Uglow v Uglow & Ors [2004] EWCA Civ 987

Case No A3/2003/2382 A3/2003/2351[2004] EWCA Civ 987
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HHJ WEEKS QC
SITTING AS A JUDGE OF THE CHANCERY
DIVISION
Venue Royal Courts of JusticeDate Tuesday 27 July 2004
Strand,
London, WC2A 2LL
Before
LORD JUSTICE WALLERLORD JUSTICE MUMMERYLORD JUSTICE JONATHAN PARKER
Between
RICHARD UGLOWAppellantPETER UGLOW & ORSRespondents
(Transcript of the Handed Down Judgment ofSmith Bernal Wordwave Limited, 190 Fleet StreetLondon EC4A 2AGTel No: 020 7421 4040, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
MARK CUNNINGHAM QC & JOHN MEREDITH HARDY (instructed by Goldbergs) for AppellantMISS PENELOPE REED (instructed by Burges Salmon) for Respondents
Judgment

General Background

[1]The Uglows are an old Cornish farming family, working several farms close to one another in the Launceston area. Tragically, the family is now deeply divided by a ruinous inheritance dispute about one of the farms. The litigation stems from an oral assurance of inheritance given nearly 30 years ago and from a later will, which failed to give effect to it. A claim based on proprietary estoppel is made by one member of the Uglow family, whom the testator orally assured would inherit a particular freehold farm, against another member of the Uglow family, who is actually named in the testator’s will as the absolute beneficiary of the same farm. The claim is only one of a number of related disputes. The parties, through their counsel at the hearing of this appeal, expressed a willingness to consider mediation as a possibility for the other remaining disputes.[2]The will in question was made on 27 May 1999 by Mr Percy John Uglow, a childless bachelor known in the family as “Uncle Percy” and often known outside as “Mr Percy.” I shall call him “the Testator.” He died on 5 July 2001 at the age of 86. The Testator’s great-nephew, Mr Peter Gerald Uglow (Peter), was left the freehold farm. It consists of about 235 acres of agricultural land, a beautiful Elizabethan farmhouse and some cottages and buildings. It was valued for probate at £775,000. The farm is called Treludick and is in Egloskerry, near Launceston (Treludick). The will, of which probate was granted on 6 November 2001, also provided that the Testator’s unmarried younger sister, Marion, should be permitted to continue to occupy, for as long as she wishes, the Treludick farmhouse, in which she and the Testator lived for many years.[3]The gift of Treludick to Peter is challenged by Mr Richard John Uglow (Richard), a nephew of the Testator. Under the will Richard was not left Treludick, contrary to what the Testator had assured him in 1976. Instead, he receives only a quarter share of the residuary estate and a legacy of £1,000. Richard contends that he was entitled to more generous treatment by the Testator on account of his oral assurance. Richard invokes recent developments in the law on proprietary estoppel as the basis of a counterclaim against Peter and the executors of the Testator’s estate.[4]Richard seeks an order that Treludick is conveyed to him in order to satisfy the equity raised by the oral assurance by the Testator that he would leave Treludick to him in his will, if he left his own family farming partnership and joined the Testator at Treludick in a new farming partnership, which he did. He had kept his side of the arrangement. The Testator was bound in equity, Richard says, to keep to his side of it. Alternatively, Richard claims a protected tenancy of 175 acres of Treludick and a further 25 acres at Red Down under a written tenancy agreement made with the Testator dated 16 April 1984 (the 1984 Agreement) after their partnership at Treludick had been brought to an end by agreement.[5]Peter denies that Richard is entitled to the freehold of Treludick, but he accepted in the course of the hearing of this appeal that, under the 1984 Agreement, Richard is entitled to a protected transmissible tenancy of part of Treludick.

