Proprietary Estoppel Claims - 2016 Case Update (Part 1)

27 May 2016

The recent cases of Linden v Burton (2016) and Davies v Davies and Davies (2016) demonstrate that there is life in the old doctrine of proprietary estoppel.

This blog reviews the first of these cases, which was an appeal in the Court of Appeal against a first instance decision declaring that a residential property was held on trust under the terms of which the first £33,522 in equity is held for the respondent to the appeal, Ms Liden, on the basis of proprietary estoppel.

The Law 

It is reasonably well established that proprietary estoppel is an equitable concept which arises where:

(a) the owner of land induces, encourages or allows the claimant to believe that he has or will enjoy some right or benefit over the owner's property;

(b) in reliance upon this belief, the claimant acted to his detriment to the knowledge of the owner; and

(c) the owner then seeks to take unconscionable advantage of the claimant by denying him the right or benefit which he expected to receive.

The Facts

Mr Burton and Ms Liden began living together in Sweden in 1995. He was married but separated from his wife. The parties moved back to the UK in 2001 and took up occupation at a property which was owned by Mr Burton and his wife in their joint names.  As part of his divorce settlement in 2002, Mr Burton paid his wife a sum of £37,500 (funded by the raising of a mortgage against the property) and the property was transferred into his sole name. From 2001 until their separation in 2013, Ms Liden provided Mr Burton with a sum of £500 per month towards the expenses of running and maintaining the property. Following their separation, Ms Liden claimed that she had an interest in the property because of those payments.

Decision at Trial

The parties were at odds with one another in respect of their evidence regarding their relationship and the property. However, the trial judge accepted Ms Liden's evidence that:

1. Ms Liden's income was from a pension paid by the Swedish authorities.

2. During Mr Burton's divorce proceedings he was concerned that he might not be able to afford to keep the property and Ms Liden agreed to help out.

3. Mr Burton represented to Ms Liden that the property was expensive to run and that they could only afford to live there if she made some payments.

4. On this basis she began the payments of £500 per month (which represented half of her income and which she would not have paid unless she expected to receive something from the property in return).

5. Ms Liden was initially unaware of the mortgage.  When she asked Mr Burton how the money was spent he would describe it as rent and other outgoings.  She challenged the description of rent and he described it as "£200 towards the house"'.

6. When she found out about the mortgage in 2002 he again agreed that it was “towards the house."

7. Mr Burton had proposed marriage to Ms Liden in 2003.

The trial judge was satisfied that the features of proprietary estoppel were made out. He found that there was an understanding between the parties that of Ms Liden’s £500 per month payments, £300 covered a contribution towards the outgoings of the property and the balance of £200 could be said to be ‘her investment.’ Over a 12 year period, this amounted to £28,800. He also found that if interest at 3% was added to this sum, her total interest in the property amounted to £33,522, which amounted to about 10% of the equity in the property at the time of the trial.

Court of Appeal

The Court of Appeal held that the trial judge  correctly applied the law to the facts in deciding that (a) Mr Burton had induced, encouraged, or allowed Ms Liden to believe she was obtaining an interest in the property, (b) that the monthly payments were made in reliance on that and (c) it would therefore be unconscionable to deny Ms Liden an interest in the property. Had Ms Liden known the true position, she would not have made the payments and would have invested her money elsewhere.

It is not surprising that the Court of Appeal reached this decision given that proprietary estoppel claims are so fact sensitive and in circumstances where the trial judge had a wide discretion in deciding how best to give effect to the equity. The Court of Appeal was satisfied that the trial judge did no more than “the minimum required to do justice between the parties”.

Given the fact sensitive nature of proprietary estoppel claims, individuals and their legal representatives really do need to have their eyes wide open to the risks and uncertainty of litigation, such that in my view that proprietary estoppel disputes are particularly suitable for mediation.  

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