England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LEICESTER COUNTY COURT
(RECORDER KATE THIRLWALL QC)

		Royal Courts of Justice Strand London, WC2
		25 November 2004

1. LORD JUSTICE MAY: Lord Justice Jonathan Parker will give the first judgment.
2. LORD JUSTICE JONATHAN PARKER: This is an appeal by Robert Wormall ("Robert"), the claimant in the action, against an order made by Mrs Recorder Kate Thirlwall QC in the Leicester County Court on 12 May 2004 in an action brought by Robert against his daughter, Jill Wormall ("Jill"), claiming an immediate order for possession of certain land and buildings at Ibstock Grange Farm, Pretoria Road, Ibstock, Leicestershire. The farm belonged to Robert but it had for some years been occupied by Jill for the purposes of an equestrian business carried on by her.
3. The judge began her judgment as describing this as a most unfortunate case, a description with which I respectfully agree. The judge concluded that Jill had made out a case of proprietary estoppel entitling her to remain in occupation of the land and buildings in question for a limited period. By her order the judge made an order designed to satisfy that equity. There is no appeal against that declaration. However, the judge went on to award Jill £50,000 by way of compensation for, in effect, having to relocate her business. Robert appeals that part of the judge's order. He also appeals against certain other provisions of the order but in those respects the issues raised are consequential upon the decision of this court on the primary issue as to compensation. There is no cross-appeal.
4. The facts which have given rise to the present dispute are, in summary, as follows. Ibstock Grange Farm was bought by Robert's father in 1945. Following his father's death in 1957, Robert, who was then about 17, began farming the farm in partnership with his mother. In 1969 he married Pamela. They had two children: Jill (born on 12 August 1973) and a son, Herbie (who was born on 27 March 1979). They all lived with Robert's mother in the farmhouse. In 1997 Robert purchased the farm from the trustees of his father's estate. Most of the price was left outstanding on the terms of a promissory note given by Robert.
5. The judge continues with the factual history in paragraphs 9 to 12 of her judgment:

"9. The family lived happily in the farmhouse at Ibstock Grange. Mr Wormall [Robert] farmed, with the assistance of his wife. Mrs Wormall senior [Robert's mother] moved to a bungalow in the grounds. She continues to live there. She is now in her eighties. As a result of this dispute she no longer sees her granddaughter [Jill].

10. It is plain, and it is not in dispute, that this family has always lived beyond its means. The claimant ran the farm on an ever increasing overdraft. In 1989 he decided, and his wife accepted, that the farm would be sold, the debts paid off and the family would move to Scotland where land was cheaper and they could begin farming again without debt.

11. The farm was put for auction by EA Lane on 8.9.89. It was divided into 4 lots: the main farm being the farmhouse, bungalow and other buildings together with over 368 acres of land, and 3 other parcels of land of 62.81, 30.20, and 5 acres respectively, all of which had separate access. In the event the main farm did not sell. The other lots were sold and the monies raised (some £242,000) were used to reduce the claimant's bank overdraft at that time. The move to Scotland did not take place. The land agent, Mr Lane, gave evidence. He said, and I accept, that the farm remained on the books of EA Lane from that time, but it was not actively marketed.

12. The claimant continued to farm but the business continued to make a loss most years. The bank overdraft increased annually."

