Introduction
Winter v Winter[1] is a recent English case in which the testator, Albert Winter, left the residue of his estate to one of his sons, Philip while cutting out his other two sons, Richard and Adrian. The residue consisted of the testator’s interest in a business partnership and company and the property on which the business was operated. Richard and Adrian brought an action in which they claimed, first, that Albert and his late wife previously made mutual wills and that Albert’s Will was materially different from the mutual wills. Second, they claimed that their parents made numerous assurances to them over the years that they would leave everything to their three sons equally and that Richard and Adrian relied on these assurances to their detriment. Thus, they based their claim in second instance on proprietary estoppel.
Facts
The testator, Albert Winter, his wife, Brenda, and his three sons, Richard, Philip, and Adrian, operated a market garden business as a partnership, known as Team Green Growers (the ‘Partnership’), since 1988. Each of them held a one-fifth share. The business was conducted from its main parcel of land, Bower Farm (Bower Farm’). It was owned by Albert and Brenda, but they had declared a trust of it in favour of the Partnership and they transferred the beneficial interest in the farm to the Partnership in 2000. The Partnership purchased two other farms later which it built houses for Adrian and Philip. The Partnership also built a new house on Bower Farm for Richard.
Brenda died in 2001 and by her will, made in 2000, she transferred her share of the Partnership to her three sons in equal shares. She left the residue of her estate to Albert. Consequently, thereafter, Albert had a 20% share in the Partnership and the three sons each had a 26.66% share. However, in 2004 they transferred the business, but not the property, to a company. Team Green Growers Ltd (the ‘Company’) of which Albert and his sons were equal shareholders. Even though Albert and his sons were equal partners, until about 2014, Albert exercised effective control over the affairs of the Company.
Albert made a new will in 2015. In it he made a gift of £20,000 to his then partner, Diana Turner, and left the residue of his estate, including his interests in the Partnership and the Company, to Philip.
Richard and Adrian sued Philip, the executor of Albert’s estate. They presented two arguments. First, they argued that Brenda and Albert made mutual wills in the same terms as Brenda’s Will of 2000, with the result that, as they claimed, Albert’s estate was subject to a constructive trust to give effect to the alleged mutual will. Second, they argued that they were entitled to an equal share of the estate with Philip based on the doctrine of proprietary estoppel. They presented evidence of numerous assurances allegedly made by Brenda and Albert that they would leave all their assets (at least the land and the farming business) equally to their three sons if they committed their lives to the family business. And they argued that they relied to their detriment on those assurances.
The sons worked part-time in the business while they were in school and full-time thereafter, except for two occasions. Richard wanted to join the military after school. But he was invalided out of the Parachute Regiment early on and then abandoned his plans to join the Royal Marines and decided to work on the farm full-time. He was by then in a committed relationship with his future wife and albert had made clear that if he chose the Marines, he would be cut off from the family business. Adrian had a falling out with Albert in 1996, when he went to work for the Royal Ordinance Factory for a few months, followed by some other jobs. But he returned to the family business when Albert had made it clear to him that if he left, he would lose any share he might otherwise receive in the family business. After Richard returned to the family business, the parents established the Partnership.
In 2013-2014 relations between Richard and Adrian on the one hand and Albert and Philip on the other, began to deteriorate. Philip had become closer to his father after Brenda died, while Richard and Adrian focused more on the business. In consequence, Albert sided with Philip in the business. Meanwhile, the business ran into financial difficulties because of excessive borrowing. An independent consultant developed a plan to resolve the difficulties. He recommended that parts of the farming business be discontinued, and some farm machines and excess acreage be sold. Albert and Philip did agree to the plan but were unhappy with it, and Philip took steps to obstruct its implementation. The accountant of the business noted that the lack of communication between the partners and the lack of teamwork would continue to cause problems. He recommended that one family member should be in control of the business, and in fact, Richard assumed effective control. When Albert gave instruction for his 2015 Will, he told his solicitor (who had also advised him and Brenda), that he was disappointed with Richard and Adrian and did not want to leave them anything. The breakdown of relations meant that Richard and Adrian did not meet with their father in the last years of his life and did not attend his funeral. Albert died in 2017. Thereafter the Partnership and Company ceased trading, and its assets were sold or were being sold. Bower Farm was sold for a large amount of money because it had development potential, and indeed, in 2018, planning permission was obtained to develop it into a residential estate.
