 27th ed at p 566/C, where it is said:
Knowledge of
the mistake makes it dishonest for him to remain wilfully passive in order
afterwards to profit by the mistake he might have prevented. The knowledge must
accordingly be proved by ‘strong and cogent evidence.’
He also points
to the learned judge’s judgment, where he said:
It was clear
that Mrs Williams–and I think this would apply to most sensitive people in her
position–was reluctant to admit, even to herself, that in spending her own
money on housekeeping and house improvement, she was thinking predominantly of
her own inheritance rather than the care and comfort of her mother. What she
did say, however, was that had it occurred to her that her enjoyment and
benefit of these improvements, or rather of the house as improved (a house that
she had always regarded as her home) would be limited to her mother’s life
span, she would have had to think whether she was not obliged to look more
closely to her own future. . . . It was equally clear, however, that none of
this occurred to her at the time, or perhaps even not until it was put to her
in this court.
In so far as
it is necessary to prove that Mrs Williams made a mistake, I think the mistake
is to be found in her belief that she would be allowed to live in the house for
the whole of her life. But I do not myself think that it really depends upon
mistake. The equity is based upon the fact that where one has made a
representation on the faith of which another party has expended his money, then
the man who made the representation will not, to the prejudice of the other, be
allowed to go back on it and assert his strict legal rights if to do so would
be unconscionable. I cite this passage from the judgment of Lord Denning MR in Inwards
v Baker [1965] 2 QB 29 at p 37/C:
So in this
case, even though there is no binding contract to grant any particular interest
to the licensee, nevertheless the court can look at the circumstances and see
whether there is an equity arising out of the expenditure of money. All that is
necessary is that the licensee should, at the request or with the encouragement
of the landlord, have spent the money in the expectation of being allowed to
stay there. If so, the court will not allow that expectation to be defeated
where it would be inequitable so to do. In this case it is quite plain that the
father allowed an expectation to be created in the son’s mind that this
bungalow was to be his home. It was to be his home for his life or, at all
events, his home as long as he wished it to remain his home. It seems to me, in
the light of that equity, that the father could not in 1932 have turned to his
son and said: ‘You are to go. It is my land and my house.’ Nor could he at any time thereafter so long
as the son wanted it as his home.
The facts in
that case were different, but the principle appears to me to apply precisely to
the facts of the present
Griffiths, was as follows: ‘Whenever the question arose in any discussion Mrs
Williams had always been assured that the house was her home for life. That was
always what was said and she never expected more than a life interest.’ That does not read as if it was the lady
giving evidence, but the notes of the evidence appear throughout in that form,
and this was obviously a record which the learned judge was making of the
evidence which had given before him. Then Mr Hedley Williams, whose evidence
the learned judge also accepted, said–or the effect of his evidence is
recorded–as follows: ‘He had always understood that the house was his mother’s
for life, and this had been said to, or in front of, him over many years by
both his grandmother and his mother’; and, again, ‘As to the improvements etc
there was no objection by the grandmother and he had never heard any mention
(prior to his grandmother’s death) of his mother leaving, or being asked to
leave.’ So when the learned judge speaks
of what Mrs Williams would have thought had it occurred to her, it is clear
that it would have occurred to her but for the fact that Mrs Cole, the
testatrix, was throughout repeatedly assuring Mrs Williams that she could live
in the house for the rest of her life. It seems to me, on this evidence, clear
that Mrs Williams expended her money on the faith of those repeated assurances,
and it is, I think, an irresistible inference that Mrs Cole knew that Mrs
Williams was relying on the assurances which she herself was repeatedly making
to her daughter. In my judgment, therefore, there is no doubt at all in this
case but that an equity is made out.
I therefore
pass to the second question, and that is: What is the equity? That must be an equity to have made good, so
far as may fairly be done between the parties, the representation that Mrs
Williams should be entitled to live in the house rent-free for the rest of her
life.
So I come to
the third question, which is really the one which gives rise to such
difficulties as there are in this case. In Dodsworth v Dodsworth
(1973) (228 ESTATES GAZETTE 1115) this court unanimously decided that if an equity
of this nature were implemented by giving the claimant the right to occupy the
house (as it was in that case) for his life, the result would be to create a
tenancy for life within the meaning of the Settled Land Act, and so the party
setting up the equity would get more than it was ever represented that he
should have, because he would get all the statutory powers of a tenant for life
under the Act: he could sell the property and take the income of the proceeds
for his life, or he could grant a long lease. In that case the court does not
seem to have considered what may in such cases be a difficult problem, namely,
what is the ‘settlement?’ I think there
are many authorities which establish that a right to occupy property for one’s
life is the equivalent of a tenancy for life under the Act. But the Act defines
‘settlement’ in section 1 in these terms:
Any deed,
will, agreement for a settlement or other agreement, Act of Parliament, or
other instrument, or any number of instruments, whether made or passed before
or after, or partly before and partly after, the commencement of this Act,
under or by virtue of which instrument or instruments any land, after the
commencement of this Act, stands for the time being. . . .
and then follow
the various limitations which make it settled land.
