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    Daughter compensated for breach of unenforceable promise, receives an award of lump sum of £1.3 million:

    Davies & Another v Davies [2014] EWCA Civ 568 (the Court of Appeal) and [2015] EWHC 015 (Ch) (the Cardiff District Registry of the Chancery Division)  

    In 2014 the Court of Appeal gave judgment in one of a large number of cases on broadly similar lines that have come before the Courts involving claims by Claimants saying that they have worked for or helped other people (the Promisors) on the basis of promises made by the Promisors that they would reward them later, possibly in their wills, by giving them property. 

    The promises are not legally unenforceable but the principle of “proprietary estoppel” enables the Court to compensate a Claimant in those circumstances.

    In this case a daughter had claimed to be entitled to an interest in her parents’ pedigree dairy farm, or other equitable relief, based on the doctrine of proprietary estoppel.

    Many people wrongly think that a promise cannot be binding if not put in writing and that children have no rights to claim their parents’ property.  This case is one of many reminders that that is simply not true.

    Proprietary estoppel:  What’s that?

    The Court summarised the principles of proprietary estoppel.

    It applies where (1) a representation or assurance has been made by the Promisor to the Claimant; (2) the Claimant has relied on the representation or assurance; and (3) the Claimant has suffered “detriment” as a result of that (reasonable) reliance on the representation or assurance.

    In that case the Court may order the Promisor or the Promisor’s estate to transfer property or money to the Claimant in order to achieve a fair result between them.

    Does the representation, assurance or promise have to be legally binding?

    No.

    Does it have to be in writing?

    No.

    Does proprietary estoppel only apply between parents and children?

    No.

    Does proprietary estoppel only apply between family members?

    No.

    Will the Court order the Promisor to carry out the promise?

    Not necessarily (see further in this Note).   It will order the Promisor or the Promisor’s estate what the Judge on the day (subject to a successful appeal to the Court of Appeal) considers an appropriate amount in money or money’s worth to the Claimant.

    That may amount to ordering the Promisor to carry out the promise, but the Court will often order the transfer of a smaller sum (or value).

    Detriment:  What’s that?

    In order to show “detriment”, Claimants can point to other factors beyond simply showing that they have spent money or incurred expense on behalf of the Promisor.

    Whether the detriment is sufficiently substantial must be judged by whether it would be unjust or inequitable to allow the assurance to be disregarded.

    It is a slightly circular discussion.

    The fundamental principle is that the Court will prevent “unconscionable conduct.”

    The court must look at the matter in the round.

    This all emphasises the importance of the assessment of the facts by the Judge and makes it difficult to predict the outcome of a proprietary estoppel claim.

    That adds to the pressure on the Claimant and the (alleged) Promisor to negotiate a settlement.

    In this case, the lower Court (the Cardiff District Registry of the Chancery Division) had found as a fact (among other facts) that the Claimant relied on a representation made to her that “the farm would be hers one day”.

    The Judge in the lower Court had held that the detriment to the Claimant was not exclusively financial.    It included the fact that she had given up a job and lifestyle that she loved.

    The Court of Appeal upheld the lower Court’s decision that the Claimant had suffered enough detriment in reliance on the assurance/representation that one day the farm would be hers to give her an interest in the farm. 

    How much will the Court award?

    That will depend on the facts of each individual case and the importance the individual Judge gives to them on the day (subject to a successful appeal to the Court of Appeal).

    The award must be in proportion to but not necessarily the same as what the Claimant expected to receive and in proportion to the detriment incurred by the Claimant.

    The Court will do the minimum required to do justice to the Claimant (while also doing justice to the Promisor or the Promisor’s estate).

    The Court will wish to deliver a fair reward (but no more than a fair reward, and certainly not a windfall) for the help given by the Claimant to the Promisor.

    If the Court considers that the Claimant’s expectations are uncertain, or extravagant, or out of all proportion to the detriment which the Claimant has suffered, it will generally look to make a different and generally more limited order than simply to enforce the Claimant’s expectation.

    Result

    The Court of Appeal said that the Claimant was entitled to an award but did not set the level of the award.  The Judges suggested that the family members involved agree a settlement.  They were unable to reach agreement so the case returned for a decision to the Cardiff District Registry.

    £1.3 million lump sum award

    In February 2015, after a thorough, detailed and painstaking review of the circumstances including the net value of the farm (in excess of £4 million), the livestock and machinery, the Judge in the Cardiff District Registry awarded the Claimant a lump sum of £1.3 million which it assessed as just under a third of the net value of the farm and farming business, depending on the impact of Capital Gains Tax which in turn would depend on how much of the farm was sold to raise the money.

    Both the Claimant and her parents would have been disappointed by the outcome of the litigation.  The Claimant did not obtain the farm, which she had expected or hoped to do.  Her parents lost control of the farm in its then form.

    Nevertheless, the Claimant was able to obtain a substantial sum to reflect the interest that the Court, after considering all the evidence, considered that she had acquired in the farm as a result of the detriment that she had suffered in reliance on assurances made to her.

    Conclusion

    This Note can do more than scratch the surface.  If you think you or someone close to you might be affected by a proprietary estoppel claim (whether as alleged Promisor or as potential Claimant) see your solicitor for detailed advice on the particular circumstances that you have in mind, and what you can do about it.

    UPDATE

    On 19th May 2016 the Court of Appeal unanimously reduced the size of the award from £1.3 million to £500,000.
    The principle of proprietary estoppel (the Court will intervene where it considers it appropriate to prevent people from breaking promises to dispose of property in a certain way, even where the promises are not legally binding) is unchallenged but this result shows the large scope for differences in view over the proper assessment of the remedy the Court should apply, and the difficulty for legal advisers and their clients in precisely forecasting the outcome of any particular case.
    It also increases the importance of considering one or other form of ADR (“Alternative Dispute Resolution”, in other words settling a dispute otherwise than by the Court).  A good mediator, for example , can often enable the parties to agree on a result which, while less satisfactory than either would have wished, at least enables both sides to avoid complete disaster and a heavy costs burden.