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28 SEP 2016

Proprietary estoppel revisited: Moore v Moore [2016] EWHC 2202 (Ch)

Proprietary estoppel revisited: Moore v Moore [2016] EWHC 2202 (Ch)
Recent years have seen a number of cases on the law of proprietary estoppel. Although Moore v Moore [2016] EWHC 2202 (Ch) (Mr S Monty QC, sitting as a deputy judge of the Chancery Division) does not purport to set out any new principles of law, the judgment is an extremely useful example of the approach to proprietary estoppel in practice. The judgment is lengthy, running to some 196 paragraphs, and the evidence before the court extensive.

Moore v Moore

The property in issue was Manor Farm, which had been run by the Moore family for four generations. Since 2008, it had been run as a partnership by the first defendant and Part 20 claimant (Stephen Moore, 'SM'), the Part 20 defendant (father of SM Roger Moore, 'RM') and the second defendant (a limited company: Till Valley Contracting Limited ('TVCL'). Shares in TVCL were held 51% by RM and 49% by SM.

The running of the farm as a partnership had begun in the mid-1960s. The partners were RM and his brother, Geoffrey ('GM'). Their father gifted the farm to them in 1966, and gifted some other land to a third brother, Richard. RM and GM bought this land from Richard in 1981. Over time RM and GM grew the business, purchasing land and extending the farming operations. Drawings were modest, most of the profit from this successful business was reinvested into it. RM led on most farming issues with support from GM.

Born on 2 November 1967, SM had worked on the farm since childhood. He became a salaried partner around 1998, and an equity partner in 2003/04. GM retired in April 2008, and the existing partnership ended. GM gave his half-share of the partnership to SM in return for the payment of £500,000 from the partnership, which was a significant discount from the market value and was said to be pursuant to the overall intention that the farm would pass to SM. This was a surprise to RM, his wife, and SM. RM, GM, and SM agreed that RM and SM would continue to farm together in partnership. Then, in 2008, TVCL was set up and became a partner for tax reasons; it had no other role. In 2010, farming assets were transferred into TVCL. Sadly, in later years, RM's health deteriorated. As a result of his father's ill-health, SM in effect came to run the farm alone. Over this period, relations between RM and SM became strained, largely as a result of RM's wife coming to the fore as RM's health deteriorated further. The wife (SM's mother) had always had a difficult relationship with SM, and she thought it unfair to SM's sibling for the farm to pass to him outright. The breakdown in family relations gave rise to the litigation.

The claim

SM claimed an equity over RM's share of the farm and farming business operated by the partnership. His case was that, from an early age, RM had told him that the farm and the farming assets of the partnership would one day be his.

The learned deputy judge identified five questions which he was required to decide:
  1. Were promises made by RM to SM to the effect that SM would one day have RM's share of the farm and assets?
  2. Did SM rely on those promises?
  3. If so, did SM rely on them to his detriment?
  4. If the promises were made, and there was detrimental reliance, would it now be unconscionable for RM to resile from that position?
  5. If so, how should SM's interest be satisfied?

The law

There was no novel or unusual issue of law. The learned deputy judge simply set out the applicable principles by adoption of para [39] of the judgment of Lewison LJ in Davies and Anor v Davies [2016] EWCA Civ 463. That said, these principles are worth setting out in full:
  1. Deciding whether an equity has been raised and, if so, how to satisfy it is a retrospective exercise looking backwards from the moment when the promise falls due to be performed, and asking whether, in the circumstances which have actually happened, it would be unconscionable for a promise not to be kept either wholly or in part.
  2. The ingredients necessary to raise an equity are: (a) an assurance of sufficient clarity; (b) reliance by the claimant on that assurance; and (c) detriment to the claimant in consequence of his reasonable reliance.
  3. However, no claim based on proprietary estoppel can be divided into watertight compartments. The quality of the relevant assurances may influence the issue of reliance; reliance and detriment are often intertwined, and whether there is a distinct need for a 'mutual understanding' may depend on how the other elements are formulated and understood.
  4. 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.
  5. There must be a sufficient causal link between the assurance relied on and the detriment asserted. The issue of detriment must be judged at the moment when the person who have given the assurance seeks to go back on it. The question is whether (and, if so, to what extent) it would be unjust or inequitable to allow the person who have given the assurance to go back on it. The essential test is that of uinconscionability.
  6. Thus, the essence of the doctrine of proprietary estoppel is to do what is necessary to avoid an unconscionable result.
  7. In deciding how to satisfy any equity, the court must weigh the detriment suffered by the claimant in reliance on the defendant's assurances against any countervailing benefits he enjoyed in consequence of that reliance.
  8. Proportionality lies at the heart of the doctrine of proprietary estoppel and permeates its every application. In particular, there must be a proportionality between the remedy and the detriment, which is its purpose to avoid. This does not mean that the court should abandon expectations and seek only to compensate detrimental reliance, but, if the expectation is disproportionate to the detriment, the court should satisfy the equity in a more limited way.
  9. In deciding how to satisfy the equity, the court has to exercise a broad judgmental discretion. However, the discretion is not unfettered. It must be exercised on a principled basis.
The learned deputy judge reminded himself that actual intentions 'were of no importance'; the question being '... whether by words and acts it would reasonable have been conveyed to [SM] an assurance that he would inherit.' [145]

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The background to the judgment

Before coming to his conclusions, the learned deputy judge set out his general approach to the evidence at paras [18]-[32]. This section of the judgment deals with the various learned deputy judge's findings as to the evidence of the various witnesses. It is extremely useful from a practitioner's perspective. It draws attention to the importance of avoiding repetition within witness statements, and of limiting the length. It draws attention to the need to avoid the repetition of documents in court bundles. It also highlights the importance of not including comment or opinion evidence in witness statements of fact. Here - and throughout the judgment - the inability of the court to consider on allegations not put in cross-examination and consequently not relied upon is highlighted.

