UK: Preventing A Proprietary Estoppel Claim

It is not every day we advise on a dispute as to who is to inherit an entire village.

Yet this unhappy family dispute is precisely the situation that confronted Paul Hewitt and Geoffrey Kertesz. After various twists and turns, the dispute was resolved shortly after a contested hearing not on the merits, but on a procedural point, namely whether the claimants could introduce a new proprietary estoppel claim three months before trial.

The village

Chettle is a village in Dorset of some 1,150 acres. In 1966, it was owned by Esther Bourke, who had three children: Susan, Patrick and Edward. Susan is our client.

In 1966, Esther, who was terminally ill, transferred Chettle to Susan in consideration of marriage so it would pass free of inheritance tax. At the time, the family took advice from solicitors who advised that the transfer to Susan had to be 'no strings attached' or the Inland Revenue (now HMRC) would say inheritance tax was chargeable on Esther's death. Esther also transferred Chettle House, a magnificent stately home located in the village, to Patrick.

Susan has thus owned the village since 1966. Patrick lives in the village and his son, Peter, now owns and lives in Chettle House.

Chettle has 33 tenanted cottages, a church, and a village shop.

The claims

Fast forwarding nearly 50 years to November 2013, Patrick and Peter brought a claim against Susan on two grounds.

First, they claimed that, based on an alleged oral family agreement entered into in 1966, Susan was bound to leave the village to Peter, as Patrick's eldest son. Patrick and Peter alleged the oral agreement also required Susan not to have children; she had a daughter in 1982.

Second, Patrick claimed that he had acquired title to some 120 acres of land in the village under the doctrine of adverse possession. In other words, he claimed he had acquired the land as a squatter.

The proprietary estoppel claim that wasn't

Before formal proceedings began, letters sent to Susan included language that bore all the hallmarks of a proprietary estoppel claim. Peter, a partner in a law firm, made references to promises made and broken, life choices made, and opportunities foregone. However, when Peter and his father ultimately brought their claims, they did not advance a proprietary estoppel claim.

The pleaded claims were factually complex, going back over 50 years, and both sides dedicated considerable resources to preparing witness statements. The process took months. Geoff travelled to Chettle, spent two days interviewing potential witnesses, and even wore wellies.

Unexpectedly, on 24 September 2014, during the course of preparing witness statements, Patrick and Peter, through their solicitors stated they would be amending their pleadings. On 29 September 2014, we invited them to send us a draft of the amended pleading immediately, or at least provide details of the proposed amendment. We received no reply.

A week later, we wrote again and said that the lack of clarity on the nature of the proposed amendment would cause difficulties in finalising witness statements. Patrick and Peter replied on 6 October and failed to address the issues raised in our letters. They claimed that, until they had seen the evidence on our client's behalf, they could not confirm whether they would be amending their pleadings because it would depend on our evidence.

In the event, witness statements were exchanged on 3 November 2014. The witness statements submitted on behalf of Patrick and Peter included numerous allegations that went to a proprietary estoppel claim. Our side's witness statements were confined to the pleaded issues.

A month later, on 2 December 2014, Patrick and Peter sent through draft amended pleadings including a substantial new proprietary estoppel claim. They asked our clients to consent to the amendments. The trial, listed for eleven days and with fourteen witnesses testifying, was due to start only three months later.

On our advice, Susan refused to agree the amendments. Patrick and Peter applied to the Court for leave to amend their pleadings.

The Parties appeared before Nugee J on 27 January 2015, less than six weeks before trial.

The hearing

In essence, we argued the situation was entirely of Patrick and Peter's own making and the amendments should not be allowed for three primary reasons:

  1. The proposed amendments were very late and there was no proper explanation let alone justification for the lateness;
  2. Patrick and Peter intentionally suppressed the proposed amendments for some months and this amounted to abuse of the Court's process; and
  3. If the amendments were permitted, our clients would suffer prejudice by having to prepare the existing claims for trial at the same time as dealing with the new claims from scratch.

It was going to be an uphill battle; courts generally allow parties to amend their pleadings provided they pay the other side's costs occasioned by the amendment. Here, however, we argued a costs order was insufficient; Susan is 80 years old, the trial date was in jeopardy, and a costs order could not compensate for the prejudice to our clients.

Judgment

Nugee J agreed the amendments should not be allowed for two primary reasons.

First, the proposed amendments were too late. Patrick and Peter' decision to hold back the basis of their proposed amendments had been 'misguided'. The Court did not accept their argument that they wanted to see our side's witness statements before amending their pleadings.

Second, allowing the proposed amendments would prejudice Susan. Nugee J found that, so shortly before trial, the parties 'ought to know' what issues are to be tried. Patrick and Peter had prepared their evidence 'knowing that they might very well seek to amend to plead a proprietary estoppel claim but not telling the defendants that that was what they were going to do'. Nugee J described this as 'unfair'.

Nugee J therefore disallowed the proprietary estoppel claim, concluding that:

'In circumstances where the amendment is made late; where no good explanation has been given for so late an amendment; where to permit the amendment might force the defendants to ask for an adjournment but where, even if it does not, it would require a significant amount of extra work and would put the defendants at the disadvantage that I have referred to, as compared to the claimants - a disadvantage entirely down, it seems to me, to the claimants' decision not to apply to amend before exchange of witness statements - it is, in my judgment, more consistent with the overriding objective to refuse the amendment. This may indeed cause prejudice to the claimants but, if so, they only really have themselves to blame.'

Nugee J also ordered Patrick and Peter to pay Susan's costs of the application.

Epilogue

Shortly afterwards the case resolved favourably for Susan. This procedural victory enabled the costs and inherent risks of trial to be avoided.

Procedural arguments may not at first blush seem as interesting as substantive arguments, and this case was no exception. A trial involving an alleged oral fifty-year-old family agreement is, it is safe to say, more interesting than an argument over amending pleadings.

But Bourke v Favre illustrates that procedural points can be as effective as substantive points in narrowing the issues and reaching a constructive solution. A procedural victory can give a party momentum.

The judgment also shows the importance of witness evidence. While the parties' witness statements did not, strictly speaking, bear on the arguments, Nugee J read them to get a feel for the substance of the matters heading to trial. Carefully and thoroughly prepared witness statements for trial can also be important for any unexpected interim hearings ahead of trial.

Finally, Bourke v Favre shows that, when one issues proceedings, one should be sure to include all claims if possible. And if new claims come to light, do not sit on the proposed amendments, particularly when pressed by the other side!

You can read the case itself here.

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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