The Taciturn and Undemonstrative Men of Somerset

 

A mere promise to leave property to someone in the will is not enforceable. But, like so much in law, there are exceptions. One exception that sometimes arises occurs when the person who is promised property reasonably relies on the promise, making sacrifices as a result. The type of claim I am writing about has the rather inscrutable label “proprietary estoppel.” I have written about it before, including a Supreme Court of Canada case, Cowper-Smith v.Morgan, 2017 SCC 61.

The principle, as set out by Chief Justice McLachlin in Cowper-Smith, is as follows:

[15] An equity arises when (1) a representation or assurance is made to the claimant, on the basis of which the claimant expects that he will enjoy some right or 2017 SCC 61 (CanLII) benefit over property; (2) the claimant relies on that expectation by doing or refraining from doing something, and his reliance is reasonable in all the circumstances; and (3) the claimant suffers a detriment as a result of his reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on her word [citations omitted].

My favourite case is an English case predating Cowper-Smith. The name of the case is Thorner v. Majors, [2009] UKHL 18, but I refer to it as the “Taciturn and Undemonstrative Men of Somerset” case.  

Perhaps what’s most interesting about Thorner is how far the trial judge and ultimately the House of Lords were prepared to go to find that the farm owner made a representation that the claimant would receive his farm.

The plaintiff, David Thorner was a farmer who did substantial work for almost 30 years on his father’s cousin’s farm. He did so without pay. The farm was in Somerset, a seemingly irrelevant fact.

The cousin, Peter Thorner, did not ever expressly say he would leave David Thorner the farm.  There was, rather, some indirect statements and conduct that led the plaintiff to believe he would inherit the farm.  In 1990, for example, Peter handed over an insurance policy bonus notice to David, and said “that’s for my death duties.” There were other oblique statements implying that Peter would leave David the farm.

Peter did not leave David the farm, but died without a will.

The trial judge found that Peter was “a man of few words.” He also “was not given to direct talking. The simplest example…is that when Peter said ‘What are you doing tomorrow?’ he generally meant ‘Would you come and help me tomorrow.’”

In awarding to David the land, buildings live stock and other farm assets, the judge found that David had established the elements of proprietary estoppel. As quoted by Lord Walker of Gestingthorpe at paragraph  47, the judge  wrote:

With regard to all that David did at Steart Farm, and in looking after Peter, for the further fifteen or so years up to his death, there is again no need for me here to repeat the various relevant findings I have already made earlier in my judgment. David’s contribution was not only unremunerated, but also far in excess of that made by any of the others who helped at Steart Farm, whose roles I have reviewed in paras 74-80 above. He was encouraged to continue with his considerable and unremunerated commitment to this work by what was said and done by Peter on the various occasions I have already identified. There is a clear and sufficient link between that encouragement from Peter and what David did for him and on his farm.

The Court of Appeal reversed primarily on the grounds that Peter’s assurances were insufficiently clear and unambiguous to be reasonably relied upon. They were consistent with Peter expressing a current intention to leave David the farm, rather than as an assurance that he would leave the farm.

In the House of Lords, there are five separate judgments restoring the trial judge’s decision. The nub of the reasons in the House of Lords is that the trial judge considered the circumstances of Peter’s words and conduct, and the decision is entitled to deference. The trial judge considered Peter’s words and conduct in the context of the relationship between him and David and also in the context of the community in which they lived. Lord Walker of Gestingthorpe wrote:

59. In this case the context, or surrounding circumstances, must be regarded as quite unusual. The deputy judge heard a lot of evidence about two countrymen leading lives that it may be difficult for many city-dwellers to imagine—taciturn and undemonstrative men committed to a life of hard and unrelenting physical work, by day and sometimes by night, largely unrelieved by recreation or female company. The deputy judge seems to have listened carefully to this evidence and to have been sensitive to the unusual circumstances of the case.

Supreme Court of Canada Decision on Proprietary Estoppel in Cowper-Smith v. Morgan

The Supreme Court of Canada rendered it judgment in Cowper-Smith v. Morgan, 2017 SCC 61, this last Thursday, December 14, 2017. The main legal issue is whether a person who relies on a promise that he will receive property to his detriment may become entitled to the property even if the person who made the promise did not own the property at the time she made the promise. Let me explain.

Elizabeth Flora Cowper-Smith died in 2010. She had three children: Gloria Morgan, Max Cowper-Smith and Nathan Cowper-Smith. In her will, she named her daughter as her executor and she provided that after payment of debts, her estate would be divided equally among her three children. She had investments and her family home in Victoria, British Columbia.

