Charities and internal investigations
Following ‘hot on the heels’ of the case of Linden v Burton (2016) the Court of Appeal have again been trying to grapple with the difficulties of proprietary estoppel claims in the case of Davis v Davis and Davis.
Davies v Davies and Davies was an appeal in the Court of Appeal against a first instance decision dealing with the issue of how to satisfy the equity raised by Ms Davies against her parents, Mr and Mrs Davies, by virtue of the principles of proprietary estoppel.
In deciding how to satisfy the equity the court has to exercise a broad judgmental discretion. This discretion is not unfettered. There are two conflicting lines of authority:
1. The essential aim of the discretion is to give effect to the Claimant’s expectation, unless it would have a disproportionate effect; and
2. The aim of the discretion is to ensure that the Claimant’s reliance interest is protected, to as to compensate them for the detriment suffered.
Mr and Mrs Davies are dairy farmers. The farm business was owned by a company but the land was owned by Mr and Mrs Davies directly. The net value of the whole farming enterprise in 2014 was approximately £4.4m. Ms Davies worked on the farm for long hours at low wages over many years, in reliance upon her parents’ assurances that the farm would one day be hers.
In 2012 Ms Davies’ parents brought proceedings to evict her and her family from the farmhouse. Ms Davies brought a counter claim for an interest in the farm, land and business.
The dispute was divided into two parts: one to decide whether Ms Davies had raised an equity and two to decide how that equity should be satisfied. In Davies v Davies  EWCA Civ 568 the Court of Appeal upheld the High Court decision that Ms Davies had a valid claim for equitable relief based on proprietary estoppel. Ms Davies was therefore entitled to an equity over the farm and/or the farming business.
Decision at Trial
The extent of the equity Ms Davies was entitled to was decided in Davis v Davis  EWHC 015 (Ch). The equity could have been satisfied either by a monetary payment, a licence to stay in the farmhouse or in some other way.
The trial judge said that this was not a case where the expected benefit and the expected detriment were equivalent nor disproportionate. The reasons for this were:
1. Mr and Mrs Davies made numerous differing representations to Ms Davies over the relevant period;
2. Ms Davies left the farm for a second time in 2001 and said she had “given up” and “had no expectations regarding the farm”; and
3. Ms Davies expectation of the fam was dependent on her continuing to work in the business which did not happen.
The trial judge commented that Ms Davies had not “positioned her whole life” on the basis of her parents’ assurances and took expectation as the appropriate starting point.
The trial judge identified two strands of detriment that Ms Davies suffered, namely:
1. Working on the farm for long hours without full payment; and
2. She would have enjoyed shorter working hours in a working environment of her choosing had she not been working on the farm and she would have been free of the difficult working relationship with Mr and Mrs Davies.
Ms Davies argued that she should be awarded the land and the business, which was what was promised to her. Mr and Mrs Davies case was that Ms Davies should be given a sufficient sum for accommodation and for a share in the farm and business, and on this basis offered Ms Davies £350,000.
The trial judge rejected both arguments and held that the accommodation element did not sufficiently accommodate the expectation and detriment. The trial Judge also found that the accommodation element did not reflect the promise that Ms Davies could live in the farmhouse for life.
The trial judge ruled £1.3m as the appropriate award for Ms Davies. This amount was just over one third of the net value of the whole farming enterprise which was a fair reflection of the expectation and detriment and other factors set out in his judgment. Mr and Mrs Davies appealed the High Court’s decision.
Court of Appeal
The Court of Appeal held that the trial judge had applied too broad a brush, failed to analyse the facts with sufficient rigour and failed to explain why he had reached the conclusion that he did. The Court of Appeal also found that the trial judge did not explain what expectation (out of the numerous differing representations) he regarded as the starting point.
In regards to the two broad strands of detriment suffered by Ms Davies, the Court of Appeal held that:
1. Ms Davies had no intention of inheriting the land between 2001 and 2006 when she initially left the farm, and following her return the expectation lasted for at best three years until her final departure in 2012. The Court of Appeal therefore held that a relatively modest sum should be awarded.
2. The effect of her final departure in 2012 meant that Ms Davies was free to work in a working environment of her choice with shorter working hours and be free of the difficult working relationship with Mr and Mrs Davies. The Court of Appeal held that the time period during which she gave up these freedoms was at best four to five years and therefore, again, an award would be relatively modest.
The Court of Appeal did not consider that the trial judge had properly analysed the offer of £350,000 made by Mr and Mrs Davies. The Court of Appeal considered that the offer actually went some way towards satisfying Ms Davies expectations as the accommodation element attempted to provide Ms Davies with the equivalent in monetary terms of what she had been promised. The partnership element gave full effect to her monetary expectations and the company element actually exceeded her expectations and was equivalent to 85% of the value of the company at the time.
The Court of Appeal awarded Ms Davies £500,000 to allow for the delay in payment and the changes in the value of money since the expectations were created.
This case demonstrates the difficulty the courts have when exercising the broad discretion mentioned above in proprietary estoppel. It also demonstrates the difficulties of calculating a monetary award, especially where there has been numerous differing representations.
Despite not resolving the conflict between the two lines of authority, this case suggests that the clearer the expectation, the greater the detriment and the passage of time that the detriment was reasonably held, the greater the weight that should be given to that expectation.
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