The Court of Appeal has recently provided a useful restatement of the principles applicable to the law of Proprietary Estoppel whilst giving its decision in the case of Habberfield -v- Habberfield.
The case concerned a family farm known as Woodrow near Yeovil in Somerset which was valued at approximately £2,500,000. The defendant in the case, Jane Habberfield, appealed the decision of the High Court to award her daughter, Lucy, the sum of £1,200,000. Lucy had spent some 30 years working on the farm, but on the basis of her late father’s assurances that she would take over the dairy business on her father’s retirement and, eventually, when both parents had died, would inherit the whole farm.
In 2008, Lucy refused an offer to run the farm in partnership with her parents and, roughly five years later, following a family dispute, Lucy left the farm. Her father then died in 2014, leaving the farm to his wife Jane who took the decision to close the dairy unit. At a hearing in the High Court, the Judge found that Lucy had established an interest in the farm based on the doctrine of Proprietary Estoppel. All of the required elements of assurance, reliance and detriment were present.
In the Court of Appeal, Jane Habberfield argued that:
(a) Lucy refusing to accept the offer of partnership made to her meant that it was not unreasonable for her father to leave the farm to Jane;
(b) The original award made to Lucy was higher than necessary to deal with the detriment Lucy had suffered;
(c) It was not appropriate to order that a cash sum be paid to Lucy during Jane’s lifetime.
The appeal was dismissed by the Lord Justices for various reasons. They held that Lucy rejecting the offer of partnership did not defeat her claim, but was simply a matter to be taken into account when determining how her interest in the farm should be satisfied. The original award of £1,200,000 covered the cost of setting up a working dairy unit, and the aim was to provide sufficient funds for Lucy to establish such a unit.
Lucy argued that the Judge in the High Court should not have reduced the award to £1,200,000 on the basis that she was entitled to the value of the whole farm. However, the Court had to consider whether in hindsight it was unreasonable for a promise not to be kept. It was relevant to consider any change in circumstances for the person who made the original promise. The closure of the dairy unit was a change of circumstance which meant that it was inappropriate to make any award to Lucy greater than the sum of £1,200,000, as assessed by the High Court originally.
The case also confirms the importance of proportionality in matters of Proprietary Estoppel. The question to be asked was whether the award made to a claimant was out of all proportion to the detriment suffered. The Court confirmed that, in cases such as these, it was required to exercise a judgemental discretion, and was able to do so in a flexible way.
It was accepted by the Court of Appeal that the requirement to raise the £1,200,000 due to Lucy would require the sale of the farm. Although this would deprive Jane Habberfield of her home, there was evidence that she had sufficient means to rehouse herself and also meet any shortfall in income. In addition, there was a need to provide Lucy with immediate funds so that she would have the finance needed to begin farming on her own account.
More information about Proprietary Estoppel can be found here.
Andrew Nicholson is managing partner and head of the Property Team at Barker Gotelee Solicitors.