Context is Everything

01/07/2009

Context: n. the circumstances that form the setting for an event, statement, or idea, and in terms of which it can be fully understood. [Concise Oxford English Dictionary].

In Stack v Dowden [2007], as part of a pivotal passage in her opinion, with which three of their lordships agreed, Baroness Hale of Richmond ruled (at [69]):

In law, "context is everything" and the domestic context is very different from the commercial world. Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties' true intentions.

I submit that the thrust of important recent authorities is clearly that, in relation to a variety of property disputes litigated on equitable principles:

· context has moved centre-stage; and

· its assessment will involve careful consideration of the parties' relationship in all its facets, be those family, commercial or social.

In what follows, I take a closer look at three recent cases demonstrating the courts' context-driven approach to the issues of common intention, detriment and assurances. I go on to flag up two notable recent examples of the important distinction between the family and the commercial context in this area of the law.

Common intention: Fowler v Barron [2008]

In Fowler v Barron, the relationship lasted 23 years, producing two children and the property was registered in joint names. The father ("B") paid roughly one half of the purchase price by a deposit, all the joint mortgage instalments, council tax and utilities' bills. The mother ("F")'s modest income and child benefits were not spent directly on the property or mortgage, but on expenditure such as gifts, school clubs and trips, personal clothing, holidays and special occasions. The judge ruled that F had no beneficial interest. Allowing her appeal, the Court of Appeal held that B had failed to rebut the Stack presumption of joint tenancy in equity and ruled unanimously (per Arden LJ at [32]):

[To] determin[e] the parties' shared intentions about the beneficial ownership of the property, the court must consider the whole of the parties' relationship so far as it illumines their shared intentions about the ownership of the property and the court must draw any appropriate inferences.

Arden LJ went on to draw these inferences:

· with the exception of clothing for herself, F's payments were her contributions to household expenses for which both parties were responsible;

· the parties intended it should make no difference to their interests in the property which party paid for what expense; and

· there being no prior agreement as to who would pay what, the inference was, especially where the parties had made mutual wills, that they simply did not care about the respective size of each other's contributions.

Although the distinction may be a fine one (as Lord Neuberger said in Stack), it seems that Arden LJ's inferences of common intention were genuine inferences, drawn from the available evidence about the parties' relationship. They were not imputations attributed to the parties by the court, when no such intention could be deduced from their actions and statements.

Detriment: Chan Pui Chun v Leung Kam Ho [2003]

In Chan Pui Chun, the Court of Appeal unanimously upheld the judge's finding of a constructive trust in the claimant's favour, rejecting the appellant's case that the acts carried out by Miss Chan did not amount to detriment. For example, she assisted Mr Leung with two business projects in Hong Kong (mainly during 2 years when he was in prison), which were complete by March 1995 and did not pursue her political career in Hong Kong. Having left her job in Hong Kong, in May 1995 Miss Chan came to England to look for a suitable house for the parties to live in. In June 1995 the disputed property was purchased and in 1998 the parties' relationship broke down irretrievably. As the Court put it (at [87], per Jonathan Parker LJ):

It was essentially a matter for the judge to evaluate whether the acts in question amounted to an alteration of Miss Chan's position to her detriment in reliance on Mr Leung's promises.

The Court continued (at [96]):

There was a continuous and developing relationship between [the parties] from 1993 onwards, on both a personal and business level. The judge was ... entitled to have regard to the entirety of that relationship, and to the promises made by Mr Leung in the course of it, in determining whether Miss Chan had altered her position to her detriment in relation to the promise of an interest in the house in which they would live together.

Assurances: Thorner v Major [2009]

This case (pleaded on the basis of proprietary estoppel) concerned David Thorner's disappointed expectation that he would inherit a farm in Somerset from his cousin Peter. David worked on the farm without remuneration from 1976 until Peter's death in 2005. During the 1980's David came to hope that he might inherit the farm. That hope became an expectation in 1990 when Peter gave him the 1989 Prudential Bonus Notice on two assurance policies on his own life and said 'That's for my death duties'.

The deputy judge found that evidence was the most direct assurance of future inheritance which Peter made to David. Over the years that followed Peter made remarks to David which, though not saying so directly, carried with them the implication that David was to have a continuing long-term involvement with the farm. He would point out little things about the farm which would only be relevant to someone who would be there after Peter had gone. For example, a cattle trough which, he explained to David, never froze up in winter.

The deputy judge ruled that Peter's oblique assurances to David were nonetheless sufficient to found the basis of a proprietary estoppel in David's favour (subject to proof of reliance and detriment). He found that the equity in David's favour extended to sole beneficial ownership of the whole of the farm's land and other assets.

The Court of Appeal (Ward LJ, Lloyd LJ, Rimer LJ), allowing the appeal of Peter's personal representatives in 2008, ruled unanimously (at [74] per Lloyd LJ) that:

the statement made implicitly in 1990 ... did not amount to a clear and unequivocal representation, intended to be relied on by David, or which it was reasonable for him to take as intended to be relied on by him. The various later matters relied on do not ... add to the strength of David's case.

The House of Lords allowed David's appeal by a margin of 5-0, concurring in the opinion of Lord Walker of Gestingthorpe. Rather than requiring a 'clear and unequivocal' representation, to establish a proprietary estoppel the relevant assurance must be 'clear enough'. What amounts to clarity, in a case of this sort,[italics added] is hugely dependent on context. The promise must be unambiguous and, taken in its context, must appear to have been intended to be taken seriously.

