Habberfield v Habberfield: Proprietary Estoppel

At the end of May, the Court of Appeal gave judgment in the case of Habberfield v Habberfield [2019] EWCA Civ 890, an appeal concerning a farming family and the operation of proprietary estoppel. The question for the court at first instance had been whether one of the daughters of the family, Lucy Habberfield, had established a equitable interest in the family farm. In this appeal case, the Court grappled with a number of important principles about the operation of the doctrine including what, exactly, is the objective that the court pursues in deciding how to satisfy proprietary estoppel? The case will no doubt be of interest to family practitioners, in particular those who regularly advise separating unmarried couples or advise on farming disputes. Such cases appear to be increasing - the first instance decision in Habberfield came in 2018, and was one of twelve such claims that came before the High Court that year. Only three of those claims, including Habberfield, were successful.

In brief, Frank and Jane Habberfield had farmed Woodrow Farm in Somerset in partnership since 1975. They had four children, Emma, Andrew, Sarah and Lucy. Lucy had worked full-time on the farm since leaving school, and it was her enthusiasm for dairy farming that persuaded Frank to return to this area of work, which eventually became the cornerstone of the business in 1983 (although by 2015, the focus had shifted to beef cattle and arable land.) It was also at that time that Frank began to make assurances to Lucy: the judge at first instance, Birss J, had found that Frank had assured Lucy that if she continued to work on the farm, he would one day pass the business and eventually the farm land to her, albeit with some land made available to Andrew, some provision for Emma and Sarah, and the understanding that the title to the farm and the farmhouse would not necessarily be conveyed to Lucy in Frank and Jane’s lifetimes. Birss J made robust findings of fact, and summarised them by finding that Lucy expected to receive at viable dairy farm at Woodrow. He was satisfied that Frank’s assurances had been made with Jane’s knowledge and authority. He also made clear findings that Lucy had relied on these promises to her detriment, for example receiving low pay and little holiday, and choosing not to set up her own independent farming business elsewhere.

Family tensions heightened in 2008, when Frank and Jane made an offer to Lucy, the key terms of which were that there would be a new limited liability partnership to run the farm, with Frank, Jane and Lucy as partners. Lucy rejected this offer, being unhappy that her siblings could continue to interfere in the farm through their parents, and that her partner Stuart, with whom she had three children and who worked on the farm, was not immediately brought into the partnership. Lucy and Stuart continued to work for the farm, in the hope that she would receive what she expected in the long run.

By October 2013, family relationships broke down completely, and Lucy and Stuart resigned. Frank died the following year, and Lucy began her claim for proprietary estoppel in 2016, seeking an order that the farm and the assets of the farming partnership be transferred to her, although conceding that Jane should be able to remain living in the farmhouse for the remainder of her life and there should be provision made for her. At the conclusion of the trial, Birss J held that Lucy had successfully established reliance on assurances and detriment, and ordered that Lucy should receive a cash payment of the value of the Woodrow farmland and farm buildings (but excluding the farmhouse) which on the evidence before him was £1,170,000. He considered the offer that had been made to Lucy in 2008, and held that although refusal of the offer did not justify denying Lucy's claim in its entirety, it was ‘a genuine attempt by Frank and Jane to resolve the issue of succession’ and should therefore be taken into account, as should the fact that Lucy had left the farm in 2013. The value of the expectation was the value of the land (less the farmhouse), without the cost of reinstating a working dairy unit. A cash payment was preferable to a transfer of the farm, which would be tax inefficient.

There was a further hearing to determine the wording of the order, with one of the primary areas of dispute being whether the cash payment to Lucy should be deferred until after Jane’s death. The judge held that the order should provide for the payment of the cash sum within 14 days, but that enforcement should be stayed pending the sale of the farm.

Jane appealed on four grounds: that Lucy’s refusal of the 2008 offer meant that it was not inequitable for Frank or Jane to resile from their earlier promises; that Lucy’s refusal of the 2008 offer meant that Lucy’s continued work after that point could not be considered relevant detrimental reliance; that Birss J’s award was disproportionate; and finally, that he had erred in ordering the cash sum to be paid in Jane’s lifetime. Lucy cross appealed on two grounds: that Birss J had erred by not taking into account the detriment that she had suffered as a result of Stuart’s work on the farm; and that the award should not have been reduced to reflect the 2008 offer or the cessation of milk production in 2015.

The Court of Appeal began by emphasising that per Jennings v Rice [2002] EWCA Civ 159, the judge at first instance had ‘a wide judgmental discretion’ in deciding how an equity should be satisfied. The Court were constrained to interfering in the original decision only in very limited circumstances.

