Publications - Property & Development
Wasn't I promised the house? Proprietary estoppel by encouragement
July 2019
Snapshot
Have you ever relied on a promise that was made to you? If so, was your reliance ever to your detriment, and ever wonder what you could do about it? This type of situation was considered in the case of Perpetual Trustee Company Limited v Corbett [2018] NSWSC 126. In that matter, the Court held that the defendant had relied to his detriment on promises made by his deceased father, and that he had established a proprietary estoppel by encouragement.
Proprietary estoppel by encouragement is a form of estoppel that applies to land. It occurs where a person relies upon express promises or representations that they will obtain an interest in land. Proprietary estoppel may be available in circumstances where other issues such as misleading or deceptive conduct, family provision or breach of contract do not arise.
This case note sets out the principles which were followed by the Court in that matter to determine whether or not proprietary estoppel by encouragement was established.
___________________________________________________________________________________________________________________________________________
On 16 February 2018, Robb J delivered judgment in Perpetual Trustee Company Limited v Corbett [2018] NSWSC 126. In his judgment, His Honour determined whether a proprietary estoppel by encouragement arose in circumstances where the deceased had made certain representations as to the transfer of ownership of a house to one of his sons to the extent that his son was influenced by those representations “in a significant or material way”.[1] The son succeeded in his claim.
Facts
The first defendant, John Corbett (John) is one of eight children of Keith and Valerie Corbett. In April 2010, Keith died intestate and the plaintiff, Perpetual Trustee Company Limited (Perpetual) was appointed as trustee of Keith’s estate. Throughout his lifetime, Keith acquired and developed properties in Picton and the surrounding areas. Sometimes these properties were purchased in his own name and at other times the properties were purchased through his companies. Like Keith, John operated businesses that, inter alia, purchased and developed properties. One of the properties purchased by Keith was located in Picton Road, Maldon (Maldon Property).
In 2002, Keith informed John that if he continued to work in the family business developing properties owned by him, he could have the Maldon Property.[2] Relying upon this representation John developed or improved, for no reward and/or at cost, seven properties owned by Keith, including the Maldon Property. From June 2005, John also received rent from leasing part of the Maldon Property.[3]
In 2004, although the Maldon Property remained in Keith’s name, Keith represented to John that the Maldon Property was his to do whatever he wanted.[4] In April 2010, Keith died suddenly, intestate and without having transferred the Maldon Property to John.
In 2014, Perpetual commenced proceedings against John and his companies seeking, inter alia, a declaration that none of the defendants have any interest, legal or equitable, in the Maldon Property. John defended the claim on the basis that he has a legal and beneficial interest in the Maldon Property because of representations made to him by Keith and his reliance upon those representations. John also filed a cross claim seeking, inter alia, a declaration that he is entitled to the whole of the legal and equitable interest in the Maldon Property.
Reasons for Judgment
The issue in this case was whether John established a proprietary estoppel by encouragement. In considering this issue, His Honour followed the statements of principle in Priestley v Priestley [2017] NSWCA 155[5] which can be summarised as follows:
Applying these principles to the evidence, His Honour found that John had established that Keith made the representations (in 2002 and 2004) and that John was influenced by those representations in a significant or material way,[6] to the extent that they were a contributing cause in John completing various development works for the benefit of Keith without reward.[7] Further, His Honour held that it would be unconscionable for Perpetual to resile from Keith’s representations as doing so would cause John a substantial detriment. [8] His Honour found that as the substantial detriment consisted of both quantifiable detriment in the money John spent developing Keith’s properties and unquantifiable detriment resulting from providing years of development assistance to Keith and his companies,[9] John was entitled to the beneficial ownership of the Maldon Property.[10]
When does it apply?
The doctrine of proprietary estoppel by encouragement may be of assistance to you in circumstances where you have been:
The remedy available for establishing that proprietary estoppel by encouragement arises is not always a conveyance of land. It may be that a lump sum award is appropriate[11] or a declaration that the property be held on trust for a certain period.[12] Accordingly, the relief available for establishing that proprietary estoppel by encouragement arises is heavily dependent on the facts of each case.
Where can I find more information?
If you are unsure whether you may be entitled to relief under the principle of proprietary estoppel by encouragement and would like advice in relation to your own personal circumstances, please contact us.
[1] At [156 and 159]
[2] At [35 and 36]
[3] At [117 to 122]
[4] At [37]
[5] At [155 and 186]
[6] At [156]
[7] At [172]
[8] At [185]
[9] At [187]
[10] At [191]
[11] Giumelli v Giumelli [1999] HCA 10
[12] Sullivan v Sullivan and Ors [2006] NSWCA 312; Sullivan v Sullivan (No2) [2007] NSWCA 11
Have you ever relied on a promise that was made to you? If so, was your reliance ever to your detriment, and ever wonder what you could do about it? This type of situation was considered in the case of Perpetual Trustee Company Limited v Corbett [2018] NSWSC 126. In that matter, the Court held that the defendant had relied to his detriment on promises made by his deceased father, and that he had established a proprietary estoppel by encouragement.
Proprietary estoppel by encouragement is a form of estoppel that applies to land. It occurs where a person relies upon express promises or representations that they will obtain an interest in land. Proprietary estoppel may be available in circumstances where other issues such as misleading or deceptive conduct, family provision or breach of contract do not arise.
This case note sets out the principles which were followed by the Court in that matter to determine whether or not proprietary estoppel by encouragement was established.