In 2005, Max Cowper-Smith visited Victoria from England, where he had been living and working as a lawyer. Gloria told Max that their mother could no longer care for herself in her own home. Gloria and Max agreed that he would leave England and move in with their mother, and care for her and the family home, after Gloria agreed that he would be able to live in the home permanently, and that he would be able to acquire Gloria’s one-third interest after their mother’s death. On the basis of his sister’s promises, Max moved back to Victoria, and cared for his mother.

After her mother’s death, Gloria said she was going to put the house on the market.

Nathan and Max sued their sister.

As an aside, there is more to this story. Elizabeth Cowper-Smith had transferred title to her house and investments into joint tenancy with Gloria, and they signed a trust declaration pursuant to which Gloria held her interest in the title to the house and investments for her mother during her mother’s lifetime, but would receive these assets on her mother’s death. The Supreme Court of British Columbia trial judge set aside the transfers into joint tenancies and the trust declaration on the basis that Gloria had exercised undue influence over her mother and that Gloria had not rebutted the presumption that the gratuitous transfer is not a gift, but is held on a resulting trust for her mother and her mother’s estate. The Court of Appeal upheld this aspect of the trial judge’s decision, and it was not part of the appeal to the Supreme Court of Canada.

On finding that the family home was part of Elizabeth’s estate, the trial judge, Madam Justice Brown considered Max’s claim to the right to purchase Gloria’s interest in the home from Gloria on the basis of what is known as proprietary estoppel. In her reasons reported at 2015 BCSC 1170, she summarized the law as follows:

[116]     The claim for proprietary estoppel begins with an assurance or representation in relation to an interest in land. The assurance can be made through words or conduct and does not have to be as precise as it would need to be in order to give rise to a binding contract. The claimant's belief in the assurance must be reasonable. A finding of reliance does not necessarily lead to a finding of detriment and the court must be satisfied that there has been detriment because this is what gives rise to an unfairness. Reliance is a change in a person's conduct as a result of the assurance. Detriment does not flow automatically from reliance and detriment must be assessed on a holistic basis, looking at the overall benefits gained and losses suffered by the claimant. Once inequity has been established, the court must determine the extent of the inequity and the relief needed to satisfy it.

Madam Justice Brown found that Max had established the necessary evidence to support his claim. She wrote at paragraph 118 and 119,

[118]     I am satisfied that Max acted to his detriment in moving from England to Victoria, giving up employment income, the long-term lease of a cottage, his contacts with his children, and his social life to look after his aged dementing mother. He did so relying on Gloria’s agreement to his conditions for the move. In doing so, he acted reasonably. His discussions with Gloria were not done in a moment, they covered several months.

[119]     The relief that Max seeks is the right to purchase Gloria’s one-third interest in the house. I consider the relief sought by Max to be the minimum required to satisfy the equity. In a sense it will cost Gloria nothing. That Gloria now would rather not sell to Max for personal reasons has no bearing on the equity, or the reasonableness, of the relief sought.

Gloria appealed. In the British Columbia Court of Appeal, reported at 2016 BCCA 200, the majority held that because Gloria did not own an interest in the family home when she made the promises to Max, and it was uncertain whether she would receive an interest in the family home, Max could not rely on Gloria’s promises to assert a claim based on proprietary estoppel. Mr. Justice Willcock for the majority (Madam Justice D. Smith dissented on this issue) wrote at paragraphs 106 though 108,

[106]     Even assuming there to be some basis for the view that proprietary estoppel might arise as a result of an assurance given by one about to be the owner of property, I would not expand that class of persons so far as to include a potential beneficiary who gives an assurance to another, years before the death of a testator, with respect to what she will do with an inheritance that she merely anticipates receiving, if the person receiving the assurance acts as requested in the meantime. Not only is there uncertainty, in such a case, with respect to the promisor’s ability to deliver a proprietary interest to the promisee at the time the assurance is given, the uncertainty is not resolved when the promisee acts in reliance upon the promise.

[107]     Leaving aside, for the moment, the question whether Gloria was in a position to exert undue influence upon her mother, there was uncertainty with respect to the property interest Max was being promised. First, there was uncertainty whether Gloria would inherit anything from her mother. She might have predeceased her mother. Her mother might have changed her will and left Gloria more or less than a one‑third interest in the property. Her mother might have sold the house and moved into accommodation more suited to her declining health. Simply by liquidating her property Elizabeth Cowper-Smith would have precluded Max from asserting a right to buy anything from Gloria. Certainly it is not suggested that Elizabeth was in any way restricted in her dealings with the property simply because her daughter made assurances to Max about what she would do on Elizabeth’s death.

