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INTERESTS IN LAND - Proprietary estoppel claims

Thursday, December 14, 2017 @ 2:47 PM  

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Appeal by Cowper-Smith from a judgment of the British Columbia Court of Appeal which overturned the trial judge’s conclusion that he was entitled to purchase his sister’s interest in their mother’s house on the basis of proprietary estoppel. The appeal concerned an arrangement between the appellant and his siblings to provide care for their aging mother. The appellant’s sister assured the appellant that, if he moved back into the family home to do so, he would be able to acquire her share of that property after their mother’s death. The question before the Court was whether equity, and specifically the doctrine of proprietary estoppel, now bound her to her word. The mother died in 2010. In 2001, the mother transferred title to the property and all her investments into joint ownership with her daughter, the appellant’s sister. Pursuant to a “Declaration of Trust”, the daughter would hold her interests in the house and the investments as bare trustee, with the mother as the sole beneficiary, and the daughter would be entitled absolutely to both the property and the investments upon her mother’s death. The mother also executed a new will which appointed her daughter as executor and revoked all previous wills. She revoked this will in 2002, when she executed yet another will. She again named the daughter as executor but this time provided that her estate would be divided equally between her three children. Neither the trust declaration nor the daughter’s joint ownership of the property and the investments was ever changed. When the appellant and his brother found out about their sister’s joint ownership of the house in 2005, the sister assured them that that the arrangement was to simplify the administration of their mother’s estate and they would still each receive a one-third share of the estate. The sister gave the appellant the same assurances four years later, when he learned that her name was on title. However, the sister changed her position following the mother’s death, at which point the trust declaration came to light and the sister declared her plans to put the house on the market. The brothers then sought an order setting aside the trust declaration as the product of the sister’s undue influence over the mother and declaring that the sister therefore held the property and investments in trust for the estate, to be divided equally between the three children in accordance with the 2002 will. They also claimed, on the basis of proprietary estoppel, that the appellant was entitled to purchase the sister’s one-third interest in the house. The trial judge found that the sister had not rebutted the presumptions of undue influence and resulting trust and declared that the property belonged to the mother’s estate. She also held that the elements of proprietary estoppel had been made out. The British Columbia Court of Appeal unanimously upheld the trial judge’s conclusions with respect to undue influence and resulting trust, but split on proprietary estoppel. The majority held that, since the sister owned no interest in the property, proprietary estoppel could not arise.

HELD: Appeal allowed. An equity arose when (1) a representation or assurance was made to the claimant, on the basis of which the claimant expected that he would enjoy some right or benefit over property; (2) the claimant relied on that expectation by doing or refraining from doing something, and his reliance was reasonable in all the circumstances; and (3) the claimant suffered a detriment as a result of his reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on her word. It was sufficiently certain that the sister would inherit a one-third interest in the property for her assurance to be taken seriously as one on which the appellant could rely. There was no question that the sister assured the appellant that, if he moved back to the family home to care for their mother, he would be able to acquire her eventual interest in the house. Nor was it disputed that, as a result of his reliance on that assurance, the appellant suffered a detriment. There was also no basis on which to overturn the trial judge’s conclusion that, in these circumstances, the appellant’s reliance on his sister’s promise was reasonable. That the sister did not own an interest in her mother’s property at the time of the appellant’s reliance was not dispositive in itself. An equity arose when the claimant reasonably relied to his detriment on the expectation that he would enjoy a right or benefit over property, whether or not the party responsible for that expectation owned an interest in the property at the time of the claimant’s reliance. When the party responsible for the expectation had or acquired a sufficient interest in the property, proprietary estoppel attached to that interest and protected the equity. Ownership at the time the representation or assurance was relied on was not a requirement of a proprietary estoppel claim. The Court had the power to direct the sister to exercise her discretion as executor in a certain manner. The sister’s duties as executor were clearly in conflict with her interests as a beneficiary. The sister’s conflict of interest and her bad faith were grounds for ordering an in specie distribution. The Court therefore ordered that the sister, as executor, was to divide the property forthwith into equal one-third interests and deliver these to herself and her two brothers. The minimum necessary to satisfy the equity in the appellant’s favour was an order entitling him to purchase the sister’s interest at its fair market value as of the approximate date on which he would reasonably have expected to be able to do so in the first place, namely February 2, 2011.

Cowper-Smith v. Morgan, [2017] S.C.J. No. 61, Supreme Court of Canada, B. McLachlin C.J. and R.S. Abella, M.J.Moldaver, A. Karakatsanis, R. Wagner, C. Gascon, S. Côté, R. Brown and M. Rowe JJ. December 14, 2017. Digest No. TLD-December112017011SCC