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Kara Swift
Kara Swift
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Predicting the remedy in a proprietary estoppel claim: which route home?

Date:24 FEB 2015
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Barrister, arbitrator and mediator
The Law Commission1 has observed that the lack of any overarching principle in s 25 of the Matrimonial Causes Act 1973 leaves the judge in a position of a bus driver with all the instructions on how to drive his bus but not where to drive it. The recent case of Davies and Davies v Davies [2015] EWHC 15 (Ch) provides a timely reminder that the position of the chancery judge, when resolving a proprietary estoppel claim, may not be much better. So, on what basis can the likely remedy in a proprietary estoppel claim be predicted?

Proprietary estoppel

In Crabb v Arun District Council [1976] Ch 179 (Ch) Scarman LJ analysed a proprietary estoppel claim as raising three questions, 'First, is there an equity established?2 Secondly, what is the extent of the equity, if one is established? And thirdly, what is the relief appropriate to satisfy the equity?' What follows here largely concerns the second and third stage of the process, although the stages are not watertight.

The broad principles upon which a proprietary estoppel claim are valued include: 
  • The well known dictum, coined in Crabb, that a remedy for proprietary estoppel must be 'the minimum to do justice' for the claimant. 
  • The value of the equity will depend upon (a) all the circumstances of the case, including (b) expectation and (c) detriment.3
  • The court must balance the proportionality of the expectation with that of the detriment incurred. 'Proportionality lies at the heart of the doctrine of proprietary estoppel and permeates its every application.'4
  • When considering detriment this must be balanced against any relevant benefit enjoyed by the claimant. The court is not simply concerned with financial detriment but looks at all the circumstances in the round. 
  • When there is a clear understanding between the parties, falling short of a contract, 'In such a case the court’s natural response is to fulfil the claimant’s expectations. But if the claimant’s expectations are uncertain, or extravagant, or out of all proportion to the detriment which the claimant has suffered the court can and should recognise that the claimant’s equity should be satisfied in another (and generally more limited) way.'5
  • The question of preventing unconscionable conduct permeates all considerations.6
  • 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 experienced.7
Lewin summarises the position bluntly, 'A successful claimant may be awarded the interest he believed he would acquire or, if the circumstances dictate, a lesser interest.'8

McFarlane notes9 '... the law in this area currently suffers from a significant lack of clarity' before suggesting that most cases can be rationalised upon the basis that, so far as is possible, B should suffer no detriment as a result of B’s reasonable reliance on A’s promise. McFarlane allows for a (rare) residual category of case where A’s liability might be reduced (but not increased) by asking whether, on the particular facts of the case, A can show that it would not be unconscionable for A to leave B to suffer some detriment.

Much depends upon the facts of the case and discretion exercised by the particular judge. This sounds very familiar territory to financial remedy practitioners and the Law Commission’s lost bus driver. Ultimately, the court hears the evidence, stands back and makes a judgment which it considers just. This will often be a highly subjective exercise.

Davies v Davies

In Davies the dispute was between parents and daughter, the former owning a dairy farm in Wales. A variety of different assurances relating to the farm had been made by the parents over the years, not all of which were consistent with each other. In reliance upon these promises the daughter acted to her detriment in working on the farm at an uneconomic rate. The daughter’s work in a less than genial environment, due to strained relationships, was also a non-financial form of detriment. Correspondingly, some benefit had been enjoyed by the daughter in having access to rent free accommodation on the farm for a long period. Further, there was a period of estrangement when the daughter left the farm. In 2013 a preliminary hearing established that there was an equity arising in favour of the daughter, the remedy for which would be determined by a later disposal hearing.

The preliminary finding of an equity was unsuccessfully challenged by the parents. The Court of Appeal noted10 that whilst there are different aspects to estoppel, they cannot be treated as watertight compartments and that a holistic judgment needed to be made, making such cases unsuitable for preliminary hearings.

Back before the first instance judge, the parties contended for wildly differing outcomes. The daughter claimed that her equity should be satisfied by the transfer of the freehold interest of the farm to her, worth net in the region of £3.15m. The parents contended that a sum of £350,000, reflecting an element for unpaid wages and a share of profits, would provide enough to secure accommodation for the daughter outright. The disposal hearing lasted 4 days.

