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Proprietary estoppel – a significant threat to legacy income
Proprietary estoppel allows the court to compel the making good of a broken promise(s) when it is equitable (or fair) in the eyes of the Court to do so. It is commonly used as one element of a broader strategy to attack testamentary wishes that do not fall in favour of unhappy beneficiaries. These types of claims continue to be popular, especially in the context of family farms and businesses.
Given the scope of statements such as 'one day this farm will be yours' to significantly damage legacy income, proprietary estoppel should remain on any legacy officer's radar.
And this remains true. Recent proprietary estoppel decisions make it clear that cases turn on the evidence, making it difficult to predict the outcome.
Below we reconsider the basic requirements of proprietary estoppel, how they have been applied recently and look at two cases which have applied the principles over the last couple of years.
Principles of proprietary estoppel
Proprietary estoppel is typically used where a party seeks to claim a right to another party's land or other property.
Lord Walker in Thorner v Major [2009]1, quoted from Simon Gardner in Introduction to Land Law (2007) that 'There is no definition of proprietary estoppel that is both comprehensive and uncontroversial (and many attempts at one have been neither)'.
But it is commonly agreed that the doctrine is based on three elements:
- a promise or assurance;
- reliance (which must be reasonable) on that promise; and
- detriment caused or suffered as a result of that reasonable reliance.
There is also an overarching requirement that it would be unconscionable for the person who made the promise to renege on it.
Where the three main elements are met and it is unconscionable, an equitable claim arises such that the court may, on a discretionary basis, enforce the promise or otherwise compensate the wronged party
Where the three main elements are met and it is unconscionable, an equitable claim arises such that the court may, on a discretionary basis, enforce the promise or otherwise compensate the wronged party. For proprietary estoppel to threaten legacy income the claimant enforcing the promise must therefore show, above and beyond the three elements set out above, that it would be unconscionable for the property to be left to charity in accordance with the will.
Looking at the elements in turn:
The promise
A promise can typically take three different forms: a representation; a promise (but not a contract); or the acquiescence of a mistaken belief. The promise or representation can include words or conduct, does not need to be identifiable on precise occasions and does not need to be clear or unequivocal. It simply has to be 'clear enough'. In Thorner v Major, handing over a life insurance notice with the words 'that's for my death duties' was sufficient assurance to the person being made the promise that they would inherit the farm.
In Armstrong v Armstrong2, parents Alan and Margaret Armstrong purchased two farms during their marriage, one of them being the North Cowton farm in North Yorkshire. Their second son, Richard, moved to North Cowton when he was 23, overseeing the farming operations for around 34 years.
Richard claimed his parents had promised that he would inherit North Cowton when they died.
In 2020, Alan executed a new will which cut Richard out and left North Cowton to Richard's brother's son. Alan died in October 2020.
Lots of evidence was given by third parties.
Richard's wife presented evidence that throughout their marriage, she was assured by Alan and Margaret that Richard would inherit the farm. She was told Margaret was pleased Richard would inherit the farm as he had a similar nature to her father. Richard's wife also claimed that when their son Thomas left school and came back to the farm to work Margaret was 'delighted' to have a grandson who wanted to continue farming at North Cowton.
A promise can typically take three different forms: a representation; a promise (but not a contract); or the acquiescence of a mistaken belief
Thomas also gave evidence that Alan and Margaret had 'repeatedly told him North Cowton would go to Richard'.
Peter Wilkinson, Alan's brother-in-law, had dinner with Alan every other Sunday and they would often visit North Cowton together, where Alan always called it 'Richard's farm'. Alan's sister also claimed that Alan always called North Cowton 'Richard's farm'.
The court also considered notes of meetings with solicitors over the years (where the family's future plans were discussed) and letters of instructions to solicitors regarding earlier iterations of Alan's will under which North Cowton would be inherited by Richard.
The court found that Alan and Margaret had made clear and unambiguous promises that Richard would inherit North Cowton that were 'binding and irrevocable'.
