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Proprietary estoppel - Is your word your bond?

View profile for Paul Branch
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The recent High Court judgement in Gee v Gee dealt with proprietary estoppel. This is a legal principle whereby a person will acquire the rights over property if they have been given assurance to this effect on which they can reasonably rely and that their subsequent actions, based on the strength of that promise, are detrimental to them.

The Gee family had owned a valuable farm in Oxfordshire since 1924 and a dispute arose between the  father and one of his sons as to the ownership of the property. The son was seeking to inherit the farm which he claimed had been continually promised to him by his father.

Bases on this assurance, the son had worked on the farm for 40 years or so and devoted his life to the business. This was to his detriment in that he received low wages and was required to work long hours.

However, in 2014, Mr Gee transferred property to another of his sons following a feud between the three of them.

The son who had initially been promised the ownership of the farm claimed that the transfer breached the proposed arrangement made with his father. Mr Gee denied that any such assurances had been made and that he was free to distribute the land and family business as he wished.

The High Court found that promises had indeed been made which the son reasonably assumed would be honoured. Therefore, it applied the principle of estoppel, which prevented the father from going back on his word. It applied because a promise had been made which had been relied upon and the breaking of the promise had caused a loss to the injured party.

The Court has discretion to award ‘fair and reasonable’ compensation in cases where proprietary estoppel applies. In this instance, it awarded a 52% of the company and 46% of the land to the son.

Proprietary estoppel was also applied by the High Court to a similar case, Thompson v Thompson, involving a family farm.

The son worked on his parents’ farm since he left school in 1979. He worked long hours every day, with minimal holiday. He received a small weekly allowance plus board and lodging. In 1992, he and his parents each held a third of the farm under a partnership agreement.

His father later passed away which his share passing to his wife. Due to a combination of ill health and the deterioration of his relationship with his mother and sister, the son stopped working on the farm. His mother expressed her desire to distribute her share in the partnership elsewhere.

The Court held that both parents had made it consistently clear that the son would inherit the farm, due to the work he had invested in it, and that his four sisters would share an insurance policy. It recognised that this planned arrangement was well established and accepted among the family and that the son’s reliance upon the promise made by his parents was to his detriment.

His equity had crystallised by 2014, the point at which family relationships worsened, and was unaffected by the situation.

Under proprietary estoppel, the Court held that, upon the death of his mother, the son was entitled to the entire farm and his mother’s partnership share. Until that time, the Court recommended that the mother should retain a life interest in her partnership share and a lifetime right to reside in her bungalow, situated on the farm site. Both cases highlight the importance of succession planning to formalise arrangements and avoid such situations arising.

For more information on proprietary estoppel and how it might affect your situation, please contact us on 01733 888888.

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