6. The judge then describes Jill's interest in horses since her childhood and her accomplishments as a horsewoman. On leaving school, Jill began taking in liveries at the farm and schooling ponies. Her equestrian activities were actively encouraged by her parents. By the end of 1990, she was, as the judge found in paragraph 21 of her judgment, running an equestrian business at the farm. From about three years from 1991 to 1994 she worked at the yard of a well-known national hunt trainer, Mr David Nicholson. However, from May to September each year (out of the national hunt season), she returned to the farm and continued to work with her own horses and schooling young ponies for others.
7. In 1993 Robert began to create gallops at the farm for Jill's use in her business. The judge found in paragraph 35 of her judgment that he maintained them for her to assist her in her business activities. In 1994 Jill left her employment with Mr Nicholson's yard and returned to the farm to carry on her business full time, despite having been offered a job at Mr Nicholson's yard. The judge found in paragraph 38 of her judgment that Robert had encouraged her to return home. In paragraph the 40 the judge found that Robert had told her "that she would be able to pursue her ambition to ride and train from home".
8. During the years which followed, Jill's business continued to grow to the point where, in March 2003, it made a profit of some £16,000 on a turnover of some £43,000. In paragraph 43 of her judgment the judge found that Jill's business was subsidised by Robert in that he made no charge for the buildings and facilities which Jill used, including the use of a horse box. Robert also assisted Jill in entertaining clients.
9. In paragraph 45 of her judgment, the judge found that in so assisting and supporting her, Robert encouraged Jill to continue with her business. In 1998 Robert gave permission to Jill to use part of the cowshed at the farm as part of her livery business.
10. Until about 1998 relations between Robert and Jill were harmonious. However, from about 1995 onwards, matrimonial relations between Robert and Pamela began to deteriorate. Moreover, the fact that, as the judge records in paragraph 51 of her judgment, the family debts were once again at a very high level only served to place additional pressure on the family relationships. The judge continued:

"After 40 years of farming, [Robert] wanted to retire from arable farming. He intended, said, to do some contracting work but his days of full-scale farming were at an end. To retire he had to reduce the farm overdraft. The only way to do was to sell land."

11. During the period 1998 to 2000, Robert sold 327 acres of the farm. In September 2000 he retired from arable farming altogether. In May 2001 he moved out of the farmhouse and went to live with his mother in the bungalow. Divorce proceedings between him and Pamela were commenced in July 2001. We are told that ancillary relief proceedings are due to be heard on 8/9 December 2004 (in about two weeks' time).
12. By letter dated 8 August 2002, Robert withdrew his permission for Jill to occupy the land and buildings at the farm for the purposes of her business. He required her to vacate them by 4 November 2002. Jill declined to do so and on 3 July 2003 Robert commenced the present action claiming immediate possession of land and buildings together with mesne profits.
13. By her Defence and Counterclaim Jill pleads a defence of proprietary estoppel, alleging in paragraphs 10 and 11 that Robert had encouraged her to occupy the land, "on the basis that Ibstock Grange would be available to her to use for as long as she wanted"; and that she had acted to her detriment in reliance on such encouragement. She accordingly alleges that it is unconscionable for Robert to assert a claim to immediate possession. By her counterclaim, she seeks a declaration to the effect that she is entitled to continue to occupy the land and buildings for so long as she wishes to do so.
14. After referring to the principles underlying the doctrine of proprietary estoppel, as summarised by Robert Walker LJ (as he then was) in Gillett v Holt [2001] Ch 210, as to which principle there is no dispute on this appeal, the judge addressed the question: What assumptions were reasonably created in Jill's mind by Robert's conduct in relation to the land and buildings which she occupied? In paragraph 78 of her judgment, the judge concluded that it was unlikely that, as Jill had asserted, Robert had told her that she could have the use of the land and buildings for as long as she wanted them. The judge went on to note certain inconsistencies in Jill's approach to, and evidence about, this aspect of the case. In paragraphs 80 and 81 of her judgment, the judge said:

"80. It is unlikely, in my judgment, that claimant ever said to the defendant in terms that she could use the land and buildings for as long as she wanted. It is much more likely, and I find, that the defendant assumed that this was the case on the basis that she believed at that time that the land and buildings would belong to the family for the foreseeable future. Neither she, nor anyone else, foresaw that her parents' marriage would break down and the farm would be divided.

81. I find that it was reasonable for the defendant to assume, on the basis of encouragement and assurances given to her by her father in 1990, 1993 and 1994, that she would be able to continue to occupy the land and buildings for the purposes of her business for as long as the land and buildings belonged to the family."