Analysis and Judgment
Mr. Justice Zacaroli addressed the argument on proprietary estoppel first. By reference to the judgment of Lewison LJ in Davies v Davies,[2] his Lordship noted that the ingredients necessary to raise an equity are: (a) an assurance of sufficient clarity; (b) reliance by the claimant of that assurance; and (c) detriment to the claimant in consequence of his reasonable reliance. The essential test is unconscionability and, if found, the court must do what is necessary to avoid an unconscionable result. But the court must also ensure that there is proportionality between the remedy and the detriment which it seeks to avoid. The question of proportionality was also a main focus of the speech of Lord Briggs in Guest v Guest.[3] Thus, for example, while specific performance of the promise, or its monetary equivalent may be the ideal, if that ‘would be out of all proportion to the cost of the detriment to the promisee’ (para 41), the court may have to limit the remedy. In §80, Lord Briggs summarized his conclusions as follows:
In the end the court will have to consider its provisional remedy in the round, against all the relevant circumstances, and ask itself whether it would do justice between the parties, and whether it would cause injustice to third parties. The yardstick for that justice assessment will always be whether, if the promisor was to confer that proposed remedy upon the promisee, he would be acting unconscionably. “Minimum equity to do justice” means in that context, a remedy which will be sufficient to enable that unconscionability question to be answered in the negative.
Mr. Justice Zacaroli went on to point out that to establish a proprietary estoppel, the assurance relied on by the claimant must be clear. He quoted a statement by Lord Walker in Thorner v Major,[4] where he pointed out that what amounts to sufficient clarity is ‘hugely dependent on context’, and on that point, Lord Walker quoted the following statement of Lord Hoffman in the unreported case, Walton v Walton:[5]
The promise must be unambiguous and must appear to have been intended to be taken seriously. Taken in its context, it must have been a promise which one might reasonably expect to be relied upon by the person to whom it was made.
Mr. Justice Zacaroli then considered the evidence. Richard and Adrian testified to the constant assurances by their parents that the three sons would inherit the business if they worked hard on the farm. He found both witnesses to be straightforward and truthful. Philip agreed that the three sons would eventually be treated equally if they worked on the farm in the meantime but denied that his parents had promised that ‘one day all this will be yours’. Philip was aware that Albert was changing his will in 2015 to leave everything to him, but Richard and Adrian were not.
Other witnesses, family members, friends, and professionals, mainly confirmed that Brenda and Albert always intended that their three sons would inherit the business. His Lordship found that the evidence provided by witnesses called by Philip was not helpful, since they had no knowledge about the assurances. The solicitor who drafted the 2015 will did testify that nothing in what Albert said or did during his course of dealings with him suggested that he made promises to his sons that could have created an estoppel. However, his Lordship noted that the assurances were made informally over a long period of time, it would be surprising if Albert was aware of the concept of proprietary estoppel, and therefore it was not surprising that Albert did not tell the solicitor about the assurances.
His Lordship found that the evidence described a family that worked together in their business, that profits were ploughed back in the business and that the sons were expected to work for low wages because they were working for their future. Further, the parents intended to treat their sons equally and intended to leave the business to them if they continued working in it. He concluded that whether or not Albert or Brenda actually told them, ‘All of this will be yours someday’, it was reasonable for the sons to understand that this would be so from the assurances their parents did make to them. This was confirmed by the fact that Brenda left her interest equally to her sons. He noted that what parents tell their children is often said informally, and then it is difficult to distinguish a mere statement of intention from an assurance. But when, as in this case the statements were made to encourage the sons to continue to work in the family business, it is easier to characterize the statements as assurances. He also noted that an assumption by the sons that they would inherit everything would not by itself suffice to raise an equity. But an assumption induced in the sons by things the parents have told them over a long period of time is a sufficient basis for an estoppel.
There was also a subsidiary question, namely, whether the assurances the parents made extended to all their property. His Lordship concluded that the evidence did not allow such a conclusion but that the assurances extended only to the farming business and assets.
Next, his Lordship considered the discrete aspects of proprietary estoppel, namely, reliance, detriment, and unconscionability, separately. He concluded that reliance was clearly established in this case. On the aspect of detriment, he concluded that, while Richard and Adrian did gain and retain a share in the Partnership and the Company, those countervailing benefits could not be held to avoid the conclusion that they suffered a detriment. However, the court may consider such countervailing benefits in structuring the remedy. On these points his Lordship relied, inter alia, on Gillett Holt,[6] and Davies v Davies.[7] His Lordship also concluded that it would be unconscionable for Albert’s estate to renege on the assurances made to Richard and Adrian. The fact that the circumstances have changed since those assurances were made, in that the business had become dysfunctional, the sons were no longer able to work together, the business has been wound up, and that Adrian had physically assaulted his father at one point.
