What Is the Idea of the Doctrine of Proprietary Estoppel - Case Study Example

 1. Fred was the registered proprietor of a semi-detached house (No 1). Fred was quite old and lived alone; Grace, who lived next door (at No 2), used to keep an eye on him. From time to time she would pop in to make Fred a cup of tea and to have a chat. Each spring Harold, Grace’s teenage son, used to dig Fred’s garden and plant vegetables for him. In 2006 Fred’s health started to deteriorate. Fred had a nasty fall and was admitted to hospital for three months. Grace looked after No 1 for Fred while he was away. When Fred returned home he was able to do less and less for himself. Grace cleaned the house for him a couple of times each month and went shopping for him each week. If any odd jobs needed doing about the house Harold would do them. On Sundays Fred had lunch with Grace and Harold at No 2. On one Sunday Fred said to Grace: “You and Harold have been very kind to me and I feel that your kindness deserves a reward. Since I haven’t got any family to speak of, I’ve decided to leave you my house when I die.” In 2006 Grace decided to sell No 2 and move to a better neighbourhood. Fred was very upset when he saw the ‘For Sale’ sign going up outside No 2. The next time he saw Grace, Fred said: “I hope you won’t move. Wait till I’ve gone. It’ll be worth your while.” A couple of days later Grace took No. 2 off the market. Grace and Harold continued to help Fred, as before. Towards the end of 2008, Fred became aware that he did not have long to live and he started trying to get his affairs in order. Fred decided to let Harold have some of his furniture. One day when Harold was round at No 1, Fred said to him: “You can have the four-poster bed. I’ve no use for it any more.” A few minutes later, Fred handed Harold a box containing a set of silver knives and forks and a bundle of papers: “Here, you can have these as well. I think that somewhere in those papers you will find the receipt for the bed.” PTO A couple of weeks later Fred agreed to sell his piano to Imogen, Harold’s girlfriend. As the piano, which had not been played for many years, was out of tune, Fred undertook to have the piano retuned before delivering it to Imogen. Fred also agreed to sell his dining table and eight of the twelve dining chairs to Imogen Imogen paid immediately but it was agreed that she would come to collect the furniture later in the year. In January 2009 Fred died; he left a will, dated 1970, under which the sole beneficiary was Jeremy, a distant relation. Introduction In order to be able to advise Grace, Harold and Imogen with regard to any claim they might have to the property of Fred, it is necessary to consider the principle of proprietary estoppel and whether they can claim a beneficial interest in the property. It is also necessary to discuss the effect of the will in order to determine whether the existence of the will is sufficient to prevent them from receiving anything from the estate. There will also need to be a discussion in relation to the property purchased by Imogen, and the items that Fred had given to Harold. One of the problems with the above is that Fred did not communicate any of the promises made to the parties in writing; therefore they might have difficulty in establishing a claim against the estate. In order to assist it is necessary to consider case law in this area. Proprietary estoppel The doctrine of proprietary estoppel is often used to provide rights for persons who are unable to establish a claim to the property under the principles of resulting or constructive trusts. Proprietary estoppel is established based on the notion that it would be inequitable for the legal owner to deny another, the right to a share in the property, in cases where they have acted to their detriment in reliance on an assurance, given by the legal owner, that they will acquire a right to the property. Many of the cases decided under this doctrine, bear similarities with those decided under the principle of constructive trusts (Oxley v Hiscock [2004]; Grant v Edwards [1986]). Case law demonstrates that the principle of proprietary estoppel can apply when there have been explicit assurances as well as in the case of implied assurances. The case of Pascoe v Turner [1979] is one such example where the respondent relied on the explicit assurance made to her in front of witnesses that the house and everything in it would be hers. Implied assurances are generally inferred by the court, based on the conduct of the parties. The courts will consider the nature of the relationship of the parties, the extent of the detriment and the housing needs of both parties when determining whether an interest should be granted under the doctrine. In Thorner v Curtis [2008] the applicant was claiming an entitlement to a farm relying on the doctrine of proprietary estoppel. His claim was based on the fact that the owner of the farm had handed him 2 life assurances policies in 1990. Thorner claimed that this amounted to an implied assurance that he would inherit the farm. The court disagreed; stating