Ipsofactoj.com: International Cases [2001] Part 1 Case 9 [CAEW]


COURT OF APPEAL, ENGLAND & WALES

Coram

Gillett

- vs -

Holt

LORD JUSTICE BELDAM

LORD JUSTICE WALLER

LORD JUSTICE ROBERT WALKER

8 MARCH 2000


Judgment

Lord Justice Robert Walker

  1. This is an appeal from an order made on 6 July 1998 by Carnwath J, whose judgment is reported at [1998] 3 AER 917. The order dismissed an action claiming equitable relief based on proprietary estoppel brought by Mr. Geoffrey Gillett. Apart from the main action the judge also heard two separate petitions for relief under s 459 of the Companies Act 1985 (both of which were also dismissed) and a subsidiary action relating to part of a farm known as The Beeches, Baumber, near Horncastle, in Lincolnshire (in which the judge refused a claim for possession and made a declaration as to the existence of a protected agricultural tenancy). This appeal is concerned only with the main action, but the subject-matter of the other proceedings spills into the main action, which relates to events spanning over forty years.

    THE FACTS

  2. The undisputed background facts have some unusual features. In 1952, when Mr. Gillett first met the first defendant Mr. Kenneth Holt, the former was a schoolboy aged 12 and the latter was a gentleman farmer (and a bachelor) aged 38. Mr. Holt’s father had been a farmer in Lincolnshire, but the family money came from shipping interests in Liverpool. Mr. Holt himself began farming on his own in 1936, as tenant of a mixed farm of 536 acres known as The Limes, Baumber. The farmhouse at The Limes is a substantial house and Mr. Holt has lived there since 1936. The landlord, from 1947, was Merton College Oxford. Since these disputes arose Mr. Holt has, through a company, acquired the freehold of The Limes.

  3. Mr. Holt had two brothers (one of whom was killed in the 1914-18 war) and one sister but he did not have any nephews or nieces who might have been expected to benefit from his estate. The surviving brother, Mr. Noel Holt, who was born in 1911, plays a peripheral part in the story. Both he and Mr. Holt’s housekeeper, Miss Hilda Bell (who died before the trial) gave witness statements to Mr. Gillett’s solicitors and these were admitted in evidence at the trial.

  4. In 1952 Mr. Gillett moved with his parents from Skegness to Woodhall Spa on his father’s promotion from police constable to police sergeant. Mr. Gillett senior (who also plays a peripheral part in the story) went on to be a police inspector and, after his retirement, the chairman of the East Lindsey District Council. Mr. Gillett junior went to Queen Elizabeth’s Grammar School at Horncastle. He first met Mr. Holt at Woodhall Spa golf club when he was earning some pocket money as a caddie. He became Mr. Holt’s regular caddie and a friendship developed between them. Mr. Gillett said in his witness statement that despite the difference in their ages they got on well. During his teenage years Mr. Gillett was a regular visitor to The Limes, helping on the farm and sometimes staying at the house. Mr. Holt was introduced to Mr. Gillett’s parents and got on well with them. They sometimes played bowls together. Mr. Gillett senior acknowledged that he was initially concerned about Mr. Holt’s relationship with his son but that after meeting Mr. Holt’s housekeeper he was reassured.

  5. When Mr. Gillett junior was 15 Mr. Holt proposed that he should leave school and work full-time for Mr. Holt. The proposal was that he should work at The Limes for a year and then go to agricultural college near Lincoln. Mr. Gillett’s headmaster was against the plan, as he was expected to take ‘O’ and ‘A’ levels, and his parents had misgivings about it. But they overcame their misgivings and in December 1956, when he was just 16, Mr. Gillett went to work for Mr. Holt, living at The Limes from January 1957. He took his meals with Mr. Holt and the housekeeper (a predecessor of Miss Bell, who arrived in 1961). He did not in the end go to agricultural college because Mr. Holt thought that he could learn more at The Limes. Mr. Holt (from 1957 through his company K A Holt Ltd - "KAHL") employed a foreman and four or five other men but Mr. Gillett was treated as a trainee rather than a farm labourer. He was made responsible for the payroll and Mr. Holt took him to Nottingham and introduced him to Mr. Holt’s accountant who explained PAYE to him.

  6. During the years when he might have been expected to be studying for his ‘A’ levels, or in further education, Mr. Gillett learned a great deal about farming, partly from his practical training at The Limes and partly from evening courses and study which he undertook on his own initiative (he said that Mr. Holt was not a believer in college learning). By 1960, when he was twenty, he had introduced a new bookkeeping system and had been given a degree of responsibility for purchasing spares. This was extended over the next two or three years to responsibility for negotiating supplies of fuel, seeds, fertilisers and sprays, and for buying and selling machinery and livestock. He introduced Mr. Holt to bee-keeping, which had been a schoolboy hobby of his, and at Mr. Holt’s suggestion he began his own business of keeping laying poultry and selling eggs. He also enjoyed an active social life with Mr. Holt, with many outdoor activities ranging from golf to shooting and speedboat racing. The only activity from which Mr. Gillett was largely excluded was fishing for salmon and trout, which became an abiding interest of Mr. Holt’s from about 1960, taking him on regular trips to Scotland.

