Sledmore v Dalby

The remedy for proprietary estoppel must represent the minimum equity required to do justice. The claimant’s encouraged expectation sets the maximum extent of the equity, but the court may award less after considering the detriment, benefits already received, current circumstances and the position of the legal owner.

An equity may therefore become exhausted. Enforcement of strict legal rights ceases to be inequitable where prolonged rent-free occupation has adequately answered the expenditure and reliance, the occupier has little continuing need for the property, and the owner has a pressing need to recover it.

The appellant owned a cottage occupied by her widowed son-in-law. From 1976 he and his family lived there without rent. Between 1976 and 1979 he contributed labour and money towards improvements after being told that the cottage would one day belong to him and his wife.

The Leeds County Court dismissed the owner’s possession claim and declared that the respondent had a personal, non-assignable licence to occupy the cottage for as long as he wished. The respondent did not pursue his cross-appeal seeking transfer of the freehold.

The central issue was whether proprietary estoppel still made it inequitable for the owner to recover possession, having regard to the respondent’s expenditure, his long rent-free occupation, the parties’ present needs and the proportionality of the relief.

1. Appeal allowed unanimously. Roch LJ delivered the leading judgment. Butler-Sloss LJ agreed with it, and Hobhouse LJ agreed with both its result and reasoning while adding further reasons. The respondent’s proprietary equity had expired. The appellant was entitled to possession, and the counterclaim was dismissed.

2. Per Roch LJ, an assurance that the cottage would one day become the property of the respondent and his wife, coupled with encouragement of the improvements, implied that the family could remain there until the intended testamentary gift took effect. The appellant’s 1979 will did not itself satisfy that expectation.

3. The expectation encouraged by the owner fixes the maximum possible extent of a proprietary-estoppel remedy. The court must nevertheless identify the minimum equity needed to do justice. It may award less than the expected interest and must consider the owner’s position as well as the claimant’s expectation and circumstances.

4. The Recorder had failed to assess the respondent’s current use and need for the cottage against the appellant’s position and need for it. He had also failed to ask whether enforcement of her legal title remained inequitable. The Court of Appeal could decide those matters from the extensive documentary and oral evidence before it without remitting the case.

5. The respondent had enjoyed more than 18 years of rent-free occupation. His use of the cottage had become minimal, alternative accommodation was available, and he was employed. His adult daughter could support herself. Conversely, the appellant was financially vulnerable and had a pressing need to occupy her own property. It was therefore no longer inequitable to defeat the original expectation. The minimum equity had been exhausted.

6. Hobhouse LJ added that proprietary estoppel requires an induced assumption, reliance, distinct and substantial detriment, and a just remedy proportionate to that detriment. On his analysis, the legitimate assumption was that the cottage would be devised to the respondent’s wife, and the appellant had made a will to that effect. The assumption had not been falsified. The expenditure and any resulting equity had in any event been answered by the family’s enjoyment of the improvements and prolonged rent-free occupation.

1. Court of Appeal (Civil Division): In [1996] EWCA Civ 1305, the court unanimously allowed the owner’s appeal, dismissed the respondent’s counterclaim and ordered possession after two months.
2. Leeds County Court: Mr Recorder Phillips dismissed the possession claim and declared that the respondent had a personal, non-assignable and non-transmissible licence to occupy the cottage for as long as he wished.