The judge rejected both parties’ proposals. Having reviewed the authorities the court determined, '[56] ... In my judgment the proportionate remedy is to award [the daughter] a lump sum in the amount of £1.3 million. That is just over or under a third of the net value of the farm and farming business, depending on the impact of CGT ... It is, in my judgment a fair reflection of the expectation and detriment and other factors set out above.' 

With the benefit of 4 days’ hearing and an exhaustive review of the evidence, and coming somewhere in between what each side contended for, it will be hard (one assumes) to say that this decision is plainly wrong. However, what of an award which had the effect of providing the daughter with 40% or 25% of the capital value of the farm and business – these too may well have fallen within the ambit of reasonable judicial discretion. In short, the horror or the glory (depending upon your perspective) of these cases is that they often require a contested determination (or a very skilled mediator) to get to the 'right result', the answer to which will not be found in the books.

Estoppel and constructive trusts compared

There have been a number of cases in recent years which deal with proprietary estoppel in the farming context.11 The sometimes vague and, frankly, non-committal manner of succession planning in the farming context, may account for this. Whilst often very similar to familial constructive trust disputes (and often resulting in the imposition of a constructive trust) estoppel cases have distinctive features.

A common intention constructive trust is founded upon the finding of an agreement, express or implied. A finding of an express agreement as to shares will determine the outcome, however disproportionate the remedy may appear in relation to detriment incurred. However, proprietary estoppel is based upon the claimant’s reasonable expectations and the result will seek to ensure proportionality between expectation and the detriment incurred. It has even been suggested that “the estoppel approach should be preferred for it will always be available where a common intention constructive trust is available, there is no need to search for an artificial intention and the remedy can be adjusted to fit the circumstances of the case.'12

Certainly, it is strongly advisable to consider pleading proprietary estoppel in the alternative to any constructive trust claim.13

The unpredictable and fact sensitive nature of estoppel cases 

The unpredictable nature of estoppel claims is highlighted by two further farming cases. In Gillett v Holt several promises were made, with one having particular significance. When pressed as to his testamentary intentions, the owner stated to the claimant that it was not necessary to put anything in writing as the farm was 'all going to be yours anyway'. This assurance when analysed in the context of expectation and detriment resulted in a successful estoppel claim. However, in Cook v Thomas [2010] EWCA Civ 227 a similar assurance, that a farm was 'all going to be yours when I am gone' (or words to that effect) did not found a successful claim to an equity by estoppel. The ‘coincidence between the words’ used was noted by the Court of Appeal in Cook but it was nevertheless held that the factual context of Gillett had been altogether different.

Overall, the exercise when determining a remedy for a proprietary estoppel claim is discretionary and the outcome can be as hard to predict as in a financial remedy claim. This is fertile ground for the family lawyer in an area often handled by private client or property law departments.

1 Matrimonial Property, Needs and Agreements, 343 at 2.5.
2 This involves the finding of an assurance which has resulted in someone reasonably relying upon it to their detriment.
3 Jennings v Rice [2002] EWCA 159, at para [36].
4 Henry v Henry [2010] UKPC 3, at para [65].
5 Ibid, at para [50].
6 Gillett v Holt [2001] Ch 210 at 225.
7 Sledmore v Dalby (1996) 72 P&CR 196.
8 Lewin on Trusts (19th ed) at 9-082.
9 The Law of Proprietary Estoppel at 7.35.
10 [2014] EWCA Civ 568, [2014] Fam Law 1252.
11 Thorner v Major [2009] UKHL 18, [2009] 2 FLR 405 (Somerset), Gillett v Holt [2001] Ch 210, [2000] 2 FLR 266 (Lincolnshire), Suggitt v Suggitt [2012] EWCA Civ 1140 (North Yorkshire), Henry v Henry [2010] UKPC 3 (St Lucia), Cook v Thomas [2010] EWCA Civ 227 (Ross-on-Wye) and Uglow v Uglow [2004] EWCA Civ 987 (Launceston).
12 Lewin, ibid, 9-083.
13 Southwell v Blackburn [2014] EWCA Civ 1347, where the constructive trust claim failed but an award was made based upon the alternative proprietary estoppel basis.