No stopping estoppel

Cases on proprietary estoppel keep coming. The existence of a valid claim for proprietary estoppel is significant, not merely because it gives a third party an interest in the estate of the promisor, but also because it will reduce the value of the promisor's estate for inheritance tax purposes.


The requirements, broadly, are that X has acted to his detriment, relying on a belief that he either has or will be given a right over Y's property, and Y knew of or encouraged the belief. If the elements are present it would be unconscionable for Y to assert his strict legal rights and the court will grant X relief.


In Douglas Clark v Keith Clark and GW Clark & Sons [2006] EWHC 275 (Ch), Douglas and Keith were brothers and the sole directors and shareholders of a family haulage business. Douglas was in poor health and wished to bring the business to an end. Keith wanted to continue it, believing it still to be viable. Douglas owned some land, the northern half of which was used as part of the company's haulage yard; in addition, the driveway giving access to the main yard ran across Douglas's land. Douglas wanted to be free to realise his land without reference to the company.


The company had moved to its present location in the mid-1980s after proceedings by the local authority had compelled it to leave the premises that it had previously occupied. It had expended around £38,000 in relocating, part of that money being spent on the construction of the access way. Keith argued that Douglas was estopped from terminating the company's right to use his land.


Douglas argued that he had done or said nothing that could have led anyone to believe that he was conferring rights on the company. He had simply allowed the company to use the land.


Mr Justice Blackburne &150; referring to Taylors Fashions v Liverpool Victoria Trustees Co Ltd [1982] 1 QB 133 &150; held that acquiescence or encouragement may take a variety of forms. It may take the form of standing by in silence. Douglas had made his land available to the company without objection and without anything being said to indicate that the use would merely be temporary. Therefore, it would have been quite unconscionable of him if, having allowed the company to commit itself to relocating to the present site and lay out £38,000 on the access way, he had suddenly terminated. The elements of proprietary estoppel were present.


However, the court then had to decide the extent of the company's claim against the land. In Jennings v Rice [2002] EWCA 159, the court said that it should do the minimum necessary to satisfy the equity. The order must be proportionate to the detriment suffered.


Here the parties could not have imagined that the company's use would be perpetual. The implicit understanding must have been that it should last for so long as the business should continue to use the haulage yard and have need of the access and then only for so long as the business was in the control of the two brothers and was capable of providing them both with a reasonable living.


The business was still viable, though on a much reduced scale, and it no longer needed to use the northern half of Douglas's land. However, it did need to continue to use the access way.


Therefore, the company should vacate the northern part of Douglas's land but could continue to use the access way for so long as the business continued and was capable of providing a living for the brothers.


In valuing Douglas's land, it would obviously be necessary to value it subject to the company's right to use the access way.


A variety of interesting points emerged from Re Clapham, Barraclough v Mell [2006] WTLR. A father died, leaving his estate (which was not large but which included a house eventually sold for £138,097) to such of his two daughters, Carol and Marilyn, as survived him, equally if more than one, and with a substitutional gift to the children of any daughter who predeceased him.


Both daughters survived him. Carol died one year after her father. She had two daughters from her first marriage and had remarried in 1995. Her husband, Alan, had two sons from his first marriage. She died intestate with a small estate plus the still unadministered share of her father's estate. Everything passed to Alan on intestacy.


Marilyn misunderstood the effect of her father's will and gave cheques to her two nieces representing their share of the proceeds of sale of their grandfather's house. Mr Justice Behrens ordered them to repay the sums on the basis that that they were paid as a result of a mistake.


The court then had to consider whether Marilyn would be liable to Alan if the daughters failed to return the money. Mr Justice Behrens held that Marilyn had been negligent in the distribution of the estate but was protected by an exemption clause that excluded liability for loss 'unless the same shall have happened through his own personal act done by him, either with the knowledge that it was wrongful or without any belief that it was rightful and not caring whether or not it was wrongful'. Marilyn had been mistaken as to the meaning of the will and was, therefore, within the scope of the clause.


A final point concerned the rule against double portions. Marilyn's father made his will in 1986 and in 1999 gave Marilyn £20,000 to enable her to buy off her husband's interest in the matrimonial home during a divorce. If the gift was a portion, there would be a presumption that it should be brought into account when calculating her share of the residue.


The court held that it was a portion. Marilyn was unable to rebut the presumption. Her father had written a statement two months after making the gift stating that it was to be brought into account.


The court held that while the statement was not contemporaneous with the gift, it was very close in time and was therefore good evidence of the deceased's state of mind. It was irrelevant that Marilyn had not known of the statement.


By Lesley King, College of Law, London