Proprietary estoppel: Some practical lessons

Proprietary estoppel: Some practical lessons

Proprietary estoppel is a topic regularly covered [see Proprietary estoppel: How recent cases fit together and Proprietary estoppel: A tale of woe]. Since June there have been three further judgments handed down by both the High Court and the Court of Appeal (Spencer v Spencer [2023] EWHC 2050 (Ch), Morton v Morton [2023] EWCA Civ 700 and Hughes v Pritchard [2023] EWHC 1382 (Ch)).

We now look at the decision in Spencer, where the Claimant succeeded in his estoppel claim, and consider some practical considerations arising out of the judgment. These could apply to any professionals involved in advising clients.

Spencer v Spencer

Michael Spencer (“Michael”) brought an estoppel claim against the estate of his late father, John Spencer (“John”), in respect of around 405 acres of freehold land forming part of the farm. John and Michael also farmed around 411 acres of tenanted land. When Michael was 19, John formed a family farming partnership between the two of them, his daughter, Penny (23), and his wife, Jean. All were given equal shares. In 1996, Penny and Jean retired from the partnership. Michael was given a 95% profit share.

The freehold land was not a partnership asset. The partnership did not pay rent for the use of the land.

John and Michael’s relationship was up and down. John had made provision in previous wills for the farmland to pass to Michael. Just before his death, John made a new will in March 2018 which left the farmland to the trustees of a discretionary trust for his children and grandchildren. Michael brought an estoppel claim on the basis John had promised him that he would inherit the freehold and, he had relied on those assurances for 40 years to his detriment and as such, it would be unconscionable for John to break those promises.

The decision

Assurances

The Judge found that assurances of a general nature were made to Michael. They were reasonably understood by Michael and the threat was there, that if Michael did not commit to the farm on his father’s terms, he would not inherit the farm.

John changed his testamentary wishes and it appeared to be linked to his concern Michael was going to die early (he was diagnosed with multiple sclerosis in January 2018), and ensuring the land was never sold.

Detrimental Reliance

Michael had received substantial benefits (rent free accommodation, majority living expenses paid, partnership capital of over £1.4m, pension provision of over £745,000). However, it was found that he had positioned his life based on his father’s assurances and as such it is “impossible now to unpick what he might have done differently with his life over 40 years if there had never been such assurances”. One such opportunity was the running of a local truck stop, which John prevented. The Judge made the point that detriment has to be something substantial. It does not have to be quantifiable financial detriment, but it has to be judged at the moment when the assurance is repudiated. In this case, on John’s death.

Unconscionability

The Judge found that it was unconscionable in all the circumstances for the assurance to be repudiated, finding it a “quasi-bargain between father and son and Michael has done what was asked of him.”

There was no change in circumstances which justified revoking the assurances.

Remedy

The Judge directed that Michael should be transferred the farmland, excluding a parcel that had planning permission for mineral extraction. For the latter, Michael should have the agricultural value of that land so he could acquire replacement fields if he so chose.

Practical points arising from the judgment

Professionals’ files

It is not uncommon in estoppel cases for professionals’ files to be disclosed unless documents are privileged. Even solicitors’ files which may be assumed to be covered by legal advice or litigation privilege could be disclosed (e.g. will files or matrimonial files).

In Spencer, the solicitors’ file, appertaining to a period of time (after the will was read and it became clear there was disagreement) when Michael and his sister, Jane, were both represented, had to be disclosed because a considerable amount of evidence/cross examination was directed at when Michael first raised the existence of assurances.

During that period, the solicitor kept two versions of the client file: an electronic and hardcopy file. A scanned copy of the hard copy file was disclosed in October 2022 and the solicitor later produced a witness statement (January 2023) after refreshing their memory of the hard copy file. The file did not contain documents Jane was expecting to see so the solicitors were asked to disclose the electronic file and its metadata. This was disclosed in April 2023. Around the same time the solicitor produced a second witness statement having read the electronic file. The second witness statement explained that the hard copy file did not contain a number of material documents that were on the electronic file which meant that some matters were not correctly recorded.

Further documents had to be disclosed close to the trial in July and no further explanation was provided. The Judge had to try and make sense of the disorganised file. This is unlikely ever to be seen in a positive light. Professionals’ files should be accurate and kept up to date in case they might have to be produced in court.

Witness Evidence

We have commented before about the unpredictability of litigating estoppel cases through to trial. Much comes down to how the Judge perceives the evidence and how witnesses perform in the witness box.

It appears from the judgment that Michael may not have come across that well. The Judge commented: “his answers were often unhelpfully monosyllabic or terse”, “not carefully prepared or thought through evidence”, “not familiar with documents in the bundle”, “adamant certain events had happened but quite often the documents showed they could not have happened in the way he remembered”, “had a tendency to accept points put to him…too readily and often without….fully comprehending what was being put to him”. This resulted in aspects of his case on alleged assurances and detriment having to be dropped because his evidence did not support them. Despite this, the Judge still found in his favour and found him to be an honest witness.

Witnesses who are professionals are subject to the same scrutiny as lay witnesses and their reliability can be called into question. In Spencer the Judge was critical of the solicitor’s evidence. It transpired their evidence did not set out matters within their personal knowledge and recollection. They were unable to account for why they gave evidence in their “witness statement of [their] memory or recollection of things when [they] in fact had no such memory or recollection”. The solicitor accepted parts of their witness statement were “inference, supposition and reconstruction from a badly organised file of matters of which [they] had no recollection whatsoever.” Thankfully the reliability of this witness did not hinder the claim. On other occasions, there may be more significant consequences.

Lessons to learn

This a cautionary tale highlighting that cases should be pleaded correctly at the outset; witness evidence should be carefully prepared and based on personal knowledge and recollection (witnesses have to sign a statement of truth and in proceedings in the Business and Property Courts a certificate of compliance must be signed by a solicitor); witnesses should be prepared for trial, should have reviewed their evidence in advance and should be familiar with documents, about which they may be questioned.

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