Charlotte Kahrman, a Solicitor in the Contentious Probate Team at Wright Hassall, examines three recent cases where proprietary estoppel was considered.

What is proprietary estoppel?

Proprietary estoppel is an equitable doctrine (primarily concerned with property) that provides a remedy when one party has relied on a promise or assurance given by another, leading to detriment when that promise or assurance is reneged on. There are three main elements of the doctrine:

1. A promise or assurance made to the Claimant by another, either explicitly or implicitly, suggesting that the Claimant has, or will have, an interest in the property.
2. The Claimant must have relied on the promise or assurance, leading them to act in a way that they would not have done but for the promise or assurance. The reliance must be reasonable and linked directly to the promise or assurance.
3. The Claimant must have suffered detriment as a result of their reliance on the promise or assurance. Detriment can take many forms and does not have to be financial.

Even if all of the elements above are made out, the Claimant must show that it is unconscionable for the promise or assurance to be reneged on, such that it is unfair/unjust for the Claimant to be denied of the interest they had expected.

A claim relying on the doctrine went before the Supreme Court for the first time in the case of Guest v Guest in 2022. The judgment serves as a useful reminder of the flexibility of the remedies available to satisfy an equity arising through proprietary estoppel and has been heavily relied upon by the Court in later decisions.

The have been three recent cases that have come to the attention of the Court which considered the doctrine of proprietary estoppel:

Spencer v Spencer [2023] EWHC 2050

The facts

Michael Spencer left school at 15 with no qualifications to work with his parents on the family farm. At 19, he went into partnership with them and his sister, Penny. Despite the relationship with his father, John, often being fractious, his father promised him that he would inherit the farm. This promise was reflected in John’s will made in 1993, in which he left all his freehold land and buildings to Michael.

John’s mother and sister retired from the partnership in 1996, which resulted in Michael having a 95% profit share. Significant sums were transferred into Michael’s capital account and pension pot. Nonetheless, Michael had devoted his entire working life to the farm and earned considerably less than his sister and the farmhand. Further, at the command of his father, Michael had made major compromises about his living arrangements, including living in a damp farm cottage with his family rather than buying a more suitable property in the neighbouring village.

John died in 2018. His will revealed that he had reneged on his earlier promises and assurances about leaving the land to Michael. Instead, he had left him his 5% share in the partnership and left all the freehold land and buildings to a discretionary trust for Michael and his sisters and then ultimately to their children.

The arguments

Michael brought a claim for proprietary estoppel on the grounds that he had been promised the farm, he had acted on that promise to his detriment, and it would be unconscionable for him not to receive it. It was argued on behalf of the defendants (being the estate and Michael’s two sisters) that Michael had benefited handsomely from the profits from the business, having built up considerable assets in his capital account and pension.

The outcome

This was a successful claim and Michael’s argument was accepted such that the Court awarded the remedy of transferring the farm to Michael. This was with the exception of a part of the farm on which planning permission had been successfully obtained for mineral extraction. Mr Judge Rajah concluded that this did both justice to Michael and rest of John’s family. To transfer the land on which planning permission had been obtained would have given rise to an unintended windfall to Michael.

Mr Justice Rajah noted: “[…] where a parent promises a child a farm if they work on the farm until the parent dies, and the child does what they were asked to do, giving up the possibility of other options, and positioning their working life based on the assurances, that is likely to amount to detrimental reliance […] Looking at the matter in the round Michael has positioned his working life in significant part on the basis of the assurances that he will receive the farm. It is impossible now to unpick what he might have done differently with his life over 40 years if there had never been such assurances.”

Winter v Winter [2024] EWHC Civ 699 (High Court decision: [2023] EWHC 2393 (Ch) / [2024] WTLR 327)

The facts

The background as set out to the Court at first instance was such that Mr and Mrs Winter ran a successful market garden business in Somerset and owned various parcels of land. They had three sons (Richard, Philip and Adrian), all of whom joined the partnership on the understanding that they would inherit the land and business in equal shares after their parents’ deaths. Mrs Winter pre-deceased Mr Winter in 2001. On Mr Winter’s death in 2017, his will made in 2015 emerged, in which his share of the business was left to Philip.

