09 April 2020 - Article
The High Court has adjudicated on quantum in the latest instalment of Davies v Davies, following the Court of Appeal's decision in 2014 that the daughter, who had worked on her parents' farm for long hours at low pay in reliance upon her parents' assurances that it would one day be hers, had a valid claim based upon proprietary estoppel.
The parents owned a large farm in Wales. The daughter (‘E') (one of three) had worked on the farm for no pay until she turned 21 in 1989. She was assured that the farm would be hers one day. In 1989 she moved out due to a disagreement over her choice of partner. She married her partner in 1990 and was reconciled with her parents. She was away from the farm for a total of 2 years.
The parents then purchased another nearby farm, 20 acres of which they sold to E. She raised her own herd of cattle, while continuing to work on the parents' farm. The work she carried out was milking, and other miscellaneous tasks. She was paid for the milking at a rate of £15 per day.
In 1997 the parents discussed bringing E into their farming partnership. E signed a partnership agreement in March 1998, in the expectation that the parents were about to sign it too. However, they never did so.
In 1998 E and her husband sold her acreage at the smaller farm and moved back to a cottage on the main farm, which they occupied rent free. E was still under the impression that her parents had signed the partnership agreement. It was not until 2001 that she realised they had not. While she and her husband were living at the farm cottage they carried out various improvements, for which they were only partly reimbursed by the parents.
In 2001, following an argument, E moved out of the cottage and began renting another property nearby. The parents rented out the cottage and paid some of the rental income to E. In the autumn of 2001, the parents gave instructions to their solicitor that they intended E to take over the running of the farm in due course, but that she was not to inherit it outright as long as she remained married to her husband. Nevertheless, they signed wills in 2002 simply leaving their estate to all three of their daughters in equal shares.
E returned to work on the farm part-time in late-2005 or early-2006. She divorced in October 2006. She continued to live at the rented accommodation with her two daughters, taking on other part-time work to make ends meet. There was another argument in 2007, provoked by the appearance of a new partner. Following this she ceased working at the farm and began working as a technician for a livestock firm called Genus. E's father ('F') repeatedly asked her to return to work on the farm, which she did at the end of 2007, and she moved back into the farmhouse. F told her that the farm would be her home, rent free, for life. The Judge noted that there needed to be some encouragement to get E to move back to the farm. E subsequently did more work around the farm and less for Genus.
In 2008 the parents and E met with a solicitor to discuss appointing E as a director of the farming business and issuing her with 49% of the shares. E's salary was not agreed, although it was later decided that she would receive £1500 per month. The documents setting out the agreement were not signed, but everyone behaved as if they had been. E resigned from her job at Genus and went back to full-time work on the farm.
Because E's ex-husband was bringing financial claims against E, the parents decided to leave E a portion of the farm along with shares in their wills, rather than allotting shares to her. In 2009 they made representations on two separate occasions that the farm would be left to her. E was shown a draft will to this effect. However, the parents continued to make changes to their wills and ultimately proposed to place the farm into trust with the residue to be split equally between their three daughters.
In August 2012 E and F had a fight in the milking parlour. The parents terminated E's employment and sought to evict her from the farmhouse.
The parents began proceedings in November 2012. They claimed that E had worked on the farm as a self-employed herdswoman with a gratuitous licence to occupy the farm house, which had been terminated.
E counter-claimed that an equity had arisen in her favour.
The first instance decision
The Judge at first instance (HHJ Jarman QC) found that although E had been paid and given free lodging during her periods of work on the farm, the arrangement did not amount to full compensation for her contribution to the business. The Judge also held that, had she not worked on the farm, but rather at Genus, she would have earned more money. The Judge took into account the emotional hardship of working in such a difficult environment with her family.
He ordered that, as a result of her detrimental reliance on the representations made by her parents, E had 'established an entitlement to a beneficial interest in the farm and/or the farming business under the doctrine of proprietary estoppel', with the nature and extent of the beneficial interest to be determined at a further hearing.
The parents appealed. E conceded that the Judge made a mistake in saying that she had a beneficial interest in the farm rather than an equity over it. However, she resisted the main thrust of the appeal, namely her parents' assertion that she had not made out a proprietary estoppel claim.
The Court considered the three elements of proprietary estoppel as set out in Thorner v Major  UKHL 18: assurance, reliance, and detriment in consequence of reasonable reliance.
However, as per Gillett v Holt  Ch 210 those elements were not to be treated as separate ‘watertight compartments'. The point of equity is to prevent unconscionable conduct and the elements must therefore be looked at in the round.
Determining whether E had suffered detriment was to be judged at the point when the person who had given the assurance sought to go back on it.
The parents argued that the Judge had been wrong to hold that E had relied on the assurance of 1984 that ‘the farm would be hers one day'. The fact that she had stopped working at the farm in their view meant that she could not claim to rely on the 1984 promise. They also argued that there could not be any reliance until E signed the partnership agreement and that this would affect the nature and extent of the equity awarded. The Judge appears to have disregarded this argument; earlier in the judgment he had noted that 'we are only concerned to see whether the Judge was right to hold that the threshold for the grant of some equitable relief has been crossed', rather than to adjudicate on the level of entitlement to be awarded.