It seems clear, furthermore, that the interpretation of the alleged promise is similarly contextual.

[58] The commercial, social or family background against which a document or spoken words have to be interpreted depends on findings of fact. When a judge, sitting alone, hears a case of this sort, his conclusion as to meaning of spoken words will be inextricably entangled with his factual findings about the surrounding circumstances. ..

[59] ... in this case the context, or surrounding circumstances, must be regarded as quite unusual. The deputy judge heard a lot of evidence about two countrymen leading lives that it may be difficult for many city-dwellers to imagine – taciturn and undemonstrative men committed to a life of hard and unrelenting physical work, by day and sometimes by night, largely unrelieved by recreation or female company. ...

[60] ... the Court of Appeal did not give sufficient weight to the advantage that the trial judge had in seeing and hearing the witnesses. ... there was [not] sufficient reason for the Court of Appeal to reverse the trial judge's careful findings and conclusion.

Thus it was that the oblique assurances of Peter, who was 'a man of few words' and 'not given to direct talking', were found by their Lordships to be clear enough to amount to assurances satisfying the first element of proprietary estoppel.

I suggest that is no good reason why the approach adopted by the House of Lords in Thorner should not be applied to express discussions relied upon in support of a common intention constructive trust. As Lord Bridge put it in Lloyds Bank v Rosset [1991] at 132E-F:

The first and fundamental question which must always be resolved is whether, there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. ... The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the parties, however imperfectly remembered and however imprecise their terms may have been.

It is for the court to decide whether express discussions, which may be imprecise and poorly remembered, demonstrate an agreement, arrangement or understanding. It cannot sensibly be denied that the context of those discussions is crucial to that issue.

The family and the commercial contexts contrasted: Laskar v Laskar [2008] and Yeoman's Row Management Ltd & or v Cobbe [2009].

These cases provide examples of how a property dispute perceived to arise in the commercial context is likely to receive different treatment from the court, in comparison with a family dispute. Yeoman's Row is a clear-cut example of that distinction, while Laskar is close to the borderline.

In Laskar mother and daughter purchased the council flat of which the mother was sole tenant. Lord Neuberger (sitting in the Court of Appeal) ruled it would not be right to apply the reasoning in Stack to a case such as this, where the parties primarily purchased the property as an investment for rental income and capital appreciation, even where their relationship is a familial one.

Doubtless aware that Laskar was a case near the borderline between the family and the commercial contexts, Lord Neuberger went on to rule that, even if the Stack presumption did apply, it was rebutted for five reasons. One of these was that there was no reason to think M intended D to receive a significant gift which was not shared with her other children.

In Yeoman's Row, the dispute arose entirely within the commercial context. Y owned a block of 11 flats in London; C was a property developer. C and Y reached an oral agreement by which C, at his own expense, would apply for planning permission to demolish the block and to erect, in its place, a terrace of 6 houses. Upon the grant of planning permission, the property would be sold to C for £12m, who would develop the property in accordance with the planning permission, sell the 6 houses and pay to Y 50 per cent of the amount, if any, by which the gross proceeds of sale exceeded £24m.

After planning permission was obtained, Y reneged on the agreement. The Court of Appeal (per Mummery LJ) agreed with the trial judge that proprietary estoppel could be established even where the parties anticipated that a legal binding contract would not come into existence until after planning permission had been obtained, further terms discussed and agreed and formal written contracts exchanged.

The House of Lords allowed Y's appeal by a margin of 5-0. As Lord Walker of Gestingthorpe put it:

[87] When a claim based on equitable estoppel is made in a domestic setting the ... understanding is typically on the following lines: if you live here as my carer / companion / lover you will have a home for life. The expectation is of acquiring and keeping an interest in an identified property. In this case, by contrast, [C] was expecting to get a contract.
...
[91] C's case seems to me to fail on the simple but fundamental point that, as persons experienced in the property world, both parties knew that there was no legally binding contract, and that either was therefore free to discontinue the negotiations without legal liability – that is liability in equity as well as at law. ... the fact is that [C] ran a commercial risk, with his eyes open, and the outcome has proved unfortunate for him.

Conclusion

Be alive to:

(a) the strong potential influence, on the court's interpretation of the parties' words and its assessment of detriment, of the details of their relationship and dealings;

(b) the wide scope the court enjoys to draw inferences as to the parties' common intention from their relationship and modus vivendi; and .

(c) the likely impact on a case of its family, social or commercial context, especially but not only in respect of the Stack presumption that the equitable interests reflect the legal ownership.

The success or failure of a case based on a proprietary estoppel or constructive trust may very well depend on the view taken by the court of the parties' relationship and of the context of relevant events.

© Luke Barnes
June 2009

This article first appeared, as edited, in Family Law Journal (Legalease), July / August 2009

Authorities

Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432; [2005] EWCA Civ 857.

Fowler v Barron [2008] EWCA Civ 377

Chan Pui Chun v Leung Kam Ho [2002] EWCA Civ 1075, [2003] 1 FLR 47

Thorner v Major & ors [2009] UKHL 18; [2008] EWCA Civ 732; [2007] EWHC 2422 (Ch)

Lloyds Bank v Rosset [1991] 1 AC 107.

Laskar v Laskar [2008] EWCA Civ 377, [2008] 2 FLR 589.

Yeoman's Row Property Management Ltd & or v Cobbe [2008] UKHL 55; [2006] EWCA Civ 1139; [2005] EWHC 266 (Ch).