15. In paragraph 82 of her judgment the judge found that Jill had relied on Robert's assurances in setting up and building up her business at the farm. The judge then turned to the question of detriment. In paragraphs 83 and 84 of her judgment she said:

"83. Has the defendant suffered detriment (or will she do so) as a result of her father's change of position. The time at which detriment is to be judged is the date upon which the owner of the land seeks to change his position (see Gillett v Holt at page 2320). In this case that was in August 2002 when the first letter was written to the defendant on the claimant's behalf.

84. The defendant has undoubtedly suffered and will suffer detriment as a result of her father's change of position. She has been working at her business for years. Recently she has begun to make money out of it. If she has to leave Ibstock Grange she will have to start again. She will, at the very least, need to find new premises, develop her clientele again -- unless she finds alternative premises that are reasonably close by."

16. In paragraph 85 of her judgment the judge declined to make a finding of detriment by reason of Jill having turned down Mr Nicholson's offer of a job at his yard. In paragraphs 86 and 87 of her judgment the judge said:

"86. The defendant suffers further detriment since she leaves behind the fruits of her own labour in the form of the maintenance and building that she has carried out or paid for herself (as well as the general farm work she carried out over the years) all on the understanding that she would be able to continue with her business at Ibstock Grange.

87. The defendant's equestrian skills, business experience and contacts are all still available to her but I am quite sure that the loss of the use of the land and buildings at Ibstock Grange will be detrimental to her."

17. The judge then turned to the question of unconscionability, saying in paragraph 88 of her judgment:

"Given my findings it is quite unconscionable, in my view, that the claimant should now, many years later seek to remove from his daughter much of the wherewithal to continue her business. I accept that but for her father's (and indeed her mother's) generosity in the first place she would never have had the opportunity to run a business like this on her own account, nor would she have been able to develop her business as she has done. She has been able to make money as a result, in part of the financial and other support her father has given her over and above the provision of land and buildings. But, as a result of her father's words and actions the defendant has reasonably assumed that she would be able to continue to use the land and buildings while they belonged to the family. I am satisfied therefore that it would be unconscionable for the defendant to assert his strict rights now."

18. Having concluded that an equity had arisen in Jill's favour, the judge then addressed the question as to how that equity should be satisfied. In paragraph 90 of her judgment she directed herself, relying on Jennings v Rice [2003] 1 P&CR 100, that her task was to do what was necessary to avoid an unconscionable result. In paragraph 93 of her judgment she accepted the submission of Miss Philomena Harrison (for Robert) that the relief granted should be framed in terms of the minimum required to satisfy the equity raised. That was not challenged by Miss Penelope Reed (for Jill). The judge continued in paragraphs 94 and 95 of her judgment:

"94. I have found that the defendant was entitled reasonably to expect that she would be able to continue her business from the farm land and buildings for as long as the farm belonged to the family. In practice that meant that while the family functioned as a family and finances permitted the farm to be retained, the defendant would be able to use it.

95. The divorce, coupled with continued financial difficulties before that, mean that the farm will be disposed of to provide for the two spouses. Whether there is a sale to a third party or a transfer between the spouses matters not for these purposes. The farm (even if retained by one or other spouse) will no longer be the family farm."

19. In a final section of her judgment under the heading "Conclusion", the judge turned to the question of the relief to be grant. In paragraph 96 she said:

"In my judgment equity can be satisfied if the defendant is able to continue at Ibstock Grange for the immediate future, while the financial matters between the claimant and Mrs Wormall are resolved. It is of course possible that the financial matters may not resolve speedily, and certainty as to the future is desirable here. I shall order therefore that the defendant be entitled to continue to use the land and buildings at Ibstock Grange for the purposes of her business until six months after the date upon which the final order is made in the proceedings for ancillary financial relief between the claimant and Mrs Wormall, or 12 months from today's date, whichever is the sooner."

