We have another notable proprietary estoppel case, concerning the ubiquitous farm, but in this instance featuring an actual fight in the milking parlour: the bucolically named Habberfield v Habberfield [2018] EWHC 317 (Ch).The decision of Birss J is of particular interest for his approach to the issue of the relief to be granted in satisfying the equity found to have arisen in favour of the successful claimant daughter. Whilst the Claimant’s quantifiable detriment was valued by Birss J at c. £220,000, he awarded her a cash sum of c. £1,170,000.
Interestingly, it was reading about the case of Davies v Davies, reported in the press as the “Cowshed Cinderella” case, that prompted the claimant in Habberfield to bring her claim.
Background
The dispute concerned a family farm called Woodrow, near Yeovil in Somerset. The Claimant, Lucy Habberfield, is one of the four children of the defendant, Mrs Jane Habberfield and her late husband Mr Frank Habberfield. The farming business was operated as a partnership between Frank and Jane. Lucy has three older siblings: Emma, Andrew and Sarah.
Woodrow Farm had been originally acquired in about 1961. In about 1989, 104 acres of additional land at Mudford had been acquired. The entire holding consists of 220 acres. The holding, including the business and all the land and buildings, including the farm house, is worth about £2.5 million.
It was Lucy’s case that she was entitled to the entire farm, or such lesser share as the court considered fit, on the basis of proprietary estoppel. She alleged that she devoted her entire working life to the farm on the basis of assurances made by her father that she would eventually take it over when he retired. She had commenced work on the farm in the 1980s as a teenager and had continued to work at the farm following her marriage and the birth of her children, after which time she was assisted by her husband, Stuart.
In 2013, after a fight in the milking parlour with her sister, Sarah, Lucy left the farm. She issued the proceedings following her father’s death in 2014.
Her mother, Jane, denied that assurances had been made and alleged that she was in any event not aware that her husband had made assurances to Lucy. She disputed Lucy’s case on detriment and on the relief that she claimed to be entitled to – contending that Lucy, at best, was entitled to a modest cash payment.
Dairy farming ceased at Woodrow from about 2015. Sarah, and her husband and son, worked the farm and the business now focuses on beef cattle and arable.
The case featured a list of witnesses for the parties, who would be at home amongst the cast of The Archers [Neville Loder, a local farmer, Brian Brooks, agricultural worker, Marguerite, the local hairdresser, the gloriously named Rod Cherry, supplier of feed, alongside farm hands, relief milkers and the bull semen supplier, to name a few].
Promises or assurances
One point of law that arose, was the question of whether or not Jane could be bound by promises or assurances made by her husband, Frank. Birss J held, following Fielden v Christie-Miller [2015] EWHC 87 (Ch), that the representations must have been made by Jane or with her authority in order for any estoppel to arise which binds her.
Birss J found that the following representations had been made to Lucy:
- From time to time, over an extended period of years from 1983 onwards, Frank told Lucy that she would take the farm over when he could not do farming any more.
- Shortly after the re-establishment of the dairy herd, Frank told her that “they are your cows, and if you want them you should milk them”.
- In about 1985, Lucy and Frank were discussing the likely cost of replacing the milking parlour in due course; Frank said that he did not know how much it would cost but said that the responsibility for doing so would be Lucy’s.
- From time to time, Lucy would raise the issue of her extensive work and limited remuneration and/or need for time off. Frank and Jane would assure Lucy that she could not have the benefit of her hard work both now and in the future. Frank in the presence of Jane assured Lucy that she would receive the farm and the farming business in the future because they could not run the farm forever. On at least one occasion the same exchange was directly between Lucy and Jane rather than Lucy and Frank.
- When Lucy asked for any time off she was told that if she did take time off ‘the cows would not be there when she got back’.
- In 1992, when she asked for a weekend off to spend at South West Young Farmers Club, she was told that if she wanted the farm then she had to stay to ensure the work was done.
- Frank would require Lucy to deal with staff employed to help on the farm, in relation to the milking, telling her that the employee would in time be working for her.
As to the meaning of these representations, Birss J held:
“99. … In isolation some of the things which are alleged to have been said could be construed as referring to running the farming business and so not making any statement about ownership of the property. However looking at the matters as a whole and in context I find that in making these statements the idea which was intended to be conveyed to Lucy was not only the idea that the farming business would be hers in future after Frank could not run it anymore but that the farm as a piece of property itself would be passed on to her too, subject to a point below. From her parents’ point of view the farm and the business went together. Turning to how Lucy understood them, in my judgment they conveyed their intention sufficiently clearly for Lucy to understand it. Her view of what her parents were intending to convey was accurate.