Regarding the 2008 offer, Jane argued that had Lucy accepted, she would have ultimately received a working dairy farm – the fact that she had rejected this meant that it was no longer unconscionable for Jane and Frank to resile from their previous assurances. They could not be expected to offer more, nor to keep the offer open after Lucy had rejected it. There was no continuing wrong after the offer was rejected, and thus there was no reason for equity to intervene. The Court roundly rejected this, commenting that ‘underpinning the whole doctrine of proprietary estoppel is the idea that promises should be kept.’ Lewison LJ went on to state that the offer made to Lucy would not in fact have satisfied her expectation because it did not give her control of the dairy business, and in any event, neither Frank, Jane nor Lucy understood in 2008 when Lucy refused the offer that in doing so, she was waiving her expectation.

Having established that Lucy’s refusal of the 2008 offer did not absolutely bar her claim, the Court then went on to consider whether the refusal of the 2008 offer should have any impact on how the court assessed what was necessary to satisfy the equity. Counsel for Lucy argued that by 2008 Lucy had raised an equity, which should have been vindicated at that time by passing on control of the dairy unit. Her refusal of an offer which fell short of vindicating that equity ought not to result in any reduction. Further still, the decision to stop dairy farming in 2015 was nothing to do with Lucy, and she should not be penalised by any reduction in the value of her equity in consequence of that decision. The Court rejected these arguments, on the basis that they were in contractual in nature and had no bearing on proprietary estoppel, which is an equitable doctrine: similar arguments were articulated in Walton v Walton [1994] (unreported), but were rejected by Hoffman LJ, who stated that ‘none of this reasoning applies to equitable estoppel, because it does not look forward into the future and guess what might happen. It looks backwards from the moment when the promise falls due to be performed and asks whether, in the circumstances which have actually happened, it would be unconscionable for the promise not to be kept.’ The Habberfield family had made the (presumably commercially-driven) decision to stop running the dairy unit, and this was ‘simply a change of circumstance which [made] it inappropriate to give full effect to Lucy's expectation.’

Next, the Court turned to the arguments advanced on behalf of Jane concerning detriment: firstly, that post-2008 reliance and detriment should not have been taken into account at all by Birss J, given that no further representations were made after this point. These were rejected on the basis that the 2008 offer was not made as a final offer to Lucy, nor on the understanding that in rejecting it, Lucy would be forfeiting her inheritance. Arguments that Birss J had not taken sufficient account of countervailing benefits that Lucy had received were also rejected, given that ‘first, the exercise upon which [the trial judge] embarked was a broad judgmental discretion. Second, his finding was that only part of the detriment was quantifiable. […] The detriment was incapable of reduction to pounds and pence.’

The Court similarly rejected Lucy’s ground of appeal that Birss J had erred by not taking into account the detriment that she had suffered as a result of Stuart’s work on the farm. Counsel for Lucy argued that Stuart, like Lucy, was underpaid and overworked, and this constituted a detriment to Lucy because were he better paid and with more free time, he would have been able to contribute more to their domestic partnership, including raising their children. This argument was despatched with swiftly: the trial judge had made no finding that Stuart’s work on the farm had any causal connection with the assurances that had been given to Lucy, although it had been open to him to do so, and the alleged detriment was entirely speculative.

Turning to proportionality, the Court held that the relevant comparison for the purposes of proportionality is a comparison between detriment and remedy. Although there was a disparity between the quantifiable detriment suffered by Lucy (Birss J put this at £220,000) and the eventual award (£1.17m), the judge had expressly stated that much of the detriment that Lucy suffered, most notably three decades of her life spent working on the farm, were simply not capable of quantification. The Court held that the relevant question was whether the award was proportionate to the detriment that had been suffered – ‘it follows that the expectation is not determinative of the relief to be granted.’

The final consideration for the Court was the time for payment. Since Lucy had received assurances that she would eventually receive the farm, but not necessarily before the deaths of both of her parents, and the effect of Birss J’s decision was to provide Lucy with a sufficient sum to acquire a viable dairy unit and land immediately, it was arguable that the eventual award exceeded her expectation. Further still, the impact of the order was to make Jane leave the farmhouse, which had been her home for many years. Lewison LJ stated that he found this ‘the most troubling aspect of the appeal’, but ultimately concluded that the order was within the judge’s discretion. In order to raise the money, the farm would have to be sold, but Jane had sufficient means to purchase a new home and meet the shortfall in her income. It was imperative that the award be paid so that Lucy could begin farming immediately, and this was particularly desirable in circumstances in which the family relations had broken down so completely. The appeal and cross-appeal were dismissed.