SQ v RQ & Anor

Proprietary estoppel requires an assurance or conduct creating an expectation of an interest in land, reliance, detriment and unconscionability assessed in the round. Once the claimant has relied detrimentally, the assurance becomes irrevocable. Relief must satisfy the minimum equity necessary to do justice and remain proportionate to the expectation and detriment. A party cannot rely on conditions forming part of an illegal tax-evasion purpose to recover property where that purpose has been partly implemented. Where legal title can be established without relying on the illegality, the claimant may enforce that title.

The proceedings concerned the beneficial ownership of a substantial family property. The property had originally been transferred by the father to two sons in 1986 as part of arrangements intended to reduce inheritance tax. In 2000, one son and his wife alleged that the father and the other son agreed that the property would become theirs if they renovated it. They raised finance, sold property and invested substantial sums in the renovation.

The father and the other son denied any agreement giving ownership, contending that the couple had only been given a right to occupy the property. The issues included proprietary estoppel, constructive trust, the effect of the 1986 arrangements and illegality.

1. Proprietary estoppel. The court applied the principle in Taylor Fashions Ltd v Liverpool Victoria Trustee Co Ltd [1982] QB 133. The father created an expectation that the property would belong to the claimant and his wife if they undertook the necessary work. The other son approved and perpetuated that assurance through the October 2000 documentation.
2. The elements of proprietary estoppel are not discrete compartments. The court must assess the parties’ conduct and the whole circumstances through the underlying principle of preventing unconscionable conduct. The assurance became irrevocable when the claimant and his wife acted to their detriment by raising finance, selling assets, renovating the property and making it their home.
3. The court also found a constructive trust. The parties’ shared intention in 2000 was that the entire beneficial interest should belong to the claimant. The deed of gift was designed to transfer the other son’s interest to him.
4. The 1986 arrangements were conditional and had an illegal purpose, namely deceiving the Inland Revenue in relation to inheritance tax. Applying Tinsley v Milligan [1994] 1 AC 340 and Tribe v Tribe [1996] Ch 107, the father could not rely on those conditions to establish a continuing beneficial interest or revoke the gift. The illegal purpose had been partly implemented through false tax treatment before the attempted withdrawal.
5. Relief for proprietary estoppel must be principled and proportionate. It is not necessarily limited to expenditure, nor does the court have an unfettered discretion to grant whatever appears fair. In the circumstances, only transfer of the property to the claimant would satisfy the equity. The claimant was therefore entitled to the property.