In contrast to the conclusions reached by HHJ Matthews in James v James, in which HHJ Matthews reached the conclusion that comments made by the deceased concerning his current intentions in relation to his testamentary dispositions did not amount to a promise or assurance intended to be acted on, Birss J concluded that the statements in this case were in the form of assurances that, in return for what Lucy was being asked to do now, she would receive something in the future.
However, he considered that the representations made did not amount to a promise that every single acre of the farm would be left to Lucy without making any provision for her siblings. Rather, the statement related to the dairy farming operation.
The representations were serious and intended to be relied upon and, crucially, Jane knew about them and that Lucy was taking them seriously and they were made with Jane’s authority.
Detriment
Birss J heard expert evidence on the question of the remuneration that Lucy could have expected to receive for her work. His conclusions on detriment were summarised as follows [207] he found that Lucy:
“relied on the representations to her detriment. The detriment overall can be summarised as pay lower than she could have reasonably expected for her work, long hours, few holidays and the continued commitment to Woodrow. This applied for all the time she was at the farm. By 2013 Lucy had acted in this way for just under 30 years. A notable feature of this detriment is that it does not only consist in the level of pay and conditions, it also involves her commitment to farming at Woodrow rather than elsewhere. She became and is a highly skilled dairy farmer. It is hard to imagine what would have happened if Lucy had not been assured she was working to build and maintain a successful dairy farm which she would inherit, because that is a long way from what happened. The assurances had been given from more or less the start of her working life in the early 1980s and continued until 2008. If they had not been given things would have been very different. Most likely Lucy would still have learned dairy farming from her father but then she would have gone elsewhere, probably sometime in the 1990s. She probably would have sought a farming tenancy elsewhere long ago. To borrow an expression from other cases, in this case the claimant has positioned her working life based on her parents’ assurances.”
Later in the judgment, Birss J estimates the quantifiable part of Lucy’s detrimental reliance. He took account of the expert evidence concerning typical agricultural wages in order to estimate what Lucy could reasonably have earnt over the period of her labour on the farm, and offset that against what she did in fact earn, plus the proceeds of an insurance policy which had been divided between Lucy and her siblings who worked on the farm, to reach the conclusion that the upper limit of her quantifiable reliance losses stood at c. £220,000.
The 2008 offer
There was evidence that in 2008, Frank and Jane had considered making a proposal to Lucy that she and her husband would be made partners in the farming partnership, together with Frank and Jane, and that they at that stage proposed that the farm, save for a small amount of land for Andrew and bequests to Lucy’s sisters, would pass to Lucy. Due to pressure, Birss J found, from Lucy’s siblings, a modified version of this proposal was put to Lucy. The long term proposal about ownership of the farm were part of what was put to her, but the immediate proposals about the partnership arrangements were different – all that was offered relating to Stuart was the two year trial period as an employee and the possibility of partnership after that.
Lucy had expected that Stuart would be offered partnership and was bitterly disappointed with this proposal and rejected it. Birss J considered that this was unwise and that it would have been better if she had kept her cool and sought to negotiate with her parents – this point was of significance in that it begged the question of whether or not Lucy should now be given relief, given her failure to accept this offer, and further was weighed into the reckoning in determining the relief that Birss J ultimately considered Lucy to be entitled to.
Mayhem in the milking parlour
Thereafter, Lucy and her husband continued to run the dairy farm until, against a background of increasingly strained relations, there was a fight between Lucy and her sister Sarah in the milking parlour and Lucy and Stuart left the farm. They issued employment tribunal claims against the partnership, which were settled in 2014.
Had Lucy acted “unconscionably” in refusing the 2008 offer?
The defendants contended that, having been offered all that she reasonably could have expected, and having rejected it, it was open to Jane to now leave the farm however she now chose to.
Subject to that issue, which amounted essentially to an allegation that Lucy herself had acted unconscionably, Birss J considered that the elements of a successful proprietary estoppel claim were made out.
Birss J considered that the a refusal by a person who would otherwise have established an equity, to accept an appropriate offer made by the owners of the property, might be such that the estoppel never arises (or if it does, it would not be inequitable for the owners to resile from it).
Birss J considered this point to be a difficult one for two reasons: (a) it was probable that if it had been accepted by Lucy and if it had been implemented in full by her parents, the result would have led to Lucy receiving the farm in the long run as a viable dairy farm, and (b) one of the main reason Lucy had rejected it (her unhappiness about the position of her husband) was that she was seeking something which she was not entitled to demand on the basis of the estoppel claim.
