Betting the Farm? Assessing Loss in Proprietary Estoppel Claims
Monday 19th March 2018
Proprietary estoppel is a legal principle applied when someone is promised that they will receive a share of a property. The person then acts in reliance on this assurance and suffers a detriment. If someone tries to go back on that promise, the courts may find this to be unfair or unconscionable and may order that the property is transferred in accordance with the original promise.
The High Court clarified how to decide the appropriate remedy in proprietary estoppel cases, in the recent case of Habberfield v Habberfield .
In this case, the claimant worked at the family dairy farm for nearly 30 years, devoting her entire working life to it for low pay, on the assurance that she would take it over on her father’s retirement or her parents’ deaths. When her father died in 2014 he left the farm to his wife, the claimant’s mother, who indicated she would divide the property equally between her four children.
The claimant brought a claim for proprietary estoppel against her mother saying she had received an assurance, relied on it and suffered detriment as a result. She claimed to be entitled to the whole farm, valued at £2.5m. Her mother defended the claim on the basis that she had never made any promises.
The court found that both parents had made assurances over an extended time period and that the claimant had worked for long hours for low pay with very few holidays as a result of these assurances. This was sufficient to give rise to proprietary estoppel.
The court decided that the claimant was not entitled to the entire farm, as some land was always intended to pass to her siblings. She was however entitled to the dairy farming operation. When looking at the losses to award the claimant, the court had to consider
a) the reliance loss – the loss she suffered as a result of relying on the promises and
b) the expectation loss – the loss of what she would have received had the promise been fulfilled.
The reliance loss (mainly lost wages) was around £250,000, far less than the expectation loss of £1.58m for the land and business the claimant did not receive.
The court decided that, given the length of time the claimant had relied on her parents’ promises and that she had fulfilled her side of the bargain in working hard on the family farm, the expectation losses were the correct starting point. However, reductions were made to the expectation losses to reflect a number of other factors.
The court awarded the claimant £1.17m.
Comment: This judgment provides some clarity on how to determine an appropriate remedy in proprietary estoppel cases and gives weight to the award of expectation losses where promises have been made and relied on over an extended period of time, resulting in a large detriment.
However, courts have a broad discretion in determining proprietary estoppel awards and it may well be that the level of such awards will remain difficult to predict.
If you have any questions about this article or proprietary estoppel generally, please contact Richard Cressall or Catherine Woodward.