February 14, 2021
Proprietary estoppel is an equitable doctrine which developed historically to prevent people from reneging on promises related to interests in land. The Statute of Frauds requires any dealing with interests in land to be in writing. In real life, people sometimes do not comply with this rule; if a promise to transfer an interest in land is not kept in certain situations, equity steps in to protect the innocent victims. As the adage goes “The Statute of Frauds was not intended to protect fraudsters.”
Because proprietary estoppel is an equitable doctrine, it is always discretionary – that is, the judge does not automatically apply it in favour of a claimant just because the test is met. The maxims of equity which guide the exercise of discretion often are described as favouring the party who occupies the “moral high ground.”
As an equitable doctrine, it is also flexible, evolving to adapt to new situations.
The usefulness of this doctrine was recognized by the Supreme Court of Canada in Cowper-Smith v. Morgan in 2017, which consolidates the law on the subject.
The facts of the case also illustrate the relationship with wills and estates law.
Elizabeth and Arthur were a married couple with three children, Gloria, Nathan and Max, all of whom were adults by the time their parents died. Shortly before Arthur died in 1992, he explained to his sons that he and Elizabeth would leave everything to be divided equally between the three children.
Elizabeth remained in the family home after Arthur’s death. Nathan moved in with Elizabeth. This created discord between Gloria and Nathan, who Gloria thought was taking advantage of their mother. Nathan moved out.
The home was then transferred into the joint names of Elizabeth and Gloria, with a written “declaration of trust” which stated that Gloria held her interest as a bare trustee for Elizabeth, but that Gloria would be entitled to the house on Elizabeth’s death. Subsequently, Elizabeth made a new will which left her estate to her three children equally. Except, if Gloria is entitled to the house, the estate is virtually empty.
Gloria assured her siblings that the joint ownership was only to simplify the administration of the estate.
Some time later, Max moved in to the home to care for Elizabeth. Gloria agreed that Max would be reimbursed for various expenses, have the use of their mother’s car, and, crucially, be able to live in the house permanently and eventually to acquire Gloria’s one-third interest in the same. Gloria later reneged on these promises.
After Elizabeth’s death, Gloria also took the position that she was entitled to the house.
All courts agreed that Gloria had exerted undue influence, and that the principle of resulting trust applied, so that the house belonged to the estate.
The live issue on appeal to the SCC was whether Max was entitled to Gloria’s share of the house based upon proprietary estoppel.
The court explains that proprietary estoppel protects the equity which arises from the claimant’s reasonable reliance when:
(1) a representation or assurance is made to the claimant, on the basis of which the claimant expects that he will enjoy some right or benefit over property;
(2) the claimant relies on that expectation by doing or refraining from doing something, and his reliance is reasonable in all the circumstances; and
(3) the claimant suffers a detriment as a result of his reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on her word.
The representation or assurance may be express or implied.
When the party responsible for the representation or assurance possesses an interest in the property sufficient to fulfill the claimant’s expectation, proprietary estoppel may give effect to the equity by making the representation or assurance binding.
In prior cases, proprietary estoppel was only available where the assurance was made by the owner of the property. The Court held in this case that because Gloria obtained an interest by the will, the equity that Max obtained when he relied upon Gloria’s earlier assurances ought to be protected by proprietary estoppel at that time.
Gloria was ordered to transfer her interest in the house, at the value shortly after Elizabeth’s death plus interest from the valuation date.
The court further stated that once proprietary estoppel is established, there is discretion to craft a remedy which suits the circumstances.
Since 2017, there has been a surge in the number of cases in which proprietary estoppel is a factor, ranging from family law situations to condominium disputes; farm management agreements, easements, treaty rights, leases, and more; as well as inheritance disputes.
It still is uncertain whether or not proprietary estoppel may apply to interests in assets other than land, so we have not heard the last word on the scope of this doctrine.
Until then, what we do know is that if you reasonably relied upon a promise from someone with an interest in land that you would obtain an interest in land, and they renege after you act to your detriment, proprietary estoppel may offer a remedy – even if you have nothing in writing.
One the other hand, you would not want to behave like Gloria and expect that the courts will allow you get away with unconscionable behaviour.