However, he considered that the proposal did not give something that Lucy ought to have had on the basis of the assurances given – namely control of the business free from the interference of her siblings. Moreover, it was not put to Lucy that by refusing the offer of partnership she would forfeit that inheritance. Taking those factors into account, he conclude that Lucy’s refusal of the offer could not entitle Jane (nor would it have entitled Frank) to resile from the assurances Lucy had been given.
How should the question of relief be approached?
Farmyard fisticuffs aside, Birss J’s approach to the question of the relief to be granted is the most interesting aspect of the judgment. The debate concerning whether or not proprietary estoppel should principally be concerned with meeting the expectations of the claimant, versus compensating them for the detriment suffered, was touched upon in James v James. In James v James, HHJ Matthews expressed a preference for giving effect to the expectation of the claimant, unless exceptional circumstances required a different approach.
Birss J explores the conceptual issues at para. 222 to 229 of his judgment, illustrating the difference between the two approaches as follows [222] (referencing the judgment in Davies v Davies):
“At paragraph 38 of his judgment Lewison LJ summarised the applicable legal principles. In deciding how to satisfy the equity the court has to exercise a broad but not unfettered discretion (paragraph 38(ix)). Then in paragraph 39 Lewison LJ explained that there is a lively controversy about the essential aim of the exercise of this discretion. The difference is between giving effect to the expectation or compensating for the detriment suffered. As Lewison LJ explained the two approaches in their starkest form are fundamentally different. That can be seen in this case. Lucy’s expectation was to end up with a viable diary farm at Woodrow. Now Woodrow as a whole is worth about £2 ½ million. Whereas if one tries to add up the quantifiable parts of the Lucy’s reliance loss they produce a much lower sum, especially when one takes care to ignore any amounts attributable to Stuart, who has no claim. I will address the detail as best I can below at this stage even without looking at the figures it is obvious the quantifiable amount which Lucy would typically have been entitled to expect to have earned over the whole period will end up around £½ million and once what she did earn is subtracted, the loss will be no more than a sum of the order of £¼ million. So Lucy’s quantifiable reliance loss could be a factor of ten smaller than the value of the fullest expression of her expectation.”
Birss J cited the following extract from Lewison LJ’s judgment in Davies v Davies:
“39 There is a lively controversy about the essential aim of the exercise of this broad judgmental discretion. One line of authority takes the view that the essential aim of the discretion is to give effect to the claimant’s expectation unless it would be disproportionate to do so. The other takes the view that essential aim of the discretion is to ensure that the claimant’s reliance interest is protected, so that she is compensated for such detriment as she has suffered. The two approaches, in their starkest form, are fundamentally different: see Cobbe v Yeoman’s Row Management Ltd [2006] EWCA Civ 1139, [2006] 1 WLR 2964 at [120] (reversed on a different point [2008] UKHL 55; [2008] 1 WLR 1752). Much scholarly opinion favours the second approach: see Snell’s Equity (33rd ed) para 12-048; Wilken and Ghaly Waiver Variation and Estoppel (3rd ed) para 11.94; McFarlane The Law of Proprietary Estoppel para 7.37; McFarlane and Sales: Promises, detriment, and liability: lessons from proprietary estoppel (2015) LQR 610. Others argue that the outcome will reflect both the expectation and the reliance interest and that it will normally be somewhere between the two: Gardner: The remedial discretion in proprietary estoppel – again [2006] LQR 492. Logically, there is much to be said for the second approach. Since the essence of proprietary estoppel is the combination of expectation and detriment, if either is absent the claim must fail. If, therefore, the detriment can be fairly quantified and a claimant receives full compensation for that detriment, that compensation ought, in principle, to remove the foundation of the claim: Robertson: The reliance basis of proprietary estoppel remedies [2008] Conv 295. Fortunately, I do not think that we are required to resolve this controversy on this appeal.
40 In Jennings v Rice at [45] Robert Walker LJ referred to a class of case in which the assurances and reliance had a consensual character not far short of a contract. In such a case “both the claimant’s expectations and the element of detriment will have been defined with reasonable clarity.” In that kind of case the court is likely to vindicate the claimant’s expectations. Although Robert Walker LJ does not say so in terms, it is implicit that in such a case the claimant will have performed his part of the quasi-bargain. At [47] he referred to another class of case in which:
“… the claimant’s expectations are uncertain (as will be the case with many honest claimants) then their specific vindication cannot be the appropriate test. A similar problem arises if the court, although satisfied that the claimant has a genuine claim, is not satisfied that the high level of the claimant’s expectations is fairly derived from his deceased patron’s assurances, which may have justified only a lower level of expectation. In such cases the court may still take the claimant’s expectations (or the upper end of any range of expectations) as a starting point, but unless constrained by authority I would regard it as no more than a starting point.”
