Proprietary Estoppel – Hull on Estates #92

January 8, 2008 Hull & Hull LLP Hull on Estates, Hull on Estates, Podcasts, PODCASTS / TRANSCRIBED Tags: , , , , , , , , 0 Comments

Listen to Proprietary Estoppel

This week on Hull on Estates, David Smith and Rick Bickhram discuss proprietary estoppel.

Proprietary Estoppel – Hull on Estates Podcast #92

Posted on January 8th, 2008 by Hull & Hull LLP


David Smith:  Hello and welcome to Hull on Estates.  You’re listening to Episode #92 of our continuing podcast series on Tuesday, January 8th, 2008.


Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.   Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and Wills.  Now, here are today’s hosts.


David Smith:  Good morning Rick.


Rick Bickhram:  Good morning Dave.


David Smith:  My name is David Smith.  I’m one of the partners at Hull & Hull.  And I’m here today with my associate, Rick Bickhram.  And today, Rick, we thought we’d talk about an interesting equitable concept which is gaining considerable traction in a lot of the cases that we look at, and certainly is an established concept in the British estates Bar.  And that, of course, is this whole issue of proprietary estoppel and when it can be used.  Rick, just generally speaking, what is proprietary estoppel?


Rick Bickhram:  Good question, Dave.  The doctrine of proprietary estoppel is primarily used by a claimant who has been promised all or part of an estate and has acted to his or her detriment in reliance on that promise.


David Smith:  So that’s really a classic equitable concept, isn’t it?  It’s where the Court is looking to fashion a remedy based on principles of fairness, when you boil it down, and principles of equity, to correct a situation which it would be unjust to leave as is.  And, of course, in the estate context, we’re always looking initially at the Will.  And I assume, Rick, that the situation where this arises is where someone’s been promised an inheritance in an estate by a testator and then subsequently discovers that they’re not receiving that inheritance?


Rick Bickhram:  That is correct, Dave.


David Smith:  Now Rick, this…I want to flesh this whole concept out a little bit more.  How does it differ from promissory estoppel, which is a term that we encounter in other areas of civil litigation?


Rick Bickhram:  Great question, Dave.  A promissory estoppel is pretty similar to the definition of proprietary estoppel.  If we look at the textbook definition of promissory estoppel, a claimant can rely on promissory estoppel where there is a clear promise by the deceased, and that promise affected their legal relationship and the promisee or representee acted to his or her detriment.  The difference between proprietary estoppel and promissory estoppel is that proprietary estoppel can be used as a sword and shield.  Proprietary estoppel can give rise to a cause of action.  Whereas promissory estoppel cannot give rise to a cause of action.


David Smith:  Okay.  And that’s really critical, isn’t it, for us, as litigation lawyers, isn’t it, Rick?  I mean, we’re always looking for opportunities to advance claims and defend or advance our clients’ interests.  And I think in a situation where…the classic example is someone’s cut out of a Will.  Well, were they relatives?  Were they…did they have an expectation of receiving a benefit?  The first thing we always tend to look at is, is there a Will challenge here, and is there a benefit to challenging a Will?  But in a lot of these cases where proprietary estoppel is useful, there’s a couple of points.  One is, the Will may not be one that can be challenged in any event because it may be a perfectly valid Will.  And the other problem may be that the person who rendered services to the deceased may not be a beneficiary under a prior Will, in which case, there’s no benefit to advancing a Will challenge in any event.  And so when we go through the flow chart of decisions or possible remedies available to any client, and we come to the conclusion that a Will challenge is not a viable option, in these circumstances we then look to other options.  And certainly, you know, proprietary estoppel is related to the concepts of quantum meruit, constructive trust, all of those other kinds of remedies that are a little better known in the Ontario Court system.  Proprietary estoppel is simply another means by which we can rely on the Court of equity to correct an injustice.  And that’s it at its highest.  But if we boil it down to its various components, Rick, what’s the first and most pivotal element of a proprietary estoppel claim?


Rick Bickhram:  Well, the first element of a proprietary estoppel claim is that the claimant must have incurred an expenditure or otherwise have prejudiced himself or herself or has acted to his or her detriment.


David Smith:  What’s an example of that, Rick?


Rick Bickhram:  Well, for instance, if the deceased represented to the claimant that if the claimant had built a road, she would leave them one third of her estate.  The claimant then built the road in reliance on that representation and the claimant is able to verify or back that up with corroborating evidence, then I think that satisfies the first element that he acted to his detriment by building that road and prejudiced himself as a result of the deceased’s representations.


David Smith:  And let’s pick up on this acting to your detriment or prejudicing yourself concept.  I mean, to my mind, any time you act to your detriment or prejudice yourself, you’re basically saying look, I spent time doing something for you, mister testator, that ate into time that I could otherwise spend doing something else.  So instead of investing in the stock market in my spare time as a day trader, I spent my time working for you because I understood that you were going to give me an entitlement.  I relied upon that to my detriment.  And my reliance was reasonable, right Rick?  Isn’t that a pretty key component of this?


Rick Bickhram:  Oh, that’s very important, and a good point, Dave.  And I guess as a general rule of thumb, your expectation should always have some type of benchmark where it can be considered reasonable from an objective point of view.


