Question of Testament: Proprietary Estoppel claims – what you need to know.
What is proprietary estoppel?
Estoppel is the legal principle that prevents someone who has led another to believe in a particular state of affairs from going back on their word.
Proprietary estoppel relates specifically to estoppel principles related to property.
In order to make a successful claim the claimant must show that the testator has acted to their detriment and that they have been reliant on their previous assurance. The claimant must prove that the testator lead them to believe that they would get an interest in the property. They must also prove that they reasonably rely on the assurance. In summary the key elements of a proprietary estoppel case are –
What is unconscionability?
In order to understand the themes of proprietary estoppel cases, it is important to understand the concept of ‘unconscionability’. This is a word used in litigation to describe conduct that does not conform to the dictates of conscience. When something is judged as unconscionable, a court will refuse to allow the perpetrator of the conduct to benefit.
In contract law an unconscionable contract is one that is unjust or extremely one-sided in favour of the person who has the superior bargaining power. Unconscionable conduct can also be found in acts of fraud and deceit, where there is a deliberate misrepresentation of fact which deprives someone of a valuable possession.
In order to further investigate the arguments surrounding proprietary estoppel cases, I have summarised a key case (Uglow v Uglow) which will helps contextualise some of the issues of proprietary estoppel and unconscionability.
Uglow v Uglow:
The Uglows are an old Cornish farming family, who work on several farms in the Launceston area. The family became divided over a dispute about one of their farms. The problem arose from an oral assurance of inheritance given 30 years ago which was later contradicted in a will. The testator orally assured a member of the Uglow family that they would inherit a freehold farm. They then named another member of the family as the absolute beneficiary of the same farm in the will. The will was made in 1999 by Mr Percy Uglow, who was a childless bachelor. The farm was left to Percy’s great-nephew, Mr Peter Gerald Uglow. The freehold consists of a beautiful Elizabethan farmhouse with 235 acres of land and is called Treludick. The will also specified that the testator’s sister, should be permitted to occupy the estate for as long as she wanted.
The nephew of the Testator (Richard Uglow), was assured in 1976 that he would receive the property. Instead he received a quarter share of the residuary estate and a legacy of £1,000. Richard imbues recent developments in the law on proprietary estoppel as the basis of his counterclaim. This promise was made by the testator under the condition that he left his own family farming partnership and joined Percy at Treludick. He fulfilled his side of the arrangement.
Peter denies that Richard is entitled to the freehold of the freehold, but accepted that he is entitled to a ‘protected transmissible tenancy’.
In 1976 the partnership between Richard and Percy began. There was no formal partnership agreed in writing. The judge accepted Richard’s evidence that the Testator told him that he would inherit the freehold. This was based on the fact that “all went well” with the partnership. Richard moved into a cottage on the farm.
The relationship between Percy and Richard became strained, this stemmed from an argument where Richard questioned the integrity of Percy. Percy in turn doubted Richard’s commitment. Richard felt that he was treated like an employee, and was not given his equal share of the profits and was disgruntled that Percy refused to use any new farming methods.
In 1984 it was agreed that they would abandon the partnership and have their own separate areas which they could farm independently. In the agreement Percy was defined as the landlord and Richard as the tenant. The agreement specified that Percy and his sister could continue to live in Treludick and that the landlord could enjoy 60 acres of land of his choice.
Richard continued to occupy 175 of the 235 acres of land, but paid no rent to the Testator. This continued right up until the Testator’s death. Percy did not insist on the rent even though Richard continued to farm a sizeable portion of his land. The judge upheld that the landlord had acted reasonably with regards to the lease. In regards to the inheritancy, he believed this to be based on the conditional promise of the partnership working out. The fact that the partnership was ceased, due to difficulties between the pair, enabled the judge to conclude that Percy was divorced of any further obligation in regards to the inheritancy.
The appealant attacked the judges submission. He stated that when Richard moved to Treludick in 1976, he was fulfilling his side of the partnership in the knowledge that the farm would be his in the future. The fact that he change to where he lived and re-established his home in the full knowledge of the stated promise, was, in the appealant’s mind, enough evidence to show he relied on the stated assurance. Later on, when things turned sour, Richard had already made a critical and irreversible choice which gave him little alternative but to accept the tenancy agreement. The appealant argued that the partnership was not a business relationship and was more a vehicle used for keeping the farm in the family and handing it down to the next generation.
The judgement concluded that the 1976 assurance was not irrevocable to the subsequent change in relations and that the claim failed. The Testator was not committing himself to leaving Treludick to Richard come what may. It was judged that the court should not use the flexible principles of propriety estoppel to secure greater benefits for Richard than he had already derived from the Testator in his lifetime. i.e. a protected tenancy of 175 acres of Treludick and 25 acres of Red Down (for which he paid no rent for during the Testator’s lifetime).
In this case the principle of proprietary estoppel was thrown out because of the arguably reasonable behaviour that the deceased Testator showed. Richard was allowed to continue to live on the farm even though he did not pay any dues for this rent. It was the discretion of the court to award what was fair, where they not only considered the unconscionablilty of the initial claim, but also the subsequent actions that the testator took, i.e. not having disregarded Richard entirely in the will.
Legal principles of the case:
To look at the principles in more depth, please find below a useful summary given by Lord Justice Mummery in the Uglow v Uglow case, which outlines some key principles which apply to testamentary cases
- The overriding concern of equity to prevent unjust conduct is relevant to all the different elements of propriety estoppel: assurance, reliance, detriment and satisfaction are all intertwined.
- The broad inquiry in this case is whether it is unconscionable for the testator to make a will giving a specific property to one person, if they have already created the expectation in a different person that they will inherit the land.
- The expectation may be created by a) an assurance made by the testator to the receiver which is intended to be relied upon. b) consequent reliance on the assurance; and real detriment (not necessarily financial) consequent on the reliance.
- The nature and quality of the assurance must be established in order to see what expectation it creates and whether it is unconscionable for the testator to leave the property to someone else.
- Proprietary Estoppel is an antidote to a lack of a required formality in the creation or transfer of property rights
- The case opened the question of the degree in which the testator had asserted something which was contrary to what was implied in a previous statement (estoppel). The question remained to what was the minimum equity necessary to give justice to the claimant and to avoid an unconscionable result.