A promise to make a gift to someone could be legally enforceable, if the person to whom the promise is made relies on it to their detriment. This concept is known as proprietary estoppel. The recent case of Moore v Moore has provided a further illustration of this.
Essentially, for proprietary estoppel to arise there are three main elements that must be present:
- A representation or assurance must have been made by one party to the other (“the Promisee”).
- The Promisee must have relied on that representation.
- The Promisee must have suffered some detriment because of their reasonable reliance on that representation.
The court has also made it clear (and it reiterated this point in both of the Davies cases last year) that the matter must be considered “in the round” and not simply be restricted to only the three elements above.
Moore v Moore does not provide any new law but it is a useful reminder to farmers and other business owners of how the courts could apply the law.
In this case, Stephen Moore brought a claim against his father, Roger, who had promised the family farm to him on more than 12 occasions. Stephen had worked on the family farm since childhood, had become a salaried partner in around 1998 and had progressed his way up to being an equity partner in the business in 2003/2004. Stephen had based his entire life around the family farm and he farmed in partnership with his father and uncle (who left the partnership in approximately 2008). Following his uncle’s departure from the partnership, the court heard evidence as to how Roger and Stephen continued to farm in partnership together, and how Roger’s mental state slowly declined due to the onset of dementia; in fact the court appointed someone to conduct proceedings on his behalf (known as a litigation friend). The case represented a “substantial falling out” between the family members. Stephen’s claims were supported by his wife and other members of the family, while Roger’s case was supported by his wife Pamela (Stephen’s mother), Stephen’s sister and her husband.
Roger and Pamela made various allegations against Stephen, suggesting that he was violent and difficult. Pamela maintained in her evidence throughout, that her intention was to redress what she saw as a significant imbalance of the inheritance that Stephen would receive if the farming business went to him on his father’s death, compared with what his sister would receive.
The court found that it was in fact Stephen’s mother Pamela who had driven the litigation forward and had taken advantage of her husband’s ever declining mental state, as she felt that his plans for the future of the farm were unfair to their daughter. It was acknowledged by the court that Roger would never have litigated against his own son, if he still had capacity. The court acknowledged there was strong evidence that Roger made a number of promises to Stephen, and that he had relied on these promises, assuming that the land and farming business would one day become his. The court accepted Stephen’s evidence that it had not just been made clear, but that his belief was encouraged namely that one day he would take over the running of the farm. In fact, both Roger and Stephen’s uncle made comments to this effect. The detriment to Stephen came when his father and mother changed their Wills in 2011/2012, to address Pamela’s perceived inequalities between the inheritance that he and his sister would receive, effectively preventing Stephen inheriting what had been promised to him. Interestingly, this was the first Will that Roger had made where Stephen was not a beneficiary of the farm or the business.
Stephen’s evidence, which the court accepted, was that from 1991-2011 he had not taken any expensive holidays, had worked very long hours without additional remuneration (which he would not have done had he have been otherwise employed) and had only earned £590 per fortnight, of which £190 was contributed to his pension. His evidence, which was accepted by the court, was that he believed he could have found a better paying job elsewhere which would likely have provided better accommodation.
The court found in Stephen’s favour and decided that the business assets (including Roger’s partnership current account) and the land (including the farmhouse) should be transferred into his sole name; the value of these assets totalled around £10 million. His parents were only entitled to receive income equivalent to what they would have received if the current arrangement had continued until their deaths, and to staying in the farmhouse for as long as it met their needs. The partnership fell to be dissolved on the basis of Roger’s ill health and lack of capacity.
In much the same way as in the two Davies cases reported last year, this case serves as a warning that the court will order what it regards to be a “just” outcome, so business owners really should be careful what they promise to others!
One final point to note is that while these sorts of cases are very much fact specific and it is perhaps unlikely that the decision itself will be appealed, assessing exactly how to remedy the inequity is always difficult and so it would not be surprising if Stephen’s parents appealed against the quantum of the award in this case.