The Appeal

[6]By an order dated 9 October 2003 in possession proceedings brought against Richard by the Testator’s executors ( Mr Gerald Uglow, who is Peter’s father and Richard’s twin brother, and Mr John Parnall, who was the Testator’s solicitor) HHJ Weeks QC dismissed Richard’s counterclaim for the transfer of the freehold of Treludick and a further 25 acres of agricultural land at Red Down, Egloskerry (the proprietary estoppel issue) and declared that Richard had a tenancy of 175 acres of land occupied by him at Treludick and the 25 acres at Red Down. He also held that a 1993 notice given to Richard by the Testator to quit the holding under the 1984 Agreement was of no effect. Appeals against the order were brought with the permission of the judge.[7]On the second day of the appeal hearing Miss Reed, appearing for Peter, informed the court that the appeal against the rulings on the tenancy issue and the notice to quit issue was being abandoned and that it was now accepted that rent for Treludick should not be claimed from Richard by the executors for the period of the Testator’s lifetime, although liability for rent after the death of the Testator remains an issue. Miss Reed accepted that in principle her clients are liable for the costs of the appeal on the abandoned tenancy and notice to quit points.

Proprietary Estoppel

[8]The appeal on the proprietary estoppel issue turns principally on the application of the general principles stated in two recent Court of Appeal decisions to the facts found by the judge: Gillett v. Holt [2001] Ch 210 and Jennings v. Rice [2003] 1 P & CR 100. The doctrine is distinguishable from the enforcement of a concluded and binding contract by a testator with a putative beneficiary to leave specific property to the beneficiary by will. No concluded contract is pleaded in this case, although the mutual understanding reached between the parties in 1976 came close to one.[9]The general principles expounded in those cases are relevant to the instant case in the following respects-(1) The overriding concern of equity to prevent unconscionable conduct permeates all the different elements of the doctrine of proprietary estoppel: assurance, reliance, detriment and satisfaction are all intertwined.(2) The broad inquiry in a case such as this is whether, in all the circumstances, it is unconscionable for a testator to make a will giving specific property to one person, if by his conduct he has previously created the expectation in a different person that he will inherit it.(3) The expectation may be created by (a) an assurance to the other person by the testator and intended by him to be relied upon that he will leave specific property to him; (b) consequent reliance on the assurance; and (c) real detriment (not necessarily financial) consequent on the reliance.(4) The nature and quality of the assurance must be established in order to see what expectation it creates and whether it is unconscionable for the testator to repudiate his assurance by leaving the property to someone else.(5) It is necessary to stand back and look at the claim in the round in order to decide whether the conduct of the testator had given rise to an estoppel and, if so, what is the minimum equity necessary to do justice to the claimant and to avoid an unconscionable or disproportionate result.(6) The testator’s assurance that he will leave specific property to a person by will may thus become irrevocable as a result of the other’s detrimental reliance on the assurance, even though the testator’s power of testamentary disposition to which the assurance is linked is inherently revocable.

