Many of the proprietary estoppel cases we cover in relate to promises made between family members about who will inherit the farm.
It is more common for such cases to be brought in a domestic setting rather than a commercial one. However, in a case earlier this year, a couple lost their appeal against a claim for proprietary estoppel brought by their neighbours over some land that they believed had been transferred to them by way of an oral agreement.
This was unusual: first the claim arose between parties who were not related; and second, the landowners tried to argue that as the transfer was essentially transactional rather than familial, it should be subject to Section 2 of the Law of Property Act 1989, meaning that such a transfer was only legally valid with a signed agreement.
Land transferred in lieu of debt
Mr & Mrs Howe owned White Hart Farm in north Lincolnshire. They sold one of their barns to a Mr & Mrs Gossop who converted it into a house. The Gossops agreed to resurface the access road in exchange for £7000 and that the work was done to the required standard. Subsequently, during a meeting between Mr Howe, Mr Howe’s son, and Mr Gossop, Mr Howe offered to transfer two separate parcels of land to Mr Gossop in lieu of the £7000 with the proviso that the land could only be used as a garden for the converted barn (now called Lea Farm). Mr Gossop agreed and the two shook hands on the arrangement (later, in court, Mr Gossop gave evidence that he had assumed the agreement would be written down at some point). After the transfer of the land was agreed, Mr Gossop started to clear and reseed it, work that Mr Howe was fully aware was being undertaken.
Claim for proprietary estoppel succeeded
The two couples fell out over an unrelated matter, following which Mr & Mrs Howe claimed possession of the land arguing that, in the absence of a written agreement, the transfer was legally void. In response the Gossops raised a claim for proprietary estoppel on the basis that they were entitled to a licence to occupy and use the land. In the county court, the judge found in favour of the Gossops on the basis that that it was clear both parties understood and accepted that the land was being transferred. As such he ruled that the three elements of proprietary estoppel (assurance, reliance and detriment) had been met so it would have been unconscionable for Mr & Mrs Howe to have reneged on an agreement that had been clearly made and witnessed. The Howe’s case was not helped by the judge finding Mr Howe “arrogant, argumentative, petulant, contrary and evasive”, along with evidence that he had tried to persuade his son to change his evidence.
Irrevocable licence granted
The Howes were given leave to appeal. At appeal, the Howes sought to rely on a number of grounds – in addition to the argument that the transfer was essentially commercial in nature and should have been subject to Section 2. They argued that there was uncertainty over the extent of land being transferred, that both parties knew the agreement was not legally binding, and that both parties intended to put the agreement in writing at a later date. On examining the facts, the judge determined that estoppel had arisen as the Gossops had believed that the transfer had been made in good faith and their actions in restoring the land to garden standard was proof they relied on that belief. Thus, the Howes’ appeal was dismissed and the land granted to the Gossops under licence, irrevocable while both remained alive and while they owned Lea Farm.
Put agreements in writing
As mentioned, cases of proprietary estoppel have tended to focus on claims within a domestic context. In this case, the judge felt that the principles of proprietary estoppel were all present: the Gossops believed that a promise to transfer the land had been made and that they had relied on that promise to their detriment (having carried out the work to restore it), thus it was unconscionable for the Howes not to honour the agreement. This should have particular resonance for landowners and farmers who agree to transfer land and / or buildings to a third party but then have second thoughts about doing so. If such a transfer is agreed, it should be recorded in writing so that both parties are crystal clear on exactly what that agreement entails.