  7. In 1958 or 1959 Mr. Holt approached Merton College to ask whether it would sell the freehold reversion to the farm. When the college declined this approach Mr. Holt asked whether the tenancy could be put in the joint names of himself and Mr. Gillett. The college declined that also (unsurprisingly, if only because Mr. Gillett was still under full age as the law then stood). Mr. Holt then made the suggestion, both to Mr. Gillett and to his parents, that he (Mr. Holt) should adopt him in order to give Mr. Gillett a right of succession to the agricultural tenancy. Nothing came of this but it is an indication of Mr. Holt’s feelings and it is part of the background to the assurances and understandings on which Mr. Gillett relied in the main action.

  8. In May 1963 Mr. Holt acquired another freehold farm of 236 acres, White House Farm, Waddingworth. This was conveyed into Mr. Holt’s own name, not to KAHL.

  9. When Mr. Gillett was between 18 and 20 Mr. Holt was clearly of central importance both to Mr. Gillett’s working life and to his social life. Mr. Gillett had some girl friends, but Mr. Holt did not encourage them. Then in 1961 at Horncastle Young Farmers Mr. Gillett met and became friendly with Sally Wingate, the daughter of a tenant farmer on a nearby estate. After some initial coolness on both sides she put herself out to become friends with Mr. Holt, and Mr. Holt became friendly both with her and with her father and mother (until their deaths in 1971 and 1984 respectively). Mr. Gillett and Miss Wingate became very close friends and at Easter 1964 they became engaged. They broke the news to Mr. Holt who was at first shocked but returned the next day to his usual friendly manner. During 1964 Mr. Gillett senior was transferred from Woodhall Spa to Boston and he and his wife moved away from the district for about three years. In the summer Mr. Holt told Mr. Gillett that he (Mr. Holt) was going fishing in Iceland and that Mr. Gillett (then aged 24) would be in charge of the harvest. Mr. Holt went fishing and Mr. Gillett got the harvest in successfully. On his return Mr. Holt congratulated Mr. Gillett and, according to Mr. Gillett, from then on he retired from day to day involvement in the work of the farm.

  10. Then occurred the first of seven incidents which the judge recorded ([1998] 3 AER at pp.930-2) as assurances given by Mr. Holt and relied on by Mr. Gillett. The judge accepted the Gilletts’ account as factually accurate. The first incident (and some supporting material from the same period) were described as follows by the judge,

    1964 Harvest

    Mr. Gillett says that he and Sally (then his fiancée) were taken to dinner by Mr. Holt at the Golf Hotel Woodhall Spa. The discussion was in line with earlier indications but was ‘more specific’. Mr. Holt explained that ‘as time progressed I would be involved more and more with the farming business and in due course I would take over the complete running of the farm and when he died the farming business would be left to me in its entirety.’ Mr.s Gillett remembers Mr. Holt saying that Mr. Gillett was going to be in full charge of the farm in due course and "that he also wanted to leave the farm to Geoff.

  11. There is some support from other witnesses. Mr. Gillett’s father speaks of a dinner at Mr. Holt’s house at about this time, at which Mr. Holt said he wanted Geoffrey to run the farm which he saw as being ‘a permanent arrangement’ and that ‘he would see to it that, when anything happened to himself, Geoffrey and Sally would be secure’. Sally’s brother, Mr. Wingate, remembers a conversation at his parents’ house, at which Mr. Holt said "something to the effect that he was going to look after Geoffrey and Sally and that they would have an assured future".

  12. In paragraphs 13 and 14 of the Amended Statement of Claim these statements are expressed as being to the effect that "upon his death the first defendant would bequeath all of his assets to the plaintiff". On any view, that is overstating the effect of the evidence, which at most supports a statement of intention with respect to the farming business.’

  13. In December 1964 Mr. and Mr.s Gillett were married. Before their marriage, but after the dinner with Mr. Holt, they had agreed to buy a bungalow called Rose Bank at Thimbleby, a little over two miles from The Limes. It cost £2,250, provided by a 95 per cent mortgage from the Abbey National and the balance from Mr. Gillett’s savings. Mr. Gillett was before his marriage being paid £15 a week by KAHL, but this was raised to £17 on his marriage. This was one of the few points on which the judge found Mr. Gillett’s recollection to be at fault. He also had a modest pension plan arranged by Mr. Holt. Mr. Gillett’s evidence was that he and his wife found it difficult to keep up with their mortgage payments, even with help from her earnings. Their first child, Robert, was born on 18 April 1971.