20. The judge's intentions in this respect were duly reflected in her order, which includes a declaration to the effect that Jill is entitled to continue to occupy the land and buildings currently occupied by her until six months after the date upon which a final order is made in the ancillary relief proceedings, or until 12 May 2005 (that being the anniversary of the making of the order) whichever should be the sooner.
21. In paragraphs 97 to 99 of her judgment, however, the judge went on to consider whether Jill was entitled to compensation for loss of the use of the land and buildings at Ibstock Grange Farm, saying:

"97. I now consider whether the defendant is entitled to a sum to compensate her for the loss of the land and buildings. Had it not been for the breakdown of her parents marriage she could have continued to run her business from Ibstock Grange for the foreseeable future, as she had reasonably expected. I am satisfied that she should be compensated for her early departure. As both counsel submitted the assessment of such a payment has to be somewhat rough and ready. The defendant submits that she should be entitled to 20% of the proceeds of sale (which would be approximately £160,000, assuming that the valuation of £800,000 given by the claimant is accurate). That, in my view, is far too much. It is the equivalent of 10 years profit at the rate achieved in the year to March 2003. The claimant's suggested £5,000 is far too little and does nothing to compensate the defendant for the loss of her premises which has been brought about by the breakdown of her parents' marriage."

22. The references to suggestions made on behalf of the claimant of a money payment have to be seen in the context of the submissions which were made to the judge by Miss Harrison in the course of the hearing. Her primary submission was that there was no equity to be satisfied. Alternatively, she submitted that a six months' possession order would be sufficient to satisfy any equity that might have arisen. In the further alternative she submitted that if possession were to be ordered immediately the equity could be satisfied by a payment of around £5,000. The judge continued:

"98. In my view a sum of £50,000 will fairly compensate her. It is the equivalent of 12 months' turnover at current rates. It will give her a cushion in the transfer of her business from Ibstock Grange elsewhere (if that is what she decides to do). It will also allow her to pay for equivalent facilities for at least a year, while she builds up her business again. I bear in mind that there seems to be no dispute about her entitlement to retain eg the removable stables and the treadmill.

99. The sum of £50,000 will, I apprehend, be taken into account when the matrimonial assets have been considered. In effect, therefore, it comes from both parents. In my view it is rights that it should do so since it is their divorce which requires her to move her business elsewhere."