[108]     Without exerting undue influence upon her mother, Gloria was not in a position to determine what property interest Max would receive in exchange for his move to Victoria. The fulfilment of Gloria’s promise was entirely conditional on her mother’s actions, which were outside her control.

Max appealed to the Supreme Court of Canada.

Writing for the majority, Chief Justice McLachlin held that Max was entitled to require Gloria to sell him her interest in their mother’s home based on the principles of proprietary estoppel. She rejected the majority’s reasoning in the Court of Appeal. Although Max could not have enforced the promise if Gloria had not acquired an interest in the property, it can be enforced if she later does receive an interest in the home. After summarizing the majority decision in the Court of Appeal, the Chief Justice wrote at paragraphs 35 and 36:

[35]                          I cannot agree. With respect, the conclusion reached by the Court of Appeal majority conflates proprietary estoppel with the equity to which it gives effect. That Gloria did not own an interest in her mother’s property at the time of Max’s reliance is not dispositive in itself: see MacDougall, at p. 456; see also Thorner, at para. 61, per Lord Walker; Re Basham (deceased), [1987] 1 All E.R. 405 (Ch.), at p. 415. An equity arises when the claimant reasonably relies to his detriment on the expectation that he will enjoy a right or benefit over property, whether or not the party responsible for that expectation owns an interest in the property at the time of the claimant’s reliance. Proprietary estoppel may not protect that equity immediately. It may not protect the equity until considerable time has passed. If the party responsible for the expectation never acquires a sufficient interest in the property, proprietary estoppel may not arise at all; where there is proprietary estoppel, there must be an equity, but not vice versa. When the party responsible for the expectation has or acquires a sufficient interest in the property, however, proprietary estoppel attaches to that interest and protects the equity: see MacDougall, at p. 458; Wilken and Ghaly, at pp. 265-66; see also Watson v. Goldsbrough, [1986] 1 E.G.L.R. 265 (C.A.), at p. 267. Ownership at the time the representation or assurance was relied on is not a requirement of a proprietary estoppel claim.

[36]                           An equity arose in Max’s favour when he reasonably relied to his detriment on the expectation that he would be able to acquire Gloria’s one-third interest in their mother’s house. That equity could not have been protected by proprietary estoppel at the time it arose, because Gloria did not then own an interest in the property. But that does not mean that proprietary estoppel cannot attach to Gloria’s share of the house once she receives it. I conclude that it can.

There were a couple of other important issues remaining. First, Elizabeth Cowper-Smith did not give her children the family home in the will. Rather she gave her children a one-third interest in the residue of the estate. Gloria would only acquire an interest in the home if she distributed the home itself to the three beneficiaries, rather than selling it and distributing the proceeds. As an executor she had discretion to sell the house.

In this case, the Chief Justice held that Gloria had a conflict of interest as executor, on the one hand, and as a beneficiary. The court could order her to distribute the home in order to allow Max to be able to purchase Gloria’s interest in the home, and the majority of the Supreme Court of Canada did just that.

Secondly, the question arose as to when Gloria’s interest would be valued. Elizabeth Cowper-Smith had died in 2010 and this decision came out seven years later. The value of the home has likely increased significantly, given the changes in the Victoria real estate market. Chief Justice McLachlin held that the appropriate time for determining the purchase price was the time Max may have reasonably have expected to have purchased Gloria’s interest. The majority used an appraisal as of February 2, 2011.   The Chief Justice wrote at paragraphs 52 through 54,

[53]                          Neither Max nor Gloria could reasonably have expected to wait the better part of a decade to exchange Max’s cash for Gloria’s interest in the property. It is safe to assume that, had Gloria not sought to escape her promise, Max’s equity would have been satisfied and Gloria’s share of the house sold to him not long after February 2, 2011, which is when, in the course of administering their mother’s estate, the property was in fact appraised for $670,000.00. Rather than sell her interest in the house to Max at that point — that is, roughly when both she and he originally contemplated she would — Gloria took the position that she was under no obligation to do so at all. This litigation was the result. In the years since, Max has had the benefit of the money he would have had to pay Gloria in 2011 for her share of the house, Elizabeth’s estate has incurred expenses associated with the upkeep of the property, and the property, the parties agree, has increased in value.

