Breaking Down Proprietary Estoppel: A Powerful Tool in Contested Wills and Estate Litigation

Breaking Down Proprietary Estoppel: A Powerful Tool in Contested Wills and Estate Litigation

The Estateably Team
October 12, 2023

Equity in Estate Litigation

As it appears on the page, black letter law can often be too inflexible to provide a just outcome. When judges follow the law verbatim, they may arrive at a legally sound outcome, but not one which serves the purpose of delivering justice to society. For this reason, the custom of equity has become a pillar of common law traditions, where courts can provide remedies where the law falls short. Equitable doctrines are common in estate litigation, as cases of contested wills and estates necessarily involve a human element: when a will contest reaches trial, it is often at the end of the embittered dissolution of familial relationships.

One such equitable doctrine often linked to estate law is proprietary estoppel. This doctrine can arise when a person has relied on a promise or assurance made by another person regarding their entitlement to an asset, such as land, and has acted to their detriment based on that reliance. In 2010, the Ontario Court of Appeal set out common law essential elements of proprietary estoppel in Schwark et al. v. Cutting:

  • Representation: A clear and unequivocal representation, promise, or assurance must be made to the claimant regarding the property in question. This representation can be expressed or implied, taking many forms, such as a statement, conduct, or silence in the face of an expected objection.
  • Reliance: The claimant must have relied on the representation to their detriment. They must have acted in some way based on the representation, such as making improvements to the property, providing services to the landowner, or refraining from taking action that would have been detrimental to the landowner's interests.
  • Detriment: The claimant must have suffered some form of detriment due to their reliance on the representation. This can include financial loss, lost opportunities, or other harm.
  • Unconscionability: It must be unconscionable for the landowner to go back on the representation, given the claimant's reliance and the resulting detriment. This requires balancing the parties' equities and considering factors such as the nature of the representation, the degree of reliance and detriment, and the parties' respective expectations and assumptions.

If all of these elements are present, the claimant may be entitled to a remedy such as a proprietary interest in the land, compensation for their losses, or an injunction preventing the landowner from acting inconsistently with the representation they made.

Importantly, as with any equitable remedy, a claimant's compensation can never be more than the minimum amount needed to adequately compensate them for their loss. In other words, they cannot be subsequently enriched by unjust impoverishment.

Hard Home Truths: Cowper‑Smith v. Morgan

The Supreme Court handed down its judgment in the case Cowper‑Smith v. Morgan, 2017 SCC 61 over a family property dispute and materially redeveloped the proprietary estoppel doctrine in the process. Courts had not widely turned to that particular equitable remedy until the Supreme Court’s decision. Cowper‑Smith v. Morgan concerned three children who had become estranged from one another after their mother’s death and a contentious broken promise.

Elizabeth and Arthur Cooper-Smith were married in 1945 in Victoria, British Columbia. They raised their three children, Gloria, Max, and Nathan, there. As adults, Gloria settled with her husband in Victoria, Max moved to England, and Nathan moved to Edmonton with his long-term same-sex partner. Before his death, Arthur told his children that he and Elizabeth planned to divide their assets equally amongst the three children, including their house.

After his relationship ended in 2000, Nathan moved back to his mother’s house in Victoria and helped her with housework, much to her chagrin. Elizabeth seemed increasingly agitated by Nathan’s presence, including the possibility that he would “entertain gay males” in her home, according to letters she sent him. In 2001, Nathan received two letters from his sister indicating he was no longer welcome in his mother’s house. After he returned from an overseas trip, he found the locks changed and that his mother had evicted him. He returned to Edmonton and later reconciled with Elizabeth, assuring her that he was certain whatever problems had gone on between mother and son were the sister's fault.

After his marriage and career fell apart, Max also returned from England to Victoria. At first, he got along well with Gloria. Gloria indicated to Max that their mother could no longer live by herself. The two agreed that, in exchange for having various expenses reimbursed, Max could live in Elizabeth’s house permanently and, most crucially, be entitled to buy Gloria’s one-third share of the property after Elizabeth’s death.

