PROPRIETARY ESTOPPEL AND INHERITANCE : AREAS OF UNCERTAINTY

1.        The classic formulation of the doctrine of proprietary estoppel is that set out in Taylor Fashions Ltd v Liverpool Victoria Trustee Co Ltd [1979] [1982] QB 133n namely that “If A under an expectation created or encouraged by B that A shall have a certain interest in land thereafter on the faith of such expectation and with the knowledge of B and without objection from him acts to his detriment in connection with such land the Court of Equity will compel B to give effect to such expectation.” The doctrine of proprietary estoppel was developed “to prevent a person from insisting on his strict legal rights whether arising under a contract or on his title deeds or by statute when it would be inequitable for him to do so having regard to the dealings which have taken place between the parties.” (see Crabb v Arun [1976] Ch 179).

2.        It has developed further since then and it is now clear that the doctrine also applies to rights of inheritance. This extension developed from the decision in Re Basham [1985] 1 WLR 1498. However, despite extensive case law since then, areas of uncertainty remain.

3.        In Basham itself, it was held that a proprietary estoppel arose where a stepdaughter and her husband had cared for the deceased and incurred other acts of detriment over many years due to the deceased’s promises to provide for her on his death. The stepdaughter had worked in the family business for no pay when she was younger, given up the chance of a tied cottage on the insistence of the deceased, not moved away so her husband could work on a farm as he wished, fed the deceased and carried out jobs for him. The claim was opposed on the basis that such an estoppel could only arise where there was a belief as to an existing property right. The Court held that an estoppel could arise in relation to acts done in reliance on a belief that future rights would be granted such as the inheritance of the promisor’s residuary estate.

4.        It was held that “the deceased encouraged the plaintiff in the belief that all the property he possessed at the date of his death would pass to her and I do not consider that the fact he made certain gifts during his lifetime and indicated a wish to make others.is inconsistent with such a belief...the plaintiff is entitled to a declaration that the defendants as personal representatives of the deceased hold the whole of his net estate on trust for the plaintiff.” The judgment itself is quite a confused one. The Judge seems to have viewed the existence of an estoppel as leading to a constructive trust arising. He also appeared to consider that the position was analogous to the law of mutual Wills.

5.        The position was clarified by the Court of Appeal in Gillett v Holt [2001] Ch 210. It was held that an estoppel could arise in relation to a promise to leave property on death in a particular way provided that the requisite elements of a proprietary estoppel were proved. It was not the irrevocability of the representation when it was made which empowered equity to intervene, it was the fact of detrimental reliance which made the representation irrevocable. Detriment was not a narrow or technical concept. It need not consist of the expenditure of money but it had to be approached as part of a broad inquiry as to whether it was unconscionable in all of the circumstances that the representor resile from the representation. The doctrine could not be treated as subdivided into watertight compartments. In reality the elements which may lead to an estoppel arising were intertwined. The fundamental principle was that equity is concerned to prevent unconscionable conduct so that in the end the Court must look at matters in the round.

6.        It was confirmed by the Lords in Thorner v Major [2009] UKHL 18 (which was an inheritance claim) that there are three essential requirements to found a proprietary estoppel claim being

6.1      the representor must have made representations or assurances to the claimant.

6.2      the claimant must have acted in reliance on those statements

6.3      the claimant must have acted to their detriment in consequence of their reasonable reliance. 

The fact that the defendant has acted unconscionably without more is not sufficient.

7.        A fundamental part of a proprietary estoppel claim is that it creates an equity to which effect is given in whatever is the most appropriate way. The Court approaches the issue of relief on the basis that it aims to do the minimum necessary to do justice to the claimant (see Crabb v Arun). Therefore, it is not the same as the remedy under the law of constructive trust where the claimant receives what was promised. Two main approaches have been adopted in the case law in regard to the issue of remedy being (i) an expectation based approach and (ii) a compensation based approach. Each has had the upper hand at different times.