His Lordship then considered the appropriate remedy. By reference to Lord Briggs’ speech in Guest,[8] he considered that, when assurances have been made and acted on over a long period of time, the starting point for determining the appropriate remedy is to give full effect to the assurances. Those assurances would result, in this case, in the sons each receiving a one-third share of the parent’s interest. The fact that the sons have already received value from the realization of their own shares in the Partnership and the Company is irrelevant. So is the fact that the sons have received a windfall from the increase in the value of the Bower Farm, something that the family members did not contemplate when they began the business. Nor was Richard and Adrian’s claim barred by contractual estoppel because they entered into Partnership agreement which contained an option that allowed continuing partners to buy out an outgoing or deceased partner. It was true that Richard and Adrian served a notice on Philip’s lawyer purporting to exercise the option to purchase Albert’s share. However, by its terms, the option was exercisable only by all the other partners together. Since that did not happen, the purported exercise of the option by Richard and Adrian was ineffective.
Finally, his Lordship dismissed the mutual wills argument. The mutual wills doctrine can be made if the testators have entered into a binding agreement that the survivor cannot change his will. There was no evidence of such an agreement and an agreement could not, in the circumstances be inferred from the assurances the parents made to their sons.
Accordingly, his Lordship held that the assurances Albert and Brenda gave throughout their lives were sufficient to give rise to proprietary estoppel in favour of Richard and Adrian. The estoppel extended only to Albert’s and Brenda’s interest in the assets of the Partnership and, from 2004, Albert’s shares in the Company. It did not extend to Albert and Brenda’s personal estates. Thus, Albert’s share of the Partnership business and assets and his shares in the Company were divisible equally between the three sons.
—
[1] [2023] EWHC 2393 (Ch).
[2] [2016] EWCA Civ 463, §38.
[3] [2022] UKSC, at §§74-80. See also my blog, https://welpartners.com/blog/2022/12/proprietary-estoppel-guest-v-guest/
[4] [2009] UKHL 18, §56.
[5] [1994] CA, §16.
[6] [2001] Ch 210 (CA).
[7] Footnote 2, supra.
[8] Footnote 3, supra.
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Written by: Albert Oosterhoff
Posted on: August 21, 2024
Categories: Commentary, Proprietary Estoppel, WEL Newsletter
Introduction
Winter v Winter[1] is a recent English case in which the testator, Albert Winter, left the residue of his estate to one of his sons, Philip while cutting out his other two sons, Richard and Adrian. The residue consisted of the testator’s interest in a business partnership and company and the property on which the business was operated. Richard and Adrian brought an action in which they claimed, first, that Albert and his late wife previously made mutual wills and that Albert’s Will was materially different from the mutual wills. Second, they claimed that their parents made numerous assurances to them over the years that they would leave everything to their three sons equally and that Richard and Adrian relied on these assurances to their detriment. Thus, they based their claim in second instance on proprietary estoppel.
Facts
The testator, Albert Winter, his wife, Brenda, and his three sons, Richard, Philip, and Adrian, operated a market garden business as a partnership, known as Team Green Growers (the ‘Partnership’), since 1988. Each of them held a one-fifth share. The business was conducted from its main parcel of land, Bower Farm (Bower Farm’). It was owned by Albert and Brenda, but they had declared a trust of it in favour of the Partnership and they transferred the beneficial interest in the farm to the Partnership in 2000. The Partnership purchased two other farms later which it built houses for Adrian and Philip. The Partnership also built a new house on Bower Farm for Richard.
Brenda died in 2001 and by her will, made in 2000, she transferred her share of the Partnership to her three sons in equal shares. She left the residue of her estate to Albert. Consequently, thereafter, Albert had a 20% share in the Partnership and the three sons each had a 26.66% share. However, in 2004 they transferred the business, but not the property, to a company. Team Green Growers Ltd (the ‘Company’) of which Albert and his sons were equal shareholders. Even though Albert and his sons were equal partners, until about 2014, Albert exercised effective control over the affairs of the Company.
Albert made a new will in 2015. In it he made a gift of £20,000 to his then partner, Diana Turner, and left the residue of his estate, including his interests in the Partnership and the Company, to Philip.
Richard and Adrian sued Philip, the executor of Albert’s estate. They presented two arguments. First, they argued that Brenda and Albert made mutual wills in the same terms as Brenda’s Will of 2000, with the result that, as they claimed, Albert’s estate was subject to a constructive trust to give effect to the alleged mutual will. Second, they argued that they were entitled to an equal share of the estate with Philip based on the doctrine of proprietary estoppel. They presented evidence of numerous assurances allegedly made by Brenda and Albert that they would leave all their assets (at least the land and the farming business) equally to their three sons if they committed their lives to the family business. And they argued that they relied to their detriment on those assurances.