In 2001, when Nathan’s relationship with his family was at its most acrimonious, Elizabeth drastically changed her estate plan. She transferred title to the property and all her investments into joint ownership with Gloria, indicating that Gloria would be entitled to the entire property absolutely upon her death. She created a trust in which Gloria would act as trustee over Elizabeth’s entire assets, giving her complete control over whether to liquidate the estate entirely. That year, Elizabeth executed a new will, appointing Gloria as executor and revoking all previous wills. In 2002, she executed her final will, revoking the previous one. She maintained Gloria as her estate executor but returned her estate devises to equal inheritance between all three children. She never changed the terms of the trust nor the joint ownership.

Max discovered this change in 2005, though Gloria continually assured him over several years that he would still be entitled to his one-third share. In 2011, after Elizabeth had died, Gloria announced her plans to put the house on the market, with Max still living in the house at the time. Max and Nathan sued, alleging Gloria’s undue influence over Elizabeth in 2001 when she executed the new estate plan. They also claimed proprietary estoppel entitled Max to purchase Gloria’s one-third interest in the house.

The trial judge found that Gloria had not rebutted the presumption of undue influence that resulted in the construction of the trust. She was also satisfied that Max and Nathan had proved the elements of proprietary estoppel. On appeal, the British Columbia Court of Appeal unanimously upheld the trial court’s ruling on undue influence and the trust but split on the issue of proprietary estoppel. The majority held that since Gloria owned no interest in the property, proprietary estoppel could not arise. Max appealed the judgment on the issue of proprietary estoppel to the Supreme Court. Crucially, proprietary estoppel is distinct from virtually every other estoppel: it can function as a sword, not solely a shield. For this reason, plaintiffs can bring proprietary estoppel as a cause of action if their property rights have been infringed due to reliance on a false promise over land.

To determine whether Max was entitled to equitable relief, the Court looked at the more elusive elements of the estoppel doctrine. Firstly, the Court determined what equity proprietary estoppel would protect in this case, outlining three criteria: a representation or assurance based on which the claimant expects to enjoy a right or benefit over property, reasonable reliance on that expectation, and detriment due to the reliance. In this case, Gloria clearly promised Max her one-third share in the property if he moved back to Elizabeth’s house. Doing so was clearly detrimental, as he left behind his family, career, and social life in England.

Finally, the Court determined whether the reliance was reasonable. The Court concluded that, in cases of equity in civil law, reasonableness is circumstantial. Max was clearly under the impression that the children would all be entitled to one-third shares of Elizabeth’s estate; he and Gloria had extensive negotiations before he decided to uproot his life in England, and Gloria repeatedly assured him of these promises. The Court concluded that Max reasonably relied on Gloria’s promise to his detriment.

The Supreme Court also disagreed with the Court of Appeal’s decision that Max was not entitled to equity because Gloria did not own interest in her mother’s estate at the time of Max’s reliance. It rejected this argument, stating that ownership at the time the representation or assurance was relied on was not required for a proprietary estoppel claim. The Court ordered Gloria, as executor, to divide Elizabeth’s property equally amongst herself and her brothers, thereby satisfying the elements of proprietary estoppel. It also compelled her to sell her share to Max at a reasonable price so as not to compound his loss or cause her to sustain one.

Justice Côté, dissenting, argued strongly against the Court’s use of its discretion to compel Gloria as executor to transfer the house to her siblings. Cowper‑Smith v. Morgan highlights the importance of careful estate planning and ensuring that a testator’s intentions are properly documented in a legally binding way. It also emphasizes the potential risks of informal agreements and promises, as these can be difficult to enforce and may be subject to disputes and litigation. As highlighted by the tension between the majority and the dissent, when courts employ equitable doctrines in their judgments, it adds an inherently unpredictable element to the outcome.

What isn’t Considered Reasonable Reliance?

