The difficulties of proprietary estoppel claims

In certain circumstances, the law will intervene to enforce a promise to receive an interest in land or property made by one person to another. Legally, this claim is known as ‘proprietary estoppel’.

In accordance with the law set out in the case of Thorner v Major, a proprietary estoppel claim will be successfully made if it can be proven that:

1. A promise or assurance was made to acquire a right in land.
2. There was reliance on the assurance or promise.
3. That the person relying on the broken promise or assurance suffered (or would suffer) detriment.

The overriding consideration of the court is fairness (or unconscionability, as it is often called). As such, even where all of the above elements are established, the court will only order a remedy if it is satisfied that the circumstances of the case make it fair to do so.

Furthermore, the successful party is not guaranteed to receive the interest in property or land he or she was promised. The remedy received, whether it be the property, money or something else entirely, will be determined by what the court considers to be fair in the circumstances of the case.

Whilst these claims are often difficult to prove and the outcome uncertain, the number of claims made has been on the rise in recent years, with an increasing number of aggrieved claimants taking their case to court.
In our experience, proprietary estoppel disputes often arise in the farming industry, usually in circumstances where a farmer has promised a family member or employee that they will inherit the farming business in return for providing assistance in running the farm, often for little to no remuneration.

This article explains recent cases that have been decided by the courts. Readers may identify that they are at risk of such claims being made against them, or if they have grounds to bring such a clam. If this is the case, they should seek legal advice and consider their options carefully as it is often helpful to remedy the issue during lifetime rather than leave bereaved family members to deal with the fall out after the owner of the property has died.

Recent Case Law

Habberfield v Habberfield [2019]

F operated a farming business in partnership with his wife, J, which was worth approximately £2.5 million. His daughter, L had worked on the farm for 30 years with a particular focus on dairy farming, which soon became the centre of the business. L worked incredibly long hours for low pay and very few holidays.

L alleged that she had continued working at the farm because F had assured her that she would take over the business when he retired.

In 2018, L refused an offer to go into partnership with her parents. She left the business in 2013, following a dispute with her sister. F died in 2014, leaving the farm to J, who closed the dairy unit.

The High Court found that L had established a claim based on proprietary estoppel, having suffered a detriment in reliance on F's assurances.

Whilst L’s work on the farm over the course of 30 years was a detriment which could not be quantified, the court decided that there was also a quantifiable detriment to L worth £220,000. L’s rejection of the partnership offer did not defeat her claim, but was a factor to be taken into account in determining how the equity should be satisfied.

L was awarded £1.2 million to acquire a viable dairy unit and associated land.

J appealed to the Court of Appeal, but the appeal was dismissed.

Guest v Guest and another [2019]

On leaving school in 1982, A worked for at least 60 hours per week at the family farm for a low wage. In 1989, he moved into a cottage on the farm.

In 2014, the relationship between A and his parents broke down and in 2015, A left the business and found alternative employment.

A’s parents made two new wills before their death, the first disinheriting A partially and the second entirely.

The court found that A’s claim was established as until 2014, D had consistently led A to believe that he would inherit the farming business. D's assurances were "clear enough" and sustained over several years. A had reasonably relied on this, to his significant financial detriment.

A's expectations regarding his inheritance had shifted in around 2012 when it became apparent that D also intended to provide for R in the farming business. However, this was not considered fatal to A’s claim. D’s assurances were always to the effect that A would inherit a sufficient stake in Tump farm to enable him to continue farming after his parents' deaths.

Further, although A was in part responsible for the breakdown in his relationship with his parents, this did not diminish the injustice resulting from D disinheriting him. Nor was A’s ability to obtain alternative employment detrimental to his claim.

When considering what remedy to award A, the court’s view was that A’s expectations had to be balanced against the detriment to him in relying on D’s promises, and any potential injustice to the parents given their remaining interest in the farm. The court was also keen to ensure a clean break between the parties. A was awarded a lump sum representing 50% of the business and 40% of the farm property.

It is understood that this case is currently on appeal.

Moore v Moore and another [2018] EWCA Civ 2669

R ran a family farming business with his brother, G.

R’s son, S had worked on the farm since childhood and subsequently became an equity partner.

S claimed that from an early age R had told him more than a dozen times that the farm and the farming assets ‘would be his one day’, and that G had made comments to the same effect.

G later retired and sold his share to S at an undervalue. Thereafter, R took on a reduced role and left S to run the business.

Following a breakdown in relations between R and S, R amended his will to prevent S from inheriting the freehold farm property.

S pursued a claim based on proprietary estoppel in relation to R's half share of the farm and the partnership business.

The High Court allowed S's claim and held that S was entitled to R's interest in the farm, the partnership and the farm assets. The court held that the over-arching plan had been that S would inherit the whole farm and business. This was a "clear understanding and intention" and underpinned all the decisions made in relation to the farm, in particular G's retirement.

In an attempt to recreate the arrangements which would have occurred had the dispute never arisen, the High Court ordered that R and his wife could live at the farmhouse as long as they lived, free of charge, and that all of the property’s upkeep and their care needs should be financed by S.

R appealed the High Court’s decision on the basis that an immediate transfer of the farm and assets was beyond what was necessary to satisfy S’s claim. R had clearly intended for his wife, P, to have access to capital and income after his death and inherit the non-farming assets. The Court of Appeal agreed.

The Court of Appeal held that the High Court’s decision failed to ensure that R and P had proper provision for the rest of their lives, or that a clean break could be achieved between the parties.

The Court of Appeal remitted the case for a further hearing on how the equity should be satisfied.

James v James [2018] EWHC 43 (Ch)

CJ (deceased) had built up a farming and haulage business, including several parcels of land. His son, S, had worked for the business for several years, living rent-free in a property (Chequers) belonging to CJ. S had become a partner in the business, and when the partnership was dissolved in 2009, he had received the haulage business and Chequers.

CJ made a Will in 2010, leaving his remaining land and farming business to his wife and two daughters, and nothing to S. S brought a claim in proprietary estoppel in respect of the farm, maintaining that he had acted to his detriment in relying upon CJ’s assurances that the farming business would be his one day.

S’s claim was unsuccessful. The High Court found that any statement made by CJ to the effect that S would one day inherit the farm should at best be regarded as a statement of current intention rather than a binding promise; particularly as there was no evidence that any clear promise to transfer property had ever been made.

Additionally, the court found that S’s claim lacked the necessary reliance and detriment to establish a proprietary estoppel claim. There was nothing to suggest that he had ever seriously considered pursuing his profession elsewhere, nor had he suffered as result of working with CJ. In fact, he had benefited to great extent through his rent-free occupation of CJ’s property and haulage business.

While it was unnecessary to do so in light of his conclusions on the merits of the claim, the judge did make some helpful comments regarding remedies. He stated that it was the creation of an expectation which was significant in proprietary estoppel claims, and that, where such an expectation was created with the intention that it should be relied upon, the remedy should, in most cases, give effect to this expectation.

Commentary

Claims of this nature could be avoided by succession planning and putting formal written agreements in place with family members and employees so that no party is in doubt as to their respective interests.

It is evident from the recent case law that the high level of judicial discretion inherent in proprietary estoppel claims is capable of producing variable, and consequently, unpredictable, results.

Accordingly, prospective claimants and defendants are strongly advised to seek expert legal advice as soon as a claim is anticipated.