An Ounce of Performance is Worth Pounds of Promises

An Ounce of Performance is Worth Pounds of Promises

Screen siren, Mae West, as witty as she was glamorous, is said to have quipped that: “An ounce of performance is worth a pound of promises”.

Whilst, Ms West no doubt had other matters in mind, it seemed an appropriate title for an article considering two recent proprietary estoppel cases of interest in which promises, coupled with an ounce or two of performance in the form of detrimental reliance, certainly sounded in pounds for one of the claimants:

• James v James [2018] EWHC 43 (Ch);
• Habberfield v Habberfield [2018] EWHC 317 (Ch).

It also seemed a fitting title given the divergence in the case law as to the approach to be taken to remedy in proprietary estoppel cases and the role of proportionality in evaluating whether or not the performance (or detriment) on the part of the successful claimant should lead to the award of what was promised to them, or some lesser award. The question of whether or not there needs to be a relationship of proportionality between the level of detriment and the relief awarded, is a controversial one. The controversy stems from the fact that the conceptual basis of proprietary estoppel is not wholly settled: is the object of the doctrine to award a remedy that gives effect to the promises made, or is the remedy focused on compensating the detriment suffered by the promise?

Putting it another way, when the court decides how to remedy the estoppel that has arisen, it must ask itself whether or not an ounce of performance is in fact worth a pound of promises (or the pounds that have been promised).

Both of the cases concern the almost ubiquitous family farm. Family run farms offer fertile ground for proprietary estoppel challenges for a number of reasons. The chief reasons, in my view, being:

• Dynastic attitudes to passing on land and a desire to see the farm kept together for successive generations, which often lead to the “all this will be yours one day” types of assurances upon which the doctrine is based.
• Many family farming enterprises are running on very tight margins and depend upon family members regularly working long hours and often without pay or for remuneration below the agricultural minimum wage, which may readily provide a claimant with grounds for alleging they have relied upon such assurances to their detriment.
• Whilst family farming enterprises may often by cash poor, they are, where the land is owned by the family, often asset rich and the capital value of the land is usually worth litigating over.

The essential ingredients of the doctrine that a claimant must demonstrate to establish that an estoppel has arisen, as set out by Lord Walker in Thorner v Major [2009] 1 WLR 776  [29], are as follows:

1. A representation or assurance made by the promisor to the promisee;
2. Reliance on the representations by the promisee; and
3. The claimant suffers detriment in consequence of his reliance.

James v James [2018] EWHC 43 (Ch)

The claimant, Sam, in James v James was the son of the deceased, Charles James. The subject matter of the proprietary estoppel claim was the deceased’s farm in Dorset.

The case was decided by HHJ Paul Matthews.

Sam’s case was unsuccessful, in HHJ Matthews’ judgment, on each of the essential ingredients of the doctrine of proprietary estoppel.

Promises or assurances

There had been occasions where Sam’s father, Charles, had told Sam what his testamentary intentions were. But a statement of current intentions as to future conduct is not a promise of that conduct, let alone a promise intended to be acted upon. Making a will in favour of someone is not the same as promising to leave property to that person. It is ambulatory, merely a statement of current intention, and can be changed at any time.

The high point of Sam’s case in relation to an assurance was his evidence that, before buying further land the deceased had asked Sam whether he should buy it, because (as Sam put it) “I would be farming it one day“. HHJ Matthews accepted that the deceased had said words to this effect to Sam, at least twice.However, these comments needed to be considered in the context of the personalities of the individual in question.

Sam’s evidence had been that Charles wanted to keep all the assets in his own name as long as possible, and, although he liked to make decisions, he would not make them until he was good and ready. He had stated in evidence that he did not accept that Charles would give away any of his land during his life. Charles did not easily make promises to transfer property, let alone actually transfer any of it. To Charles, “money was God.”

Against that background, the comments made by Charles James did not amount to a promise or assurance to leave the property to Sam. Really, these comments reflected nothing more than him acknowledging that one day he would die and would have to pass the land to the next generation and, at the time that he made these remarks, Sam was the obvious person to leave it to. Statements of intention of this sort are not promises intended to be acted on. HHJ Matthews remarks [38]:

“there is sufficient place in our legal system for a landowner to be able to express a present intention to leave property by will to another person but without making any promise to do so, such that he or she is not then bound so to leave the property even if that other, misunderstanding what the landowner has done, purports to rely to his or her detriment on a supposed promise.”