The Facts: more detail

[10]Richard originally worked in a farming partnership of members of his immediate family. He worked in the firm of TR Uglow & Sons, with his father, mother and his two brothers at Trehummer Farm and Maxworthy Farm close to Treludick. Richard’s parents retained ownership of the farms on the formation of the partnership in 1970. Richard married in 1972 and went to live in a cottage at Maxworthy. There were plans to expand by buying a further farm for Richard to run.[11]Between 1969 and 1976 the Testator tried to persuade Richard to come and work at Treludick on the footing that he would inherit it on the Testator’s death. On 5 April 1976 Richard left TR Uglow & Sons and went to work at Treludick which the Testator, as the eldest son in his family, had inherited on his own father’s death. The Testator was unmarried. He lived with his younger sister Marion in the farmhouse at Treludick.[12]The Testator and Richard began to farm Treludick in partnership as “PJ and RJ Uglow. ” No formal partnership agreement was ever signed. The judge accepted Richard’s evidence that, before the partnership began, the Testator had told him that he would inherit Treludick. The judge inferred that that was on the basis that “all went well” with the partnership. Richard moved into a cottage on the farm. The Testator’s plan to build a bungalow at his own cost for Richard and his family at Treludick was never carried out.[13]All did not go well with the partnership. The relationship between the Testator and Richard was poor: Richard doubted the integrity of the Testator, who in turn doubted Richard’s commitment. Their approaches to farming methods were different. As is not uncommon in such situations, Richard felt that he was being treated as an employee and kept short of money and the Testator opposed any introduction of new farming methods. The judge’s view was that there were faults on both sides, although he had not, of course, heard the Testator’s version of events.[14]In March 1984 it was decided to abandon the partnership and to have separate areas of Treludick, which each of them could farm independently. The Testator agreed to create a tenancy in favour of Richard comprising farmland at Treludick and 25 acres at Red Down. They entered into the 1984 Agreement, which was drawn up by the family solicitor, Mr Parnell of Parnall, Godwin & Chegwin of Launceston. The Testator was referred to as “the Landlord” and Richard as “the Tenant” in a document called a “Tenancy Agreement.” The term was expressed to begin from 25 March 1984 at an annual rent of £7,800, payable half yearly in arrears, and as continuing from year to year until terminated by not less than 12 months previous notice in writing by either party at the end of the second or any subsequent year. The 1984 Agreement contained the usual tenant’s and landlord’s covenants and was subject to provisions and conditions and to exceptions and reservations, including the following clauses:
“(35). The Landlord reserves the right for himself and his sister Marion to reside in and occupy the dwellinghouse at Treludick and the stable block and wagon house thereto belonging. (36) The right for the Landlord to occupy and enjoy the profits of land not exceeding in area of Sixty acres forming part of the holding such Sixty acres to be of his choice.”
[15]Before the 1984 Agreement was signed the Testator chose the 59 acres of land nearest to the farmhouse, in which he and his sister continued to live. He never sought to farm any other land at Treludick.[16]The Testator became dissatisfied with Richard’s failure to pay the rent. The judge did not accept Richard’s evidence that the Testator had told him that he need not pay any rent under the tenancy, that he provided services in lieu of rent and that the Testator repeated his assurances that he would leave him Treludick. A notice to quit, which was in the standard form under the Agricultural Holdings Act 1986, was served and expressed to expire on 25 March 1994 or on the expiration of the next year of the tenancy. Richard neither served a counter-notice under s26(1) of the Agricultural Holdings Act 1986 nor did he pay any rent to the Testator. The Testator did not take any steps to enforce the notice to quit. Richard claimed that the Testator told him to ignore the notice to quit.[17]The Testator farmed the 59 acres and Richard continued to farm the remaining acreage, paying no rent. At the date of the Testator’s death Richard was still in occupation of about 175 of the 235 acres of Treludick.

The Judgment

[18]On the tenancy issue, which is no longer live, the judge held that:(1) The provisions of the 1984 Agreement were not incompatible with an agreement to give exclusive possession and the existence of a tenancy. Richard had exclusive possession of 175 acres of Treludick and was entitled to an agricultural tenancy of that part of the farm.(2) The notice to quit was ineffective to terminate the 1984 Agreement and the executors were not entitled to rely on it.[19]On the proprietary estoppel issue, the judge, who did not regard Richard “as an entirely reliable witness”, concluded that it was not unconscionable for the Testator to make a will in May 1999, which did not leave Treludick to Richard. The Testator wanted Treludick to remain intact. He had a “not unreasonable fear” that Richard would sell it piecemeal. He said “…Uncle Percy had no moral obligation to leave Treludick to Richard. Uncle Percy had taken Richard into partnership with him at a very early age. The partnership had not worked out, Uncle Percy had treated Richard fairly on the dissolution by giving him a tenancy of the major part of the land and thereafter by not insisting on rent. They had been on less than friendly terms for many years and Uncle Percy could reasonably regard himself as having discharged already whatever obligations he had to his nephew.”[20]On specific factual issues the judge held as follows:(1) The Testator told Richard in 1976, before they entered into partnership, that he would inherit Treludick. He added this, however, “The promise, or assurance, has, however, to be taken in context. Uncle Percy and Richard were about to become partners. I do not think that Uncle Percy’s words were intended or understood to mean that, come what may, Richard would have Treludick. On the contrary the natural inference from the context is that Richard would inherit if all went well with the business relationship. Mr Parnall said that he understood that Richard was on trial in this period, and that, I think, is how Uncle Percy must have regarded the situation.”(2) Richard believed and relied on the Testator’s assurance that he would inherit Treludick and he would not have left the existing family partnership if the assurance had not been given.(3) He rejected Richard’s evidence that in 1984, when the relationship between them was very strained and the partnership had failed, the Testator repeated his assurance that he would leave Treludick to him. Even if the Testator had repeated his assurance, Richard had not relied on it or acted to his detriment on the faith of it.(4) The judge said that he had not found the question of detriment regarding reliance on the 1976 assurance easy, observing, however, that the emphasis in the recent authorities was on considering the matter in the round. He said “ Richard left a partnership of five which was farming, but did not own, about 350 acres. He joined a partnership of two which would farm about 260 acres.”