The sons worked part-time in the business while they were in school and full-time thereafter, except for two occasions. Richard wanted to join the military after school. But he was invalided out of the Parachute Regiment early on and then abandoned his plans to join the Royal Marines and decided to work on the farm full-time. He was by then in a committed relationship with his future wife and albert had made clear that if he chose the Marines, he would be cut off from the family business. Adrian had a falling out with Albert in 1996, when he went to work for the Royal Ordinance Factory for a few months, followed by some other jobs. But he returned to the family business when Albert had made it clear to him that if he left, he would lose any share he might otherwise receive in the family business. After Richard returned to the family business, the parents established the Partnership.
In 2013-2014 relations between Richard and Adrian on the one hand and Albert and Philip on the other, began to deteriorate. Philip had become closer to his father after Brenda died, while Richard and Adrian focused more on the business. In consequence, Albert sided with Philip in the business. Meanwhile, the business ran into financial difficulties because of excessive borrowing. An independent consultant developed a plan to resolve the difficulties. He recommended that parts of the farming business be discontinued, and some farm machines and excess acreage be sold. Albert and Philip did agree to the plan but were unhappy with it, and Philip took steps to obstruct its implementation. The accountant of the business noted that the lack of communication between the partners and the lack of teamwork would continue to cause problems. He recommended that one family member should be in control of the business, and in fact, Richard assumed effective control. When Albert gave instruction for his 2015 Will, he told his solicitor (who had also advised him and Brenda), that he was disappointed with Richard and Adrian and did not want to leave them anything. The breakdown of relations meant that Richard and Adrian did not meet with their father in the last years of his life and did not attend his funeral. Albert died in 2017. Thereafter the Partnership and Company ceased trading, and its assets were sold or were being sold. Bower Farm was sold for a large amount of money because it had development potential, and indeed, in 2018, planning permission was obtained to develop it into a residential estate.
Analysis and Judgment
Mr. Justice Zacaroli addressed the argument on proprietary estoppel first. By reference to the judgment of Lewison LJ in Davies v Davies,[2] his Lordship noted that the ingredients necessary to raise an equity are: (a) an assurance of sufficient clarity; (b) reliance by the claimant of that assurance; and (c) detriment to the claimant in consequence of his reasonable reliance. The essential test is unconscionability and, if found, the court must do what is necessary to avoid an unconscionable result. But the court must also ensure that there is proportionality between the remedy and the detriment which it seeks to avoid. The question of proportionality was also a main focus of the speech of Lord Briggs in Guest v Guest.[3] Thus, for example, while specific performance of the promise, or its monetary equivalent may be the ideal, if that ‘would be out of all proportion to the cost of the detriment to the promisee’ (para 41), the court may have to limit the remedy. In §80, Lord Briggs summarized his conclusions as follows:
In the end the court will have to consider its provisional remedy in the round, against all the relevant circumstances, and ask itself whether it would do justice between the parties, and whether it would cause injustice to third parties. The yardstick for that justice assessment will always be whether, if the promisor was to confer that proposed remedy upon the promisee, he would be acting unconscionably. “Minimum equity to do justice” means in that context, a remedy which will be sufficient to enable that unconscionability question to be answered in the negative.
Mr. Justice Zacaroli went on to point out that to establish a proprietary estoppel, the assurance relied on by the claimant must be clear. He quoted a statement by Lord Walker in Thorner v Major,[4] where he pointed out that what amounts to sufficient clarity is ‘hugely dependent on context’, and on that point, Lord Walker quoted the following statement of Lord Hoffman in the unreported case, Walton v Walton:[5]
The promise must be unambiguous and must appear to have been intended to be taken seriously. Taken in its context, it must have been a promise which one might reasonably expect to be relied upon by the person to whom it was made.
Mr. Justice Zacaroli then considered the evidence. Richard and Adrian testified to the constant assurances by their parents that the three sons would inherit the business if they worked hard on the farm. He found both witnesses to be straightforward and truthful. Philip agreed that the three sons would eventually be treated equally if they worked on the farm in the meantime but denied that his parents had promised that ‘one day all this will be yours’. Philip was aware that Albert was changing his will in 2015 to leave everything to him, but Richard and Adrian were not.
