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19 February 2015 | Comment | Article by Roman Kubiak TEP

Proprietary estoppel claims and trusts


The team discusses the requirements needed for a successful proprietary estoppel claim against trustees of a settlement.

The High Court in Fielden v Christie-Miller and others [2015] EWHC 87 (Ch) has recently ruled that where a claim in proprietary estoppel is made against trusts, the claimant must show that the representation relied upon was made by or on behalf of all the trustees, unless the trust document discharges them of the duty to act unanimously.

Background

The legal proceedings issued relate to two separate trusts. The first was created in 1967 (“the 1967 settlement”) by Charles Wakefield Christie-Miller (“Charles”) and was a settlement of land and various other assets. The trustees were empowered to execute deeds of appointment (documents giving away some of the trust assets) to include, amongst others, Charles’s grandson, Stephen Christie-Miller (“Stephen”), and a family friend, Sam Fielden (“Sam”).

In 2005, the trustees agreed to give Sam a life interest to all assets in the 1967 settlement. However, one of the assets in the 1967 settlement was a farmhouse that had been occupied by Stephen and his family since 1996. At the same time in 2005, the trustees also agreed to give Stephen an assured tenancy for the farmhouse.

To confuse matters, Charles’s son, John, who died in 1999, left a will which created a trust giving Stephen a life interest in his estate, subject to any appointment the trustees may wish to make. In 2007, the trustees executed a deed (“the 2007 trust”), despite the life interest the will created in favour of Stephen, to hold John’s estate (the trust fund which included land adjoining land from the 1967 settlement) and income for Sam absolutely.

Sam therefore issued legal proceedings, claiming that the 2007 trust was valid and that after Stephen’s death, he would receive the farmhouse. Stephen counterclaimed and said that the 2007 trust could not reduce his life interest to the farmhouse and, further, that he had an absolute interest in the farmhouse on the basis of proprietary estoppel.

Stephen asserted that John had promised him the farmhouse and he acted on that promise by moving in, which was to his detriment as he could have chosen another more lucrative lifestyle. Stephen alleged that one of the trustees of the 1967 settlement confirmed this to him. Therefore Stephen argued that he was due the farmhouse on the basis of proprietary estoppel.

Pausing here for a minute, I imagine you are wondering why the above information is necessary (or interesting!) to the background. Essentially the above shows that the situation was extremely complicated regarding who was entitled to the farmhouse.

Find more information on our Contested Wills, Trusts & Estates department. Or if you want to discuss any issues raised in this article, contact us today.

The law

Sam disagreed with Stephen’s allegations and sought to have his counterclaim dismissed owing to the lack of prospects of success, citing the two following legal reasons:

  • trust law provides that trustees must act unanimously (unless the trust document says different – which in this case it did not) and according to Stephen’s pleadings (legal documents setting out his case) they do not allege that any representation was made by or on behalf of the trustees so it ignored the unanimity principle; and
  • an estoppel (like proprietary estoppel) would run counter to the principle that trustees cannot fetter their freedom to dispose of trust assets at some future date when they came to exercise that power of appointment.

Outcome

The judge presiding heard a lot of legal arguments and precedents although the key ruling covered the two above points:

  • The unanimity principle still operated when it was alleged that only one trustee made the representation. However, it was not sufficient for Stephen to simply say that he believed the trustee had authority to act on behalf of the others. The judge ruled that Stephen had to set out expressly, according to the well-established legal rules on agency, how he thought that the trustee had authority to act on behalf of the others.
  • The non-fettering principle did not act as a complete defence to a proprietary estoppel claim as, if it did, then it would leave a claimant who, in good faith, had relied on a promise made by a trustee to his detriment, with no remedy. Therefore, if Stephen could establish all the criteria for a successful proprietary estoppel claim, the non-fettering principle would not defeat Stephen’s right.
  • The application by Sam was therefore dismissed and Stephen’s claim is allowed to continue to trial. That said, Stephen will need permission from the court to amend his pleadings, to state how and why he thought the trustee had authority to bind his fellow trustees. No doubt any such application is likely to be vigorously contested by Sam.

Summary

The case suggests that the court will not readily grant applications to have claims struck out, despite the apparent deficiencies contained within the claimant’s pleadings, preferring to allow the matter to be listed for trial where all of the factual evidence will be heard and tested.

Whilst I appreciate that some of the legal arguments raised are complex and not necessarily applicable to the everyday application of the doctrine of proprietary estoppel, there is a clear message from the courts that a trustee can be bound by promises made to a claimant, who then goes on to rely, and act to their detriment, on those promises. However, to do so, the evidential thresholds are set even higher and a claimant will need to show how and why he thought the trustee had authority to bind his fellow trustees. In addition, a claim that trustees are estopped from exercising a power of appointment in a certain way is not bound to fail on the sole ground that trustees cannot fetter the exercise of their discretion.

Author bio

Roman Kubiak is a partner and head of the market leading Contested Wills, Trusts and Estates team.

He advises across the whole spectrum of private wealth disputes, with a particular focus on high value, complex and cross-border disputes including: trust disputes, breach of trust claims and applications to remove trustees; will disputes, particularly those with an international element; claims under the Inheritance (Provision for Family and Dependants) Act 1975; and claims for equitable relief under proprietary estoppel, constructive trusts and resulting trusts.

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