that in order for them to grant proprietary estoppel there had to be a clear and unequivocal promise or assurance by conduct or words. The court stated that in this instance the owner had never given such an assurance or promise and the handing over of the assurance policies could not amount to an implied assurance that he would inherit. Lord Justice Lloyd said in this case ‘the representation must be clear and unequivocal and that it must be intended to be relied on, or at least reasonably taken to be so intended’. By contrast in Jennings v Rice [2002] the court held that an implied assurance did exist. In this case the applicant had worked as a gardener and handyman for the intestate for a number of years. Initially he had been paid for his services, however in latter years the intestate was struggling to pay him. He continued to work for no remuneration after she promised him that as she had no husband or children to inherit the property would become his upon her death. Unfortunately for the applicant no will was made by the lady and when she died intestate other family members claimed an entitlement to the estate. The applicant attempted to rely on proprietary estoppel to claim the whole of the estate. Whilst agreeing with the applicant that he had an entitlement to part of the estate, the court felt that allowing him to inherit the whole of the estate would be inequitable to the other beneficiaries. The court calculated the entitlement of the applicant on the basis of the remuneration he ought to have been paid for his services, and awarded him half the value of the estate with the remainder being divided amongst the other beneficiaries. Applying this to the above, it could be argued that Grace acted in her detriment as she was originally going to sell her property and to a better location, but was persuaded to stay on reliance that she would inherit Fred’s house. It is likely that the court would agree that she acted in her detriment in this respect, especially since she continued to care for Fred based on the promise he had made. It is not certain whether the court would award Grace the whole of the estate or just a proportion as was the case in Jennings, mentioned above. In relation to the four poster bed and the cutlery given to Harold, he would have to prove that Fred had given him these items in order to be able to claim them. The fact that Fred gave the box with the receipt for the bed in could be used to argue that he intended to give him these items, however, the court might take the view from the case of Thorner above, where it was decided that the handing over of the life assurances policies was insufficient to prove that the owner intended to give the property to the applicant. With regard to the items bought by Imogen, she might be able to prove that she paid Fred for these items, especially if she paid for these by cheque rather than cash. If this were the case, then she need only prove that the money was transferred from her account to Fred’s to assert her claim to the furniture. If, however, she paid in cash, she might have difficulty establishing ownership. Conclusion From the above, Grace might be able to claim entitlement to some of the estate of Fred if she can prove that she acted in her detriment by not moving and staying to look after Fred, based on the promise he made to her that she would inherit his house. She might face some difficulty with this, as generally such claims are only brought were the person acting in detriment is in actual occupation of the property they are claiming a right over. In this particular case Grace lives next door, so therefore, although she expected to inherit Fred’s house, she would still have her own house to live in if the court upheld the will. It may be that the court will take the view of the judge in the Jennings case listed above, and only award Grace a proportion of the estate, to compensate her for the work she has done looking after him. Harold might be able to claim the bed, especially since he was given the box containing the receipt. However, in order to succeed, he would have to persuade the court that Fred had intended to transfer the items into his ownership. The receipt of the box might not necessarily be sufficient for the court to accept this. As Harold has not given Fred any consideration for the items he has been given, he might have difficulty proving ownership. If the court does not accept that it was Fred’s intention to transfer these items to Harold, then he would not be entitled to keep them. Imogen could face difficulties in claiming the items she has paid for, especially if she paid in cash. Imogen might be able to establish ownership if she paid by cheque as she could prove that money was transferred from her account into the account of Fred. If anyone witnessed her paying the money over to Fred, then the courts would be more likely to agree that the ownership of the piano and the table should transfer to Imogen. 