Adomauskas v Chrolavicius^[1]

1. Introduction

I have written about proprietary estoppel before, most recently in connection with the landmark case Guest v Guest,^[2]KEN TO EMBED LINK a decision of the United Kingdom Supreme Court. In some respects, the reasons in the Adomauskas case are unexceptional. They provide a careful examination of the proprietary estoppel doctrine. But it is worth considering the case for two reasons: (1) proprietary estoppel cases are becoming more common; and (2) decisions at the highest levels have considered the doctrine recently and need to be kept in mind. The Adomauskas case did not refer to Guest v Guest for the simple reason that it was decided after Adomauskas. But Adomauskas does rely on the important Supreme Court of Canada case, Cowper-Smith v Morgan.^[3]

2. Facts

John and Ona Adomauskas emigrated from Lithuania after World War II. They met and were married in Hamilton. They had two sons, Edward, born in 1953, and Peter, born in 1960. John worked for Stelco for many years but in the late 1960s he and Ona bought a hotel and tavern in Hamilton. Edward joined them in the business when he was in his early twenties. Thereafter the three of them ran the business together until it was sold in 1986 for $520,000. Edward received one-third of that amount. Peter had a difficult relationship with his parents, who regarded him a rebellious and unreliable. He moved to Calgary in 1983 to get away from his parents and found regular employment there. However, he maintained contact with them through phone calls and visits.

In 1989 John and Ona decided to purchase a house in Calgary for Peter. They spoke to Edward about it and John asked Edward to go to Calgary to find a house and pay the down payment his parents provided. Peter was married, had two young children, and had recently separated from his wife. With Edward’s help, a house was found and purchased. But title was taken in the joint names of John and Ona so that Peter’s wife could not lay claim to an interest in it. However, Edward understood that the parents intended ultimately to transfer title to Peter. He also understood that his father wanted to make amends to Peter for his difficult upbringing and to do something for him since Edward had benefited from the sale of the hotel. Moreover, Peter understood that the house was his. Since the purchase Peter has paid the insurance, taxes, and utilities for the house. He also invested his own time and money in the upkeep of and improvement to the property. His parents were aware of this.

John then died and Ona became to the sole legal owner of the house by right of survivorship. Thereafter, Peter’s relationship with his mother became increasingly strained. The evidence indicated that Ona suffered from severe depression and was treated in and out of hospital with medications and shock therapy. Her personality was difficult and she was manipulative and controlling of her sons. Peter asked her to transfer title to him in 2000, as he wanted to sell it and buy another house, but she refused. Nonetheless, Peter trusted that she would ultimately transfer the property to him.

Ona’s last will provided that Peter could remain in the Calgary house for five years after she died. Then it was to be sold and the proceeds divided equally among Peter and his two children. She appointed the defendants, her adult nephew and niece as her executors. Peter brought this action claiming entitlement to the property under the doctrine of proprietary estoppel. The defendants wanted to distribute Ona’s estate in accordance with her will.

3. Analysis and Judgment

By reference to Cowper-Smith,^[4] Justice Dilts stated that she had to determine whether John and Ona represented to Peter that he would be given the Calgary property, and whether Peter reasonable relied on that representation to his detriment, so that it would be unfair to deny him ownership of the property.

3.1 The Representation

Justice Dilts noted that the representation may be express or implied and can be inferred from the promisor’s conduct. It does not have to be made in detail, but it must be sufficiently certain to give rise to reasonable reliance.

She found that the parents expressly or impliedly represented to Peter (and Edward) that the property would belong to Peter. They also told their sons why title would be taken in the parents’ names, but there was no evidence to indicate that the property would remain part of their estates. Thus, Justice Dilts concluded that the representations made by the parents were capable of giving rise to an equity in Peter’s favour.

3.2 Reliance

Justice Dilts noted that reliance and detriment are distinct elements of proprietary estoppel. Reliance involves a change in a party’s conduct because of the representation made. The reliance must be reasonable, but reasonableness is measured by the nature of the promise and the relationship between the parties. The representation must also be plausible; otherwise the reliance of the promise cannot be reasonable. Based on the evidence, she concluded that the reliance was reasonable. Moreover, the parents themselves expected Peter to rely on their representations and to maintain the property and improve it. And it was clear that Peter in fact relied on his parents’ representations.