  14. Robert’s christening was the occasion of the second assurance relied on by Mr. Gillett in the main action. The judge made the following finding about this,

    1971 Robert’s Christening

    Mr. Holt attended the christening as Robert’s godfather and gave a speech. The Statement of Claim (para 27) alleges that he stated words to the effect that ‘Robert’s birth would enable the farm to continue to the next generation’. This wording accords with Mr. Gillett’s evidence. He says it did not surprise him because it was already well settled between them that ‘I would eventually succeed to his farming business’. The evidence of Sally and Mr. Gillett senior is to similar effect.

  15. Shortly before Robert’s birth there had been an important change in that Mr. Holt’s company KAHL, acquired further freehold property and Mr. and Mr.s Gillett went to live there. They sold Rose Bank for about £4,000, leaving a net equity in their hands of about £1,500. The purchase of the new land (103 acres and a farmhouse, then called Hatton Farm, Baumber, now The Beeches) was negotiated and carried through by Mr. Gillett, with Mr. Holt’s approval. The price was £28,000 financed by an increased overdraft (which Mr. Gillett negotiated as being preferable to an inflexible mortgage loan). The farmhouse (renamed The Beeches) was in a poor state and the Gilletts carried out repairs and improvements, some at the expense of KAHL and some at their own expense.

  16. On 16 March 1973 their second son Andrew was born. A few months later a new company, G&H Farms Ltd ("G&H") was formed. Mr. Holt and Mr. Gillett each had 45 per cent of the shares and Mr. Holt’s brother Noel the remaining 10 per cent (which was transferred to Mr.s Gillett in 1991). The directors were Mr. Holt and Mr. Gillett (who in 1973 were aged 59 and 33 respectively). The idea for the company came from Mr. Holt’s accountant in Nottingham, Mr. Ray, who suggested that the new company could hire machinery out to KAHL and build up liquid assets derived from it, and so achieve a legitimate saving of estate duty on Mr. Holt’s death (this was before the replacement of estate duty by capital transfer tax, and a raft of new reliefs for agricultural and business assets, transformed tax planning for farmers). Mr. Holt’s concerns about tax planning may have been prompted partly by the partition, during 1973, of the Holt family trust, which made a substantial addition to Mr. Holt’s disposable assets. Mr. Holt freely discussed these matters with Mr. and Mr.s Gillett, who assisted Mr. Holt with the secretarial side of managing his investments and in the preparation of his tax returns. The Gilletts had in 1967 formed a company of their own, Horncastle Secretarial Services Ltd, which was run by Mr.s Gillett and provided secretarial and bookkeeping services, mainly to farmers (including KAHL). It ceased trading in 1980 but Mr.s Gillett continued to work for KAHL and became its employee in 1986.

  17. During the first part of 1974 Mr. Holt must have written again to Merton because there was a letter dated 30 April 1974 from the Estates Bursar to him. It began,

    The College policy for re-letting farms to sons of tenants before the death or retirement of the father has, for the last twelve years been that until the father dies or retires completely, no change can be made. This may seem harsh but there are reasons for it.

    Then after some explanation of the college policy it went on,

    With regard to Limes Farm, I hope that you will remain our tenant for a great number of years. If your tenancy did end, then the College would have to decide whether to sell or re-let, as I am sure we would not wish to farm it ourselves. As you know we have no other land near Baumber with which to amalgamate and 543 acres is rapidly becoming a small unit for the type of land. The College might be tempted to sell but if it did not then we would want a tenant and Mr. Gillett, who I have got to know quite well over the last few years and who I know would make an excellent tenant so long as he had the necessary finance, would stand a very good chance of getting the tenancy.

  18. The next three instances of assurances given by Mr. Holt to Mr. Gillett occurred in 1973, 1974 and 1975, and again the judge’s findings about these should be set out in full:

    Christmas 1973

    According to the Statement of Claim (para 32) Mr. Holt held a dinner for Mr. and Mr.s Gillett at which he ‘repeated once again that he would bequeath all his assets’ to Mr. Gillett, and ‘specifically stated’ that he believed that his non-farming assets would be sufficient to pay the tax liability on the estate ‘leaving (at the least) the entirety of his farming business to be passed to the plaintiff free of liability to tax’.

    The evidence does not go so far. According to Mr. Gillett’s statement, Mr. Holt ‘re-iterated all he had said about leaving K A Holt Ltd to Sally and me on his death and the formation of G&H Farms Ltd’. As I understood his answers in cross-examination, he did not suggest that the representation extended to ‘all his assets’. The other assets came into the conversation, because Mr. Holt ‘thought it would be possible’ to use them to enable the Farm to be passed on free of tax; he was in consultation with his solicitors and accountants about this. According to Mr.s Gillett, Mr. Holt said that he was ‘looking into the best way of passing assets over but he was worried about the tax side of it’.