2. In 1998 Jane and Kate became friends when they were both working for the local authority. As neither could afford individually to buy the kind of house she wanted, they decided to buy something together. No 1, a three-bedroomed house, which was transferred into the joint names of Jane and Kate, cost £200,000. For the deposit of £40,000, Jane provided £10,000 and Kate £30,000. The remainder of the purchase price was provided by a bank loan on mortgage, for which Jane and Kate were jointly liable. In 2000 Jane and Kate met Lou, who was working in a local pub. When Jane and Kate heard that Lou had just been made homeless, they offered to let him have use of the third bedroom in No 1 in return for a payment of £40 per week. Shortly after moving into No 1, Lou lost his job and it was agreed that he would no longer have to pay for his room if he did all the housework. This arrangement continued for three years, by which time Jane and Lou were having a relationship and thinking about getting married. Nevertheless, all three were happy living under the same roof. In 2005 Jane and Kate decided to sell No 1 and to buy a larger house, No 2. As Lou did not have a regular job, No 2 was transferred into the joint names of Jane and Kate, who, as in relation to No 1, were jointly responsible for the mortgage. Nevertheless, the understanding was that No 2 would be a home for all of them and for the next four years the three of them lived happily in No 2, with Lou continuing to do all the housework and odd jobs around the house. In 2007 Lou landscaped the garden of No 2 and built a conservatory, paying for the necessary materials out of his earnings from casual bar work. Earlier this year this domestic harmony was shattered when Jane discovered that Kate and Lou had started an affair. The three of them agreed that, as they could no longer continue living in the same house, No 2 would have to be sold. It is reckoned that No 2 is worth £400,000 and that the outstanding mortgage is £100,000. Introduction The above requires discussion in relation to resulting trusts and constructive trusts in order to determine the rights of the parties in relation to the ownership of the property. There also needs to be a discussion in relation to the division of the profits from the sale, based on the different amounts contributed by each party to the purchase price. Resulting trusts In situations where the plaintiff has made a direct contribution to the purchase price of a property equity will presume the existence of a resulting trust, even though the person making the contribution has not been entered onto the property register. The equitable presumption is made on the basis that the person making the contribution must have expected to acquire an interest in the property in proportion to the money expended y presumes the existence of a resulting trust in situations where the plaintiff has clearly made a contribution towards the purchase price of the property, despite the fact that they have not been entered onto the property register. This equitable presumption is based on the notion that the person contributing towards the property must have expected to acquire an interest in that property, in proportion to the money expended (Lloyd’s Bank plc v Rosset [1991]; Tinsley v Milligan [1994] ). Lord Diplock in Gissing v Gissing [1971] made the point that A resulting, implied or constructive trust…is created by a transaction between the trustee and the cestui que trust in connection with the acquisition by the trustee of a legal estate in land, whenever the trustee has so conducted himself that it would be inequitable to allow him to deny the cestui que trust a beneficial interest in the land acquired. Generally speaking a resulting trust will have the effect of making an express declaration that the person contributing towards the purchase price will have an interest in the property (Pettitt v Pettitt [1970]). The courts are free to make the presumption that the legal owner is holding the property on trust for the other party in shares according to their contribution (Gissing v Gissing [1971]; Pettitt v Pettitt [1969]). Constructive trusts Under constructive trusts an applicant has to prove that they expected to acquire an interest in the property. In order to do this, they can rely on wither their actions and the actions of the other parties, or any payments made to the maintenance or improvement of the property. The courts have conceded that a constructive trust has been formed in cases where the applicant has paid towards household bills or has spent their own money on improvements to the property (Gissing v Gissing [1971]). When determining whether a constructive trust can be inferred, the court will examine the conduct of the parties, for evidence to support an assertion that the applicant has acted in their detriment, in reliance on a promise made by the other party, that they will be entitled to a share of the property. This was held to be the case in Lloyd’s Bank Plc v Rosset [1990], in which the court found that work carried out by the applicant on the property, should be regarded as evidence that the applicant expected to gain a beneficial interest in the property. The court confirmed the doctrine