Real Estate and Property Disputes

Proprietary Estoppel: What remedies are available when someone takes back a promise to transfer property?

In a previous post, we discussed the legal doctrine of proprietary estoppel. The purpose of proprietary estoppel is to prevent unfairness where a promise is made to someone that they will be granted a benefit or right over real property and the person making the promise does not keep their word.

However, even if the court finds that the requirements for a claim under proprietary estoppel have been proven, this does not automatically mean that the court will make an order that gives the claimant everything that they were promised.

Our earlier post describes the legal test for proprietary estoppel applies in some detail. Generally, proprietary estoppel may apply to situations where the claimant has relied on the promise to make decisions, and going back on the promise would be detrimental to them in a way that is unfair or unjust.

This post discusses the orders that the court may make where the requirements for promissory estoppel are met, and the factors the court will consider in deciding what the remedy should be.

Remedies in proprietary estoppel cases

When the claimant succeeds in proving each element of the test for proprietary estoppel, the court then must decide what remedy should be granted. There are many possible orders the court can make to ensure that the remedy appropriately accounts for the specific unfairness caused to the claimant. This may include transferring the entire property to the claimant, or more limited relief such as allowing the claimant to purchase the property at fair market value.

In deciding on the appropriate remedy, the court will consider whether granting the remedy sought is proportionate to the detriment suffered by the claimant. The court will not grant a remedy that is excessive compared to the detriment that the claimant experienced as a result of relying on the promise.

In both of the following cases, the claimant was working on a property assuming that they would later inherit that property and the court found that the requirements for proprietary estoppel were established. However, the court’s decision about whether to order that the claimant is entitled to the property differed. The reason for the difference between the cases results from the different degrees of harm caused to each claimant based on the extent of their reliance on the defendant’s promises.

Linde v Linde: A successful claim in proprietary estoppel

Linde v Linde, 2019 BCSC 1586, involved a dispute between an 89-year-old father (the defendant Kenneth Linde) and his 60-year-old son (the plaintiff Howard Linde) along with Howard’s wife, Beatrix. The dispute centred around Kenneth’s 623-acre ranch. Kenneth had promised that Howard and Beatrix would inherit the ranch upon his death. However, the plaintiffs and Kenneth had a major falling out after Howard withdrew money from a joint bank account and took gold from Kenneth’s safety deposit box. Kenneth told Howard and Beatrix that they were no longer going to inherit the ranch and that he was going to gift it to a neighbouring First Nations Band. This gift was put on hold until the court decided whether Howard and Beatrix were entitled to ownership of the ranch upon Kenneth’s death based on the doctrine of proprietary estoppel.

Applying the legal test for proprietary estoppel

The court applied the three-part test for proprietary estoppel, and found that Howard and Beatrix’s circumstances met each requirement.

First, the court found that a promise had been made to Howard and Beatrix, and that, based on this promise, the couple had expected to enjoy some right or benefit over the property. Kenneth had promised that, with continued hard work, Howard and Beatrix would inherit the ranch. Kenneth encouraged the couple to work on the ranch and to give up alternative careers. Howard and Beatrix agreed to work on the ranch for relatively little pay because they understood the arrangement with Kenneth was that they would inherit the ranch upon his passing.

Second, the court found that Howard and Beatrix reasonably relied on their expectation by doing something or refraining from doing something. Howard worked for his parents on the ranch for his entire life, including some 50 years as an adult. Beatrix also worked full-time on the ranch after marrying Howard in 1996. Additionally, both Howard and Beatrix decided not to pursue alternative careers so that they could carry out the work that needed to be done on the ranch.

Third and finally, the court found that Howard and Beatrix suffered a detriment that resulted from their reasonable reliance, such that it would be unfair for Kenneth to go back on his promise. The couple was paid little if at all for their work. Furthermore, Howard and Beatrix gave up different career paths because of Kenneth’s promise that the ranch would pass to them. When Beatrix and Howard married, Beatrix was working as a substitute teacher, and she had several job offers in a nearby town that she turned down so that she could work on the ranch.

Result of the case

In the result, the court ordered that the transfer of the ranch to the First Nation was set aside and that the ranch be transferred to Howard to hold in trust for Kenneth until his death. The court order required Howard to pay half of the net profits of the ranch to Kenneth while Kenneth was alive, and that that the ranch would be given to Howard and Beatrix after Kenneth’s death.

Sabey v von Hopffgarten Estate: A Lesson in Proportionality

The court in Linde v Linde noted that a claimant who satisfies the elements of proprietary estoppel is only entitled to relief that is proportional to the work they put in or the sacrifices they made. This proportionality was found in Linde v Linde. The ranch’s value was proportional to the hours that Howard and Beatrix worked.

However, in Sabey v von Hopffgarten Estate, 2014 BCCA 360, the Court of Appeal overturned the decision of the trial judge in that case on the basis that value of the property in question was disproportionate to the amount of detriment suffered by the plaintiff.

The decision of the trial judge

In Sabey, the alleged detriment suffered by the plaintiff, Mr. Sabey, was that he worked and studied dressage for two and a half years on the deceased’s horse farm and was underpaid for his labour. During this period, the deceased assured the plaintiff that he would inherit the farm. Mr. Sabey also claimed that he had given up his aspirations in professional dressage, and made different decisions about his accounting career as a result of this assurance.

During the farm owner’s lifetime, she had executed a codicil to her will attempting to change the will so that the plaintiff would inherit the farm. However, the codicil was found to be invalid as it was only witnessed by one person. Therefore, the original will giving the farm to someone else was still effective.

The trial court initially awarded Mr. Sabey the farm on the basis that the requirements for proprietary estoppel were met. However, the deceased’s estate appealed the decision.

Decision on appeal

The majority of the justices hearing the appeal held that granting Mr. Sabey the entire horse farm was not proportional to the detriment that he suffered due to the time that he had spent working there. The majority overturned the trial judge’s findings of fact, and found that the only detriment he suffered was his underpaid labour on the farm. Mr. Sabey had only worked for two and a half years, and he received room and board and other benefits during that time. Even though Mr. Sabey had been assured that he would inherit the farm, he had not put in many years of work, as had Howard and Beatrix in Linde v Linde. Nor had Mr. Sabey sacrificed an alternative career, as had Howard and Beatrix. Since, in the majority’s view, the detriment suffered by Mr. Sabey was not significant, it was disproportionate to award him the ranch.

One of the justices dissented on the basis that the trial judge’s interpretation of the evidence was reasonable, and the Court of Appeal should not interfere with that reasonable assessment. Particularly, the dissenting justice disagreed that the Court should overturn the trial judge’s findings of other detriments to Mr. Sabey including that he had given up his aspiration to pursue dressage professionally in order to work on the farm, and that he had chosen to work in a smaller accounting firm so he would not have to travel and could work as closely as possible to the farm. Because these factors supported the view that the plaintiff was significantly detrimentally impacted by his reliance on the assurance that he would inherit the farm, the justice concluded that the trial judge’s decision to grant him the farm was not disproportionate.

Result of the case

The decision of the majority overturning the trial judge’s decision meant that Mr. Sabey was not entitled to any compensation as a result of his relying on the promise that he would inherit the property.

Estate lawyers in Vancouver

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