Broken Promises: The doctrine of proprietary estoppel

What is the doctrine of proprietary estoppel?

The doctrine of proprietary estoppel in simple terms refers to a situation where someone suffers detriment as a result of another person's broken promise. It gives the person who has lost out the chance of acquiring a proprietary right to property which they dont legally own. The principle is often relied upon by common law wives or husbands whose name is not on the deeds of the property they live in. It is also often used by family members where promises have been made about what will be left in a will and the intended recipient has acted to their detriment in reliance on those promises. In this context such promises are sometimes referred to as a pre-death agreement.

The 3 main constituent parts of proprietary estoppel are: -

• A landowner induces, encourages, or allows a person to believe that he has or will enjoy some right or benefit over the owners property;

• In reliance on this belief, the person acts to his detriment to the knowledge of the owner; and

• The owner then seeks to take unconscionable advantage of the person by denying him the right or benefit which he expected to receive.

Two recent proprietary estoppel cases.

The law regarding broken promises is constantly developing. There have been two recent court decisions on the doctrine of proprietary estoppel that assist us in understanding how the doctrine is likely to be viewed and implemented by the courts.

Linden –v- Burton

The first one, and a prime example of the doctrine of proprietary estoppel in action, is the case of Liden v Burton (2016 EWCA Civ 275).

Mr Burton and Ms Liden lived together in Sweden before moving back to Mr Burton’s home in England. The property was previously owned by Mr Burton and his ex-wife. In the divorce proceedings Mr Burton paid his ex-wife £37,000.00 and the house (referred to at the trial as ‘Willow Beck’) was transferred into his sole name. The £37,000.00 was raised by a mortgage on the property.

Mr Burton told Ms Liden that the property was now also her home and in order for them to be able to afford to keep it he would require some contribution. Ms Liden therefore began giving Mr Burton £500.00 per month for, what she believed, was the running of the property. It is important to note that Ms Liden lived at the property for 12 years and was not initially aware that there was a mortgage on the property. During the time Ms Liden lived at the property she questioned what the money she was paying was being used for. Mr Burton told her that it was going to ‘rent and other outgoings’. Ms Liden challenged the word rent and Mr Burton referred to it as ‘money towards the house’. It is relevant that Mr Burton promised Ms Liden on a number of occasions that they would be together for the future, that Willow Beck was their home and he would look after her forever. Mr Burton also proposed to Ms Liden during the time she lived at the property. These promises led Ms Liden to believe that she would benefit from living in the property and that her payments each month were enabling this.

It was clear to the Judge from Ms Liden’s evidence that she relied upon Mr Burton’s promises and she would not have made the payments otherwise. The Judge ruled that:

• Mr Burton had induced, encouraged, or at the very least allowed Ms Liden to believe that she was acquiring an interest in the property.

• Ms Liden’s monthly payments were made in reliance upon Mr Burton’s assurances.

• It would be unconscionable for Mr Burton to deny Ms Liden an interest in the property.

• And finally, a sum of £33,552.00 was a reasonable and fair reflection of Ms Liden’s contributions to the property.

The sum was arrived at on the basis that £200.00 per month of the £500.00 Ms Liden paid was used towards ‘rent’. Therefore the principle sum of these payments over the time Ms Liden resided at the property totalled £28,800.00 and accrued interest totalling £4,752.00.

Mr Burton appealed the decision, arguing that there was insufficient evidence for a finding of proprietary estoppel. His appeal was allowed on the basis that he did not dispute the Judge’s findings. Therefore the issues for consideration were whether the Judge: -

• Wrongly applied the law to establish the facts; and/or,

• Incorrectly exercised his discretion when giving effect to the equity.

The appeal was dismissed as it was found that the Judge had not erred in his decisions.

This case underlines the need for those facing a proprietary estoppel claim to be able to ensure that they are clear in their motives and that anyone who is suffering detriment is aware that they may not be acquiring any right or benefit in the property. If a defendant has acted in an unconscionable way making promises that cause detriment to the claimant then there is every chance that proprietary estoppel will be established.

Davies and Anor v Davies 

Another case of proprietary estoppel is Davies and Anor v Davies (2016 EWCA Civ 463776).

In this case Eirian Davies worked on her parent’s farm after she finished school. She did not earn a wage but was given lodging and board at home, and money for clothes and leisure, a scooter, and had use of a car. The benefits were substantial but less than full recompense for the work she did. There were many periods over the next 30 years where Eirian stopped working at the farm and left. These were mainly due to family arguments. During the time Eirian worked at the farm she was promised that she would inherit the farm, or become a partner. The latter was even enshrined in a partnership agreement at one point which Eirian signed but her parents did not.

Eirian was led to believe on several occasions that she would be left the farm upon her parents' death. She was shown draft Wills which her parents had signed leaving Eirian the farm. This however was changed to leave one third each to Eirian’s two sisters and one third in trust to Eirian’s daughters and later changed again to one third to each of Mr and Mrs Davies 3 children.

At trial the Judge ruled that Eirian had an interest in the farm on the basis of promises made by her parents on which she relied to her detriment. At one stage Eirian had given up a career to return to the farm at the beckoning of her parents. It would be unconscionable for her parents to now deny her equity in the farm or the farming business. An award of £1.3m was made.

This decision was appealed by the parents. In the appeal it was found that the daughter's successful proprietary estoppel claim would not necessarily involve an entitlement to an immediate beneficial interest as the original Judge had ruled. The monetary award was therefore reduced to £500,000.00.

The core issue in the appeal was whether Eirian’s reliance on the promises made by her parents gave rise to sufficient detriment so as to entitle her to a share in the ownership of the family farm. This case is notable as Eirian was awarded monetary compensation as opposed to a proprietary interest on her parent’s land. Whilst proprietary estoppel was found in this case it was agreed by the court that Eirian’s benefit should be that of monetary compensation as she knew at intermittent periods over the years that she may not get the farm itself. At one point she had given up on the farm and thus it would not have been reasonable to award a proprietary interest in the farm or the business. This decision favours prospective defendants more than the case of Liden v Burton. If a defendant can show that the claimant had at any point known that they were not going to receive the benefit or had actually given up on this they may not be awarded a proprietary interest. However defendants still have to be wary as the claimant may nevertheless be entitled to compensation as was the case in Davies.

If you have suffered loss as a result of a broken promise by your common law partner, your family or anyone else who has led you to act detrimentally then call our specialist team of lawyers for FREE initial assessment and details of the availability of NO WIN - NO FEE funding. Call FREEPHONE 0808 139 1596 or email lee.dawkins@sleeblackwell.co.uk