What’s yours is mine (in variable proportions)

Clarke v Meadus [2010] EWHC 3117 (Ch)

Normally Dave would be covering this kind of case, knowing more about equity and trust right now than I probably ever will. But Dave is off being very clever to a tight deadline for other people, so I get to indulge my hobbyist’s interest at your expense.

The question in this appeal was whether supervening events could override an express declaration of trust shares in a property, whether in proprietary estoppel or a form of constructive trust. Much of the outcome remains subject to trial, as will be seen, given that this was an appeal of an order striking out C’s claim.

The brief facts were as follows. C and M, mother and daughter, were the title holders of the property (a large property) which had been purchased and built by Mr M, the husband and father of the parties. In 1989 Mr M transferred the property to the joint names of himself and Mrs M.

On Ms C’s evidence, before his death Mr M had expressed a wish that C should come to live at the property with M after his death and then have the property on M’s death.

Mr M died and M took the whole by survivorship. M then apparently asked C and her family to move in with her in the property and, if they did so, she would leave the property to C. C and her family moved in and, initially, let their property.

M was advised, for tax purposes, to “implement arrangements which would have, for inheritance tax purposes at least, the same effect as if the joint tenancy had been severed before Mr Meadus’ death, thus allowing his notional half share to pass pursuant to a variation of the dispositions otherwise taking effect on his death. As part of that variation, Mrs Clarke was to receive his notional half share in the house, garden and woodland thus making herself and Mrs Meadus owners in equal half shares.” This was done. There was no evidence that M considered this to be in satisfaction of any promise she may have made to C that the property would be left to her. So there was an express trust of 50% share between M and C as a result.

According to C, M also executed a will at this time leaving M’s 50% of the property to C. In any event, C and her family sold their property and moved in to the property (after, C says, obtaining a further assurance M would leave the property to her – being a basis for an estoppel claim). C asserts that she paid all for the mortgage payments for a period, and at least 50% the rest of the time.

C asserted that she had expended money and entered into liabilities thereafter, in reliance on M’s promise.

  • She had bought an adjacent field in her name on M’s urging, funded by an increase in the mortgage for which C undertook liability for the capital and for paying the increased mortgage interest.
  • C had incurred a loss of £57,000 on the sale of her family’s property
  • She had lived with M and cared for her without payment, giving up her free time
  • She had paid for a sitter/companion for M on occasions
  • She had invested the equity of the sale of her property and her husband’s pension in substantial improvements to the property:
    “i. The erection of a new barn/garage, new fencing, hard-standing and car-parking. It is to be noted, however, that she and her husband have had enjoyment of this new building in connection with their business.
    ii. Significant items of refurbishment – including replacing two bathrooms, installing double glazing and replacing barge boards.
    Mrs Clarke accepts that the DADT [the trust arrangement] obliged her to meet half the cost of these items (which go beyond maintenance) but says that there was no obligation on her to carry them out or to permit Mrs Meadus to do so.”
  • She had discharged obligations on the lending on the property, over half of which had accrued before she occupied the property.
  • She had entered agreements which prevented her from moving from the property unless M wished to sell

In 2006 M changed her will to leave her 50% share of the property to C’s sister. C brought a claim in proprietary estoppel or alternatively constructive trust, in reliance on the assertions set out above.

At first instance, C’s claim was struck out.

The Master held on constructive trust:
“where there is an express declaration of trust, that is an end of the matter with respect of the court determining the parties’ respective interests, unless one party applies for rectification or rescission of the deed”. The claim in constructive trust could therefore not succeed, whether or not it was characterised as ‘some form of remedial trust’ in the alternative.

On proprietary estoppel, the Master first considered that the relief sought was “an immediate right given by proprietary estoppel to an order that Bonavista is held by the claimant and the first defendant upon trust, subject only to a right to Mrs Meadus to occupy the property for so long as she may wish”.Such an order would go further than would be permissible to give effect to any proprietary estoppel.

The Master then turned to questions of reliance. He recorded the submission that (i) an examination of the various items of alleged reliance and (ii) the case of detriment based on such reliance, led to the conclusion that there was no case which should be allowed to go forward. By way of example, the move from Kent was, it had been submitted, a benefit and not a detriment at all. Although on Mrs Clarke’s case she had made a loss by selling the Kent property, the value of the equity in Bonavista that she was declared to be entitled to pursuant to the DADT in fact gave a valuable increase in equity overall.

The Master next referred to the question of payment for improvements and maintenance, noting that such expenditure was for the benefit of Mrs Clarke’s half share as much as Mrs Meadus’ share, and pointing out that the sharing of the cost was dealt with by the DADT. In that context, Mr Sinnatt had taken the Master to the example of the erection of the new barn/garage which I have mentioned already. As to that, Mrs Meadus’ defence relies on the manner in which Mrs Clarke and her husband had expanded their business (an ammunition business) despite the misgivings and concerns of Mrs Meadus making use of the new barn/garage to the exclusion of Mrs Meadus. But even here, the parties are at odds, since the Reply suggests that Mrs Clarke and her husband have stored Mr Meadus’ guns belonging now to Mrs Meadus, and the guns of some of Mrs Meadus’ friends.

In short, what was termed detrimental reliance was a benefit, ‘at least in part’. While this was not conclusive, the Master went on to say “it does seem to me to underline the importance of trying to see whether there is in fact made out here a sufficient case of detriment supporting proprietary estoppel that is worthy of going forward to be dealt with at a trial in the sense of has it been established by Mrs Meadus that there is no real prospect of success in relation to the proprietary estoppel claim? I have come to the conclusion that it really does not do so.”