3.3 Detriment

If the promisee relies to his detriment on the representation, that results in unfairness to which the doctrine of proprietary estoppel responds. When there has been continuous reliance of a long period of time, the court must measure the detriment at the point in time when the promisor resiles from the promise, or when, as here, the promisee learnt that the promisor has broken it. Based on the evidence, Peter clearly suffered a detriment. He paid for the upkeep and improvement of the property over two decades and did not consider any possible alternative than that the property was his. Moreover, Ona was aware of Peter’s continuing investment in the property. Consequently, all the elements of the doctrine of proprietary estoppel were established, and therefore Ona could not resile from the original representation.

3.4 Remedy

Justice Dilts noted that the doctrine does not axiomatically give title to the promisee. Rather, ‘the court must satisfy the equity that has arisen in a way that is proportionate to the overall detriment suffered and the benefits gained (para 54). In other words, the remedy is not based solely on the promisee’s expectation, for the equity must be proportionate to the detriment suffered.

The remedy must be the minimum necessary to avoid an unfair or unjust result according to Cowper-Smith.^[5] But, having regard to the fact that Peter’s reliance on his parents’ promise continued over decades to the parents’ knowledge, and that it was consistent, the appropriate remedy to satisfy the equity was to order that title the property be transferred to Peter.

4. Conclusion

I do not quarrel with the decision as such. It is well-supported by the evidence and it is well argued. However, in light of the majority reasons in Guest v Guest,^[6] courts in future cases should probably approach the resolution of such cases somewhat differently. Lord Briggs makes the following points:

(1) Detrimental reliance is a necessary condition for the equity to arise, but when the court holds the promisor to his promise, that does not seek to protect the promisee from the detriment or compensate him for it. Rather, the court’s aim is to prevent or remedy the unconscionability of the promisor’s conduct, ‘with the effect, but not the aim’ that it tends to satisfy the expectations of the promise (para 61).

(2) The court ‘should firmly reject the theory that the aim of the remedy for proprietary estoppel is detriment-based (para 71).

(3) The concept of proportionality has been adopted by the cases ‘as part of the assessment of whether a proposed remedy to deal with the proven unconscionability based on satisfying the claimant’s expectations works substantial justice between the parties’. However, while the concept is a good servant, it is a bad master and ‘is no more than a useful cross-check for potential injustice’. Thus, ‘the best summary of the proportionality test is that the remedy should not, without some good reason, be out of all proportion to the detriment’ (para 72). Moreover, the court should not consider the question of proportionality on the basis of pure financial considerations (para 73).

(4) The court should normally approach the issue in two stages. The first stage is to determine whether the promisor’s repudiation of the promise is unconscionable, having regard to the promisee’s detrimental reliance on it (para 74). In the second stage the court considers the remedy. Normally, that means that court will hold the promisor to his promise, but that may depend on the circumstances (paras 75-76).

(5) The concept of a ‘minimum equity’ derives from a dictum of Scarman LJ in Crabb v Arun District Council.^[7] In that case the court sought to fulfill the plaintiff’s expectations in the fairest way, while ensuring that his expectations were not exceeded. In that context Scarman LJ said. ‘I would analyse the minimum equity to do justice to the plaintiff either to an easement or a licence upon terms to be agreed’.^[8] This concept has often been misunderstood. However, Robert Walker LJ said of it in Jennings v Rice,^[9] ‘Scarman LJ’s reference to the minimum does not require the court to be constitutionally parsimonious, but it does implicitly recognize that the court must also do justice to the defendant’. In Guest v Guest Lord Briggs noted that the dictum was not ‘minimum equity’, but ‘minimum equity to do justice’ (para 13).

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[1]2022 ABQB 567, 81 ETR 4th 104.

[2][2022] UKSC 27. See ‘Proprietary Estoppel: Guest v Guest’ https://welpartners.com/blog/2022/12/proprietary-estoppel-guest-v-guest/.

[3]2017 SCC 61, [2017] 2 SCR 754.

[4]Ibid., para 15.

[5]Ibid, para 47

[6]Footnote 2, supra.

[7][1976] Ch 179 (CA).

[8]Ibid., pp 1998-99, emphasis supplied.

[9][2002] EWCA Civ 159, para 44.