Proprietary estoppel is an equitable doctrine which allows the court to prevent a legal owner of property (usually land) from asserting their strict legal rights, when it would be unfair to allow them to do so. This doctrine often arises in cases of family feuds, where informal and undocumented arrangements relating to property rights go awry. A classic example involves a hardworking child who spends years working for low or no pay on their parent’s farm, under the promise that it will all be theirs one day. Years later, when relationships turn sour and the parents renege on their promise, a proprietary estoppel claim can operate as a cause of action to prevent the parents from denying their child’s interest in the farm.
In this article, we look at the central elements of the legal test, and the lessons to be learned.
The Elements of Proprietary Estoppel
There are three central elements to a successful claim of proprietary estoppel: a representation or assurance, detrimental reliance, and unconscionability. It is crucial to appreciate at the outset that proprietary estoppel is a particularly fact-sensitive area of law, and each case will turn on its own merits.
1) Representation or assurance
The first requirement is for the property owner to make some form of representation, assurance or other encouragement which induces the claimant to believe that he has or will enjoy some right or benefit over the owner’s property. Examples of such promises include a father assuring his son that the family farm would belong to him one day (Suggitt v Suggitt), or trustees of a will trust assuring the son of the testator that he could occupy the family pub (the Albert in Esher) for as long as he wished (Preedy v Dunne).
The law is flexible when it comes to considering what is sufficient to amount to a promise, and the representation or assurance need not be unequivocal, but only “clear enough” (Thorner v Major). Encouraging a belief, or even acquiescence can be sufficient. So in Ramsden v Dyson, proprietary estoppel was established where the claimant spent money on property he believed he owned, while the true owner passively stood by without intervening.
2) Detrimental reliance
The next stage of the test is that the claimant relies on the promise or assurance to his detriment. This means that the claimant believed the owner’s promise, took it seriously, and was induced by it to take a certain course of action that proved harmful in some way.
In the recent Court of Appeal case of Davies v Davies, the court found that the claimant daughter (Eiran, a skilled and passionate stockman) had relied on the representation that “the farm would be hers one day” even though she left the farm and ceased working there for several years due to a disagreement over the suitability of her boyfriend at the time. The Court reached this conclusion on the basis that she had always understood that if she returned to work on the farm it would be hers.
There is no defined scope of what can constitute a detriment, and the court will adopt a flexible approach to identify the harm caused. The detriment does not need to consist of financial expenditure, but it must be “significant” (Gillett v Holt). Examples of detriment that have been established by the courts include:
- Contributing substantial amounts of money towards building works (Rawlings v Chapman);
- Working for low or no pay (Gillett v Holt);
- Selling off a part of your land, reducing its overall value (Thorner v Major);
- Pursuing a less lucrative career (Davies v Davies);
- “Positioning your life” on the expectation that the promise would be fulfilled (Suggitt v Suggitt).
Finally, the landowner must seek to unconscionably deny the claimant the right or benefit he expected. Recent case law has indicated that this is the critical factor. Indeed, unfairness is a central theme of all estoppel claims since equity seeks to afford the courts the flexibility to prevent injustice.
The court’s equitable powers are broad and flexible, and the court has wide discretion to award whatever remedy is required to achieve justice taking into account a broad range of factors. While the claimant will usually seek outright ownership of the property he was promised, the court may adopt remedies ranging from a lump sum payment to a licence to occupy the property. A transfer of the assets in dispute is most likely in cases where the non-financial detriment suffered has involved the claimant making life-changing decisions on the basis of the representation.
Many (but by no means all) proprietary estoppel claims involve family disputes because by their very nature arrangements and promises are less likely to be formally documented. Apart from bitter and lengthy litigation tearing apart families, the legal costs can be huge. Courts are often required to scrutinise events which span years, or even decades, and examine multiple witnesses. By virtue of the fact-specific nature of the doctrine, it is also incredibly difficult to predict the judgment or the remedy awarded. Even on a successful claim, full proprietary rights to the land in question are rarely awarded with lump-sum judgments being more common.
The pitfalls of not taking proper legal advice when entering into family agreements over property could hardly be more starkly emphasised. The risk of any such problems arising in future can be minimised by speaking to a solicitor and ensuring that all agreements in relation to property rights are properly documented in writing. A difficult conversation to perhaps have with family members, but well advised.
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.