Formulating a remedy for proprietary estoppel

Harris v Harris [2021] VSCA 138  

In assessing whether the trial judge’s decision to declare a promisee’s entitlement to inherit the land was disproportionate in satisfying the requirements of conscientious conduct, the Court of Appeal in Harris v Harris identified and applied a number of key principles guiding the award of remedies for proprietary estoppel.

The facts

The applicant was registered proprietor of a number of parcels of farm land (‘Farm’) and carried on a business there for several years. The applicant’s two sons, on the basis of what they alleged had been a number of oral promises made by the applicant and the applicant’s late wife that they would be given the Farm, sued the applicant in a proceeding in the Supreme Court claiming, among other things, a proprietary interest in it.

On the first day of trial, the applicant gave an unconditional undertaking to the Court to the effect that he would hold one of the parcels of the Farm on trust for his sons for them to inherit as tenants in common in equal shares when the applicant passed away. The trial was adjourned that same day and the matter was referred to mediation. The applicant and his younger son reached a compromise. The elder son, the respondent on appeal, continued with his claim. He maintained his entitlement to the Farm although he did not seek more than a half-share in that parcel which had been the subject of the applicant’s undertaking.

The trial judge ultimately found for the respondent. The judge made declarations to the effect that the applicant held a proprietary interest in the Farm on trust upon his death for the respondent (with the exception of that parcel which had been the subject of the applicant’s undertaking and which was to go to the respondent and his brother in equal shares).

The applicant sought leave to appeal on four grounds, two of which essentially challenged the judge’s findings of unconscionability and two of which contended for a lesser remedy than a proprietary interest to the extent the respondent was entitled to equitable relief at all.

On appeal

The trial judge’s finding that the respondent was prima facie entitled to the Farm went unchallenged on appeal. It was necessary, instead, to determine whether the relief the judge granted went beyond what was required to do justice in the case. Beach, Niall and Kennedy JJA in a joint judgment articulated the four grounds of appeal as being “directed towards the same enquiry, namely, whether the trial judge was correct to make good [the respondent’s] expectation (that he would inherit the Farm), or whether some lesser proprietary interest sufficed to satisfy the requirements of conscientious conduct”: [14].

In analysing the applicable legal principles, the Court noted the thrust of cases such as Giumelli v Giumelli (1999) 196 CLR 101 and Donis v Donis (2007) 19 VR 577 was such that, in formulating an equitable remedy, ‘the making good of the expectation’ took primacy over the (mere) reversal of detriment: [65]–[66]. The applicant, in submitting that the remedy imposed was wholly disproportionate to the respondent’s detriment, argued that the trial judge should either have declined relief or have imposed some lesser remedy than a proprietary interest. The applicant advanced a number of arguments in support of this position, key of which were as follows.

Was a ‘ledger’ approach appropriate?

The applicant contended that a ‘ledger’ approach was appropriate when determining whether or not the granting of a proprietary interest went beyond what was required for conscientious conduct or in order to avoid doing injustice to others. Such an approach involved quantifying and comparing the value of the promise with the value of the detriment. The Court of Appeal rejected this approach for two reasons.

First, the Court held that such an approach would be “tantamount to treating […] detriment as ‘the consideration’ for the promised interest” and that “[s]uch an approach [was] misdirected as a matter of principle”; the Court held that the focus should not be on whether a promisee has earned the thing promised but on whether it would be unconscionable for the promisor to resile from the promise: [82]. Secondly, the applicant had made a series of promises over time which built upon one another and the Court held that it would be artificial to isolate one particular promise and weigh it against the detriment suffered given a certain ‘continuity’ of the promises and the corresponding detrimental reliance: [83].

Their Honours observed that even if the Court were to adopt a ‘ledger’ approach, the facts showed that the value of the respondent’s detriment — in the form of extensive unpaid work and capital improvements to the land — “was not insignificant”: [85]. Their Honours were fortified in their view that the detriment was significant given it was in some ways (to quote the trial judge) “beyond the measure of money” and reflected life choices made by the respondent over the course of several years. Their Honours noted that while “proportionality is not to be viewed as a ‘necessary constitutive element’” there might be cases where the detriment cannot meaningfully be measured for lack of evidence — but such was not the case here: [96].

Other factors

The applicant submitted that he had conferred certain benefits on the respondent during the course of the respondent’s reliance and that this had an ameliorative effect on the detriment suffered. In rejecting this argument, the Court of Appeal held that it was not for the applicant as promisor “to unilaterally change the terms of his promises, and provide substitute benefits to those promised”: [89]. Similarly, the Court noted that the applicant’s undertaking at trial did not alter the analysis; it was important to begin the enquiry with the respondent’s prima facie entitlement to the Farm; the undertaking ought only have been taken into consideration if fulfilment of the other promises each went beyond what was required for conscientious conduct, and this was not the case. Moreover, the fact that the applicant’s other son had settled his claim did not alter the enquiry because the trial judge had already taken that into consideration when formulating the respondent’s relief.

Finding no error in the trial judge’s decision, their Honours granted leave to appeal but dismissed the appeal.

Comment

Paragraph 79 of the Court’s decision in Harris v Harris contains a useful summary of the factors guiding a determination of the proper remedy in a case of proprietary estoppel. The case is illustrative of an application of those principles. Moreover, without quite ruling out the appropriateness of a ‘ledger’ approach when weighing the value of a promise against its corresponding detrimental reliance the Court’s comments suggest limited utility in such an approach.

An issue raised on appeal, and which did not fall for determination, was whether the trial judge’s conclusion as to the proportionality of a particular form of equitable relief amounted to the exercise of a discretion and therefore subject on appeal to the principles in House v The King (1936) 55 CLR 499. In holding that the judge had not erred in granting the particular relief his Honour did, it was not necessary for the Court of Appeal to determine this issue. Nonetheless, the Court noted “there [was] some force” in the applicant’s submission that such principles did not apply. The Court cited in support of this view the decision in Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541. There, Edelman J observed that “some categories of decision that were once discretionary are still described as such, although they are no longer the subject of any real judicial restraint”: 590. His Honour noted that such categories of decision included the exercise of equitable discretion to order specific performance, award an account of profits, and grant injunctive relief. His Honour did not mention, however, the decision to award a proprietary interest.