David Peachey and Jeremy Hudson answer questions on proprietary estoppel
Question
I live on my father’s farm, which I have helped to run for little pay since leaving school. He assured me often that I would inherit the farm, but whenever I asked for more money or threatened to quit he threatened to disinherit me. My father declined to show me his will, assuring me that I would be “looked after”. He now plans to retire and sell the farm. Am I entitled to all or part of the proceeds of sale?
Answer
When assessing the amount of damages to be awarded to you in a classic proprietary estoppel case like this, the court will assess how clear your expectation was, what detriment you suffered, and the length of time you held that expectation. In your case it is likely that a court would award at least part of the proceeds of sale, but may reduce the damages to take account of the quarrels with your father and uncertainty about his testamentary intentions.
Explanation
Where A has acted to his detriment on an expectation encouraged by B that he would be given a right in or over B’s property, B is estopped from insisting on his strict legal rights if inconsistent with A’s belief.
Proprietary estoppel cases often involve complex family histories; Davies v Davies [2016] EWCA Civ 463 was no exception. Nicknamed “Cinderella”, the claimant – one of three sisters – claimed to be entitled to the whole of her parents’ dairy farm. She had been the only daughter interested in running the farm, where she had lived for many years and worked for low pay. The court found a proprietary estoppel, but also concluded that there had been a series of different and sometimes mutually incompatible expectations, some of which had been repudiated by the claimant herself, and others which had been superseded by later expectations.
The Court of Appeal stressed that: “There must be a proportionality between the remedy and the detriment which is its purpose to avoid.”
The court concluded that, where the claimant’s expectations were uncertain and the degree of detriment was unclear, the best approach would be to apply “a sliding scale by which the clearer the expectation, the greater the detriment and the longer the passage of time during which the expectation was reasonably held, the greater would be the weight that should be given to the expectation”.
The court concluded that it was necessary to analyse the claimant’s expectations from time to time, and the degree of the claimant’s detrimental reliance thereon. In the circumstances of this case the Court of Appeal more than halved the damages originally awarded. All in all, therefore, this was not a fairy-tale ending for Cinderella.
Question
I live with my partner and pay money towards the home in reliance on an oral understanding that I will gain an interest in the property. Will the fact that our understanding is oral mean that it is unenforceable due to section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989? Does it make any difference if this happens in a commercial setting?
Answer
Although cases of this type continue to be very fact-dependent, the remedy of proprietary estoppel may still be available despite the provisions of section 2(1). Even where a payment is called “rent”, oral evidence may show the contrary. In a commercial context, proprietary estoppel is theoretically available, but parties often opt to rely on alternative equitable doctrines.
Explanation
In Burton v Liden [2016] EWCA Civ 275, the Court of Appeal made clear that there must be a sufficiently clear assurance in order to establish a proprietary estoppel, and that the resulting detriment must not be insubstantial. This is consistent with the principle of proportionality enunciated in Davies. Remarkably, the trial judge found that payments called “rent” and described in oral evidence as being “towards the house” were in fact payments “towards the ownership of the house”: a warning that cohabitation without formal documentation is risky.
The court’s struggle with proprietary estoppel and section 2(1) was summed up in Muhammad v ARY Properties Ltd [2016] EWHC 1698:
“Here I have the luxury of four… decisions, though unfortunately pointing in opposite directions, two one way and two the other. I also have the obiter dictum of one Lord of Appeal in a House of Lords decision, and the considered but extra-judicial view of another Lord of Appeal (now Supreme Court justice)…, they also point in diametrically opposed directions. There is also the decision of the Court of Appeal in Yaxley v Gotts, the scope and ambit of which is not entirely clear but which certainly supports the notion that at least in some cases section 2 does not bar a claim based on proprietary estoppel.”
The court concluded that there may be scope for arguing that section 2(5) of the Act (which disapplies section 2(1) in relation to resulting, implied or constructive trusts) also disapplies section 2(1) in relation proprietary estoppel.
In two cases litigants decided to abandon proprietary estoppel arguments in favour of an alternative doctrine. In Preedy v Dunne [2016] EWCA Civ 805, the claimant failed on proprietary estoppel at trial and on appeal relied on estoppel by convention instead. In Matchmove Ltd v Dowding and Church [2016] EWCA Civ 1233, the claimant succeeded on proprietary estoppel at trial, but abandoned this in favour of a constructive trust argument on appeal (which succeeded). Both cases involved commercial parties, and the change in tack may have arisen from uncertainty as to whether section 2(1) affects proprietary estoppel.
David Peachey is a barrister at Enterprise Chambers and Jeremy Hudson is a partner at Charles Russell Speechlys
Questions on any topic can be e-mailed to egq&a@crsblaw.com and egq&a@enterprisechambers.com