The Appellant’s Submissions

[21]In a vigorous submission Mr Mark Cunningham QC attacked(a) the judge’s inference that the assurance was intended, and was understood, to be conditional (i.e. “if all went well with the business relationship”);(b) the conclusion that “the conditionality of the assurance” meant that it could not be relied on for the purpose of establishing proprietary estoppel; and(c) the judge’s unduly narrow approach to the requirement of detriment.[22]The judge should, he submitted, have made a clear finding of detriment in Richard’s favour, as there had been a very substantial change of position by Richard in 1976 in reliance on an unglossed assurance given by the Testator, which was tantamount to an irrevocable promise that he would receive nothing less than the whole of Treludick outright. In joining a partnership with the Testator in reliance on the assurance Richard had made a critical and irreversible choice, which left him with little practical alternative in 1984, when the partnership was abandoned, but to accept the new arrangements presented to him by the Testator for a tenancy of part of Treludick. He had burnt his boats when he moved from the family partnership to Treludick in 1976. That substantial alteration of his position was sufficient to satisfy the detriment requirement of the doctrine and justified the intervention of equity to prevent the Testator from repudiating his promise.[23]Mr Cunningham criticised the judge’s inference of a conditional promise and of the “on trial” nature of the relationship between the Testator and Richard, pointing out that the defence to Richard’s counterclaim was that no assurance at all had been given by the Testator, rather than that he had only given a conditional assurance. The judge had not dealt with the history of the Testator’s unsuccessful efforts from 1969 onwards to get Richard to move to Treludick by promises to leave him the farm. The earlier promises underpinned the unconditional nature of the 1976 assurance. It was the judge himself who had raised during the evidence the “on trial” nature of the assurance. Mr Parnall’s evidence on the point had to be seen in the context that he had had no significant contact with the Testator at the relevant time (1976). Richard had not even been cross examined on his understanding of the position. It was important to focus on the family context of the assurance. The partnership was not a business relationship. It was a vehicle used for keeping the farm in the family and handing it down to the next generation of farming Uglows, to the son that the Testator had never had.[24]Reference was made in the judgment below and in argument to this court to the “Robert Frost quote,” meaning the theme of Robert Frost’s poem “The Road Not Taken.” The poem presents the reader with the dilemma of irrevocable life-changing choices, which have to be made when we encounter “two roads diverged in a yellow wood” and the difference it makes to take “the one less travelled by.”[25]Richard had, according to Mr Cunningham, made such an irrevocable choice between divergent alternatives back in 1976, and only then after seven years of the prolonged efforts by the Testator. It had made all the difference to his subsequent career: he had left his family’s farming partnership at the age of 27, taken up residence in accommodation provided by the Testator, entered into partnership with him, spent the next 25 years of the most productive part of his life relying on the assurance given to him and he has suffered irreversibly the loss of opportunities, which there would have been, had he stayed with his own family partnership or set up on his own account.[26]The collapse of the partnership with the Testator had not revoked the assurance or negatived the fact of Richard’s detrimental reliance on it. There was an unglossed assurance made on the implicit assumption that all would go well. Having been relied on, it became and remained irrevocable to the end, whether or not all went well with the partnership. The Testator was not released from it or entitled to resile from it, whatever happened later. In 1984 the Testator had himself recognised the fact that he was under an obligation to Richard with regard to Treludick, but the 1984 Agreement, which did not include all the land or the very valuable farm house, did not satisfy the assurance on which Richard had relied.