No reasons were given for reaching this conclusion. The Master did also come to the view that “Mrs Clarke had no prospect of showing at trial that any equity to which Mrs Clarke might be entitled as the result of any detrimental reliance on the promises and representations alleged, had not already been satisfied by the beneficial half-share”.

The Claim was struck out. C appealed.

The appeal hearing was also a consideration of an application to amend the particulars of claim to include a pleading that:

“Immediately prior to the sale of her home in Kent the Claimant sought and obtained from the First Defendant express reassurance that the First Defendant fully understood the nature of the transactions she had entered into in September 1996 viz.; the transferring of a half share in Bonavista to the Claimant and the First Defendant remained committed to her promise to the Claimant to leave the other half of Bonavista to the Claimant in her Will. The First Defendant confirmed to the Claimant at that time that she wanted the Claimant to sell her home and commit her and her family fully to Bonavista on the faith of her promise that Bonavista would be the Claimant’s when the First Defendant was dead. If the First Defendant had refused to make such a commitment or had intimated any change of heart the Claimant could and would have moved the family and the business back to Kent.”

Held:
1. While the relief sought might go too far in seeking a declaration of 100% beneficial interest, this did not in itself mean that there was no valid claim. It was for the court to mould the appropriate remedy. The claim was in any event also for ‘such shares as the court may decide’ and always subject to M’s right to reside. The prayer also requested ‘further or other relief’.
2. The terms of the express trust are capable of being overidden by proprietary estoppel, should C make out her claim. The Master was wrong to strike out the claim in proprietary estoppel. Reliance and detriment were asserted and it was matter for detailed evidence, not the summary consideration of the Master, whether they were established.
3. If C established her allegations, this was a clear ‘bargain’ case:

Mrs Clarke’s expectations were based on an express promise by Mrs Meadus, repeated on several occasions. The closeness of the facts to a “bargain” are a factor in the ultimate resolution of the case: see Robert Walker LJ in Jennings v Rice [2002] EWCA Civ 159, [2003] 1 P & CR 8 at [41] ff especially at [45]. Of course, this reasoning does not apply to what one might call an extravagant case where the promise does not, on any view, justify a claim based on detrimental reliance.

It is no doubt the case that a change of position induced by a representation or promise is not enough because that change may actually be highly beneficial to the claimant. That is one factor which leads to the conclusion that the time when the prejudice to a claimant is to be judged is when the person making the representation or promise departs from his promise or indicates that he will break his promise or act otherwise than in accordance with his representation in the future.

The whole period of 10 years from the time when the promises were allegedly made and act upon must be considered in assessing reliance and detriment. While any subsequent benefit resulting to C should be taken into account, deciding the unconscionability of M resiling on her promise had to be based on the whole course. In this case it was clear that there had been reliance and detriment remained to be considered at trial, as it was arguable. Gillett v Holt [2001] Ch 210, per Robert Walker LJ:

The overwhelming weight of authority shows that detriment is required. But the authorities also show that it is not a narrow or technical concept. The detriment need not consist of the expenditure of money or other quantifiable financial detriment, so long as it is something substantial. The requirement must be approached as part of a broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances.

3. While estoppel is always backward looking, from the point the promise has been resiled from, this is not to say that estoppel can’t be given effect at a time before the promise falls due. It is not right to suggest that the claimant has no rights in a property until the promise has been resiled from – as per Jennings v Rice, an equity is established once the elements of a proprietary estoppel are established.

4. The arrangements of the express trust in this case did not displace or satisfy any previous promise by M to leave the property to C if, as on C’s case the agreement was consistent with an affirmation of the promise, albeit that at the point of the agreement C’s rights in the property might not have fully accrued (her house had not yet been sold, etc,)

5. On constructive trust, the claim appeared to be cast as a remedial constructive trust. This was out of favour in English law, although Lord Scott in Thorner v Major [2009] UKHL 19 might suggest otherwise. It would be wrong to strike out the claim in constructive trust when the proprietary estoppel claim was to go ahead as they were both routes to the same end – an equitable interest in the rest of the property. “[T]he authorities, in particular Stack v Dowden, do not in my view preclude a remedial constructive trust once Mrs Clarke has jumped the hurdle of establishing the availability of such a remedy as a matter of English law.”

6. The enquiry into unconscionability is not suitable for summary judgment or strike out save in the most exceptional cases

Appeal allowed and application to amend Claim successful.

(Brief) comment
It is fascinating to see the resurgence of proprietary estoppel over the last few years, from the point it almost disappeared into constructive trust. Here the ‘remedial’ constructive trust claim is allowed to proceed almost as an afterthought (apparently with very limited prospects of success), as being very weak in comparison to the estoppel claim.

But remedy is always the difference between the two. The Court’s suggestion that getting 100% of the beneficial interest would be somewhat unlikely for C would be a marker of that. The assessment of the remedy sufficient to satisfy the equity arising from the unconscionable conduct is, we are firmly reminded, for the Court, not either of the parties.

Also useful to note is the lack of hesitation in finding that an estoppel claim can override an express declaration of trust shares. While I grant that few of us will be pleading storing the client’s mother’s friends’ guns as detrimental reliance (even if, thinking of my borough, the facts may be made out), the principles here may well be of use where there has been some sort of agreement on the eventual ownership of a property but an express trust in the meantime – or as part of that agreement for the future. And there is that point that effect can be given to an estoppel at or after the point of resiling from promise, not at the point the promise would have crystallised or fallen due – perhaps an obvious one, but a useful reminder.

Let us hope we get to hear the outcome of the trial, should matters get that far.

Hopefully Dave will be along in the next few days with some more intelligent comments…

About Giles Peaker

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts, and still is Nearly Legal on Google +.
Posted in Housing law - All, Trusts and Estoppel and tagged , , .

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