A recent decision of the Supreme Court of Canada deals with the issue of proprietary estoppel.
In Cowper-Smith v Morgan, the court dealt with an arrangement between two siblings to provide care for their mother. Gloria assured her brother Max that if he moved back into the family home, he would acquire Gloria’s share of that property after their mother’s death.
At trial, the judge concluded that all the elements of proprietary estoppel were established:
(1) The sister promised the brother that he would be able to purchase her eventual interest in their mother’s property;
(2) The brother relied on the expectation that he would be able to do so; and
(3) Because of the detriment the brother suffered as a result of his reliance, it would be unfair and unjust in the circumstances to permit the sister to resile from her promise.
Gloria appealed the trial judge’s decision to the British Columbia Court of Appeal which, in a split decision found that, since Gloria owned no interest in the property at the time of the promise, proprietary estoppel could not arise.
On appeal, the majority of the Supreme Court of Canada found that the trial judge did not err in concluding that proprietary estoppel operates to enforce Gloria’s promise. Ownership at the time the representation or assurance was relied upon is not a requirement of a proprietary estoppel claim:
[35] …With respect, the conclusion reached by the Court of Appeal majority conflates proprietary estoppel with the equity to which it gives effect. That Gloria did not own an interest in her mother’s property at the time of Max’s reliance is not dispositive in itself: see MacDougall, at p. 456; see also Thorner, at para. 61, per Lord Walker; Re Basham (deceased), [1987] 1 All E.R. 405 (Ch.), at p. 415. An equity arises when the claimant reasonably relies to his detriment on the expectation that he will enjoy a right or benefit over property, whether or not the party responsible for that expectation owns an interest in the property at the time of the claimant’s reliance. Proprietary estoppel may not protect that equity immediately. It may not protect the equity until considerable time has passed. If the party responsible for the expectation never acquires a sufficient interest in the property, proprietary estoppel may not arise at all; where there is proprietary estoppel, there must be an equity, but not vice versa. When the party responsible for the expectation has or acquires a sufficient interest in the property, however, proprietary estoppel attaches to that interest and protects the equity: see MacDougall, at p. 458; Wilken and Ghaly, at pp. 265-66; see also Watson v. Goldsbrough, [1986] 1 E.G.L.R. 265 (C.A.), at p. 267. Ownership at the time the representation or assurance was relied on is not a requirement of a proprietary estoppel claim.
[36] An equity arose in Max’s favour when he reasonably relied to his detriment on the expectation that he would be able to acquire Gloria’s one-third interest in their mother’s house. That equity could not have been protected by proprietary estoppel at the time it arose, because Gloria did not then own an interest in the property. But that does not mean that proprietary estoppel cannot attach to Gloria’s share of the house once she receives it. I conclude that it can.
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