The Court of Appeal has ruled on an inheritance dispute involving a mother who was ordered to pay £1.2 million to her daughter on the grounds of proprietary estoppel.
Lord Justice Lewison, in affirming the earlier High Court decision, weighed in on the controversial issue of whether the Court should compensate a successful claimant based on their detriment or on their expectations.
Inheritance dispute - background
This was an inheritance dispute brought by Lucy Habberfield (“the Claimant”) against her mother, Jane Habberfield (“the Defendant”), for control of a family farm worth £2.5 million. The Claimant alleged that her mother and her late father had promised her the farm. Relying on that promise, the Claimant worked there for some 30 years for very low pay, eventually quitting her job to work on the farm full-time. Following an argument, the Claimant left the farm and did not receive any share of it after her father passed away.
Last year, the High Court awarded the Claimant nearly £1.2 million. The Court held that the Claimant had been promised “a viable dairy farm” and that she had made out a claim of proprietary estoppel. For details of that decision, please see our blog post.
A subsequent hearing took place to deal with the terms of the High Court’s order. The Court accepted that the farm would have to be sold, which meant the family members currently living there would have to relocate.
The decision was appealed to the Court of Appeal in Habberfield v Habberfield,  EWCA Civ 890.
The grounds of appeal
The Defendant appealed the decision on three main grounds. She argued that:
(1) the Defendant and her husband had offered the Claimant a partnership deal back in 2008, but the Claimant refused. The Defendant argued that, because the Claimant had refused this offer, it was not unconscionable to later refuse to transfer the farm to her;
(2) the £1.2 million award was disproportionate to the Claimant’s actual detriment, which was the £220,000 shortfall between the wages she was paid by her parents and the wages she would have received elsewhere;
(3) the Judge should have deferred the £1.2 million until after the Defendant’s death so that the 82-year old would not be forced to lose her house.
The Court of Appeal’s decision
First, the Court considered the partnership offer. In 2008, the Defendant and her husband had suggested to the Claimant that they set up a limited partnership in which all three would be partners. The Claimant’s husband would be taken on an as employee for two years, at which time they might bring him into the partnership as well. It was intended that eventually most of the farm would pass to the Claimant, save for small gifts of land to her siblings. The Claimant refused the offer because she felt her husband should be a partner from the start and because she was concerned her siblings would be able to interfere in farm affairs via their parents.
The Defendant argued that, if the Claimant had accepted the original offer, she would have effectively obtained the viable dairy farm she had been promised. Because the Claimant rejected the offer, the Defendant and her husband were no longer bound to their promise. Lord Justice Lewison held that the offer did not extinguish the Claimant’s expectation of receiving some sort of compensation for all the work she had put into the farm for nearly 30 years:
Underpinning the whole doctrine of proprietary estoppel is the idea that promises should be kept. We were not shown any case in which the rejection of an offer meant that the [C]laimant, who had kept her side of the bargain, received nothing.
The Claimant cross appealed this point, arguing that the High Court Judge was wrong to reduce the award to £1.2 million to reflect the fact that all dairy operations at the farm had stopped shortly after she left. She argued that this decision was nothing to do with her and that she should not be penalised for it. Lord Justice Lewison distinguished between contract law and proprietary estoppel. In contract law, the Claimant would have been entitled to the full value of what she had bargained for. However, because this was a proprietary estoppel claim, the change in circumstances at the farm could be taken into account and reduce the value of the award.
Second, the Court of Appeal looked at the proportionality argument. The issue was whether the relief granted to the Claimant was out of all proportion to the detriment she suffered. The Defendant argued that the award (nearly £1.2 million) was disproportionate to the quantifiable loss suffered (£220,000 in lost wages). The Court of Appeal rejected this argument, citing the significant detriment suffered by the Claimant that could not be quantified. In other words, even though it was not possible to give a monetary value to the 30 years the Claimant spent on the farm, it was still a detriment which could be taken into consideration.
The Court also weighed in on the “unsolved question” of whether proprietary estoppel claims should compensate successful claimants for the value of their detriment or the value of what they expected to receive. The Court limited its answer to cases such as these, where it can be inferred that both parties agreed the detriment was a fair price to pay for the expected benefit. Here, the Claimant “had performed her side of the bargain” and it was unconscionable for her parents not to keep their side.
Last, the Court of Appeal considered the argument that payment should be deferred until after the Defendant’s death. The Defendant argued that the Claimant had never expected to receive anything until both her parents died. Lord Justice Lewison acknowledged that “[o]n the face of it, it seems hard that an 82-year-old woman should have to leave the house which has been her home for over 40 years.” In the end, the Court of Appeal agreed it was within the trial Judge’s discretion to make that order. Relevant factors included the fact that a clean break was desirable, that the Claimant should be able to begin farming immediately, and that the Defendant would have enough money left over to house herself and meet her needs.
Unfortunately, the Court of Appeal did not answer the question of whether proprietary estoppel should be based on a successful claimant’s expectations or detriment. The decision does hint that the law may be moving towards a sliding scale test, where the more a claimant has kept their end of the bargain, the more a defendant will be expected to keep theirs. In the words of Lord Justice Lewison:
“[l]ooking back from the moment when assurances are repudiated, the nearer the overall outcome comes to the expected reciprocal performance of requested acts in return for the assurance, the stronger will be the case for an award based on or approximating to the expectation interest created by the assurance.”
It seems more important than ever for claimants to ensure that they take proper advice on the strength of their evidence. Probative evidence that they have kept their end of the bargain and about the terms of the agreement will help maximise the award they can expect to receive.
If you are looking to make or defend a proprietary estoppel, or wish to discuss anything relating to an inheritance dispute please contact Nicholas Choiniere or our Contentious Private Client Department via their webpage or by calling 0113 336 3349.
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