8.        The judgments of the Lords in Thorner v Major only dealt with two specific issues and they did not clarify precisely how the law operates in this area. Those two issues were

8.1      the degree of certainty required in relation to representation relied on ,and,

8.2      the identification of the property in respect of which the representation was made, that is how precise did the identification need to be before an estoppel could arise.

9.        In Ramsden v Dyson [1886] LR 1 HL 129 and Taylor Fashions it had been stated that a representation sufficient to found an estoppel needed to relate to a certain interest in property. However, it was then held in Re Basham that an estoppel could arise in relation to the whole of the residuary estate of the deceased as opposed to in relation to specified assets. 

10.      In Thorner, the Lords found that there will be sufficient certainty as to the property involved if it is clear that a promise is being made to leave a farm as an entity and it does not matter that the extent of that farm may change over time. Where a promise is made in relation to a named farm, this is likely to relate to whatever that farm consists of at death. Changes in its character or extent may be relevant to the issue of relief but they would not usually defeat the claim. However, there could be cases where such a promise had a different meaning at the time the promise was made or where intervening events justify giving it a different meaning or effect.

11.      They went on to query whether a promise to leave someone the residue of an estate or a promise to provide future support might lack the requisite certainty. In MacDonald v Frost [2009] EWHC 2276 further doubt was expressed in relation to this aspect of the reasoning in Basham and whether a promise to leave someone an entire estate was sufficiently certain to found an estoppel claim. Theobald on Wills suggests that there should be no difficulty in that regard as it can be taken to mean whatever residue consists of at death. I agree with that view but the law must be regarded as currently uncertain.

12.      It is not entirely clear from the cases how the debts and expenses of the promisor’s estate are to be borne in the event of an estoppel award being made. In Thorner itself, the claimant was awarded the farm subject to all inheritance tax referable to it. In Bradbury v Taylor [2012] EWCA Civ 1208 the award made to the respondents was that they should receive a house but subject to the tax referable to it. The Court of Appeal commented that “the judge required the respondents to bear the inheritance tax attributable to the value of Lower Manaton which plainly reduced the value of the award for them and might be said to reduce it below what they might reasonably have expected.”

13.      What is not discussed in those cases is what the position would be in relation to the debts and administration expenses of the promisor’s estate. The inference would appear to be that they were to be borne in the usual way as provided for in Schedule 1 Part II of the Administration of Estates Act 1925. It is impossible to tell from the reports what other assets were in the estates in the cases referred to above. In Gillett (which led to an inter vivos award as the promisor resiled from his promises about his Will whilst still alive), the Court took into account the likely effect of tax and other claims on the promisor and his estate before deciding the form of award to make.

14.      It is clear from Gillett itself that the promisee can sue whilst the promisor is still alive. It was held that the estoppel arises as soon as detriment of sufficient weight has been suffered. This means that relief can be sought by the promisee during the promisor’s lifetime where they have fallen out and the promisor has no intention of complying with his promises to leave property to the promisee. However, a falling out during the lifetime of the promisor may equally lead the Court to conclude that (i) an unexpected circumstance has arisen which was not contemplated when the promises were made and no relief is available or (ii) satisfactory arrangements were made by the parties when relations broke down.

15.      Is section 2 of the Law of Property (Miscellaneous Provisions) Act 1975 of relevance to a proprietary estoppel claim? The section renders void any agreement to dispose of an interest in land which is not in signed writing. Section 2(5) specifically excludes resulting and constructive trusts from its ambit but no reference is made to the law of proprietary estoppel. It was suggested in Thorner that the section would have no impact on a straightforward estoppel case with no contractual connection. It also appears that the Law Commission took the view that section 2(5) implicitly included proprietary estoppel cases.

A more detailed seminar dealing with all aspects of the law of proprietary estoppel in this area will be delivered in Chambers in Leeds on 17th April 2018

Sarah Harrison

St Philips Chambers

41 Park Square

Leeds