    1974 Golf Hotel Dinner

    According to the Statement of Claim (para 34) Mr. Holt told Mr. Gillett that he had appointed him executor of his Will, and showed him some papers which ‘appeared to indicate’ that he had ‘bequeathed his entire estate’ to Mr. Gillett. Again Mr. Gillett’s evidence is less specific. His statement says that at a dinner at the Golf Hotel, Mr. Holt said that ‘he had now made his Will in our favour’, with him as one of the executors. Shortly afterwards, at the Limes, Mr. Holt showed him a document which he understood to be this will, but he was not given it to read.

    1975 Discussion of The Beeches

    Mr. Gillett says that he asked Ken for something in writing to confirm that the Beeches Farm would be theirs. He was told ‘that was not necessary as it was all going to be ours anyway’. Mr. Gillett was disappointed but after discussing it with his wife and parents decided ‘that Ken was a man of his word so I accepted his assurances’. His statement supports the Statement of Claim in this respect (para 35). In cross-examination he said that he understood this as a representation that the farming business would come to him on Mr. Holt’s death.

    The last of these episodes is referred to in the notice of appeal as ‘The Beeches incident’.

  19. It does not appear from the documents disclosed on discovery that Mr. Holt had by this stage made a will in favour of Mr. and Mr.s Gillett. The official announcement (in November 1974) of the proposed replacement of estate duty by capital transfer tax, with partially retrospective effect, had a chilling effect on tax planning at that time. But there is a draft will of Mr. Holt prepared in February 1976 appointing Mr. Gillett and two others (Mr. George Grant, a local farmer, and Mr. Wormald, a Liverpool solicitor) as executors and (after numerous pecuniary legacies and specific legacies of chattels, many to the members of the Gillett family) settling the residuary estate on trusts under which Mr. and Mr.s Gillett took successive life interests, with ulterior trusts of capital in favour of their children (and an ultimate trust, if no child attained a vested interest, for Mr. and Mr.s Gillett in equal shares). Another similar draft will, but with Mr. Noel Holt as one of the executors in place of Mr. Grant, and Mr. William Pinfold, another partner in Alsop Stevens, in place of Mr. Wormald, was prepared in March 1977. It is probable but not certain (and may not ultimately be significant) that wills in these forms were executed by Mr. Holt, and destroyed when revoked by a new will. At that time Mr. Holt was taking a lot of advice on tax planning from different quarters, primarily Alsop Stevens (his Liverpool solicitors), Prior & Palmer (his Nottingham accountants) and a firm of insurance brokers. The judge summarized the slow progress in arriving at a tax-planning strategy and implementing it ([1998] 3 AER at p.920):

    By September 1978 this had crystallised into a decision in principle to give 20% of the shares in KAHL to Mr. Gillett, to sell White House Farm to KAHL, and (subject to tax considerations) to channel future machinery purchases through G&H. The transfer of the shares in KAHL was not implemented until the end of 1983 when Mr. and Mr.s Gillett were given 10% each of the shares in KAHL.

  20. These decisions were documented at the time in the minutes of a meeting held at The Limes on 27 September 1978. The meeting was attended by Mr. Holt, his brother Noel (who took the chair), Mr. Palmer and Mr. Kennedy of Prior & Palmer, Mr. Pinfold of Alsop Stevens and (for part of the meeting) Mr. Gillett.

  21. Shortly afterwards Mr. Gillett, at Mr. Holt’s request, visited Mr. Palmer and expressed some doubts about the effect of the proposals on the liquidity of the farming business, especially as KAHL was losing its tenancy of a farm called Greenfield Farm. He is also recorded by Mr. Palmer (in a letter to Mr. Pinfold) as having expressed personal anxieties:

    He has also pointed out that the whole family has a record of longevity, and he envisages the possibility that he, Gillett, may reach retirement age before anything really happens. I pointed out to him that this is highly unlikely, and in any case if it go anywhere near that I am sure Ken Holt, having voluntarily taken these steps to try and help Gillett, would do something about it. I also pointed out that Gillett himself, is not immortal, and if we went too far handing things over at this stage we could well be landed with the classical situation that Ken Holt could be stripped of a large part of his fortune. I begged him to drive carefully on the way back to Baumber.

  22. Mr. Pinfold’s response was that Mr. Gillett should be grateful for anything. Mr. Kennedy replied on 15 December saying at the beginning of a long letter,

    I do not think that Mr. Gillett’s comments are necessarily in contradiction of our main conclusion. I think that Peter Palmer and I both tend to agree with the comments in your letter of 28 November that Mr. Gillett is in a way tending to look his gift horse in the mouth. Nevertheless, he is the business manager used to thinking chiefly in terms of the business and his comments do have some bearing on our proposals.