The arguments

Richard and Adrian issued a claim on two grounds. The first was a challenge to the validity of the 2015 will on the basis that Mr and Mrs Winter had made mutual (not mirror) wills in 2000 which left everything equally between their three sons, such that Mr Winter could not unilaterally change his will at a later date.

Mutual wills are increasingly rare, particularly following the Law Society’s guidance addressing the potential for will drafters to be exposed to professional negligence claims. They limit the testamentary freedom of the testators and restrict their ability to change their wishes to reflect evolving circumstances. Mirror wills, however, are commonplace and do not impose the same restrictions on testators. This claim was dismissed as the Court could find no evidence that the wills were mutual.

In the alternative, Richard and Adrian claimed that an equity arose by way of proprietary estoppel. This was on the basis that all three brothers had been given assurances throughout their lives that they would inherit equally.

The outcome

The Court heard evidence from all three of the brothers and various other witnesses and was persuaded that Mr and Mrs Winter fully intended that the partnership and business assets would be divided equally between their sons. The 2015 will was prepared and executed following an argument between Mr Winter, Richard and Adrian but this did not negate Mr Winter’s clear intention up until this point to leave the business equally to all his sons.

Ultimately the Court found that all three had relied on assurances that they would inherit to their detriment. All of them had devoted long hours to the business and received minimal remuneration in expectation of their promised inheritance. The estoppel applied to the partnership assets and business, though did not extend to the personal assets of Mr Winter.

An interesting submission was made on behalf of Philip that his brothers had not suffered detriment on account of what were described as ‘countervailing benefits’, in the form of partnership assets and company shares with a value in the region of £2million each. Philip’s position was that these benefits more than made up for the long hours and minimal pay received. The Court dismissed this argument, by reference to the decision in Spencer v Spencer. Philip appealed the decision on the issue of detriment: the Court of Appeal upheld the original decision.

Teasdale v Carter [2023] EWHC 490 (Fam)

The facts

While this case still involves a farm, it is somewhat unusual in that the proprietary estoppel element was ancillary to financial remedy proceedings before the Family Court. Mr and Mrs Teasdale were getting divorced, and a dispute arose as the beneficial ownership of ‘Cow House’. Cow House had been renovated by Mr and Mrs Teasdale’s daughter, Rebecca, on the basis of her father’s promise (made with the knowledge of her mother) that Cow House would ultimately be hers.

The outcome

The Court determined that Cow House should be transferred to Rebecca, provisional on her discharging the mortgage secured over it. Mrs Teasdale appealed this decision, arguing that Cow House should remain as part of the farm, rather than a distinctly owned piece of land, and that Rebecca should instead receive a lump sum. The appeal was dismissed: to give Rebecca a lump sum payment rather than Cow House would not be equitable.

On appeal, Moor J remarked on how regrettable it was that the costs of the litigation eclipsed the value of the property in dispute. Costs aside, a once close family had also become irrevocably alienated.

Summary

While proprietary estoppel cases lend themselves particularly well to mediation, cases are still frequently making their way to trial, as is evident from the examples discussed. Mediation aside, so often these cases could have been avoided altogether had the promises and assurances made been documented with the intentions of the parties being clearly recorded.

The importance of succession planning is drawn into sharp focus when reviewing the decisions of the Court and those drafting wills for farming clients, as a matter of best practice, should always find out if any promises have been made during the testator’s lifetime.

About the author

Charlotte Kahrman is a Solicitor in the Contentious Probate Team at Wright Hassall. She specialises in contentious matters relating to wills, trusts and probate disputes.

See also

Place a deceased estates notice

Wills and undue influence - case law updates 2024

Wills and testamentary capacity - case law updates 2024

What inheritance tax reliefs are there for farmers?

Images

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Publication date

16 October 2024

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.