Equity and Trusts, Elements of Proprietary Estoppel - Essay Example

Equity and Trusts By of [Word Count] Introduction The idea of equity developed in the Middle Ages (a period of European history that between the 5th and the 15th century.) as the society struggled to eliminate the strict application of common laws by the Royal Courts. The idea of equity allowed the aggrieved parties in the Kingdom to petition the Crown, with their appeals eventually being sent to the Lord Chancellor, the Crown’s chief minister who mostly happened to be a member of the clergy1. Although equity itself had become rigid by the 18th Century, the origins of its authority prevailed in later years and even today, the principles of the concept of equity are applied in civil courts. Because of the implementation of the principles of equity, the concept of Trust was invented. Trust is said to apply in circumstances in which an individual places his/her trust in another person to run his/her affairs2. Such relationships based on trust are fully governed by the principles of Equity. The concept and principles of trust have since been used in the legal system to handle a number of situations particularly those dealing with pension funds, charities and family relationships among others. There are certain technical terms that one must be conversant with for the best understanding of the concepts of Equity and Trust. Among these terms are proprietary estoppels, secret trust and fiduciary, purpose trust, fixed trust, discretionary trust, resulting trust charitable trusts, personal remedies and constructive trusts. Similarly, it is vital that all the elements of cases related to trust and equity such as proprietary estoppel should be clearly understood and determined. Among the cases that have emphasized the relevance and applications of Equity and Trust in the legal system is Thorner versus Major [2009] UKHL 18, [2009] 1 WLR 776 which this paper explores among other related cases decided earlier. Elements of Proprietary Estoppel There are certain elements that must be addressed, understood and proved for a proprietary estoppel claim to be successful. First, proprietary estoppel refers to legal claims built on the basis of any rights to possess, inherit or use a property such as land and house3. These claims are mostly caused by disputed transfers upon the death of the owner of the property in question. There are numerous steps or stages into which proprietary estoppel may be divided, more so regarding the causes of these estoppels. Foremost, a party or an individual may represent or assure the other that he/she intends to transfer the ownership of a property without any legal effects or proofs. In addition, a person may promise that he/she may transfer a property such as land or any interests in a property in the future. This assurance may be based on the fact that the person to which the assurance is made spends his/her time or other resources on the property. There are also cases in which the reliance on these representations or assurances is disadvantageous to the life or well-being of the person assured of inheritance4. Examples of these cases involving proprietary estoppel are the Thorner versus Major of 2009 and others and the Dillwyn v Llwellyn (1862). In this latter case, a father had promised his son a house which the son later improved using large sums of money; unfortunately, the father never actually transferred the house to the son. With the father’s death, the son claimed the property and the court ordered the testamentary trustees to give the house to the son. The other element of proprietary estoppel is the requirement that a claimant must have made a mistake regarding his/her legal rights and had portrayed acts of reliance. In addition, defendants in estoppel cases must be aware of the existence of his/her legal rights that are inconsistent with the rights and views of the claimant5. In addition, defendants in proprietary estoppel should be aware of the claimant’s mistaken beliefs. Also important in proprietary estoppel cases is the role of the person giving assurance must have in encouraging the claimant to rely on his/her representations6. The concept of proprietary estoppel does not apply most in legally binding relationships but in cases closely linked to the doctrine of constructive trust as seen in the pronouncements of Lord Scott and Lord Walker in Cobbe versus Yeomans Row [2008] UKHL 55 and Thorner versus Major and others [2009] UKHL 18) respectively. Facts of the Case The general facts about this case was that, David Thorner, a Somerset farmer, had been working for almost thirty years in the farm of his father’s cousin, Peter Thorner. Strangely, David worked for these thirty years without pay, making him believe that he would inherit the farm. In fact, his hope of inheriting the farm increased when in 1990; Peter gave him the bonus notice on two life policies, stating that they were for his (Peter’s) death duties. These happenings convinced even the trial judge that Peter had thus indicated to David that he (David) would be Peter’s successor at the farm and that similar understanding by David was correct. In the years that followed, Peter would make more remarks to the effect that there was an unspoken mutual understanding, a scenario that further increased David’s expectation of inheriting the farm. Because of these remarks and hints, David continued to do substantial amount of work at the farm without pay rather than look for job opportunities elsewhere. In 1997, Peter wrote a will leaving his financial legacies to other people and his residuary estate to David. Because of disagreements with some one of the people to whom he left his financial legacies, Peter destroyed the will and died in 2005 without leaving behind a legal will. The Courts’ Decisions The Thorner versus Major case of 2009 is an interesting one since the decisions of the trial judge and the Court of Appeal were different. That is, the Court of Appeal reversed the decisions made by the trial judge. The trial judge found that a case of proprietary estoppels had been proved and ordered that David receives Peter’s land, farm businesses and buildings7. This judgment was however subject to