Thompson v Foy

Proprietary estoppel requires an assurance sufficiently clear in its context, reasonable reliance, and detriment. The remedy is discretionary and should do the minimum necessary to satisfy the equity, ordinarily giving effect to the claimant’s expectation unless disproportionate.

Undue influence must be proved as at the time of the impugned transaction. A transaction does not become tainted retrospectively merely because a party later breaks a promise. A close and trusting family relationship does not, without more, create a presumption where the transaction is explicable by ordinary motives and its substance is understood.

For registered land, an overriding interest based on actual occupation is assessed by reference to the statutory priority rules. A person who transfers title to enable a mortgage may be precluded from asserting a competing right against the mortgagee.

Mrs Marion Thompson transferred Valley View to her daughter, Mrs Julie Foy, through a deed of family arrangement and a deed of gift. The arrangement contemplated that Mrs Foy would mortgage the property, pay Mrs Thompson £200,000, and use the balance to acquire a home in Spain capable of accommodating Mrs Thompson.

Mrs Foy obtained a mortgage from The Mortgage Business plc, but did not pay the promised £200,000. Mrs Thompson sought to set aside the transactions for undue influence and claimed that her right had priority over the mortgage as an overriding interest. The Mortgage Business also sought protection of its charge and, alternatively, a charge over any beneficial interest retained by Mrs Foy. The court also determined whether Mrs Foy had acquired an interest through proprietary estoppel and whether a separate £20,000 loan had been repaid.

1. Proprietary estoppel. The understanding that the extension would belong to Mrs Foy was sufficiently clear in context. Mrs Foy and her husband relied on it by constructing the extension at their own expense, causing detriment. The claim extended only to the extension and its site, not the garage, workshop, store, drive or wider land. Mrs Foy therefore acquired an equitable entitlement equivalent to ownership of the extension.
2. The remedy for proprietary estoppel is discretionary and should do the minimum necessary to satisfy the equity. An indefinite licence would not be proportionate after about five years’ occupation. Ownership of the extension was the appropriate remedy.
3. Undue influence. The relationship involved closeness, trust and some reliance, but Mrs Thompson did not generally entrust her financial affairs to Mrs Foy. The transaction, properly understood, was economically explicable by the improvements to Valley View, the intended payment of £200,000, and the proposed accommodation arrangements. No presumption therefore arose.
4. Mrs Thompson knew the substance of the transaction and intended to proceed. The repeated promise to pay £200,000 was found to have been sincerely made and did not constitute undue influence. Undue influence must have operated when the documents were executed; later failure to honour the promise could not retrospectively establish it. The claim to set aside the deeds failed.
5. Mortgage and priority. If the transaction had been set aside, Mrs Thompson’s actual occupation would have protected an interest in the original cottage and shared land under Schedule 3 to the Land Registration Act 2002, but not the extension or buildings used exclusively by the Foys. The court left open whether occupation was required both at disposition and registration. Mrs Thompson had also authorised the transaction by transferring title to enable the mortgage, and would have been precluded from asserting the right against TMB.
6. On the assumed facts, First National Bank plc v Achampong supported an equitable charge over Mrs Foy’s beneficial interest. Mrs Foy’s interest was valued at £200,000. The separate £20,000 loan remained unpaid.