23. The judge's conclusion as to financial compensation is duly reflected in paragraph 2 of her order, which provides that on Robert paying to Jill the sum of £50,000 Jill shall deliver up possession of the land and buildings in accordance with the declaration. By paragraph 1 of her order the judge dismissed Robert's claim for possession. By paragraph 3 she ordered that Robert pay Jill's costs of the action.
24. The judge refused Robert's application for permission to appeal against paragraphs 1, 2 and 3 of the order; that is, the dismissal of his claim for possession, the order for the payment of £50,000 and the order for costs. Robert duly applied to this court for permission to appeal and I granted permission on the papers on 24 June 2004.
25. By his grounds of appeal Robert contends that, having found it was reasonable for Jill to assume, on the basis of encouragement and assurances which the judge found to have been given by Robert, that she would be able to occupy the land and buildings "for as long as [they] belonged to the family" (paragraph 81 of the judgment), and that that equity could be satisfied by the terms of the declaration (paragraph 96 of the judgment), there was no legitimate basis for any order for the payment of compensation for Jill's "early departure". Robert also raises a number of other consequential matters to which I need not refer at this stage.
26. Miss Harrison, for Robert, accepts that once court has found that an equity has been raised, it is for the court exercising a judicial discretion to decide how that equity may be most appropriately satisfied. She submits, however, that the order for compensation in the instant case is contrary to principle in that once the equity has been satisfied, as it has in the instant case (according to what the judge says in paragraph 96 of her judgment) by the grant of a declaration, there is, by definition, no outstanding loss or detriment to be compensated. The starting-point, she submits, is the equity as found by the judge in paragraphs 94 and 95 of the judgment. As already indicated, Miss Harrison does not seek to challenge the judge's findings as to either the existence or the extent of that equity. Miss Harrison points out that in paragraph 96 of the judgment the judge reaches her conclusion as to how the equity thus found could be satisfied and the declaration provides for this.
27. Relying on what Robert Walker LJ said in Gillett v Holt at page 235E-F, Miss Harrison submits that in awarding compensation over and above the protection afforded to Jill by the declaration, the judge has patently, on her own reasoning and contrary to the direction which she gave herself in paragraph 93 of the judgment, exceeded "the minimum equity to do justice to the plaintiff" (to use the words of Scarman LJ in Crabb v Arun District Council [1976] Ch 179 at 198, quoted by Robert Walker LJ in Gillett v Holt in the passage from his judgment to which I have just referred).
28. Miss Harrison submits that given the extent of the equity which the judge found, there was no question of the declaration providing for an early departure from the farm. She points out that the Wormall family was no longer functioning as a family and that the family's financial difficulties, which had been continuing since about 1989, also contributed to the need to dispose of the farm. She submits that it is irrelevant that, as found by the judge, Jill could not have foreseen the breakdown in her parents' marriage. She asks, rhetorically, what would have been the position had Robert suffered a fatal accident leading to an early sale of the farm?
29. Miss Reed submits that the fact that Jill did not foresee the breakdown in her parents' marriage is a relevant factor in that her expectation was that she would be able to carry on her business at the farm for the foreseeable future. In the event she was required to vacate the land and buildings earlier than expected. Miss Reed submits that, in satisfying the equity, the court looks not only at the expectation but also at the detriment which has been suffered. In this connection she relies on the findings made by the judge in paragraphs 84 and 86 of the judgment, which I have quoted.
30. Miss Reed submits, relying on Jennings v Rice, that the court has a discretion in deciding how an equity arising under the doctrine of proprietary estoppel is to be satisfied, a proposition which, as indicated earlier, Miss Harrison accepts. Miss Reed goes on to submit, relying on Gillett v Holt, that the order for compensation in the instant case was clearly within the limits of the judge's discretion. She submits that the judge in the instant case adopted the same approach as this court adopted in Gillett v Holt: that the order for compensation correctly takes into account the detriment which the judge found Jill will suffer when she has to relocate her business elsewhere; and that it rightly recognises the unconscionability of Robert seeking an immediate order for possession. She submits that delivery up of possession in accordance with the terms of the declaration will require Jill to make an "early departure", given her expectation that she would be able to carry on her business at the farm for the foreseeable future; and that the judge rightly took into account the detrimental effect on Jill of Robert withdrawing the support and encouragement which he had given her over many years previously.
31. Miss Reed submits that on a proper interpretation of paragraphs 96 to 96 of the judgment, the judge was expressing the view that the declaration in itself would not be sufficient to satisfy the equity and that something more was required in the form of financial compensation. She stresses the extent to which Jill's own labours led to the building up of her business. She suggests that there is a thread running through the judgment of the learned judge; that although the judge did not consider that Jill could carry on her business at the farm come what may, nevertheless she did consider that there was still an outstanding element of the equity to be satisfied even taking into account the making of the declaration. Miss Reed invites us to look at the judgment in the round and to interpret it, and in particular paragraphs 96 and 97 in that way. She accordingly submits there is no error of principle in the judge's approach to the award of compensation and that the appeal should be dismissed.
