Proprietary estoppel

Clearing the fog…a promise is a comfort for a fool (unless it gives rise to an estoppel)

In daily life, we often rely on promises by someone else that they will do (or not do) something, even when we know there are no means to enforce that promise.  This is understandable; it would be both impractical and unattractive on many levels to insist on recording every small promise and commitment in, say, the form of a binding contract.  For the most part, however, a broken promise will not harm us to any great extent.

On occasion, however, in a private domestic or commercial context, individuals (and companies) substantially alter their position in reliance on a promise made to them. In that context, a broken promise may be very harmful.   In a private domestic context (which this article focusses on), individuals have been known to give up lucrative employment or career prospects, move home and alter the course of their personal lives on hearing that “one day all this will be yours”.

A typical example of this is a promise by, say, Farmer Andrews (A) to Basil Brown (B) that, if B gives up his current job/home to care for or work for Farmer A, for little or no pay, then Farmer A will leave his land (or part of it) to B on his death.

Although an individual in England and Wales is free to leave his or her estate to whomever they please by their Will, in the scenario sketched out above B is not necessarily left stranded by the law if Farmer A reneges on his promise.  If certain matters can be proved, then B may have a claim under the doctrine known asproprietary estoppel(an unhelpfully archaic name, particularly as it is a remedy developed relatively recently by the courts!).

Requirements for a claim in proprietary estoppel

In order to bring a successful claim, B must be able to show that:

1. there was a representation or assurance (the promise) made to him by Farmer A;
2. B reasonably relied on that representation or assurance; and
3. B suffered detriment in consequence of his reasonable reliance on Farmer A’s promise.

If the court is satisfied that it would be unconscionable, in the circumstances, for Farmer A to be allowed to renege on his promise to B, then it may order that Farmer A (or his personal representatives, after Farmer A’s death) transfer the promised property to B (or some other property interest – there is some uncertainty as to whether the court’s approach should be to make good the promise or, alternatively, to compensate B for the detriment he has suffered.

First requirement – a representation or assurance (the promise)

A promise, in order to satisfy this first limb of the requirements, does not need to be one baldly stated by Farmer A to B in terms such as “If you do X, then I will leave you my interest in land Y”.  Such a promise, made in writing, would be extremely strong evidence for B.  More often, however, the promise may in fact take the form of ambiguous or even vague words (or actions) comprising an encouragement or inducement to act in a particular way.  It may then be difficult to prove that the promise, as such, was made by Farmer A to B.  The courts have been open to interpreting the limited words and gestures of somewhat taciturn individuals in such a way as to amount to an inducement, by placing those words and gestures in the context of the whole course of dealing between those individuals.

It is also the case that the reported authorities all deal with promises that relate to land or an interest in land. It can relate to land which Farmer A will acquire in future, but it appears (under the doctrine of proprietary estoppel, at least) to be unclear whether a claim arises where the promise relates to some other type of property (say, money or shares in a company). This is an aspect of the doctrine that is ripe for further judicial comment and development.

There have been cases where the promise related to land which both parties believed, mistakenly, belonged to the promisor, when in fact the land belonged to another.  Unfortunately for the person who relies on a promise in that context, it is almost certain that their claim to an interest in that land would fail.

Second requirement – (reasonable) reliance on the promise

B must be able to show that he actually relied on the promise by Farmer A.  If, for example, B had already taken a particular decision before the promise was made by Farmer A, then it would be extremely difficult (if not impossible) for B to argue that he relied on the promise by Farmer A when he made that decision.   It may also be the case that the decision would have been the same whether or not he received the promise, as the decision benefitted B in other ways.

The promise need not necessarily be the only factor which influenced the decision by B to do (or not do) something, although again there is some uncertainty in the authorities as to whether it must be shown that, “but for” the promise by Farmer A, B would not have made that particular decision.

It is therefore essential that the promise must have been believed by B.  If B did not believe that Farmer A would really leave him his land by his Will, then it cannot be said by B that he relied on the promise.

Third requirement – B suffers detriment

This is perhaps the easiest part of the concept to grasp and also the most important element of a claim.  If B has suffered no detriment, then the court will not prevent Farmer A from reneging on his promise.

In establishing that there is detriment, the courts have been open to accepting that various changes of position other than simply suffering some financial loss can amount to detriment, provided the detriment is substantial.  The detriment is assessed by the court at the time that Farmer A seeks to renege on his promise to B.

What does a successful claimant receive?

The court has a wide discretion as to the order it will make in favour of B, if the three requirements are satisfied. This means that it is very difficult to assess whether a claim by B (in terms of the costs risk that such litigation entails) will be worth the potential reward.  If there was a relatively clear promise made that, if B did X, then Farmer A would give land to B (and the land is valuable), then this sets a clear bar for what B can expect to receive, if he is successful.   Unfortunately, in practice, the facts and merits are rarely that clear.  Strategically, a claimant will often try to combine a claim based on proprietary estoppel with other claims such as constructive trust or a claim under the Inheritance (Provision for Family and Dependants) Act 1975, if they are eligible to do so.

Mark Lindley represented the successful defendants in the estoppel claim Murphy v Rayner & ors ([2011] EWHC (Ch) 1).  He is representing, with Andrea Zavos, the trustee defendants in the matter of Fielden v Christie-Miller & Ors ([2015] EWHC 87 (Ch), [2015] EWHC 752 (Ch)), which includes a novel claim based on proprietary estoppel against the trustees of a discretionary settlement.