David assuring Peter’s personal representatives of inheritance tax payable. As mentioned earlier, the Court of Appeal reversed the decision of the High Court that awarded David Peter’s Steart farm. This reversal was on the ground that Peter did not make any sufficient, clear and indisputable assurance that David could rely on while suggesting that he would leave the farm to David. In fact, the Court of Appeal considered David’s argument as a mere statement of Peter’s immediate intentions to leave the farm to David. Nonetheless, the Court of Appeal agreed with the trial judge that a reasonable person must be understood to mean what he intends. However, the Court of Appeal asserted that Peter may not have been aware of any alternative opportunities that David may have pursued instead of working at the farm. Consequently, Peter did not have any idea that David relied on his (Peter’s) remarks at his (David’s) own disadvantage8. In the House of Lords, there was an express agreement among Lords Rodger, Neuberger and Hoffmann L. J that the case was clear enough. The Lords concurred that there was need for clear and unequivocal assurance from Peter that David was supposed to inherit his farm. Although Lord Walker also agreed that the assurance had to be clear, he further stated that sufficient clarity depended on the context or the circumstances of the case9. As Lord Hoffmann had earlier said in his decision on Walton versus Walton in (14/4/94), there must not be any uncertainty in such statements and assurances. In this earlier case, a mother had told her son who had been working on her farm for low wages that she could not pay her more since he would one day have the farm. To this effect she said “You can’t have more money and a farm one day”. According to Lord Hoffmann, this statement was intended to be taken serious by the son (to whom the words were spoken) since they were unmistakable and was intended to be taken seriously by the son. The House of Lords thus came to the conclusion that the judge had impartially assessed Peter’s assurances and found them to have been intended to be taken seriously. Additionally, the House of Lords concluded that the judge had no restrictions to come to such a critical finding although the assurances by Peter were explicit and not expressed10. However, there was no proof that Peter was aware of any alternative opportunities that were available to David11. The House of Lord’s Judgments In the Thorner (Appellant) versus Majors and others (Respondents), the judgment was delivered by an Appellant Committee composed of Lord Hoffmann, Lord Scott of Foscote, Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe, and Lord Neuberger of Abbotsbury. The counsels for the Appellants were John McDonnell QC and Michael Jefferis while the counsels for the respondents were Andrew Simmonds QC and Penelope Reed12. Lord Hoffmann read the decision, stating at the onset that the main issue of the case was that the Court of Appeal reversed an earlier decision by a judge estoppping the late Peter’s estate from denying that David had acquired the beneficial interests in Peter’s farm. Therefore, on March 25th, 2009, the House of Lords handed its judgment in the Thorner versus Major case, upholding the decision of the trial judge in the High Court to award David Thorner the farm on which Peter Thorner, his father’s cousin had given him assurances that he would take over. The key elements of David’s claim that made the decision in his favour were that he showed there were representations or assurances from Peter and he relied on these representations13. In addition, there were detrimental consequences for David due to his reliance on the representations given by Peter as he did not seek opportunities to earn a living elsewhere14. Importantly, the property in this case, the Steart Farm, was clearly identified although it had changed over time. The Identification of Property One core issue that arose in the Thorner versus Major case of 2009, just like in many other proprietary estoppels, was the identification of the property. This issue deals with whether the assurance given to the claimant (David) must have related to an identified property owned or about to be owned by Peter or the defendant. According to the House of the Lords, proprietary estoppels are only established once the property in question is identified. In other words, Peter’s assurances would only hold if they were related to an identified property since it is the relation of these assurances to an identified property that enables the establishment of proprietary estoppel15. The House of Lords asserted that in the Thorner case, the nature of the farm had changed over the fifteen years during which Peter had been giving assurances to David on the inheritance of the farm. For instance, during this period, Peter had sold a portion of his other field and only used some of its parts of the proceeds for farm businesses and to buy more land. However, in the Thorner case, the assurances were assumed to cover all that constituted the land at the time of Peter’s death, as it would have been the case in any written will16. The other core issue that arose in the Thorner versus Major case was whether proprietary estoppel or constructive trust was at the centre of the case. In fact, the Law Lords did not discuss this aspect of the case. However, in the earlier case of Re Basham [1986] 1 WLR 1498, the doctrine of proprietary estoppel had resulted in an award of the deceased’s whole residuary estate. The argument during the Thorner case was that the whole estate award in the case of Re Basham in 1986 was erroneous and the award should have been restricted to the specified property. In the Thorner case therefore, Lord Walker did not prefer to give an express decision or view on the issue of giving whole award of the deceased’s estate. Generally, in cases with clearly identified property, proprietary estoppel is relied upon on the basis of majority judgment while cases where assurances and promises do not relate to a clearly defined and identified property, advisors should make their claims on constructive trust in the alternative17. In fact, the decision of the House of Lords in the Cobbe versus