Canada: Equity Rules The Day: The Supreme Court Of Canada Clarifies The Tenets Of Proprietary Estoppel

Last Updated: January 9 2018
Article by Caroline Abela

In December 2017, the Supreme Court of Canada released its decision in Cowper-Smith v. Morgan, 2017 SCC 61, a case dealing with the issue of proprietary estoppel. While the facts of this case are borne out of circumstances relating to an estate, the law as set out by the Supreme Court can be equally applied in the context of commercial litigation in relation to promises made in a commercial context.

In Cowper-Smith v. Morgan, a husband and wife made it clear that, after their deaths, their three children would inherit their property equally. However, after the husband died, the wife, Elizabeth, changed her estate planning. She transferred title to the family home and all of her investments into joint ownership with her daughter Gloria. Further, pursuant to a Declaration of Trust, Gloria was entitled, upon her mother's death, to all of the assets absolutely. In addition, Elizabeth executed a new will appointing Gloria as executor and providing the estate assets to be divided equally among her children – despite the fact that the trust declaration ensured that there were no estate assets to bequeath.

Sometime later, when Elizabeth could not live independently, she asked her son Max to move in with her. He did so only after his sister Gloria agreed that he would be reimbursed for various expenses, have the use of their mother's car, be able to live in the house permanently and eventually acquire Gloria's one-third interest in the house. This arrangement worked for five years, until Gloria began to renege on her promises.

Over the years, Gloria's siblings discovered Gloria's trust declaration. However, Gloria assured her brothers that it was put in place to simplify the administration of their mother's estate and that each of them would still receive their one-third share of their mother's assets. However, eight months after their mother's death, Gloria announced her plans to put the house on the market with her brother Max still living in it.

At trial, the brothers sought an order setting aside the trust declaration as the product of Gloria's undue influence over their mother, and a declaration that Gloria therefore held the property and investments in trust for Elizabeth's estate, which was to be divided equally between her children. They also claimed - on the basis of proprietary estoppel - that Max was entitled to purchase Gloria's one-third interest in the house.

The trial judge held that Gloria had not rebutted the presumption of undue influence and resulting trust and she declared that the property belonged to Elizabeth's estate. She also held that the elements of proprietary estoppel had been made out. Gloria appealed. The British Columbia Court of Appeal unanimously upheld the trial judge's decision related to undue influence and resulting trust, but split on the issue of proprietary estoppel. The majority of the Court of Appeal held that since Gloria held no interest in the property, proprietary estoppel could not arise. That specific issue is what the Supreme Court of Canada heard on appeal: can proprietary estoppel arise when a person who makes the promise has no interest in the property at the time the promise is made?

The Chief Justice delivered the opinion for the Supreme Court's majority. Chief Justice McLachlin clarified the tenets of the law. To establish proprietary estoppel, one must first establish an equity of the kind that proprietary estoppel protects. This requires three things: (1) a representation or assurance on the basis of which the claimant expects to enjoy a right or benefit over property; (2) reasonable reliance on that expectation; and (3) detriment as a result of the reliance such that it would be unfair or unjust for the party who made the representation to go back on her word. When the owner of an interest in the property over which the claimant expects to enjoy a right or benefit is responsible for the representation or assurance, then the equity established by the claimant's reasonable reliance may be given effect by proprietary estoppel.

Having satisfied the remaining requirements, the only question in this case was whether Max's reliance was reasonable. The reasonableness of his reliance centered on the question of: "how can Max's reliance be reasonable when Gloria did not have an interest in the property or her interest was uncertain?" This is a question of mixed fact and law.

The Supreme Court held that it was sufficiently certain that Gloria would inherit a one-third interest in the property for her assurances to Max to be taken seriously. Gloria made the commitment to Max and Max's reliance on Gloria's representations were therefore reasonable. According to McLachlin C.J., the fact that Gloria did not own an interest in her mother's property at the time of Max's reliance was not dispositive of the issue. She stated: "An equity arises when the claimant reasonably relies to his detriment on the expectation that he will enjoy a right or benefit over property, whether or not the party responsible for that expectation owns an interest in the property at the time of the claimant's reliance." Therefore, if the person making the representation does not acquire an interest in the property, proprietary estoppel may never arise. In this case, proprietary estoppel attached or crystalized at the time that Gloria inherited her share of the house.

As a result, the Supreme Court made an order compelling Gloria to sell her share of the house to Max at one-third of the appraised value of the property as it was in 2011, which was when Gloria received an interest in the property from their mother's estate. The Court did not permit a sale at the fair market value of the property as of today, which had increased over time.

In the end, equity stepped in, as it was intended to do and still centuries later, it ruled the day.

As stated above, the importance of this decision is not limited to estates. While proprietary estoppel has been commonly applied to interests in land, it can also be used for other assets. In the context of commercial litigation, proprietary estoppel can be used in relation to, for example, chattels, intellectual property rights and commercial assets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Caroline Abela
Events from this Firm
7 Dec 2017, Webinar, Toronto, Canada

FEX Members Jeff Noble, BDO, and Caroline Abela, WeirFoulds LLP, invite you to a complimentary webinar series titled: All About Shareholders.

11 Nov 2018, Seminar, Toronto, Canada

WeirFoulds Partner Glenn Ackerley will Chair the RICS & CIQS 5th Annual Construction & Project Management Seminar.

28 Nov 2018, Seminar, Toronto, Canada

We invite you to join us for our fall seminar where we will discuss topics that have put employment law front and centre!

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions