Dodsworth v Dodsworth & Anor

An equity may arise where a property owner induces another to spend money on the property in the expectation of continued occupation, even though no legal relationship was intended. Compensation for expenditure may satisfy the equity where an occupation order would be impracticable or would confer a proprietary interest greater than the expectation. The court must consider statutory trust-for-sale and settled-land consequences. Compensation may include the reasonable value of the claimant’s own labour. The remedy should reflect the induced expectation while avoiding unintended rights to sell, let or receive income from the property.

The plaintiff invited her brother and his wife to live in her bungalow. They spent more than £700 on improvements in the expectation, induced by her, that they could remain there as their home. The county court found an equity but ordered that it be satisfied by protecting their occupation until reimbursement, rather than by securing permanent occupation.

The plaintiff’s possession claim had been non-suited. After she died intestate during the appeal, her administrators were joined as respondents. The appeal concerned the appropriate method of satisfying the equity in the context of the administrators’ statutory trust for sale, and whether the compensation should include the first defendant’s labour.

Disposition. The Court, in a judgment delivered by Lord Justice Russell on behalf of the Court, allowed the appeal to the limited extent of increasing the compensation award from £711.72 to £976.72.

1. The Court accepted that the defendants had an equity arising from expenditure induced by an expectation that they could remain in the bungalow as their home. The absence of an intention to create a legal relationship did not prevent compensation for the expenditure from being an appropriate satisfaction of that equity.
2. The remedy had to avoid conferring on the defendants a greater interest than the parties’ expectation contemplated. The administrators held the only estate asset subject to the statutory trust for sale under the Administration of Estates Act, 1925. Giving the defendants an immediate right to occupy in priority to that trust could engage the Settled Land Act and confer rights to sell, let or receive income which had never been contemplated.
3. A requirement that the defendants consent to a sale would not by itself preserve rent-free occupation. If they also had to be protected against eviction for letting, that protection would itself amount to an interest taking priority over the trust for sale. The practical difficulties of preserving occupation, including financing administration expenses, mortgage interest, repairs and insurance, therefore made reimbursement the only sensible remedy. The Court considered that the authorities of Inwards v Baker, Ayer v Benton and Re Herklots’ Will Trusts did not avoid that difficulty. The reference to section 205 (1) (XXIX) of the Law of Property Act, 1925 was relevant to the character of an immediate binding trust for sale.
4. Where reimbursement is used to satisfy an equity based on improvements, the reasonable value of the claimant’s own labour may be included. The first defendant was therefore entitled to the unchallenged £265 valuation of his work, although he was not a qualified artisan.

The appellants’ costs were payable out of the estate, subject to Legal Aid taxation. The respondents could retain their trustee-basis costs from the estate.

• Court of Appeal (Civil Division): allowed the appeal to the limited extent of varying the compensation award and made costs directions.
• Boston County Court: His Honour Judge Braithwaite found an equity in favour of the defendants and ordered that it be satisfied by securing their occupation until their expenditure was reimbursed.