Canada: A Promise Is A Promise: Proprietary Estoppel At The Supreme Court Of Canada

Last Updated: February 22 2018
Article by Aubrie Girou and Polly Storey

In December 2017, the Supreme Court of Canada released its decision in Cowper-Smith v. Morgan, 2017 SCC 61, clarifying how a promise relating to an interest in property may be enforced through the equitable doctrine of proprietary estoppel — even if the person making the promise does not actually own the property in question.

The case concerned a dispute between the adult children of the late Elizabeth Cowper-Smith. Elizabeth and her husband, Arthur, lived in Victoria and intended, on the death of the survivor of them, for their real property (the "Property") to be divided equally among their three children, Gloria, Max, and Nathan. Gloria lived in Victoria, while Max and Nathan lived in England and Edmonton, respectively.

Five years prior to her death, Elizabeth became incapable of living alone. Gloria and Max discussed options for their mother's care, with Max eventually agreeing to move from England to Victoria to care for their mother and to maintain the Property. However, he only did so after Gloria agreed that Max could live in the Property permanently and acquire Gloria's eventual 1/3 interest in it. After Elizabeth's death, Gloria refused to honour her promise.

In previous blog posts, we discussed the trial and appellate decisions in Cowper-Smith v. Morgan, where the issue of undue influence between Gloria and Elizabeth was unanimously dealt with. However, the question of proprietary estoppel divided the BC Court of Appeal and the plaintiff appealed to the Supreme Court of Canada.

Proprietary estoppel is an equitable doctrine that can be invoked to establish a right in property. An equity sufficient to ground a claim for proprietary estoppel arises where:

  1. a representation or assurance is made to the claimant, on the basis of which he or she expects to enjoy some right or benefit over property;
  2. the claimant relies on that expectation by doing or refraining from doing something, and that reliance is reasonable in the circumstances; and
  3. the claimant suffers a detriment as a result of his or her reasonable reliance, such that it would be unfair or unjust to permit the promising party to renege.

If the claimant establishes this equity, proprietary estoppel may be invoked to give effect to it. The court has discretion to fashion an appropriate remedy, but, in doing so, will order the minimum relief necessary to protect the equity.

The question facing the Supreme Court of Canada was whether Max could succeed in a claim for proprietary estoppel where Gloria did not have an interest in the Property when she made the representation. The majority of the Court of Appeal had answered this question in the negative, in part concerned how any reliance on a promise to convey an interest in property could be reasonable where the person making it did not actually have such an interest.

The Supreme Court of Canada disagreed. Former Chief Justice McLachlin held that "[r]easonableness is circumstantial": para. 26. The promise must be one that could reasonably be expected to be relied on, and what matters is what one party induced the other to expect. For example, a claimant may not succeed in proprietary estoppel where the party making the representation had so speculative an interest in the property that the claimant's reliance could not have been reasonable.

Here, Max and Gloria understood that their mother's estate, including the Property, would be divided equally among Elizabeth's three children on her death. It was certain enough that, since Gloria would inherit a 1/3 interest in the Property, her assurance could be taken seriously and relied on. She unequivocally promised that Max would be able to acquire her share if he moved to Victoria to care for their mother, which he did. As a result of this reliance, he suffered a detriment by giving up his personal and professional life in England, making it unfair or unjust for Gloria to break her promise. An equity arose in Max's favour, even though Gloria did not have an interest in the Property at the time the promise was made. Proprietary estoppel attaches to and protects the equity when the person has or acquires a sufficient interest.

An interesting problem that confronted (and divided) the Supreme Court of Canada was the issue of an appropriate remedy. The majority ordered Gloria, who was the executor of Elizabeth's will, to distribute shares in the Property directly to each beneficiary. Although the will divided the residue of Elizabeth's estate, the Court noted that an in specie distribution could be ordered where all beneficiaries agree or where a beneficiary unreasonably withholds consent. Relying on its power to control executors in breach of their fiduciary duty, the majority ordered that Gloria exercise her discretion to transfer a 1/3 interest in the Property to each of the three beneficiaries, at which time proprietary estoppel would attach to Gloria's share.

Elizabeth passed away in 2010, seven years before the dispute made its way to the Supreme Court of Canada and during which time, the real estate market had risen substantially. In regard to the valuation of the Property, the majority held that Max was entitled to buy Gloria's interest in the Property at its fair market value as at February 2011, which is when he would reasonably have expected to do so. Neither Max nor Gloria could have expected close to a decade in delay, and had Gloria not sought to escape her promise, Max's equity would have been satisfied and Gloria's share in the Property sold to him years earlier when it was appraised in the course of the administration of the estate.1

Cowper-Smith v. Morgan is a reminder that promises and informal agreements, including among beneficiaries, may have significant consequences in terms of estate planning and the administration of estates.


1 Justice Brown and Justice Côté, in separate reasons, disagreed on the remedy. Justice Brown held that Max's equity only arose once Gloria acquired an interest in the Property, such that Max could purchase of Gloria's 1/3 share of the Property for its value as of the date of the Court's order in 2017.

Justice Côté disagreed with the majority that the Court could order the executor to exercise her discretion in a particular manner.

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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