    I was myself unaware of the pending loss of Greenfield Farm and this will obviously have a material effect on the results of the business unless an alternative can be found.

    The letter then continued with detailed financial projections. This exchange of correspondence is interesting as showing the perceptions of detached professionals whose instructions came from Mr. Holt.

  23. In 1979 Merton College was again asked about transferring Mr. Holt’s tenancy of The Limes into the joint names of himself and Mr. Gillett, but again this approach came to nothing. The Estates Bursar wrote to Mr. Holt,

    I fully understand your desire to secure Mr. Gillett’s future and I feel it is good of you to be so concerned on his behalf. I am afraid, however, that it would be quite contrary to the College’s policy to create a joint tenancy with him.

  24. Mr. Gillett’s own view of the matter appears from some manuscript notes which he prepared, probably in 1981, for a presentation to Mr. Holt (which did not in the event happen, so that the notes were not used). The judge set out part of the notes as an expression of what he called Mr. Gillett’s frustrations ([1998] 3 AER at p.923):

    After a long series of intermittent discussions no conclusion has been reached. During this protracted period I have accepted a lower salary in anticipation of a substantial capital involvement over the years. I believe the time has come that a satisfactory solution must be reached as my total involvement in the farm must not be allowed to wane. As you are aware I have been for some time frustrated because of your policy of non-expansion. I ask myself at 40 years old just what on earth I will do with my untapped energy for the times on the farm when it is slack.

  25. But the judge commented that there was no evidence before 1992 that his frustrations were reflected in any failings in the management of the farm. In particular, Mr. Gillett’s decision in 1987 to develop on some of the land at The Beeches what he called the Countryside Companions project - a project for farm diversification first into wild flower seed, and then into the growing of native trees and shrubs, and fish farming - was taken with Mr. Holt’s blessing and support, although Mr. Holt did not wish to be a shareholder or director in Countryside Companions (an unlimited company).

  26. There was a good deal of evidence before the judge (uncontradicted by any evidence from the defendants, since they elected to call no evidence) that Mr. Gillett, so far from neglecting the farm business, was energetic, skilful and innovative. One example of many to be found in Mr. Gillett’s long witness statement is his collaboration with ICI in developing a new means of transporting and handling fertiliser:

    In 1973 I hit on an idea to make easier the handling of bulk fertiliser. I was fed up with all the work involved in lifting bags of fertiliser, generally packed in 1 cwt bags. Farm mechanisation was increasingly happening and my simple idea was to use bigger bags which could be lifted by a tractor fitted with fork lifting gear. I discussed this with a contact at ICI which led to trials on the farm in which we co-operated with ICI. The result was the ‘big bag’ system now universally in use on farms.

  27. In 1984 Mr. Holt celebrated his seventieth birthday. His birthday party on 24 March 1984 was the occasion of the sixth assurance on which Mr. Gillett relied in his pleadings. The judge made this finding about it:

    Mr. Holt’s 70th birthday party (March 1984)

    According to the Statement of Claim (para 42) there was a party organised by Mr. and Mr.s Gillett. Mr. Holt said that he was pleased that they and their children ‘had a very secure future’. This wording accords with Mr. Gillett’s statement.

  28. On 9 June 1986 Mr. Holt made a new will. This is the first executed will disclosed on discovery but it probably revoked a will in the form of the draft prepared in March 1977. It appointed as executors Mr. Noel Holt, Mr. Gillett and Mr. Pinfold. It contained no pecuniary or specific gifts and left the entire residuary estate to Mr. Gillett absolutely (with alternative gifts to Mr.s Gillett or to their children at 21 in equal shares, if the gift to Mr. Gillett failed).

  29. The seventh and last assurance pleaded by Mr. Gillett was made in 1989 when Mr. Holt had to go into hospital. The judge made this finding:

    1989 Mr. Holt’s operation

    According to the Statement of Claim (para 43), on 21st June 1989, Mr. Holt had to go to hospital in Lincoln for a prostate operation. He was taken there by Mr. and Mr.s Gillett. He told them that, if anything went wrong with the operation, ‘it is all yours, but I would like you to look after all the people who have worked for me’. Again this is supported by Mr. Gillett’s statement.

  30. A few months after Mr. Holt’s operation in 1989 Mr. and Mr.s Gillett celebrated their silver wedding by going on a round the world cruise. Mr. Holt was sufficiently recovered to have their younger son Andrew (then 16) to stay with him, and Mr. Holt wrote affectionate letters to the elder son, Robert, signing himself ‘Love from Uncle Ken’. So in 1990 there were still very warm relations between Mr. Holt and the Gilletts, and in 1991 Mr. Holt made a codicil appointing Mr. Grant as an executor in place of his brother Mr. Noel Holt, but otherwise confirming his will.

