Davies v Davies [2016] EWCA Civ 463

Eirian Davies worked on her parents' farm over many years on the strength of various assurances about inheriting the farm and business. The Court of Appeal reduced her proprietary estoppel award from £1.3 million to £500,000, emphasising proportionality between remedy and detriment.

Facts

Mr and Mrs Davies are dairy farmers in their seventies who have built up a substantial farming enterprise over fifty years, including Caeremlyn, Henllan, Blaenos, Glascoed, Llwynderw and Castell Draenog. They had three daughters, of whom Eirian, the middle daughter, became the only one interested in taking over the farm. The total net value of the farming enterprise (before tax) was approximately £4.4 million.

From around 1985, when Eirian was 17, her parents indicated she would have the farming business, with Mrs Davies telling her not to kill the goose that lays the golden eggs. Eirian worked on the farm in return for board, lodging and modest benefits. She left in 1989 after an argument, returning after reconciliation around 1991, working primarily in milking (paid at going rates) with additional unpaid veterinary and farming work.

In 1998 a draft partnership agreement was drawn up transferring Henllan and Llwynderw into joint names with Eirian, though her parents never signed it. Eirian believed she was a partner and moved with her husband into Henllan farmhouse. In 2001, following an argument, she discovered she was not a partner and left the farm, acknowledging she had “given up on Henllan” and had “no expectations regarding the farm”.

After her marriage broke down, she returned part-time in 2006, and in December 2007 moved back into Henllan after her father told her it would be her home for life. In 2008 she gave up her employment at Genus following discussions about being issued 49 per cent of the company shares, and worked very long hours (up to 100 per week) for £1,500 per month. In 2009 she was shown draft wills leaving her the land and buildings, but these were superseded by proposals for a discretionary trust. Relations deteriorated, culminating in a physical altercation in August 2012 when Eirian left for the last time.

Procedural Background

HHJ Jarman QC tried the claim in two stages. In the first judgment he held Eirian had raised an equity by proprietary estoppel (upheld by the Court of Appeal in 2014). In the second judgment he awarded her a lump sum of £1.3 million, being just over one third of the net value of the farm and farming business.

Issues

The sole issue on appeal was how the equity raised in Eirian’s favour by proprietary estoppel should be satisfied — specifically whether the judge’s monetary award of £1.3 million was proportionate and properly reasoned.

Arguments

For Eirian

That she should be awarded what was promised: the land and the business.

For Mr and Mrs Davies

That £350,000 was sufficient, comprising: an accommodation element of £180,000 (to pay off the Ludchurch mortgage); £22,000 for the partnership profit share 1998–2001; £120,000 as a half share of company profits 2008–2012; and £28,000 for underpayment in early years.

Judgment

Lewison LJ (with whom Underhill and Patten LJJ agreed) set out core legal propositions, including that proprietary estoppel requires assurance, reliance and detriment; that detriment is judged at the moment the promisor seeks to resile; that the essence of the doctrine is to avoid an unconscionable result; and that proportionality between remedy and detriment lies at the heart of the doctrine, citing Thorner v Major, Gillett v Holt, Jennings v Rice and Henry v Henry.

The court noted a scholarly controversy between expectation-based and reliance-based approaches to relief but declined to resolve it. Lewison LJ accepted as a “useful working hypothesis” that the clearer the expectation, the greater the detriment, and the longer the expectation was reasonably held, the greater the weight to be given to expectation.

The judge below was criticised for applying “far too broad a brush” and failing to analyse the facts with sufficient rigour. He had not identified which of several different and sometimes mutually incompatible expectations he treated as the starting point. The Court of Appeal analysed each expectation in turn:

• The 1985 assurance was conditional upon Eirian remaining and working on the farm; her departure in 1989 would, on a contractual analogy, have been a repudiatory breach.
• The 1998–2001 partnership expectation was for profit-sharing during the partnership, not inheritance, and was falsified in 2001.
• Between 2001 and 2006 she had no expectation regarding the farm.
• The 2007 assurance concerned only rent-free accommodation at Henllan for life.
• The 2008 company share discussions concerned shares in a company which did not own the disputed land.
• The 2009 draft will was only an indication of intention and was superseded within a short time.

On detriment, the judge had himself found that Eirian had not “positioned her whole life” on her parents’ assurances. The non-financial detriment (long hours, difficult working environment, giving up Genus) was for a period of only 4–5 years and was not irretrievable.

The Court of Appeal found the defendants’ £350,000 offer already substantially accommodated the identified expectations: the accommodation element reflected the Henllan promise (freehold value only £300,000); the partnership element of £22,000 fully reflected monetary expectation during that period; and the company element of £120,000 represented 85% of the company’s value, exceeding half of dividends plus half of company value during the relevant period.

Lewison LJ held the judge had erred in treating Mr and Mrs Davies’ “significant role in bringing that expectation to an end” as a factor increasing the award — this is inherent in every proprietary estoppel claim and has no authority as an uplift factor. The judge had also overstated the inheritance expectation, which after 2009 was at a high level not fairly derived from what she had been told, and which Eirian knew by March 2010 would not be kept.

The court increased the offer by £150,000 to reflect delay in payment of past expectations, non-financial detriment and the inheritance expectation, arriving at a total of £500,000. The appeal was allowed and the award reduced from £1.3 million to £500,000.

Implications

The decision reinforces the centrality of proportionality in proprietary estoppel, requiring proportionality between the remedy and the detriment it seeks to avoid. It shows that where a claimant’s expectations have changed over time, have been mutually incompatible, or have been repudiated at various points by the claimant herself, the court must undertake a careful and specific analysis rather than a broad-brush impressionistic award.

The judgment emphasises that where a claimant has not performed her side of a quasi-bargain — particularly where she has herself departed from the arrangement for periods — it is not equitable to hold the promisor fully to the original assurance. It also confirms that the fact a promisor has resiled from a promise cannot of itself justify enhancing a monetary award, since resiling is inherent in every proprietary estoppel case.

The decision is significant for farming inheritance disputes, which frequently generate proprietary estoppel claims. It demonstrates that where the claimant retains the ability to pursue the career they say they gave up (the detriment not being irretrievable), non-financial detriment will carry only modest weight. It also indicates that in such cases, careful attention must be given to countervailing benefits — free accommodation, wages, board — when quantifying detriment.

The Court of Appeal expressly declined to resolve the broader theoretical question whether the remedy should aim to vindicate expectation or protect the reliance interest, leaving that controversy open for future resolution.

Verdict: Appeal allowed. The judge’s award of £1.3 million was reduced to £500,000 as a lump sum payment to satisfy Eirian Davies’ equity arising by proprietary estoppel.

Source: Davies v Davies [2016] EWCA Civ 463