___________________________________________________________________________________________________________________________________________
On 16 February 2018, Robb J delivered judgment in Perpetual Trustee Company Limited v Corbett [2018] NSWSC 126. In his judgment, His Honour determined whether a proprietary estoppel by encouragement arose in circumstances where the deceased had made certain representations as to the transfer of ownership of a house to one of his sons to the extent that his son was influenced by those representations “in a significant or material way”.[1] The son succeeded in his claim.
Facts
The first defendant, John Corbett (John) is one of eight children of Keith and Valerie Corbett. In April 2010, Keith died intestate and the plaintiff, Perpetual Trustee Company Limited (Perpetual) was appointed as trustee of Keith’s estate. Throughout his lifetime, Keith acquired and developed properties in Picton and the surrounding areas. Sometimes these properties were purchased in his own name and at other times the properties were purchased through his companies. Like Keith, John operated businesses that, inter alia, purchased and developed properties. One of the properties purchased by Keith was located in Picton Road, Maldon (Maldon Property).
In 2002, Keith informed John that if he continued to work in the family business developing properties owned by him, he could have the Maldon Property.[2] Relying upon this representation John developed or improved, for no reward and/or at cost, seven properties owned by Keith, including the Maldon Property. From June 2005, John also received rent from leasing part of the Maldon Property.[3]
In 2004, although the Maldon Property remained in Keith’s name, Keith represented to John that the Maldon Property was his to do whatever he wanted.[4] In April 2010, Keith died suddenly, intestate and without having transferred the Maldon Property to John.
In 2014, Perpetual commenced proceedings against John and his companies seeking, inter alia, a declaration that none of the defendants have any interest, legal or equitable, in the Maldon Property. John defended the claim on the basis that he has a legal and beneficial interest in the Maldon Property because of representations made to him by Keith and his reliance upon those representations. John also filed a cross claim seeking, inter alia, a declaration that he is entitled to the whole of the legal and equitable interest in the Maldon Property.
Reasons for Judgment
The issue in this case was whether John established a proprietary estoppel by encouragement. In considering this issue, His Honour followed the statements of principle in Priestley v Priestley [2017] NSWCA 155[5] which can be summarised as follows:
- The fundamental purpose of equitable estoppel is to protect a person, who acts to their detriment, from the detriment that would flow from the representor resiling from their representation.
- The question is whether the conduct of the representee was so influenced by the representation that it would be unconscionable for the representor thereafter to enforce their strict legal rights.
- It is sufficient for the representee to show that the representation was a significant factor taken into account by the representee when deciding whether to act or not to act.
- If the belief of the representee is a contributing cause of the conduct of the representee, that will be a sufficient connection between the assumption induced by the belief and the detriment.
- It is only necessary to establish that the belief was a contributing cause.
- The question is whether the representee would have committed to and continued in particular conduct that had a detrimental effect on them if the relevant representation had not been given to them.
- A representee has the onus of establishing that they believed the representation made by the representor, and on the faith of that belief the representee took a course of action or inaction that would turn out to be to their detriment if the representor was to depart from their representation.
- The detriment is not a narrow or technical concept and need not be a quantifiable financial detriment so long as it is something substantial.
- The test is not whether the representee would have acted differently if the representor had not encouraged their assumption and belief but whether they were influenced, in a significant or material way, such that it was a contributing cause to their conduct or made a difference to their action or inaction, so that it would be unconscionable for the representor to resile from the assumption and belief that the representor induced in the representee.
- The proper measure of relief in a case where the detriment to a representee is something substantial is performance of the representation.
Applying these principles to the evidence, His Honour found that John had established that Keith made the representations (in 2002 and 2004) and that John was influenced by those representations in a significant or material way,[6] to the extent that they were a contributing cause in John completing various development works for the benefit of Keith without reward.[7] Further, His Honour held that it would be unconscionable for Perpetual to resile from Keith’s representations as doing so would cause John a substantial detriment. [8] His Honour found that as the substantial detriment consisted of both quantifiable detriment in the money John spent developing Keith’s properties and unquantifiable detriment resulting from providing years of development assistance to Keith and his companies,[9] John was entitled to the beneficial ownership of the Maldon Property.[10]
When does it apply?
The doctrine of proprietary estoppel by encouragement may be of assistance to you in circumstances where you have been:
- promised land;
- you have acted on that promise to your detriment; and
- the person who made that promise is attempting to resile from that promise.
The remedy available for establishing that proprietary estoppel by encouragement arises is not always a conveyance of land. It may be that a lump sum award is appropriate[11] or a declaration that the property be held on trust for a certain period.[12] Accordingly, the relief available for establishing that proprietary estoppel by encouragement arises is heavily dependent on the facts of each case.
Where can I find more information?
If you are unsure whether you may be entitled to relief under the principle of proprietary estoppel by encouragement and would like advice in relation to your own personal circumstances, please contact us.
[1] At [156 and 159]
[2] At [35 and 36]
[3] At [117 to 122]
[4] At [37]
[5] At [155 and 186]
[6] At [156]
[7] At [172]
[8] At [185]
[9] At [187]
[10] At [191]
[11] Giumelli v Giumelli [1999] HCA 10
[12] Sullivan v Sullivan and Ors [2006] NSWCA 312; Sullivan v Sullivan (No2) [2007] NSWCA 11
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Emma Davies
Senior Associate Bradfield & Scott Lawyers Telephone: 9233 7299 Email: edavies@bradscott.com.au |