of constructive trust in the later case of Rowe v Prance [1999], even though the applicant had made no financial contribution to the purchase price. In this case the court awarded the applicant a half share in the yacht based on the expressions made by the respondent with reference to the yacht as ‘our boat’. The court held that as a result of his comments the applicant had an expectation of a beneficial interest in the yacht and that as such a constructive trust had been duly created. Similar inferences were also drawn from the behaviour of the respondents in the cases of Eves v Eves [1975] and Grant v Edwards [1986]. By contract in Burn v Burn [1984] the court held that the carrying out of household chores and the raising of the children was insufficient contribution to the household for a constructive trust to be inferred. In the above Lou could argue that he ought to have gained a beneficial interest in the property on the basis of a constructive trust as he has spent some of his own money on repairs and improvements to the property (Williams & Glyn's Bank Ltd v Boland [1981]). With regard to Kate and Jane, both their names are on the register for the property which gives them both an entitlement to the property. It has been stated that Kate paid £30,000 towards the deposit and Jane paid £10,000. This would mean that their entitlement to the profits from the sale of the property would be in proportion to the amount they invested (Gissing v Gissing [1971]). The court would calculate the amount payable to each based on their contribution to the purchase price. The court would also have to take into account the fact that Lou would be entitled to a proportion of the profits as well under the doctrine of constructive trusts. Overriding interests Persons in actual occupation can gain an interest in that property on the basis that theie occupation should be regarded as an overriding interest (Wallcite Ltd v Ferrishurst Ltd [1999]). Overriding interests are interests that need not be on the register but have the ability to bind the new owner. In general terms all interests in land should be entered on the register in order to protect those interests. Where such interests are not recorded the court can that the new purchaser will not be bound by unregistered interests. The principle of overriding interests was introduced to assist those whose interests would not reasonably expect to be registered, and includes those who are in actual occupation. In situations where a person is in actual occupation and can demonstrate an interest in that property the court are unlikely to interfere with their right to remain in the property. Any attempt to do so would entitle that person to apply for proprietary estoppel on the basis of their contribution to the property (Pascoe v Turner [1979]). Conclusion Although Lou did not pay towards the purchase price of the property, he is still likely to be granted a portion of the profits from the sale, as the courts are likely to infer that by paying for the improvements a constructive trust has been created. Jane and Kate would automatically be entitled to a share of the profits as the property is registered in both their names. The amount each would receive would be calculated in proportion to the amount each has contributed to the property. The property would not be divided into 3 equal sums, as this would be unfair to Kate who supplied a larger amount towards the deposit. The court would deduct the amount owing for the mortgage before apportioning the remainder amongst the three. It was stated that Lou was originally living in the property as a lodger and paying rent. The court might allow the money paid by him to count as money towards the household bills, which would then be included in determining the amount he should receive. Although it is stated that Lou paid for the materials to carry out the improvements on the property, there is no mention of whether he paid any extra money towards the household bills. If he did pay extra towards these, the court would take those payments into account when deciding how much to award him. Case law is likely to assist Lou, as the court has recognised the payment towards improvements and repairs of the property has been able to be counted as contributing towards the cost of the property. Lou might also be entitled to claim proprietary estoppel if Jane and Kate sell the house, on the basis that he is in actual occupation of the property. If the court decide allow the claim under this principle Jane and Kate could be prevented from selling the property. 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DG2; Lloyd’s Bank Plc v Rosset [1990] 1 All ER 1111 (HL) Oxley v Hiscock [2004] EWCA Civ 546 Pascoe -v- Turner [1979] 1 WLR 431; [1978] EWCA Civ 2; [1979] 2 All ER 945 Pettitt v Pettitt [1969] 2 All ER 385 Rowe v Prance (1999) 2 FLR 787 Thorner v Curtis [2008] EWCA Civ 732; 2 FCR 435 Tinsley v Milligan [1993] 3 WLR 126 (HL) Williams & Glyn's Bank Ltd v Boland [1981] A.C. 487 [1980] 3 W.L.R. 138 [1980] 2 All E.R. 408 (1980) 40 P. & C.R. 451 (1980) 124 S.J. 443 Read More