[54]                          February 2, 2011 is a reasonable approximation of when Max expected to be able to purchase Gloria’s one-third interest in the property. That expectation reflects the defined right that Gloria promised Max in exchange for his returning to Victoria to care for their mother. In these circumstances, the claimant’s expectation must be the court’s guide in exercising its remedial discretion. This is because, as Walker L.J. put it in Jennings, at para. 45:

. . . the consensual element of what has happened suggests that the claimant and the benefactor probably regarded the expected benefit and the accepted detriment as being (in a general, imprecise way) equivalent, or at any rate not obviously disproportionate.

The majority of the Supreme Court of Canada also recognized that because of the delay Max has had the benefit of the use of the funds he would have used to purchase Gloria’s interest in 2011, and that estate assets were used to maintain the property. According, Max is required to pay Gloria interest on the purchase price at post-judgement interest rates from February 2, 2011, and also to account to the estate for any expenses paid out of estate funds to maintain the property since February 2, 2011.

This decision was released the day before Chief Justice McLachlin’s retirement on December 15, 2017. She was the longest serving Chief Justice of Canada. Here is a biography from the Canadian Encyclopedia. 

B.C. Court of Appeal Overturns Trial Judgement in Sabey v. Rommel

The British Columbia Court of Appeal overturned the trial judge’s decision to award the plaintiff, Jesse Sabey, the horse farm that had been owned by his friends Kim and Dietrich von Hopffgarten, in Sabey v. Rommel, 2014 BCCA 360.

Jesse Sabey used to ride horses and work at the von Hopffgartens’ farm. He and the von Hopffgartens were all involved in dressage riding. The von Hopffgartens had promised Mr. Sabey that they would leave him the farm, and indeed had tried to make codicils to their wills to do just that, but the codicils were invalid because they were not witnessed by two witnesses. The trial judge held that because Mr. Sabey had relied on the promises they made to him by working for them for less than market value and by making career choices to his detriment, he was entitled to the farm on the basis of the doctrine of proprietary estoppel. I wrote a post about the trial judge’s decision in greater detail previously.

Burgi Rommel, who was the beneficiary of Mrs. von Hopffgarten’s will, appealed the decision to the Court of Appeal. Two of the three judges hearing the appeal allowed the appeal, holding that the award to Mr. Sabey of the entire farm was disproportionate to the detriment he suffered.

Madam Justice Bennett, writing for the majority, set out the legal test as follows:

[25]         The foundation of a claim in proprietary estoppel is an equitable right arising out of the conduct of the parties. In Crabb v. Arun District Council, [1976] Ch. 179 at 192-93, [1975] 3 All E.R. 865 (C.A.), Scarman L.J. stated the test in a claim for a proprietary right on the basis of equity:
1.               Is there an equity established?
2.               If so, what is the extent of the equity?
3.               What is the relief appropriate to satisfy the equity?

A person making a claim on the basis of proprietary estoppel needs to prove three elements: an assurance or representation was made to him, that he relied on it, and that he did so to his detriment.

The majority agreed that Mr. Sabey had proven that the von Hopffgartens had made assurances to him that they would leave him the farm. The also accepted that he relied on those assurances to his detriment by working for them for two and a half years with less than market pay, and for working for Mrs. von Hopffgartens without any pay after her husband’s death. But the majority did not agree that he relied on their assurances when he made his career choices, specifically choosing to become an accountant instead of a professional dressage rider, and then choosing a small firm so he could ride at their farm instead of working for a larger firm that would have provided higher pay, but more travel. Nor did the majority accept the argument that in becoming an accountant and working at a small firm Mr. Sabey had acted to his detriment.

Although, Mr. Sabey established an equity, the majority held that the extent of the equity was not sufficiently great to warrant an award of the whole farm to Mr. Sabey. Madam Justice Bennett wrote at paragraph 80:

[80]         In my view, no equity arises as a result of Mr. Sabey deciding not to pursue professional dressage or limiting his employment prospects to firms that were close to the farm. The extent of the equity that arises in this case is Mr. Sabey’s two and a half years of underpaid work after the assurances were made and his continued work on the farm without payment after Dietrich’s death. If Mr. Sabey had not expected to inherit the farm, then he may not have continued to work on the farm. The trial judge erred in concluding that there were other bases on which an equity arose, and in failing to assess proportionality. As a result, the remedy he crafted is not due deference, and is, with respect, clearly wrong.       

Accordingly, the majority ordered that the case be remitted to the trial judge to consider the alternate claims made by Mr. Sabey on the basis of unjust enrichment, and express or implied trust.

Madam Justice MacKenzie dissented. She would have dismissed the appeal on the basis that the trial judge’s findings were supported by the evidence and that the decision was within the trial judge’s broad discretion. 