Other witnesses, family members, friends, and professionals, mainly confirmed that Brenda and Albert always intended that their three sons would inherit the business. His Lordship found that the evidence provided by witnesses called by Philip was not helpful, since they had no knowledge about the assurances. The solicitor who drafted the 2015 will did testify that nothing in what Albert said or did during his course of dealings with him suggested that he made promises to his sons that could have created an estoppel. However, his Lordship noted that the assurances were made informally over a long period of time, it would be surprising if Albert was aware of the concept of proprietary estoppel, and therefore it was not surprising that Albert did not tell the solicitor about the assurances.
His Lordship found that the evidence described a family that worked together in their business, that profits were ploughed back in the business and that the sons were expected to work for low wages because they were working for their future. Further, the parents intended to treat their sons equally and intended to leave the business to them if they continued working in it. He concluded that whether or not Albert or Brenda actually told them, ‘All of this will be yours someday’, it was reasonable for the sons to understand that this would be so from the assurances their parents did make to them. This was confirmed by the fact that Brenda left her interest equally to her sons. He noted that what parents tell their children is often said informally, and then it is difficult to distinguish a mere statement of intention from an assurance. But when, as in this case the statements were made to encourage the sons to continue to work in the family business, it is easier to characterize the statements as assurances. He also noted that an assumption by the sons that they would inherit everything would not by itself suffice to raise an equity. But an assumption induced in the sons by things the parents have told them over a long period of time is a sufficient basis for an estoppel.
There was also a subsidiary question, namely, whether the assurances the parents made extended to all their property. His Lordship concluded that the evidence did not allow such a conclusion but that the assurances extended only to the farming business and assets.
Next, his Lordship considered the discrete aspects of proprietary estoppel, namely, reliance, detriment, and unconscionability, separately. He concluded that reliance was clearly established in this case. On the aspect of detriment, he concluded that, while Richard and Adrian did gain and retain a share in the Partnership and the Company, those countervailing benefits could not be held to avoid the conclusion that they suffered a detriment. However, the court may consider such countervailing benefits in structuring the remedy. On these points his Lordship relied, inter alia, on Gillett Holt,[6] and Davies v Davies.[7] His Lordship also concluded that it would be unconscionable for Albert’s estate to renege on the assurances made to Richard and Adrian. The fact that the circumstances have changed since those assurances were made, in that the business had become dysfunctional, the sons were no longer able to work together, the business has been wound up, and that Adrian had physically assaulted his father at one point.
His Lordship then considered the appropriate remedy. By reference to Lord Briggs’ speech in Guest,[8] he considered that, when assurances have been made and acted on over a long period of time, the starting point for determining the appropriate remedy is to give full effect to the assurances. Those assurances would result, in this case, in the sons each receiving a one-third share of the parent’s interest. The fact that the sons have already received value from the realization of their own shares in the Partnership and the Company is irrelevant. So is the fact that the sons have received a windfall from the increase in the value of the Bower Farm, something that the family members did not contemplate when they began the business. Nor was Richard and Adrian’s claim barred by contractual estoppel because they entered into Partnership agreement which contained an option that allowed continuing partners to buy out an outgoing or deceased partner. It was true that Richard and Adrian served a notice on Philip’s lawyer purporting to exercise the option to purchase Albert’s share. However, by its terms, the option was exercisable only by all the other partners together. Since that did not happen, the purported exercise of the option by Richard and Adrian was ineffective.
Finally, his Lordship dismissed the mutual wills argument. The mutual wills doctrine can be made if the testators have entered into a binding agreement that the survivor cannot change his will. There was no evidence of such an agreement and an agreement could not, in the circumstances be inferred from the assurances the parents made to their sons.
Accordingly, his Lordship held that the assurances Albert and Brenda gave throughout their lives were sufficient to give rise to proprietary estoppel in favour of Richard and Adrian. The estoppel extended only to Albert’s and Brenda’s interest in the assets of the Partnership and, from 2004, Albert’s shares in the Company. It did not extend to Albert and Brenda’s personal estates. Thus, Albert’s share of the Partnership business and assets and his shares in the Company were divisible equally between the three sons.
—
[1] [2023] EWHC 2393 (Ch).
[2] [2016] EWCA Civ 463, §38.
[3] [2022] UKSC, at §§74-80. See also my blog, https://welpartners.com/blog/2022/12/proprietary-estoppel-guest-v-guest/
[4] [2009] UKHL 18, §56.
[5] [1994] CA, §16.
[6] [2001] Ch 210 (CA).
[7] Footnote 2, supra.
[8] Footnote 3, supra.
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