Where the
interest arises under a contract or other agreement, of course, there is no
difficulty, because that falls fairly and squarely within the words of
subsection (1) of section 1. But where what is set up is an equity arising from
acting upon a representation, it is not obvious how that can be brought within
the terms of section 1(1). There are two other cases in which this type of
problem was considered by this court, namely, Binions v Evans
[1972] 1 Ch 359 and Bannister v Bannister [1948] 2 All ER 133. In
Binions v Evans the Master of the Rolls thought that such an
equity would not in any event create a settlement; but, with all respect, I
think his reasoning leads to difficulties, because at p 367 he reached the
conclusion that it created an equitable interest, and once that is established
then the ground on which he said (at p 366) there was no settlement appears to
me to be undermined. The other two Lord Justices who heard that case, Megaw LJ
and Stephenson LJ, felt that they were bound by the earlier decision in Bannister
v Bannister to hold that there was a settlement; but they did not direct
themselves to any question under section 1; nor, I think, need they have done
so, because in Binions v Evans and the earlier case of Bannister
v Bannister there was actually an agreement. So that the difficulty
which in my view arises, on the case of Dodsworth v Dodsworth and
upon the present case, of seeing whether there can be a settlement when you
have an interest which appears to give you a tenancy for life but there does
not obviously appear to be anything which is a ‘settlement’ within the Act, did
not arise in those two earlier cases. If it were necessary, we would have to
decide what is, I think, a serious problem–whether Dodsworth v Dodsworth
is binding upon us or whether it was decided strictly per incuriam
because the learned Lord Justices who heard it did not advert to section 1 of
the Settled Land Act, and, if it be not binding upon us, whether in truth it be
right, and if so, what is the answer to the conundrum posed by subsection (1)
of section 1. It may be that in such a case there is a settlement, and it is
the order of the court declaring the equity, which is an ‘instrument’ and,
therefore, the ‘settlement’ within the meaning of that subsection.
Happily, by
the good sense of the parties in accepting a solution of the problem which I
propounded for their consideration, it is unnecessary for this court to resolve
those problems. In Dodsworth v Dodsworth, having decided that a
right of occupation for the whole life of the claimant would be a wrong way of
giving effect to the equity because it would create a settlement under the
Settled Land Act and give the claimant too much, the court then adopted an
alternative suggestion of compensation by recouping the claimant his
expenditure (I think with interest) and giving him possession until payment.
They recognised that that really went too far the other way; and certainly it
would not be appropriate in this case–if for no other reason, because of the
difficulty of quantification. But it seems to me that Dodsworth v Dodsworth
proceeded upon the basis which I have spelt out of Crabb’s case–that the
third problem is one of discretion: the court ought to see, having regard to
all the circumstances, what is the best and fairest way to secure protection
for the person who has been misled by the representations made to him and
subsequently repudiated.
In the present
case, it seemed to me, and I suggested to the parties, that the fairest way of
dealing with the matter would be to direct the plaintiffs to grant Mrs Williams
a long lease, determinable upon her death, at a nominal rent, since that would
give her the right of occupation for her whole life and could not in any event
give her the statutory powers under the Settled Land Act. The nominal rent
would be an obligation not contemplated when the representations were made to
her, but perfect equity is seldom possible.
There appeared
to be only two objections to this course. One was that she might assign the
lease; but that can be dealt with by including in the lease an absolute
covenant not to assign, and by her giving an undertaking to this court, which I
understand she is prepared to do, not to assign. The other difficulty was that,
if she were to marry again, her husband might be able to claim a protected
tenancy under the Rent Acts. I know that to Mrs Williams that appears a flight
of fantasy; but we have to take precautions to see that what we propose is
something which will not go wrong in an event which is not impossible and could
happen.
entitled to protection under the Rent Acts if the rent did not exceed
two-thirds of the rateable value at the relevant date; and they have
ascertained that that rateable value is £46 per annum. Therefore, if we direct
the lease to be at a rent of £30 per annum we will have served the two ends of
keeping it below two-thirds of the rateable value and making it nominal; and that
is what I would propose. I took the precaution of making it clear to counsel,
and they have made it clear to the parties, that, while we might order that as
a term after deciding whether or not a life interest would be a ‘settlement’
within the meaning of the Act, if we were to decide that it was not a
settlement within the Act Mrs Williams would be entitled to claim a full life
interest without reservation of any rent, and therefore we could only adopt
this course of a long lease at this stage if the parties consented to it,
otherwise we must first determine the problem which I have mentioned and then
consider what it would be right to order in the light of that determination.
Counsel, having withdrawn and consulted with their clients and taken instructions,
say that they are content that we should adopt the solution proposed by me.
I would
therefore allow the appeal, discharge the order of the learned deputy circuit
judge, and direct the plaintiffs to grant to Mrs Williams the lease which I
have indicated.
MEGAW and ORR
LJJ agreed.
The order made
by the court was as follows:
Appeal
allowed with costs. No order as to costs below. Respondents’ costs to be paid
out of estate on trustee basis. Legal aid taxation of appellant’s costs. Order
below discharged. Direction that plaintiffs grant defendant lease of the house
in question, determinable on her death, at a rent of £30 per annum. Other
terms, in default of agreement between the parties, to be settled by county
court. The lease to contain an absolute covenant against assignment; this being
the subject also of an undertaking given to the court. Account directed, on the
basis that defendant pays rates from date of the death of the testatrix and
rent from date of notice to quit.