41 What is not entirely clear from this passage is what the court is to do with the expectation even if it is only a starting point. Mr Blohm suggested that there might be a sliding scale by which the clearer the expectation, the greater the detriment and the longer the passage of time during which the expectation was reasonably held, the greater would be the weight that should be given to the expectation. I agree that this is a useful working hypothesis.
42 Nevertheless in my judgment the judge in this case applied far too broad a brush and failed to analyse the facts that he found with sufficient rigour. Nor, to my mind, did he explain why he reached the conclusion that he did. Although he said that he took “expectation” as an appropriate starting point, he did not explain which expectation out of the many he found he regarded as the starting point.”
Birss J posed himself the following questions, derived from the above:
- Could it be said that Lucy’s detriment could be fairly quantified such the foundation of the claim would be removed if she received that sum by way of compensation? The answer to this question, in Birss J’s view, was ‘no’. Part of her detriment could be quantified but her commitment to the farm over three decades and her lost opportunity to go somewhere else and build a different life could not be readily quantified. He considered it relevant that the promise made to Lucy was a single promise, albeit repeated in different guises and reinforced over a long period. He drew a distinction with the position in Davies, where a series of different and mutually inconsistent expectations had arisen over the years.
- How certain were Lucy’s expectations? In Birss J’s view, she expected to receive a viable dairy farm and that was a specific expectation that was capable of being vindicated. The question of whether or not that would be the right thing to do, was a separate consideration.
- Were Lucy’s expectations fairly derived from the assurances? In Birss J’s judgment, they were and following Jennings v Rice, this was not a case for saying that the expectation was no more than a starting point. The converse of this point could not be taken too far, however – it did not follow that an award giving effect to the expectation was justified just because the expectation was fairly derived from the assurances.
Birss J developed this last point further, by reference to paragraph 41 of the judgment of Lewison LJ in Davies, where he mooted a sliding scale approach as a useful working hypothesis, whereby (amongst other things) the longer the expectation was reasonably held, the greater would be the weight given to the expectation.
HHJ Matthews, in James v James, expressed the view that he was not attracted to the sliding scale approach. Conversely Birss J approves of that approach, subject to one refinement derrived from an article by McFarlane and Sales Promises, detriment, and liability: lessons from proprietary estoppel (2015) LQR 610:
“228. They make the point (at p620) that the level of the claimant’s expectation in a case like this effectively stays the same throughout the period when the claimant is working to fulfil the promise made to them. As the authors suggest, if the defendant in Thorner had died six months after making his promise then the claimant would have been restricted to having his equity satisfied by payment of reasonable remuneration for that period. The claimant’s expectation in Thorner was characterised by the authors as being that the claimant would earn the right to the farm by working on it for very little remuneration over many years. So once the claimant had given service over many years, the idea that the equity should be fulfilled by a transfer of the farm seems more readily justifiable. With this in mind the authors propose a “hybrid” model as follows:
“The relief afforded to B under the promise-detriment principle is protection in respect of B’s detrimental reliance, unless and until any performance he or she rendered under a reciprocal arrangement with A of which A’s promise forms part amounts to substantial performance by B of the return A wished to secure by making the promise.”
229. In other words it is not simply that an expectation reasonably held for a long time necessarily justifies giving greater weight to the expectation over the reliance loss, an important factor (if true) is that the long period of time amounts to fulfilling what the person promised was told they had to do in order to secure what they had been promised.”
What relief should be granted?
In reaching his conclusion on relief, Birss J carefully considered the evidence regarding the value and viability of Woodrow.
He concluded that Lucy had done what had asked of her over the years and thus that this was a case in which she should receive compensation based on her expectation, rather than her reliance loses. What she was promised was a viable dairy farm at Woodrow.
However, Birss J considered that the following factors needed to be taken into account in determining what relief to award Lucy:
- It had always been intended that some land would go to Lucy’s siblings and it would be fair to deduct the land at Mudford or its value to reflect this.
- The farmhouse was Jane’s home and also the home of Andrew and James (son of Sarah and her husband). It was relevant that Lucy had not expected to receive any land in the lifetime of either of her parents.
- Lucy’s rejection of the 2008 offer and her departure in 2013 needed to be brought into account. The offer had been a genuine attempt to resolve the succession issue. Had Lucy accepted the offer and remained at Woodrow, there would still today be a dairy unit at Woodrow. The fair approach was to measure Lucy’s compensation by reference only to the value of the land and farm buildings at Woodrow itself (excluding Mudford and excluding the farmhouse), as at the date of his order – that was a piece of property which was capable of being a viable dairy farm, excluding the cost of reinstating a working unit.