Yeoman’s Row Management Ltd [2008] 1 WLR 1752 was considered to have destroyed or weakened the doctrine of proprietary estoppel and should thus be confined to its own unique facts. The Status of the Proprietary Estoppel After the decision of the House of Lords on the Yeoman’s Row in July of 2008, there has been considerable level of worries among practitioners that the approach used by Lord Scott in the cases may have curtailed the scope of proprietary estoppel doctrine. Recent cases, practices and approaches and decisions have however shown that the doctrine is still alive, given that the Yeoman case had its own peculiar facts and circumstances18. Nonetheless, the Yeoman case should serve as caution to those intending to rely on oral agreements and assurances about inheritance in the commercial context. However domestic and family contexts have particularly benefitted from the recent applications of the doctrine of proprietary estoppel (Hansen, 2009). As in many other proprietary estoppel cases, the Thorner versus Major case was about the possibility of the claimant relying on the proprietary estoppel against the estate of the deceased who died without leaving a legal will on the basis of the assurances given by the deceased (Shuman, 2009). The main issues with which the case was concerned were the necessary character and quality of the representations or assurances given by the deceased. This first issue arose due to the oblique nature of Peter’s assurances. David reasonably relied on Peter’s assurances and remarks since Peter was a man of few words and kept information about his finances a secret. Second, whether the insufficient identification of the land/property were capable of making the claims fail, more so given the fact that the farm had undergone changes since the representations were given by the deceased. To this matter, the House of Lords asserted that although the farm had changed considerably since the first assurances were made by Peter, there was really no doubt about the subject of Peter’s representations19. One of the significant observations that may be made from the Thorner versus Major case is that the House of Lords affirmed the benefits of the principles of proprietary estoppel. Furthermore, the decision confirmed that the principle of proprietary estoppel had not been weakened by the House of Lords’ decision on the Yeoman’s Row versus Cobbe case. After the decisions made in the Thorner versus Major case, it is now apparent that testamentary proprietary estoppel and the established laws related to proprietary estoppel have survived beyond the Yeoman’s Row. However, the Yeoman case remains relevant and important since the relationship between the concerned parties was commercial and the estoppel was raised by an experienced businessman. Generally, in such commercial circumstances, the Court expects that parties enter into contracts and should not rely on estoppels. The legal system would therefore be quite unsympathetic if such commercial cases are based on estoppel, implying that proprietary estoppel would have little or no role to play in such cases20. In addition to the commercial relationship cases, there are certain agreements between parties that have legal basis and verbal assurances such as Peter’s do not hold. For instance, the Central London Property Trust Ltd versus High Trees House Ltd [1947] KB 130 (or the High Trees case) was an English contract law decision in the High Court that re-confirmed the doctrine of promissory estoppel in contract law in England and Wales. This kind of estoppel is held to be, promise made and intended to create legal relations and in the knowledge of the person making such a promise, is to be acted on by the person to whom it was made and must in fact be so acted on21. Conclusion The Thorner versus Major 2009] UKHL 18, [2009] 1 WLR 776 case was a rather significant one for the principle of proprietary estoppel in the United Kingdom. Coming years after the Yeoman Row case, which was considered to have infringed on the principles of proprietary estoppel, the Thorner versus Major case was a success as far as the invoking of the proprietary estoppel is concerned. This invocation satisfied the expectations of David Thorner who had worked on Peter Throner’s farm unpaid for 29 years, believing in Peter’s assurances or representations that he (David) would be the successor of his farm when he dies. On Peter’s death in 2005, his estate refused to recognise that David had the rights to the benefits of Peter’s farm. Although the Court of Appeal reversed the trial judge’s decision to award David the farm, the House of Lords affirmed the decision of the trial judge in High Court. David showed that he relied on Peter’s assurances and that by doing so, it would have been detrimental on him if he was denied the chance to inherit Peter’s farm for he did not take up other opportunities believing he would be the successor of Peter’s farm. References Calnan, R. (2010) Proprietary rights and insolvency. Oxford University Press. Hansen, W. (2009) The Current State of Proprietary Estoppel: Alive and Kicking. Retrieved on January 31, 2012 from http://www.no5.com/news-publications/publications/the-current-state-of-proprietary-estoppel-alive-and-kicking. House of Lords (2009) Opinions of the Lords of Appeal for Judgment in the Case Thorner (Appellant) versus Majors and others (Respondents). Retrieved on January 31, 2012 from http://www.publications.parliament.uk/pa/ld200809/ldjudgmt/jd090325/thorn-1.htm McFarlane, B. (2003) Proprietary Estoppel and Third Parties after the Land Registration Act 2002” [2003] C.L.J. 661. The Cambridge Law Journal, 62(3), 696. Mee, J. (2009) The Limits of Proprietary Estoppel: Thorner v Major. University College Cork: Child and Family Law Quarterly, 21(3), 367. Property Law UK (2009) Assurance and Reliance – Thorner: Nature of Assurance and Reliance. Retrieved on January 31, 2012 from http://www.propertylawuk.net/estoppelthorner.html Rotherham, C. (2002) Proprietary Remedies in Context. Hart Publishing. Shuman, K. (2009) Proprietary Estoppel: Rising from the Ashes. Retrieved on January 31, 2012 from www.1chancerylane.com/.../Proprietaryestoppel_risingfromtheashes_. Read More