A recent case from the British Columbia Supreme Court has an answer to this question, hopefully to shed more light on the issues the Court discussed in Cowper‑Smith. In Kennedy v Marcotte Estate, 2022 BCSC 1486, Stewart Kennedy initiated legal proceedings against Beverly Propp regarding the ownership of Keith Marcotte's farm. Kennedy believed he would inherit all or a portion of the farm due to his family's longstanding friendship with Marcotte, who had never married and had no children of his own.

When Kennedy wasn't fishing, he would help Marcotte on the farm, and in return, Marcotte would express his appreciation by giving him gifts, including money, restaurant meals, and gas. On a few occasions, Marcotte made comments that Kennedy had interpreted as meaning he would inherit the farm after Marcotte's passing. However, his comments were often no more than mere platitudes, such as, “Anybody who works on Mr. Marcotte’s farm will get a piece of it one day.”

However, 19 months before Marcotte died, Kennedy learned that Marcotte had willed the farm to Propp, who was his neighbor and another close friend. Kennedy attempted to convince Marcotte to reconsider the terms of the will, but his efforts were unsuccessful. As a result, Kennedy filed a claim in promissory estoppel and unjust enrichment against Marcotte's estate and Propp. He sought an order that would grant him title to the farm or financial compensation for the value of the portion of the farm to which he claimed he was equitably entitled. Alternatively, Kennedy requested an award equal to the value of the farm labor he provided for Marcotte's benefit.

However, the Court found Kennedy's claims unfounded. The judge determined that Marcotte's statements regarding his testamentary intentions were ambiguous, and it was unreasonable for Kennedy to rely upon them. These facts contrast with those in Cowper-Smith, in which Gloria’s repeated, explicit assurances to Max of her promise were evidence of his reasonability. Additionally, the Court in Kennedy held that there was a valid juristic reason for Kennedy's farm labor, which was his intention to give his help to Marcotte as a long-time family friend. Finally, the Court concluded that any reasonable reliance Kennedy may have had should have unequivocally dissipated in 2004 when Marcotte explicitly told him that the farm would only have one beneficiary. Consequently, the Court dismissed Kennedy's legal action.

Takeaways for Estate Planning

Proprietary estoppel is an essential equitable doctrine in estate litigation that can provide remedies where the law fails to deliver true justice. Its four fundamental elements (representation, reliance, detriment, and unconscionability) make it a useful tool in cases of contested wills and estates involving a human element: unfulfilled promises, family strife, and broken friendships. If all the elements are present, a claimant may be entitled to a proprietary interest in the land, compensation for losses, or an injunction preventing the landowner from acting inconsistently with the representation.

However, a claimant's compensation cannot be more than the minimum amount needed to compensate them for their loss. The Supreme Court’s judgment in Cowper‑Smith v. Morgan was a significant development in the proprietary estoppel doctrine. Future litigation at the appeal court level will indicate whether the doctrine becomes a mainstay of probate litigation. In his reasons, Justice Brown raised a concern about resolving competing proprietary claims where a proprietary estoppel's necessary equity exists before the promisor gains interest in the property. He cited an English court's view that if a promise creates a personal equitable right for the claimant, the promisor's later acquisition of the benefit doesn't allow the claimant to assert priority over a third party's proprietary right established in the interim. However, the Court left a definitive answer to that question for another set of future facts.

It is important for estate administrators and testators to understand the implications of proprietary estoppel in estate litigation. To avoid potential claims of proprietary estoppel, it is advisable to be clear and transparent about any promises or assurances made to individuals regarding land or property. This can be done by documenting such promises or assurances in writing and ensuring that all parties involved clearly understand their rights and responsibilities.

Estate administrators should also be aware of the potential for claims of proprietary estoppel and take steps to ensure that the estate is managed in a fair and equitable manner. This can include seeking legal advice and guidance on managing potential disputes or claims arising from the estate. Testators should also consider consulting with legal professionals to ensure their estate plan is clear, unambiguous, and reflects their wishes and intentions to distribute their assets. By taking these steps, estate administrators and testators can help minimize the risk of disputes and litigation arising from proprietary estoppel claims.

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