Real life lessons
Paul Kerrigan and Heather Roberts explain why students are increasingly learning about proprietary estoppel claims
There have been a spate of cases over the past decade where family disputes over farming land, often after the death of a family member, have come to court. These cases often arise out of a lack of formal agreement between families as to what will happen with the business and or land after someone passes away.
The claims are therefore usually brought under the equitable doctrine of proprietary estoppel. These types of cases are on the increase, which appears to come in line with the increasing values of properties and estates across the country and increasingly complicated family structures. The increasing prevalence of such claims has led to a greater need for practitioner understanding in this area; and law students are increasingly finding that this area is receiving far more attention in their studies as a result.
At Manchester Law School we use examples of specific cases to highlight the contentious nature of wills and estates. This shows our students how practitioners need to be creative in order to try and achieve their clients’ objectives.
It is important that students understand firstly, that to establish such a claim three main elements must be present: promise, reliance and detriment. There must be a representation or assurance made to the claimant by the defendant and the claimant must have suffered in some respect (usually financially), as a result of their reliance on that promise.
The form of reliance will generally depend upon the type of promise that was made. It has to be reasonable reliance, and where the representation is too vague or could not be expected to be relied upon, the claim may not succeed. The detriment element is often the hardest to show, but is the most important and often the most contentious.
A flexible approach
It is important for our students to know that these cases are always fact specific and the courts will always look at the case as a whole, though they have developed a more flexible approach to such claims as a result.
In many cases before the last decade, great importance was placed on the contractual nature of negotiations, such as in Yeoman’s Row Management Ltd v Cobbe [2008] 3 EGLR 31 which prevented an estoppel arising.
But in Thorner v Major [2009] 1 WLR '¨776, the court demonstrated the importance '¨of flexibility. The claimant, David, was the cousin of the deceased, Peter. He had worked for 29 years, unpaid and for long hours, on Peter’s farm and believed he would inherit the farm in return, though there was never an explicit promise.
In the House of Lords, David was awarded the farm and his legal costs. Lord Walker commented: “There is no definition of proprietary estoppel that is both comprehensive and uncontroversial (and many attempts at one have been neither).”
He added a more “general, or overarching requirement, that it be unconscionable for the claimant not to be granted the relief sought”. This marked a flexible approach of a requirement to consider the case as a whole, and what was ‘fair’ and ‘conscionable’ in all of the circumstances.
This is a particularly landmark case that is important in students’ education as it was the first example of a case of this kind going to the Lords. As the judgment encourages more claimants to bring these claims than ever before it is vital that students understand the complexities in this area before they begin working in practice.
The award
As an example of the flexibility operating in relation to the award, another farming case (Davies v Davies & Others [2015] EWHC 1384) the High Court in highlighted the discretion to consider the proportionality between the expectation and the detriment.
The court had to consider the lack of communication of the ‘promise’ to the rest of the family, but looking at the case as a whole accepted the claimant’s witness evidence as genuine. It found there had been a “substantial balance of detriment” which made it unconscionable. The claimant was awarded the farm and farmhouse but not a bungalow. It was in the court’s discretion to consider the estate as a whole and the detriment suffered by the claimant to determine an award that was not necessarily what the claimant was seeking or what the deceased had promised.
We use this case as a perfect demonstration to students of how hard it can be to unpick a claim so heavily based in fact. Students must understand the importance of documenting arrangements properly and understanding that when it comes to estoppel claims, practitioners are dealing with complex family relationships.
In the separate case of Davies v Davies [2016] EWCA Civ 463, the Court of Appeal adopted the approach of looking at the case as a whole to reduce a first instance award of £1.3m to £500,000. It found that the first instance judge had applied “too broad a brush, failed to analyse the facts that he found with sufficient rigour and did not explain why he reached his conclusions”. The period of detriment was a lot shorter which the court held should be reflected in a more modest award.
Proportionality
The courts must always be mindful that any award is proportionate and that if they are to grant a claim for estoppel it should only be the minimum equity necessary on the facts (eg McDonald v Rose & Ors [2018] EWHC 445).
Where a successful claim is brought, an estoppel does not necessarily grant an '¨interest in the farm or property itself. In '¨Habberfield v Habberfield [2019] EWCA Civ 890 for example, a cash payment was considered more suitable than a transfer of land to the claimant on the facts; and in Guest v Guest and another [2019] EWHC 869 (Ch) a lump sum payment was appropriate.
This case particularly stood out as the court had to deal not only with the basic principles of an estoppel claim, but also where the representations/assurances were a mixture of express and implied promises; and a situation where the expectation changed over time.
As we tell our students, in practice it is often valuing the equity that is the most difficult part of these cases and can differ from judge to judge. Many cases tend to settle at mediation for this very reason, as you cannot predict what a judge may award.
Entering practice
Proprietary estoppel cases are unique in the modern law student’s education. They highlight that clients must be warned that a valid will should be drawn up as early as possible and reviewed upon significant changes to the family circumstances; and that when significant assets are involved, including business assets, it is just as important to formulate a succession plan for the business.
Families who own a farm should really consider what belongs to them, and this amount of wealth shouldn’t be left down to a verbal promise between family members: it deserves careful, documented planning. The costs of litigation can run to hundreds of thousands of pounds and can often be avoided (or at least minimised) by spending a little time and money getting it right at the start.
Being able to draw upon recent landmark cases in this area is vital in giving an insight into the complexities that practitioners need to deal with. In this ever-growing area of law, the modern law student will enter practice with an increased understanding of the history and latest developments in dealing with proprietary estoppel claims.
Paul Kerrigan is a senior '¨lecturer at Manchester '¨Law School mmu.ac.uk
Heather Roberts is a senior '¨associate at Irwin Mitchell '¨irwinmitchell.com
