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“One day all this will be yours…”

30 Jun 2015

Can such a promise give the recipient a right to assets? It is possible to enforce such a promise under the principle of proprietary estoppel. For such a promise to be binding, a claimant must show that a promise was made to them or assurances were given upon which they relied to their detriment. The claimant must also have been encouraged in their incorrect belief.

The facts

A claim under the principle of proprietary estoppel was recently made in the case of the “Cowshed Cinderella”.

This case involved Miss Davies. Her parents owned a successful farming business. Miss Davies had worked on her farm for little or no payment on the understanding that she would receive the entire business one day. Miss Davies had two sisters neither of whom had been involved in the business. They had left the farm to pursue other careers. The “Cinderella” name arose from one story which described how Miss Davies’s sisters had paraded through the poultry shed in ball gowns whilst she prepared the Christmas turkeys.

The promise

Miss Davies’s parents told her that she would have a long term future on the farm and would be made a partner in the farming business. She did leave the farm for a short time in 2001 but returned after her father promised her that she would have rent-free accommodation for life at the farmhouse. She was told that she would become a shareholder in the farming business and she continued to work on the farm in reliance of the assurances made.

In 2008, Miss Davies’ parents had agreed to hand over 49% of the business to her. Documents were prepared to effect this but the agreement was never signed. Instead, Miss Davies’ parents agreed to draft Wills which would give her the land and buildings and a share in the company.

The fall out

Shortly after, a family rift developed. Miss Davies’ parents decided to put the farm into a trust with the residue being split equally between all 3 daughters. The family fallout continued and Miss Davies left the farm in 2012. She then sued to establish her interest in the business which was valued at £3.8million, claiming proprietary estoppel.

In the High Court, the Judge allowed her claim although the value of her interest was left to be decided. Miss Davies’ parents appealed but this was rejected.

The end result

The Court of Appeal invited Miss Davies and her parents to agree a settlement but this proved impossible. Therefore in Feburary 2015, Miss Davies went back to the High Court which awarded her £1.3million (one third of the value of the business) as compensation.

This is less than she was originally promised by her parents but Miss Davies is getting it now rather than having to wait until her parents die. The judge did take into account the fact that Miss Davies’ parents had owned the farm originally, are still actively involved in the farming business and had contributed considerably to the success of the business.

What lessons can be learnt from this case?

  1. Don’t make promises you cannot keep– by making promises you may be granting someone an interest in your estate if that person acts to their detriment in reliance upon it.
  1. If promises are made to you – these may be empty and although the court may intervene, if you do not inherit what you were promised, you must remember each case turns on its facts and being awarded an interest is not a given right.

This case is a reminder that anyone who makes a promise, in the absence of a legal agreement, can still put themselves at risk of a later equitable claim against them. If the Court deems it ‘unconscionable’ for a promise or assurance not to have been kept, an individual could be compensated for their loss.

Can you reverse a promise by making a Will?

Someone may decide to change their Will to counteract a promise that has been made; nonetheless, if the law finds sufficient evidence to show that someone relied on a previously given promise i.e. assurance, to their detriment, the court may ignore your Will and instead, honour the promise.

The value of an award will obviously depend on a person’s expectation, the detriment suffered, as well as historic and relevant events. The circumstance as a whole will be considered and every case turns on its facts. However, let it be known: formal legal arrangements/documents are not necessary to enforce a promise, within this area of law.

What can you do?

This is a complicated area of law and you should seek advice from a solicitor and allow them to explain the possible consequences of any promise you may have made, or received. If necessary, a viable agreement could potentially be sought to pre-empt the possible future need for costly proceedings.

Ultimately one must have in mind: don’t make promises you may not want to keep in future.

For further information, please contact Alison Hall, Partner at Hay & Kilner

Call: 0191 232 8345

Email: Alison.Hall@hay-kilner.co.uk