32. I turn to the order made by the judge for the payment by Robert to Jill of £50,000 by way of compensation. As I read the judge's judgment, she awarded that compensation not on the basis of any assurances or representations made by Robert to the effect that Jill could carry on her business at the farm for as long as she wished (for, as the judge found in paragraphs 78 and 80 of her judgment, no such assurances or representations were ever given or made), but rather on the basis that the farm would cease to be a family farm very much earlier than Jill had been able to foresee. In effect, the judge was, as I read her judgment, awarding Jill compensation for the fact that her parents' marriage had broken down. This appears most clearly, in my judgment, from what the judge says in paragraph 99 of her judgment in which she expressly acknowledges that it was the divorce which required Jill to move her business elsewhere. If that is the correct reading of the judge's judgment, as I think it is, it must follow that the judge erred in principle in awarding compensation for an expectation which exceeded the expectation which, as the judge found, it was reasonable for Jill to have, based on the more limited assurances which the judge found that Robert had given; that is, an expectation that she could stay at the farm so long as it continued to be the family farm, in the sense explained by the judge in paragraphs 94 and 95 of her judgment. Having satisfied the equity by making the declaration, there could, by definition, be no outstanding equity which remained to be satisfied by an award of compensation.
33. To sum up, therefore, the relocation of Jill's business was always on the cards. The fact that the need to relocate arose earlier than Jill had foreseen was not the consequence of any assurance or representation given or made by Robert. As the judge found, Robert's conduct led only to a reasonable belief on Jill's part that she could continue to carry on her business at the farm so long as it continued to be the family farm. Regrettably, Robert and Pamela's divorce means that it will cease to be family farm (in the sense described by the judge) much sooner than Jill thought. But, on the judge's own findings, that is not something for which Robert is liable to compensate her.
34. In my judgment, therefore, the order for compensation should be set aside as being wrong in principle. I would accordingly allow the appeal. I would go on to hear counsel as to what variations to the judge's order are appropriate in the light of that decision, with particular reference to the form of the declaration and the date upon which possession is to be delivered up.
35. LORD JUSTICE NEUBERGER: For the reasons given in the judgment given by Lord Justice Jonathan Parker, I, too, would allow this appeal.
36. LORD JUSTICE MAY: I agree that this appeal should be allowed to the extent described by Lord Justice Jonathan Parker and for the reasons which he has given. In my judgment, the satisfaction of the equity found by the recorder, as to which there is no challenge, requires that Jill should be entitled to continue to use the land and buildings at Ibstock Grange, as described in paragraph 3 of the amended particulars of claim, for the purpose of her business until completion of any disposal of the farm following the ancillary relief proceedings. "Disposal", in that context, embraces a sale to a third party or a transfer between the spouses (see paragraph 95 of the recorder's judgment).
37. The court cannot second guess the relevant outcome of the ancillary relief proceedings. I consider that each of the alternatives dates in the recorder's declaration was arbitrary in the context of Jill's equity as found by the recorder. Neither of them necessarily represents the proper end date for the purpose of satisfying the equity. The recorder might conceivably have considered making an additional money award to cover the contingency that the later date in her declaration could have been earlier than the completion of any disposal. I do not read paragraph 97 of the judgment as attempting that assessment, which would in any event have been an entirely speculative matter. No such assessment and award is necessary to achieve the minimum necessary to satisfy the equity, provided that Jill's entitlement to remain on the land and building fully does so.
38. Since, as I agree, the recorder's additional award of compensation was wrongly made and should be set aside, but since the declaration has taken dates which are arbitrary, in my view a modified declaration becomes necessary.
39. The court will hear short submissions from the parties on this point in addition to the other matters that remain to be considered. In substance the declarations should be such as to entitle Jill to continue to use the land and buildings for her business until completion of any disposal of Ibstock Grange within the contemplation of paragraph 95 of the recorder's judgment. An appropriate declaration to that effect will provide the certainty that is needed for any calculation that has to be made in the ancillary relief proceedings. It will enable vacant possession to be given to a purchaser on completion to which end Jill must understand that she will have to have left by them.
40. I am inclined to think that a formal possession order as at that date may be helpful, but we will hear the parties. Jill should be protected against a very early snap sale if there is any prospect of that taking place. She is also entitled to be kept fully informed of the progress of any disposal, so that she may have proper notice of the need for her to leave so that vacant possession may to be given. It may be appropriate to consider whether solicitors might, on instructions, give some kind of undertaking to this end.

Order: Appeal allowed. Undertaken to be given by Robert Wormall to keep Jill Wormall informed as to progress of any disposal of the property. Respondent to remain on the property for the purposes of her business until the disposal of the property, but to give up possession as at the date determined by a modified form of declaration. Respondent to pay the appellant's costs of the appeal, but she will retain her order for costs in the court below, such costs to be subject to detailed assessment. Liberty to both parties to apply to a recorder or a judge of the Northampton County Court.

Counsel to draw up agreed minute of order.