Sabey v. Beardsley

Dressage is sometimes referred to as horse ballet. It does appear to me that the horses are dancing. Here is a video of from the London 2012 Olympic Grand Prix Dressage I found on You Tube. It involves a high level of horse training, and a high level of skill by the dressage rider and trainer.

Jesse Sabey became interested in dressage riding at a young age. He began riding at 12. He met Kim and Dietrich von Hopffgarten, prominent dressage riders and trainers, a couple of years later after seeing them at a horse show. He lived in Washington State, and they lived across the border in British Columbia. He asked them to give him dressage riding lessons, and they did. After he graduated from high school, the von Hopffgartens assisted in arranging for him to get a student position in a dressage facility in Germany.

In 2001, Mr. Sabey moved to the von Hopffgartens’ horse farm, Sansoucci, in Langley, B.C. He worked for them, while taking riding lessons, but also commuting to Washington State to study accounting, eventually becoming a Certified Public Accountant. He had told the von Hopffgartens that he wanted to become a professional dressage rider, but Mr. von Hopffgarten encouraged him in his studies to become an accountant. He moved to Washington State in 2005, but continued to return to work on the farm, usually on Saturdays. They had become very close over the years.

Although the von Hopffgartens paid Mr. Sabey while he was a working student on the farm, they often paid him less than the other working students they employed. Mr. von Hopffgarten told him on three occasions that the farm would someday be Mr. Sabey’s. Mrs. von Hopffgarten was present on at least one of those occasions. He made further comments that were less explicit, but implied that Mr. Sabey would one day get the farm.

Mr. von Hopffgarten died in 2006, and the farm became Mrs. von Hopffgarten’s as the surviving joint tenant. She told Mr. Sabey that it had been their plan that if anything happened to Dietrich von Hopffgarten, the farm would be Mr. Sabey’s. She asked him to come back and take it then, but because of his job and concern about immigration issues, he continued to live and work in Washington State, returning to the farm on weekends.

Mrs. von Hopffgarten died in May 2011.

Both Dietrich and Kim von Hopffgarten made codicils to their wills leaving Mr. Sabey the farm. Unfortunately, they made the codicils on their own, and each only had one witness to the codicil. In British Columbia, a will or codicil must be witnessed by two witnesses to be valid.

When the new Wills Estates and Succession Act comes into force on March 31, 2014, the Supreme Court of British Columbia will have the power under section 58 to give effect to a document that does not comply with the formal requirements of a will if the Court is satisfied that the document represents the maker’s testamentary intentions (as I discussed here). But this provision, not being in effect, is of no benefit to Mr. Sabey.

Although he could not give effect to the codicils, Mr. Justice Myers in Sabey v. Beardsley, 2013 BCSC 642, awarded Jesse Sabey the farm.

Mr. Sabey’s lawyers, Amy Francis and Andrea Frisby, argued on his behalf that Mr. Sabey was entitled to the farm on the basis of the legal doctrine of proprietary estoppel and Mr. Justice Myers agreed.

In his reasons for judgment, at paragraph 43, Mr. Justice Myers set out the requirements for a promissory estoppel as follows:

Therefore the courts have normally looked to three main elements as a foundation for a proprietary estoppel claim:  a representation made to the claimant; reasonable reliance on the representation; and a detriment to the claimant flowing from the reliance.

He found that Mr. Sabey’s evidence of what Mr. and Mrs. von Hopffgarten told him was credible, consistent with the relationship, and his credibility had not been challenged at trial. The assurances they gave him that the farm would be his were sufficiently clear to convey to him that he would someday receive the farm.

Mr. Justice Myers found that Jesse Sabey relied on the von Hopffgarten’s statements to him to his detriment in choosing a career as an accountant instead of pursing a career as a professional dressage rider. With respect to the argument advanced on behalf of the beneficiary of the farm under Mrs. von Hopffgarten’s will that Mr. Sabey did not suffer financially from his decision to become an accountant, Mr. Justice Myers wrote at paragraph 63:

A financial loss is certainly one type of detriment, but I do not think it is the only type or a necessary element of detriment.  Jesse gave up something he wanted, to become a professional dressage rider.  Whether he would have made more or less money doing that is beside the point.  Further, Jesse oriented his accounting career so that he would not have to travel and so he could work as close as possible (within the United States) to the farm.  I do not think it is incumbent on him to prove a resulting financial loss.  As stated above, reliance and detriment are often one and the same.

In the result, Mr. Sabey is entitled to the farm, Sansoucci.

[This decision was appealed to the British Columbia Court of Appeal, which overturned the decision. See my later post on the Court of Appeal decision here.]