By contrast, the court found in the recent case of Mate v Mate3 that a promise, representation or assurance was not made. Julie Mate's parents, Shirley and Donald, ran a dairy farm. Following Donald's death, the farm was run by Shirley and two of her sons.
Julie claimed that her parents had encouraged her to look into the development potential of the farm. On that basis, Julie engaged a planning consultant with whom she worked for many years, aiming to remove the land from the Green Belt.
The intention was to share the sale proceeds between Shirley and her five children. In 2015, Julie discovered that her mother and two brothers had entered into an agreement with a developer to purchase part of the land for £9 million without informing her.
Julie brought a proprietary estoppel claim against her mother and her two brothers. She was unsuccessful as the court held she had failed to make out that any promise or assurance of any clarity was made in relation to the land. Julie had relied on three specific promises (the first two being made in 2004 and the third in 2020) and generic promises made from the late 1990s until 2003.
The court held the promises were not 'clear enough' and that it was possible Shirley had simply made general comments over the years in the expectation her daughter would benefit if the farm was ever sold. Shirley had not specified what share of the proceeds Julie could expect to receive nor was her intention to bind Julie's two brothers.
When assessing proprietary estoppel claims, the court considers the net detriment suffered by the promisee
Detrimental reliance
The person benefiting from the promise must have reasonably relied on the promise or representation to their detriment. Here, there must be a sufficient causation between the assurance and the detriment. The detriment is judged at the moment when the promisor seeks to revoke it. When assessing proprietary estoppel claims, the court considers the net detriment suffered by the promisee. Detriment can include factors other than financial detriment.
In Armstrong, Richard's reasonable reliance had influenced him to forego a university education in favour of studying agriculture. Richard assumed responsibility for debts of around £500,000 relating to the farm. Richard also, following Margaret's passing in 2018, executed a deed of variation to vary Margaret's will (which originally left her residuary estate to Simon and Richard), providing instead that the residuary estate was passed to Alan. Richard signed the deed of variation agreeing to this after reasonably relying on a promise: his father had given him an 'encouraging look or nod', which he took to mean he would 'receive his inheritance from his mother when his father died and that his father would leave North Cowton to him'.
The court upheld Richard's claim, finding that he had reasonably relied on Alan and Margaret's promises over decades to his detriment. The court found that Alan had acted unconscionably by reneging on the promise that Richard would inherit North Cowton.
So, what has changed over the last couple of years?
Winter v Winter4 - broadening the scope of 'detriment'
Winter v Winter is a notable new case as it clarifies the scope of what detriment means. It lowers the burden on claimants to demonstrate what could have been had they not relied on promises made to them.
The claimants, Richard and Adrian Winter and the first defendant, Philip Winter, were the sons of Brenda and Albert Winter. All three sons had worked for their parents' strawberry farming business in Somerset for most of their lives. The sons had received very little financial reward for many years, on the basis that Brenda and Albert had told them that if they committed to working for the family business, it would be left to them equally. Substantial shares and dividends began to be paid in 2014, following a restructuring of the business whereby the business, but not the property, was transferred to a company in which Albert and each son held equal shares.
Winter v Winter is a notable new case as it clarifies the scope of what detriment means. It lowers the burden on claimants to demonstrate what could have been had they not relied on promises made to them
Albert, in his will, had originally left his three sons equal shares in the business and in his estate.
Following Brenda's death in 2001 and a subsequent dispute over the business's finances, Albert revised his will in 2015, leaving the residue of the estate, including his interests in the partnership and the company solely to Philip.
Albert died in 2017.
Richard and Adrian brought a proprietary estoppel claim against Philip, claiming that their father had promised them each a one-third share in the business and that they had relied on this promise to their detriment. In particular, Richard and Adrian claimed that had they not been assured they would receive an equal share in the business, they would have pursued alternative careers. Richard forewent a potential career in the Royal Marines, whilst Adrian would have become an independent contractor.
At first instance, the High Court upheld Richard and Adrian's claim.
Philip appealed the High Court decision. He claimed that Richard and Adrian had not shown sufficient detriment. They had not given up opportunities that would have placed them in a better position.