Detriment and reliance

Sam’s case further lacked the necessary reliance and detriment to found a proprietary estoppel.

Sam could not demonstrate sufficient detriment. This was not the classic proprietary estoppel scenario where a claimant works for nothing, or very little, on the strength of assurances that they would inherit the farm. Sam had been properly paid the going rate for farm work, had been bought cars (which had been shown in the business accounts as ‘bonuses’), had occupied a property rent-free, had been made a partner in the family business and in time had received some land, cash and a haulage business.

There was further no evidence of reliance. Sam had not ever thought seriously about going away to make his fortune in some other industry or occupation.

Relief: expectation, detriment and proportionality

Given all of the above, the question of how to approach the relief to be awarded was not a live issue in James v James. Nonetheless, HHJ Matthews did express his view on the relevance of proportionality, comparing views expressed by the Court of Appeal in Davies v Davies [2016] EWCA Civ 463 with those expressed in Suggitt v Suggitt [2012] WTLR 1607:

In Davies, Lewison LJ appeared to endorse a suggestion put forward by counsel in that case that there should be a sliding scale approach, whereby greater weight would be given to expectation in cases where there is a clearer expectation, greater detriment and a longer passage of time during which the expectation was held.

In Suggitt (which was cited in Davies), at [43] Arden LJ referred to the judgment of Robert Walker LJ in Jennings v Rice [2002] EWCA Civ 159, where he had said that, rather than to simply fulfil the claimant’s expectations:

“if the claimant’s expectations are uncertain, or extravagant, or out of all proportion to the detriment which the claimant has suffered, the court can and should recognise that the claimant’s equity should be satisfied in another (and generally more limited) way.” Commenting on this statement, at [44], Arden LJ said that this: “does not mean that there has to be a relationship of proportionality between the level of detriment and the relief awarded“.

HHJ Matthews, for his part, comes down on the expectation fulfilment side of the debate stating as follows:

“51. For what it may be worth, I agree with what Arden LJ said. Proprietary estoppel is a doctrine which, like the law of contract, focuses on expectations created rather than losses suffered. So if A promises B some property right, intending B to rely on this, and B does rely on it to B’s detriment, the natural impulse is (as with contract law) to require A to make good the expectation. Making the remedy proportionate to the detriment suffered would be to focus more on what B has lost, rather than on what B expected to obtain.

52. But of course proprietary estoppel is not as strict as contract law. It is also an equitable doctrine, and therefore tempered by conscience. So there may be exceptional cases where (as Robert Walker LJ said) it is just not right to require A to go the whole length of satisfying the expectation created. In those cases, there may be another way to satisfy the equity raised, without however necessarily requiring the remedy to be proportionate to the detriment. For myself I respectfully doubt how far a “sliding scale” approach would be useful. Just as a contract is either made and broken or not, either the promisor has created an expectation, on which the promisee has relied to his or her detriment, or not.”

It would appear from the above, that HHJ Matthew’s preference is for awarding the claimant’s expectation, unless the case is an exceptional one.

Habberfield v Habberfield

The dispute concerned a family farm in Somerset. The Claimant, Lucy, was one of the four children of the deceased, Frank Habberfield. The farming business had been operated as a partnership between Frank and his wife, Jane. The main business had been dairy farming, however that had ceased when Lucy had departed from the farm following a disagreement with other family members.

The case was decided by Mr Justice Birss.

Promises or assurances

Birss J found that the following representations had been made to Lucy:

• From time to time, Frank told Lucy that she would take the farm over when he could not do farming any more.
• Shortly after the re-establishment of the dairy herd, Frank told her that “they are your cows, and if you want them you should milk them”.
• When Lucy and Frank were discussing the need to replace the milking parlour in due course, Frank said that he did not know how much it would cost but that the responsibility for replacing it would be Lucy’s.
• From time to time, Lucy would raise the issue of her extensive work and limited remuneration and/or need for time off. Frank and Jane would assure Lucy that she could not have the benefit of her hard work both now and in the future. Frank in the presence of Jane assured Lucy that she would receive the farm and the farming business in the future because they could not run the farm forever.
• When Lucy asked for any time off she was told that if she did take time off ‘the cows would not be there when she got back’.
• When she asked for a weekend off to spend at South West Young Farmers Club, she was told that if she wanted the farm then she had to stay to ensure the work was done.
• Frank would require Lucy to deal with staff employed to help on the farm, in relation to the milking, telling her that the employee would in time be working for her.

