Canada: You May Have To Keep Your Promises

Last Updated: February 7 2018
Article by Predrag Tomic

Some people are good for their word. Others are not. Depending on the circumstances, a promise you make may not be legally enforceable. However, in the words of the outgoing Chief Justice of the Supreme Court of Canada in the recent judgment in Cowper-Smith v Morgan, 2017 SCC 61, equity enforces promises that the law does not.

That case involved a promise made by a sister to her brother in the context of making arrangements for the care of their elderly mother. The Court was asked to consider whether the doctrine of proprietary estoppel bound the sister to her promise after the mother's death.

At a very high level, the mother's will gifted her estate equally to her three children. At some point, the mother became unable to live on her own and care for herself. One son, Max, who lived in England at the time, agreed to move back to British Columbia to live with and care for his mother in her house. He did so after his sister, Gloria, agreed that he would be entitled to reimbursement of expenses, use of the mother's car, and the ability to acquire Gloria's 1/3 interest in the house after the mother's death. On the basis of that promise, Max moved to Victoria and upheld his end of the bargain. After the mother's death, Gloria reneged on her promise. Max started a lawsuit, in part claiming that he was entitled to buy Gloria's 1/3 interest in the house based on the doctrine of proprietary estoppel.

Max succeeded at trial, the judge agreeing that he had established his claim in proprietary estoppel. Gloria appealed. The British Columbia Court of Appeal sided with her on that particular issue, concluding that proprietary estoppel was not available because at the time of the promise, she did not own an interest in the house (since the mother was alive). Max appealed to the Supreme Court.

The Supreme Court confirmed the three elements of proprietary estoppel:

1) A representation or assurance on the basis of which the claimant expects to enjoy a right over property;

2) Reasonable reliance on that representation or assurance; and

3) Detriment to the claimant as a result of that reliance.

The Court easily found that Gloria had represented to Max that if he moved back, he could acquire her interest in the house after their mother's death. The Court also held that Max's reliance was reasonable – there was sufficient evidence the children were led to believe they would be inheriting an equal share of their parents' estates. In the Court's view, Gloria's expectation of the inheritance was not so speculative so as to render her promise meaningless.

The case turned on whether at the time of Max's reliance, Gloria had to have owned an interest in the property in question. The Court of Appeal held that for the estoppel to arise, the promisor must have had an interest in the property when she made the promise.

The majority of the Supreme Court disagreed, concluding that an equity arose in Max's favour the moment he relied on Gloria's promise. Proprietary estoppel protected that equity, and according to the Supreme Court, it attached to Gloria's interest when she became entitled to her share of the estate. In other words, the protection provided by the promissory estoppel could be deferred indefinitely until the promisor actually acquired an interest in the subject property. However, until then, it was largely meaningless.

Once the elements of proprietary estoppel are established, the Court has significant latitude in crafting a remedy. In this case, the Supreme Court allowed Max to purchase Gloria's interest in the home based on its appraised value in 2011, shortly after the mother's death. The property had increased in value by the time of the Supreme Court's decision.

Some lessons

As with every case, the Cowper-Smith case provides some useful lessons:

  1. Once a deal was struck, Max should have reduced it to a written agreement. Often people hesitate to insist on formal contracts with family members, but time and time again, the cases show the potential downsides of not documenting intentions properly.
  2. Max took on a considerable amount of risk with his reliance on Gloria's promise. The Supreme Court (and to an extent the Court of Appeal) touched on the fact that it was entirely possible that Gloria would have never acquired a 1/3 interest in the house. Proprietary estoppel would not have been available in that case. For example, if the house was sold during the mother's lifetime to pay for her expenses, there would be little for Max to enforce against. Remember that a gift under a will does not itself create a legal interest in property – it merely provides an expectation. Max lucked out in that the property subject to the promise still existed at the time of his mother's death.
  3. Plan proactively. Disputes around compensation due to a family member who assumes primary care of an elderly parent are not uncommon. When considering your own estate plan, consider how family caregivers will be recognized and compensated. We encourage parents and children to have the discussion early so that misunderstandings are minimized when the parent is no longer able to communicate his or her intentions.

Predrag (Peter) Tomic is a wills and estates lawyer with a focus on complex estate and trust litigation, estate planning and probate matters.

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.

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