  31. In 1992, however, things began to change, and relations between Mr. Holt and the Gilletts deteriorated rapidly until the final rupture on 27 November 1995, when Mr. and Mr.s Gillett were summarily dismissed by KAHL after a police investigation (which resulted in no criminal charges) and a disciplinary hearing.

  32. The primary cause of this dramatic change, after friendships which went back 43 years as between Mr. Holt and Mr. Gillett, and at least 31 years as between Mr. Holt and Mr.s Gillett, was the appearance on the scene in 1992 of Mr. David Wood, the second defendant. He was then a trainee solicitor with Roythorne & Co of Spalding. That firm, principally in the person of Mr. Alan Plummer, appears to have played a major part in initiating the police investigation and conducting the disciplinary hearing against Mr. and Mr.s Gillett. It has also acted for Mr. Holt and Mr. Wood in this litigation. But all Mr. Holt’s testamentary instruments appear to have been prepared by Alsop Stevens (or its successor Alsop Wilkinson).

  33. The judge’s findings in relation to Mr. Wood were as follows:

    As for the period after 1992, there is no doubt that the primary cause of the rift was the change in Mr. Holt’s affections, brought about by Mr. Wood’s appearance on the scene. This is not just the view of the Gillett family, but it is supported by Mr.s Bell (Mr. Holt’s housekeeper since 1961) and his brother, Noel. From Mr.s Bell’s evidence it is clear that Mr. Holt’s relationship with Mr. Wood developed into something of an obsession, which was of concern to his family and other friends. Not having heard Mr. Holt or Mr. Wood (although they were sitting together at the back of the court for most of the trial), I have no reason to doubt her account. By February 1994 this relationship had developed sufficiently for Mr. Wood to have replaced Mr. Gillett as the principal beneficiary under Mr. Holt’s will.

  34. In that will Mr. Wood became an executor in place of Mr. Gillett. Mr. Gillett and members of his family took pecuniary legacies totalling £120,000, but White House Farm, Mr. Holt’s shares in KAHL and G&H and his residuary estate were left to Mr. Wood. There was a provision for Mr. and Mr.s Gillett to occupy the farmhouse and garden at The Beeches for as long as they wished. It is not clear whether this provision was mandatory or precatory in nature. In Mr. Holt’s next will dated 5 April 1995 the legacies to the Gilletts had been reduced to £60,000 but the rest of the will was in substantially similar form. By 20 November 1995, a week before the disciplinary hearing, the legacies to the Gilletts and the provision for them to stay in The Beeches farmhouse had disappeared.

  35. As to the substance of the complaints made against Mr. and Mr.s Gillett at the disciplinary hearing, the judge’s findings were as follows:

    .... the general impression given by the evidence is that Mr. Gillett continued to discharge his duties as a farm manager properly, in spite of his deteriorating personal relationship with Mr. Holt. The final breakdown in the relationship, which came to a head in Roythorne’s letter of 4th October 1995, could not fairly be blamed on Mr. Gillett.

    Notwithstanding the lack of any positive evidence to contradict that impression, Mr. Martin in closing persisted with the case that Mr. Gillett was ‘flagrantly in breach’ of the trust which Mr. Holt was entitled to expect from him, and that such misconduct was sufficient to destroy any equity which might otherwise arise (see e.g. Willis and Son v Willis [1986] 1 EGLR 62).

    This was based on a number of specific complaints, which he supported by reference to the documentation and to his cross-examination of Mr. Gillett and other witnesses. They included allegations as to the treatment in the accounts of the area of land occupied by Countryside Companions and the rent paid by it to KAHL; the arrangements for sale of peas and beans by KAHL to Countryside Companions, which, it is said, were structured to benefit Countryside Companions at KAHL’s expense; the arrangements for charging for labour as between KAHL and Countryside Companions; an incident in 1994 when the documentation in respect of the purchase of a tractor was switched by Mr. Gillett from KAHL to G&H; and other similar allegations.

    Mr. Gillett has responded to all these complaints, and has been cross-examined on his explanations. In view of the conclusions I have reached on the main issues (see below), I do not find it necessary to examine them in detail. I doubt, in any event, whether they would have affected the overall result. In the first place, it was not these complaints which led to the breakdown in the relationship. They only emerged in the investigation following the letter of 4th October. Secondly, whether or not I accept Mr. Gillett’s explanations, what matters much more is how Mr. Holt would have reacted to these points if he had not by then been looking for reasons to justify the separation.

    The complaints are largely concerned with the accounting between KAHL, G&H and Countryside Companions. Although it was understood that proper accounts would need to be kept between them, if only for tax reasons, for many purposes the businesses were treated as one enterprise. This clearly caused problems when the Gilletts were confronted by Mr. Vestbirk [a farm management consultant whose company took over management of the farms] and Mr. Plummer with the detailed investigation in November 1995. As Mr.s Gillett says:

    What they didn’t seem to grasp was that the whole thing was treated as one enterprise and it was divided up in this way so that assets could be passed on to us before Ken died so as to save tax.