Whilst some of these statements related to the operation of the business, rather than ownership of the farm property, Birss J concluded that, taken as a whole, they did amount to assurances that the farm business and land would be Lucy’s one day. Birss J concluded that the statements in this case, in contrast to those in James, were in the form of assurances that, in return for what Lucy was being asked to do now, she would receive something in the future.

Detriment

Birss J heard expert evidence on the question of the remuneration that Lucy could have expected to receive for her work. His conclusions on detriment were summarised as follows [207]:

“The detriment overall can be summarised as pay lower than she could have reasonably expected for her work, long hours, few holidays and the continued commitment to Woodrow. This applied for all the time she was at the farm. By 2013 Lucy had acted in this way for just under 30 years. A notable feature of this detriment is that it does not only consist in the level of pay and conditions, it also involves her commitment to farming at Woodrow rather than elsewhere. She became and is a highly skilled dairy farmer. It is hard to imagine what would have happened if Lucy had not been assured she was working to build and maintain a successful dairy farm which she would inherit, because that is a long way from what happened. The assurances had been given from more or less the start of her working life in the early 1980s and continued until 2008. If they had not been given things would have been very different. Most likely Lucy would still have learned dairy farming from her father but then she would have gone elsewhere, probably sometime in the 1990s. She probably would have sought a farming tenancy elsewhere long ago. To borrow an expression from other cases, in this case the claimant has positioned her working life based on her parents’ assurances.”

Birss J estimated the quantifiable part of Lucy’s detrimental reliance. He took account of the expert evidence concerning typical agricultural wages in order to estimate what Lucy could reasonably have earned over the period of her labour on the farm, and offset that against what she did in fact earn, to reach the conclusion that the upper limit of her quantifiable reliance losses stood at c. £220,000.

Relief: expectation, detriment and proportionality

Birss J also considered the debate concerning the approach to be taken to remedying the estoppel which has been found to have arisen and the decisions of the Court of Appeal in Davies and Jenning v Rice to which HHJ Matthews referred in James.

Birss J posed himself the following questions:

• Could it be said that Lucy’s detriment could be fairly quantified such the foundation of the claim would be removed if she received that sum by way of compensation? The answer to this question, in Birss J’s view, was ‘no’. Part of her detriment could be quantified but her commitment to the farm over three decades and her lost opportunity to go somewhere else and build a different life could not be readily quantified.
• How certain were Lucy’s expectations? In Birss J’s view, she expected to receive a viable dairy farm and that was a specific expectation that was capable of being vindicated. The question of whether or not that would be the right thing to do, was a separate consideration.
• Were Lucy’s expectations fairly derived from the assurances? In Birss J’s judgment, they were and following Jennings v Rice, this was not a case for saying that the expectation was no more than a starting point.

Birss J developed his analysis further by reference to sliding scale approach mooted by Lewison LJ in Davies. Whereas HHJ Matthews was not attracted to this approach, Birss J considered it to be useful, subject to one refinement – it is not only the length of time that the claimant has held the expectation and the extent of their detriment that is relevant in considering whether or not to give effect to it, how far the claimant has gone in performing what was expected of them is also relevant. In a quasi bargain case, where a claimant has been working to fulfil the promise made to them, they should be entitled to receive their expectation where they have substantially fulfilled their side of the bargain.

What relief should be granted?

Birss J concluded that Lucy had done what had asked of her over the years and thus that this was a case in which she should receive compensation based on her expectation, rather than her reliance loses. What she was promised was a viable dairy farm.