The Court of Appeal clarified that courts did have to weigh any non-financial disadvantage, such as the loss of opportunity to lead a different life, against any financial benefit. This is the case even where the disadvantage is not quantifiable. In this case, the Court of Appeal held the High Court was right to consider that 'where a claimant has made a life-changing choice and over many years undertaken work in reliance on an assurance, the Court will probably be prepared to treat loss of opportunity to lead a different life as itself detrimental'. The mere loss of alternative careers is itself sufficient detriment. The alternative course that would have been taken by the individual does not need to have been more beneficial. The Court of Appeal therefore dismissed Philip's appeal.
Guest v Guest5 – how to remedy
This case is interesting because it provided further clarity on how the Court may remedy a claim for proprietary estoppel.
This case again concerned a family farm (Tump farm) owned by David and Josephine Guest. David and Josephine had three children. Their eldest child Andrew lived and worked on the farm for 33 years. Andrew expected to receive an unspecified part of the farm on his parent's death, sufficient for him to establish a viable business.
David and Josephine made wills in 1981 whereby they left Tump Farm and its business in equal shares to Andrew and his brother on their death. Following a dispute between Andrew and his parents in 2015, Andrew moved out of their cottage on Tump Farm and his parents made new wills which excluded Andrew.
...the proprietary estoppel framework means the outcome of each case is heavily dependent on its facts.
Andrew brought a claim in proprietary estoppel (interestingly and unusually, whilst his parents were still alive). The Court found that Andrew had reasonably relied on representations made by his parents to his detriment and so his claim was made out.
The question of how to remedy this result was appealed to the Supreme Court.
The Supreme Court considered the question of whether the remedy should fulfil Andrew's expectation or compensate Andrew for the detriment suffered in reliance on his parent's promises.
Andrew sought specific performance of his parent's promise (ie for the court to enforce the promise) whereas his parents sought the 'minimum equity to do justice' (ie that the court should quantify the detriment suffered and compensate Andrew for it).
The Supreme Court was split but the majority ordered specific performance of the promise to meet Andrew's expectation. The starting point for this approach was 'remedying the unconscionability' and to do this one needs to look at both the detriment to, and expectation of, the wronged party.
Interestingly, the majority of the judges gave David and Josephine the choice between a non-financial remedy, the promised share in the farm and business held on trust for Andrew until his parents' death, and a financial remedy, the sale of the farm now, with a discount for early receipt.
The dissenting judges decided that they, instead, would have awarded Andrew financial compensation based on a calculation of his detriment.
This judgment provides some guidance on the correct approach to adopt when assessing the remedy in proprietary estoppel cases. One should consider the expectation of the promise and giving effect to the promise, not simply the detriment (or financial harm) suffered as a result of the reliance on the promise.
Very significantly, this judgment moved away from the concept of proportionality in favour of fulfilling a promise or expectation.
Risks to legacy income
It remains clear, despite the cases discussed above, that the proprietary estoppel framework means the outcome of each case is heavily dependent on its facts.
This means proprietary estoppel claims are high-risk. They can involve huge amounts of evidence making trials lengthy and expensive. The strength of the evidence that witnesses will present only really becomes apparent when you get to court. Though the burden lies on a claimant to make out their claim, that burden can quickly shift onto the charity beneficiary to disprove a claimant's case.
Engaging in the facts of each case and considering alternative dispute resolution early on in these types of claims is likely to be the most cost-efficient way for charities to deal with them.
The flexibility inherent in each element of proprietary estoppel means legacy officers and practitioners alike should not pre-judge a case without careful consideration of all the facts.
Footnotes
1 [2009] 3 All ER 945 (25 March 2009)
2 [2024] EWHC 2989 (Ch) (22 November 2024)
3 [2023] EWHC 238 (Ch) (10 February 2023)
4 [2024] EWCA Civ 699 (21 June 2024)
5 [2022] UKSC 27 (19 October 2022)
Key contact
Isabelle Moisy
Associate | London