David Smith:  And so, of course, that brings us to the question of proof which we’ll talk about in a minute.  But if we think about, again, the equitable concept here.  On the one hand, you’ve got the innocent, naïve if you will, worker bee doing all of this work for the benefit of the testator.  And on the other hand, there’s a bit of a value judgment about the testator in the sense that if the person doing the services relies…reasonably relies…on representations made, and if the testator breaches the arrangement, then really it’s a bit of a damning indictment, isn’t it, of the testator who leads the promisee to expect an entitlement which he or she doesn’t receive.


Rick Bickhram:  And I guess that’s why it’s sort of an equitable remedy.  There is no formal contract.  It sounds like a contract, but there is no actual written document.  And that’s why we ask that the Court of equity step in here and correct the injustice that has been done by the testator’s breach.


David Smith:  As I understand it, too, Rick, the third component that we think about is that we have to obviously deal with proving this.  We have to prove that the testator encouraged the promisee to do the work which was done, and the testator must have known of the work incurred or the expenditure incurred, and consciously made a decision not to honour the equitable obligation to provide a benefit.


Rick Bickhram:  Absolutely, Dave.  And it’s interesting that you say that, because there is a case, a 2006 decision by the Nova Scotia Supreme Court, wherein the claimant here had built a causeway across an island that was owned by the deceased.  The deceased had promised the claimant here, the son, that he would receive an interest in that island if he had built the causeway. Now, during the deceased’s lifetime, she attended her solicitor’s office.  While at her solicitor’s office, she put the deed, or put an interest of the island into her two other children’s.  So not the claimant.  She put it into her daughter’s name and to her other son’s name.  The Courts, in the situation…well the claimant brought an action on the grounds of proprietary estoppel.  And the Courts here dismissed Ronald’s claim.  And the reason for dismissing Ronald’s claim was because there was insufficient evidence.  Ronald, who was the deceased’s son, the claimant here, he was unable to demonstrate that the deceased had promised him the island and he had built the causeway because of that promise.  Primarily what he was…or the evidence that the Court was looking for…was some form of corroboration of the alleged promise.  And the only evidence that the claimant, Ronald, had in this situation, was his own evidence.


David Smith:  And let’s finish up the podcast, Rick, by talking about evidence.  You know, Section 13 of the Evidence Act, requires corroboration in claims made against estates, for the very good reason that unless there is corroboration, it’s open to unscrupulous plaintiffs to advance claims which may be completely without merit.  Of course, there’s lots of good claims where regrettably there is no corroborating evidence.  And it would seem, given the rigidity of Section 13 of the Evidence Act, that those are unfortunately situations where the Court quite likely will be compelled to reject the claim if there’s no corroborative evidence.


In terms of the kind of corroboration we look for, obviously paper is the best thing we can have.  If there’s any kind of paper which evidences the nature of the arrangement between the plaintiff and the defendant, it’s really good to have something of that nature.  I might point out also that there’s other cases that you can have where you might be able to argue proprietary estoppel.  A case that comes to mind is one in which a deceased, during his lifetime, befriends a woman late in life.  She’s younger in age, she comes in and agrees to live with him as husband and wife.  He buys her an engagement ring, although he never actually marries her.  And when he dies, leaves her out of the Will.  Now, of course, other remedies would be available to someone in that case.  She’d be able to advance, presumably, a support claim under Part V of the Succession Law Reform Act.  Although consider a case where she lived in a relationship with him as a common-law spouse for less than 3 years.  In that case, she couldn’t make a claim as a spouse, she wouldn’t get a benefit under the Will or on an intestacy rather, because she’s not married to him.  And so this would be an interesting instance where proprietary estoppel would be an attractive remedy because the argument would be that she acted to her detriment in reliance upon a promise, the promise being that he would marry her.  And by not marrying her, she lost any entitlement that she would otherwise have on an intestacy.  And so there, from an evidentiary point of view, you can see that the engagement ring, evidence of friends as to how he treated her and whether he introduced her as his wife to others.  Those witnesses would obviously be relevant and would corroborate the intention to provide her with some benefit.


Rick Bickhram:  That’s a great point, Dave.


David Smith:  One other point from an evidentiary point of view, just to wrap it up, Rick, is an issue where there may be a prior Will that’s unsigned, which benefits the person who then renders the services.  That Will is of no value on a Will challenge, but it’s very valuable evidence to corroborate the later intention to benefit the person who renders the services.


Rick, do you have any other thoughts before we wrap up in terms of the kind of evidence we’d want to look for?


Rick Bickhram:  As you said earlier on, paper evidence is absolutely great.  We could always use that, or lawyers in general could use that, in demonstrating the testator’s intent at one point.  Also it would be helpful if there was some type of witness, if there were witnesses that were unbiased, who could give or account for a promise or an assurance that the testator once…or that the testator had put out for the person who was using proprietary estoppel.


David Smith:  All good points, Rick.  And certainly I think we’ve touched on this topic.  It’s an interesting topic.  There’s lots more we can say about it obviously but it’s been a lot of fun and we’ll look forward to podcasting again, Rick.


Rick Bickhram:  Thank you, David.


This has been Hull on Estates with the lawyers of Hull & Hull.  The podcast you have been listening to has been provided as an information service.  It is a summary of current legal issues in estates and estate planning.  It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.


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