    Whatever view I might objectively form of the propriety or otherwise of Mr. Gillett’s actions in relation to these matters, it is the perceptions of the parties themselves which matter. In the absence of evidence from Mr. Holt, it is impossible to judge to what extent any of the complaints, if substantiated, would have been regarded by him, before Mr. Wood’s intervention, as sufficient to end a successful relationship of nearly 40 years.

    Another difficulty is one of basic fairness. It seems to me fundamentally unfair to make findings against Mr. Gillett on serious charges of breach of trust and impropriety, when those who make the charges have not in the event put their heads above the parapet to support them. If they had given evidence, it would have been possible for them to be cross-examined on the detailed responses made by Mr. Gillett, and I would have had a balanced picture of the true significance of the individual points.

  36. After his dismissal Mr. Gillett commenced the main action against Mr. Holt, and (after Mr. Gillett learned of lifetime dispositions made by Mr. Holt in favour of Mr. Wood) the proceedings were amended to join Mr. Wood as second defendant. The other proceedings (a s 459 petition in respect of KAHL issued by Mr. Gillett, a s 459 petition in respect of G&H issued by Mr. Holt, and the possession proceedings in respect of The Beeches commenced by KAHL with a counterclaim for a declaration) also followed. These matters were heard together during twelve days of hearings in April and May 1998 (and would no doubt have taken longer but for the defendants’ decision, described by the judge [1998] 3 AER at pp.921-2, not to call any evidence). The amended statement of claim pleaded the claim in terms of contract as well as estoppel, but the former claim was abandoned at trial.

    THE JUDGMENT AND THE NOTICE OF APPEAL

  37. In his reserved judgment the judge made numerous findings of fact (the most important of which are set out above). He made those findings on the basis that the Gilletts and their witnesses had told the truth, apart from a few errors of recollection. Nevertheless he reached the conclusion that the main action must be dismissed. He set out his reasons as follows ([1998] 3 AER at p.932, in a paragraph headed ‘Conclusions’):

    It is not in dispute that for a long period Mr. Holt intended to leave the bulk of his estate to the Gilletts; and that he both made that intention known to Mr. Gillett, and gave effect to it in wills executed by him. (The precise extent of the property covered by those statements from time to time is less clear.) What I am unable to find in the representations reviewed above is anything which could reasonably be construed as an irrevocable promise that the Gilletts would inherit, regardless of any change in circumstances. Nor do I believe that Mr. Gillett himself did so construe them. In cross-examination, he accepted that if circumstances had changed materially, for example if Mr. Holt had married and had children, he could not have complained if Mr. Holt had made some provision for them. No doubt it was because of this insecurity that he pressed for something more formal in relation to the Beeches. On that he was unsuccessful. He must have been well aware that his expectations, however reasonable, were dependent on Mr. Holt’s continuing good will, and had no legally enforceable foundation.

    In those circumstances the claim based on proprietary estoppel must fail.

  38. The judge went on to say that the claim would in any event have failed because Mr. Gillett had not proved himself to have suffered sufficient detriment, in reliance on Mr. Holt’s assurances, to give rise to a proprietary estoppel.

  39. Mr. Gillett’s notice of appeal runs to seventeen paragraphs, some subdivided, but its main thrust appears from the headings to groups of paragraphs: ‘irrevocability’ (paras 1-6); ‘mutual understanding as to form of reliance’ (paras 7-12); and ‘reliance / detriment’ (para 13-17). Mr. John McDonnell QC and Mr. James Aldridge (appearing in this court, as they did below, for Mr. Gillett) have put in a skeleton argument which follows the same lines, but with a further section on the flexibility of proprietary estoppel. There is no respondent’s notice, and Mr. John Martin QC and Mr. Keith Rowley (appearing in this court, as they did below, for Mr. Holt and Mr. Wood) submit in their skeleton argument that the judge was entirely right to dismiss the action on the grounds stated in his judgment. The oral argument has followed the same general lines.

    PROPRIETARY ESTOPPEL

  40. This judgment considers the relevant principles of law, and the judge’s application of them to the facts which he found, in much the same order as the appellant’s notice of appeal and skeleton argument. But although the judgment is, for convenience, divided into several sections with headings which give a rough indication of the subject-matter, it is important to note at the outset that the doctrine of proprietary estoppel cannot be treated as subdivided into three or four watertight compartments. Both sides are agreed on that, and in the course of the oral argument in this court it repeatedly became apparent that the quality of the relevant assurances may influence the issue of reliance, that reliance and detriment are often intertwined, and that whether there is a distinct need for a ‘mutual understanding’ may depend on how the other elements are formulated and understood. Moreover the fundamental principle that equity is concerned to prevent unconscionable conduct permeates all the elements of the doctrine. In the end the court must look at the matter in the round.