- The relative size of the quantifiable reliance loss as compared to the value of the expectation was a further fact that might justify a reduction in the value of the award, but it did not in his view necessitate a further reduction in addition to the reduction he considered appropriate for the rejection of the 2008 offer.
- He considered, as a cross-check, what Lucy would receive if Jane divided the farm equally between her four children (which is what she was indicating that she would do) c. £637,500 – the award that he proposed to make was substantially more than that but still less than half of the value of the farm as a whole.
- An in specie transfer would not be appropriate given that it would not, in his view, be fair to make an order that would inevitably force Jane to leave her home or to separate the land from the farmhouse (although he recognised that it might not be possible to avoid a sale).
On the basis of valuation evidence given in February 2017, an award assessed by reference to the land and buildings at Woodrow, excluding the farmhouse and land at Mudford, would necessitate a cash payment of £1,170,000, subject to any updating valuation evidence.
Learning points for practitioners
- What makes for a successful case? The decision in Habberfield on the question of whether or not an equity had arisen in Lucy’s favour, is largely uncontroversial – there was evidence of assurances that had been repeated over a long period of time and which had given rise to a clear expectation on Lucy’s part that she would take over the farming business and in time would inherit most of the land. This was a case in which Lucy could be said to have organised her working life on the basis of that expectation and there was evidence of both quantifiable and non-quantifiable detriment on her part. It is illuminating to contrast this case with the circumstances in James v James, where representations as to the testator’s present intention to leave the farm to his son were considered to be insufficient to amount to a promise or assurance that was capable of being relied upon.
- Expert evidence. The judgment is worthy of closer study for Birss J’s detailed examination of the expert evidence, which he drew upon in reaching his conclusion on relief. Expert evidence was considered from two valuers on the value of the land and the viability of the constituent parts of the farm for dairy farming. Further expert evidence was obtained from an accountant who advised on the remuneration that Lucy would have received on varying assumptions. It is unsurprising that the case law in this area is dominated by multi-million pound farming disputes. These cases are costly to run, often necessitating reports from experts in a number of different disciplines and very detailed forensic analysis in order to reach a conclusion about the countervailing detriment and benefit to the claimant.
- The claimant’s conduct. One of the most notable features of this case is the way in which Birss J dealt with the issue of Lucy’s refusal to accept a reasonable offer from her parents to resolve the issues between them. Birss J did not go so far as to say that the failure to accept the offer, had it been wholly sufficient to meet Lucy’s expectation, would necessarily afford a basis for refusing relief to Lucy – but he appeared to contemplate that such an outcome might be justified in an appropriate case. Notwithstanding the fact that the offer did not go all the way to meeting Lucy’s expectation, primarily because it did not cede control of the farming business to her, Birss J plainly considered that she would have been better off making the best of the offer and trying to make it work and this was a factor that led her to receive less than she might otherwise have received.
- Determining the relief to be awarded. This is a very interesting case from the perspective of demonstrating all of the careful workings out and calculations that were required to reach a conclusion on the ultimate outcome. However, it is difficult to discern points of principle of ready application to other cases and we are arguably no closer to settling the expectation vs detriment debate – particularly when one considers that Birss J adopted Lewison LJ’s approach from Davies, whereas HHJ Matthews in James expressed disfavour towards the ‘sliding scale’ approach. This decision weighs in favour of the view that there are emerging sub-categories of ‘bargain’ and ‘non-bargain’ cases in the proprietary estoppel case law. The former category of case yields expectation relief (where the expectation is clear and the claimant has performed his side of the bargain) and in the latter, some form of wider discretion is involved.
- The role of the “proportionality” principle. In Davies v Davies, the trial judge’s decision to award £1.3 million was overturned on appeal on the basis, in essence, that it was disproportionate to the quantifiable detriment suffered by the claimant (c. £350,000) and the trial judge had failed to explain his reasoning for his award. The Court of Appeal in Davies noted that proportionality was at the heart of the doctrine of proprietary estoppel. There can be no suggestion that Birss J failed to show his workings out, which are set out in considerable detail. One would be forgiven for thinking that the award of £1,170,000 in Habberfield was disproportionate to Lucy’s quantifiable detriment of c. £220,000. However, “proportionality” receives only the most fleeting of mentions in Birss J’s judgment in Habberfield and it would appear that the fact that the detriment may be disproportionate to the expectation is of less significance in a case of very clear expectations held over a long period of time and where the claimant has done what was expected of them – this may be justified in a quasi bargain case on the basis that the claimant and the promisor have in essence agreed between them what the claimant was required to do in order to receive his promised reward.