The learned deputy judge also explained the reasons why RM was unable to play much, if any, part in the litigation since late 2012/early 2013, and the reasons for the appointment of a litigation friend at paras [33]-[51].

The findings of fact

There was a great deal of evidence before the court and, consequently, the findings of fact are lengthy. The general factual findings comprise paras [52]-[144]. In particular, it was found that 'everything points to an over-arching plan under which [SM] would inherit the whole farm and business in due course, and that [SM] was told that this was the case by both [RM] and [GM]' - this was more than a 'mere hope' (para [63]).

Having reached these general conclusions, the learned deputy judge answered his five questions.

First, SM had established as a matter of fact that he was promised the farm and the business. The learned deputy judge accepted the evidence of SM and his wife, and found it inconceivable that the promises were not made given the over-arching plan. Allegations of bad behaviour made against SM were so trivial as to have no effect. Finally, as a matter of fact, the promises were not mere indications of intention, but promises (paras [145]-[147]).

Secondly, SM had relied to his detriment on the promises. He had based his life on the farm and worked there without any consideration of alternative employment, as he truly believed (and had been encouraged to believe) that he would, in the fullness of time, inherit the farm and the business (para [148]).

Thirdly, SM had suffered detriment in reliance on the promises. He could have found a role elsewhere, paid far better and with higher quality accommodation; he took no expensive holidays from 1991 until the end of 2011; he did not have a lavish lifestyle, only spending money on good farm equipment; he had long working hours which he would not have had (or would have had additional compensation for) in alternative employment; he had no intention of cashing-in and becoming a wealthy man; the cars belonged to the partnership; his income was modest and a sizeable proportion was put into a pension; and his family's simple lifestyle could not in any event not be attributed solely to his work on the farm (para [149]). As SM was not challenged on this in oral evidence, the learned deputy judge found it sufficient to dispose of any objections to detriment (para [150]). In any event, nothing else raised by RM altered the learned deputy judge's conclusion (paras [151]-[161]).

Fourthly, it would be unconscionable for SM not to receive RM's share (paras [162]-[166]). It was immaterial that SM had already received GM's share, as the issue was to do with whether it would be unconscionable for RM to renege on his promise concerning his own share, rather than GM's share. Any 'bad behaviour' on SM's part was so trivial as could not defeat his claim. The competing moral and legal claims on RM's estate were to be taken into account when considering how the equity should be satisfied.

Finally, the learned deputy judge adopted the cautious approach and the requirement to award no more than the minimum equity needed to do justice. The starting point was the finding of fact as to the promises. SM had been told that 'the farm and the farming assets of the partnership which, following the incorporation of [TVCL], have included the farming assets of [TVCL] would be his one day ... in the fullness of time take over [RM]'s role in the farming enterprise, and that, upon the later of [RM]'s or [RM's wife]'s, [SM] would inherit [RM]'s interest in the farm (including for the avoidance of doubt [RM]'s interest under the partnership) and the farm assets, to become the fourth generation custodian of the farm by the Moore family'. A declaration was sought that '[RM]'s interest in the farm and the farm assets is subject to an equity in favour of [SM].' The learned deputy judge agreed that, in exercising his discretion, he should mirror as closely as possible the arrangements which would have been obtained had the dispute not arisen.

SM was entitled to an equitable interest in RM's share of the farm and the assets, including RM's current and capital accounts, his share of the TVCL cash and profits, and his director's loan account. However, both RM and his wife should continue to receive what they were intending and expecting up until their deaths, and they should remain at the farmhouse for as long as met their needs, with SM responsible for maintenance and repair, and further consequential provision. This was a just and equitable outcome, and proportionate to the detriment (paras [167]-[178]).

An ancillary matter: the partnership

Readers will no doubt be wondering who the claimant was, and why the parties to the litigation were set out above as they were. This was because the claim was initially brought by RM against SM and TVCL seeking dissolution of the partnership, with the proprietary estoppel claim being made by way of Part 20, CPR.

However, the partnership claim occupied a significantly secondary role. The learned deputy judge found that it was a partnership for the joint lives of SM and RM. It was common ground that it should be dissolved, but that could only be on the basis that RM lacked capacity (paras [179]-[192], [195]).

Moore does not purport to alter or change the law of proprietary estoppel. However, it is a very good example of the application of settled principles to a complicated case. Practitioners will find the comments throughout the judgment on case presentation and scope of cross-examination useful, particularly in complex, fact-heavy cases.
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