The Judge noted that an Appeal Court can only interfere with the Judge's assessment if it is perverse or clearly wrong. He found that the Judge had been entitled to make the decisions he made. He had clearly accepted E's evidence that there was detrimental reliance during the period in which E returned to work on the farm. This was a finding of fact which the Court was entitled to make.
The Judge had also acknowledged that E's detrimental reliance was not purely financial; had she been able to work in an environment of her choosing, she would have been free of the problems and stresses caused by working with her parents, and also able to work shorter hours and see more of her children. The Judge did not have to quantify the detriment. His conclusion was simply that there had been a net detriment to E, and the Court of Appeal held that it was a conclusion he was entitled to reach.
The Court of Appeal upheld the daughter's proprietary estoppel claim. However, it then returned the case to the first instance Judge to determine the extent of her entitlement.
The quantum hearing
The case came back before HHJ Jarman QC.
E argued for a transfer to her of the farm and the farming business. The net worth of the farm at the time of the hearing was just under £4.4 million with a value after CGT (assuming a sale of over 20% of the land) of £3.15 million.
The parents argued that the appropriate remedy was to quantify E's interest in monetary terms having regard to unpaid hours and a fair share of the profit, which they assessed to be £350,000.
The parties did not seek to re-open findings of fact. However, each argued that further detailed evidence as to the detriment suffered by E in reliance upon the representations of her parents was needed.
In broad terms the detriment was the long working hours for a total period of 20½ years from 1984 to 2012 without full payment. Eleven of those years were full-time and the remainder part-time. The detriment was not purely financial. Had E worked elsewhere she would have had shorter working hours and would have been free of the difficult working relationship with her parents. There is a dispute between the parties as to how much work apart from milking she did. The Judge found E's evidence on this issue to be clear, detailed, straightforward and fluent. In contrast, the Judge found that the parents' bitterness had affected their recognition of the full contribution she made. Accordingly, the Judge preferred E's evidence and that of her partner as to the quantity and quality of work done on the farm.
In determining the appropriate remedy, E's Counsel submitted that the representations and detrimental reliance gave rise to a relationship of a contractual nature; therefore the approach should be to award what was promised unless it was out of proportion with the detriment suffered. The parents' Counsel accepted that what was promised must be a factor to be taken into account, but submitted that the overarching approach should be to seek to do justice between the parties, and that the remedy should be proportionate.
The Judge noted the statement of Aldous LJ in Jennings v Rice  EWCA 159;  1 T&CR 8: 'The value of that equity will depend on all the circumstances including the expectation and the detriment. The task of the Court is to do justice. The most essential requirement is that there must be proportionality between the expectation and the detriment'. He also noted that the present case did not come within the category of case delineated by Walker LJ in Jennings whereby the benefactor and the claimant had reached a mutual understanding which was reasonably clear but did not amount to a contract. Firstly, a number of different representations were made over the years. Secondly, E had accepted that she was capable of earning a living elsewhere. Thirdly, E's expectation from the business was dependent upon her continuing to work in the business which did not happen.
The Judge also distinguished the facts of the present case from Suggitt v Suggitt in which the assurances were consistent and continuing until the father's death, as was the reliance. It cannot be said here that E positioned her whole life on the basis of her parents' assurances. As recently as eight or so years ago she was living and working independently of them, with no intention of returning.
As regards expectations, the Judge found that until 2001 there was a loss of expectation because E was brought up to believe that she would take over the business. For a period of around 5 years following 2001, E left the farm and had no expectations regarding it. From 2007 to 2012 the position with regard to expectation was changing and somewhat uncertain. Much of the uncertainty related to her parents' proposals over how to formalise E's position. The Judge found that in terms of expectation what was important to E was working with the particular herd in question, rather than with any herd. However, he also found that, although the expectation was focussed on the herd, there was no suggestion of the business being carried on from land other than the farm.
In terms of detriment, the Judge found that, in view of E's considerable skills with the milking herd and her capacity for hard work, she would in all likelihood have done very well in another career. He found that she gave notice to Genus because her parents promised her a share of the company in the July 2008 meeting. The Judge found that another career would not provide a wholly fulfilling use of her skills.
The Judge looked at consequential benefits. The parents put in evidence a detailed schedule in the total sum of £465,323.56, setting out the sums they had paid out to E over the years. This included the value of free accommodation and board. E's Counsel submitted that the difficulties for E in living in close proximity with her parents should be taken into account.
Each side raised allegations of conduct as affecting the level of relief. However, the Judge found that the conduct (whereby E and F assaulted each other during the fight in the milk parlour) arose in the context of a difficult and very bitter relationship between the two parties and, in view of the long history of the parties' dealings with each other, did not amount to the sort of misconduct which would have any bearing on the relief.
Weighing all the above circumstances, the Judge found that a lump sum award of £1.3 million to E was a fair reflection of the expectation and detriment and other factors sets out above. This was just under one-third of the net value of the farm and farming partnership depending on the consequences of CGT which in turn depended how much was sold. The Judge recognised that the farming business or a substantial part of it would have to be sold, but noted that in view of the poor relationship between the parties the options were limited.