Conclusion

[27]In my judgment, the judge correctly applied the principles of proprietary estoppel to the facts, which he was entitled to find or infer on the material before him.[28]As to the assurance made by the Testator, the judge rightly considered its nature and quality in the context of the formation of the farming partnership between them. There was clearly an implicit link between the Testator’s promise and the farming of Treludick by the Testator in partnership with Richard. The Testator did not simply promise to leave Treludick to Richard. The partnership was part of the package proposed by the Testator.[29]As to the effect of the collapse of the partnership, it was more likely than not that each side went into the partnership on the assumption that it would continue until death and did not expressly address the question what would happen, if things did not work out and the Testator wished to change his mind about the inheritance of Treludick: what would happen, for example, if Richard cleared out after a year, went sheep farming in Australia and left the Testator to manage Treludick on his own for the rest of his life? Clearly some conduct on the part of Richard would make it conscionable for the Testator to modify his testamentary plans and assurances. The nature of the assurance must be implicitly qualified in ways which take account of events unforeseen and not expressly catered for in 1976. The scope of the court’s inquiry is not limited to what it would be unconscionable for the Testator to have done in 1976, but should take account of subsequent events affecting the conscience of the Testator.[30]In my judgment, HHJ Weeks was entitled to infer that the Testator’s 1976 assurance was not irrevocable, whatever happened. The Testator was not committing himself to leaving Treludick to Richard come what may. If there was a relevant unforeseen change of circumstances, the probable reaction of the just bystander (and it is by reference to his conscience that these matters should be judged) would be that the assurance of the Testator could be rescinded by him and replaced by a different arrangement, as long as it satisfied the equity that had arisen in favour of Richard before the change of circumstances.[31]As to the overall outcome, the judge stood back and looked at the entire matter broadly and in the round in accordance with the guidance in Gillett. He correctly concluded that it was not unconscionable for the Testator to make a will in which he left Treludick to Peter instead of Richard. The earlier arrangements made on the termination of the partnership satisfied the requirements of equity that the Testator should not act unconscionably towards Richard, who had entered into the partnership in reliance on an assurance about Treludick. Under the 1984 arrangements Richard began to farm all but about 60 acres of Treludick on his own account and in circumstances in which he became entitled to the security of a protected tenancy transmissible on his death.[32]The just man observes standards of decency and honour and shuns shabby conduct in his dealings with others. In the light of subsequent events, unforeseen by those concerned, the just man would have regarded the 1984 arrangements as in accordance with conscience and as appropriate satisfaction of the assurance, which the Testator had given Richard in 1976 and of the equity arising from Richard’s reliance on the Testator’s assurance. The court should not use the flexible principles of proprietary estoppel to secure greater benefits for Richard than he had already derived from the Testator in his lifetime . i.e. a protected transmissible tenancy of 175 acres of Treludick and 25 acres of Red Down paying no rent for it during the Testator’s lifetime.

Result

[33]I would dismiss the appeal.[34]I agree.[35]I also agree.

Order

In Respect of the first appeal, by consent it is ordered that: (1). The appeal be dismissed (2). The full costs that have been incurred by the first defendant on the appeal of the Fourth Defendant be determined by the District Judge (3). The fourth defendant, a party who is in receipt of services funded by the Legal Services Commission, to pay the first defendant an amount to be determined by the District Judge in respect of the costs incurred by the first defendant on the appeal of the fourth defendant. In respect of the second appeal it is ordered that: (4). The appeal be dismissed (5). The full costs that have been incurred by the fourth defendant on the appeal of the first defendant be determined by the District Judge (6). The first defendant, a party who is in receipt of services funded by the Legal Services Commission, do pay the fourth defendant an amount to be determined by the District Judge in respect of the costs incurred by the fourth defendant on the first defendant’s appeal; and (7). There be a detailed assessment of the costs of the first and fourth defendants which are payable out of the Community Legal Service Fund. (Order does not form part of the approved judgment)

Cited in 10 later judgments

and 1 more case