However, Birss J considered that the following factors needed to be taken into account in determining what relief to award Lucy:

• It had always been intended that some land would go to Lucy’s siblings and it would be fair to deduct some of the land to reflect this.
• The farmhouse was Jane’s home and should also be deducted.
• Lucy had rejected an offer made by her parents to resolve disagreements concerning the future of the farm in 2008 and had departed from the farm in 2013. The offer had been a genuine attempt to resolve the succession issue. Had Lucy accepted the offer and remained at the farm, there would still have been a viable dairy unit.
• The relative size of the quantifiable reliance loss, as compared to the value of the expectation did not in his view necessitate a further reduction in addition to the reduction he considered appropriate for the rejection of the 2008 offer.
• An in specie transfer would not be appropriate given that it would not, in his view, be fair to make an order that would inevitably force Jane to leave her home or to separate the land from the farmhouse (although he recognised that it might not be possible to avoid a sale).

On the basis of valuation evidence given in February 2017, an award assessed by reference to the land and buildings where the dairy enterprise had been carried out, excluding the farmhouse and other and, would necessitate a cash payment of £1,170,000.

Learning points for practitioners

• What makes for a successful case? The decision in Habberfield on the question of whether or not an equity had arisen in Lucy’s favour, is largely uncontroversial – there was evidence of assurances that had been repeated over a long period of time and which had given rise to a clear expectation on Lucy’s part that she would take over the farming business and in time would inherit most of the land. This was a case in which Lucy could be said to have organised her working life on the basis of that expectation and there was evidence of both quantifiable and non-quantifiable detriment on her part. It is illuminating to contrast this case with the circumstances in James v James, where representations as to the testator’s present intention to leave the farm to his son were considered to be insufficient to amount to a promise or assurance that was capable of being relied upon. In contrast to Lucy, Sam had also received fairly substantial benefits in his father’s lifetime and the required ingredients of reliance and detriment were absent.
• Expert evidence. The judgment in Habberfield is worthy of closer study for Birss J’s detailed examination of the expert evidence, which he drew upon in reaching his conclusion on relief. Expert evidence was considered from two valuers on the value of the land and the viability of the constituent parts of the farm for dairy farming. Further expert evidence was obtained from an accountant who advised on the remuneration that Lucy would have received on varying assumptions. It is unsurprising that the case law in this area is dominated by multi-million pound farming disputes. These cases are costly to run, often necessitating reports from experts in a number of different disciplines and very detailed forensic analysis in order to reach a conclusion about the countervailing detriment and benefit to the claimant.
• The claimant’s conduct. One of the most interesting features of Habberfield is the way in which Birss J dealt with the issue of Lucy’s refusal to accept a reasonable offer from her parents to resolve the issues between them. Birss J did not go so far as to say that the failure to accept the offer, had it been wholly sufficient to meet Lucy’s expectation, would necessarily afford a basis for refusing relief to Lucy – but he appeared to contemplate that such an outcome might be justified in an appropriate case. Notwithstanding the fact that the offer did not go all the way to meeting Lucy’s expectation, primarily because the proposal did not include ceding control of the farming business to her, Birss J plainly considered that she would have been better off making the best of the offer and trying to make it work and this was a factor that led her to receive less than she might otherwise have received.
• Determining the relief to be awarded. The expectation vs detriment debate and the role of the proportionality principle continues to bedevil proprietary estoppel cases, particularly when one considers that Birss J expressed favour for Lewison LJ’s approach from Davies, whereas HHJ Matthews in James expressed disfavour towards the ‘sliding scale’ approach. In Davies v Davies, the trial judge’s decision to award £1.3 million was overturned on appeal on the basis, in essence, that it was disproportionate to the quantifiable detriment suffered by the claimant (c. £350,000) and the trial judge had failed to explain his reasoning for his award. The Court of Appeal in Davies noted that proportionality was at the heart of the doctrine of proprietary estoppel. One would be forgiven for thinking that the award of £1,170,000 in Habberfield was disproportionate to Lucy’s quantifiable detriment of c. £220,000. However, it would appear that the fact that the detriment may be disproportionate to the expectation is of less significance in a case of very clear expectations held over a long period of time and where the claimant has done what was expected of them. There may be force in the view that there are emerging sub-categories of ‘bargain’ and ‘non-bargain’ cases in the proprietary estoppel case law. The former category of case yields expectation relief (where the expectation is clear and the claimant has performed his side of the bargain) and in the latter, some form of wider discretion is involved. It will be interesting to see if Habberfield is appealed to the Court of Appeal.