  41. In his discussion of the law the judge took as his starting point the decision of Mr. Edward Nugee QC in Re Basham [1986] 1 WLR 1498. In that case the claimant and her husband had helped her mother and her stepfather in all sorts of ways throughout the claimant’s adult life. She received no remuneration but understood that she would inherit her stepfather’s property when he died. After her mother’s death in 1976, and until her stepfather’s death in 1982, she and her husband lived near the cottage to which her stepfather had moved (but never lived in the cottage). The claimant was told by her stepfather that ‘she would lose nothing’ by her help and (a few days before his death) that she was to have the cottage. The deputy judge held that she was entitled, by proprietary estoppel, to the whole of the estate of her stepfather (who died intestate). He rejected the submission that the principle could not extend beyond cases where the claimant already had enjoyment of an identified item of property (see at pp.1509-10). In that context he referred to the well-known judgment of Oliver J in Taylors Fashions v Liverpool Victoria Trustees (1979) [1982] QB 133. That judgment has been described as ‘a watershed in the development of proprietary estoppel’ (Gray, Elements of Land Law, 2nd ed p.324). In it Oliver J stated (at p.151) that in the light of the more recent cases the principle

    requires a very much broader approach which is directed rather at ascertaining whether, in particular individual circumstances, it would be unconscionable for a party to be permitted to deny that which, knowingly or unknowingly, he has allowed or encouraged another to assume to his detriment than to enquiring whether the circumstances can be fitted within the confines of some preconceived formula serving as a universal yardstick of unconscionable behaviour.

  42. Re Basham may be difficult to reconcile with the decision of Scott J in Layton v Martin [1986] 2 FLR 227, which was not cited in Re Basham and may not have been reported at the time when Mr. Nugee heard the case. Nevertheless Re Basham has been referred to at least twice in this court without its correctness being challenged. In Jones v Watkins (26 November 1987, [1987] CAT 1200) Slade LJ referred to it as containing a helpful statement of the principle. Slade LJ’s judgment also contains some important observations about the possibility of proprietary estoppel (unlike promissory estoppel) arising even from an equivocal representation:

    At first sight, it may be surprising that a promise to confer an interest in property which is so equivocal in its terms that it would be incapable of giving rise to a binding contract may be capable of conferring on the promisee a right in equity to a transfer of the whole property. However, I think that Mr.s Hill must be right in describing this as simply one instance of equity supplementing the law. The equivocal nature of the promises found by the judge is clearly one relevant factor when considering whether or not it would be unconscionable to permit the Administrators to rely on their strict legal title, having regard to any detriment suffered by the plaintiff in reliance on them.

  43. The other case in which Re Basham has been referred to in this court is Wayling v Jones (1993) 69 P&CR 170. It concerned an assurance (‘It’ll all be yours one day’) given by the elder partner in a male homosexual relationship to his younger partner. Balcombe LJ (at p.172) cited Mr. Nugee’s statement of principle in Re Basham (at p 1503) as having been accepted by the parties:

    The plaintiff relies on proprietary estoppel; the principle of which in its broadest form may be stated as follows: where one person (A) has acted to his detriment on the faith of a belief which was known to and encouraged by another person (B) that he either has or is going to be given a right in or over B’s property B cannot insist on his strict legal rights if to do so would be inconsistent with A’s belief.

    Balcombe LJ went on (at p.173) to state the relevant principles as to reliance and detriment:

    (1)

    There must be a sufficient link between the promises relied upon and the conduct which constitutes the detriment - see Eves v Eves [1975] 1 WLR 1338, 1345 in particular per Brightman J in Grant v Edwards [1986] Ch 638 at 648-649; 655-657; 656, per Nourse LJ and per Browne-Wilkinson V-C and in particular the passage where he equates the principles applicable in cases of constructive trust to those of proprietary estoppel.

    (2)

    The promises relied upon do not have to be the sole inducement for the conduct: it is sufficient if they are an inducement - Amalgamated Property Co v Texas Bank [1982] QB 84, 104-5.

    (3)

    Once it has been established that promises were made, and that there has been conduct by the plaintiff of such a nature that inducement may be inferred then the burden of proof shifts to the defendants to establish that he did not rely on the promises - Greasley v Cooke [1986] 1 WLR 1306; Grant v Edwards [1986] Ch 638, 657.

    IRREVOCABILITY OF ASSURANCES

  44. The judge referred to these authorities and then to the decision of Judge Weeks QC in Taylor v Dickens [1998] 1 FLR 806 (which has since been compromised on appeal). That was the case of the elderly lady who said that she would leave her estate to the gardener and did so, but then changed her mind (without telling him) after he had stopped charging her for his help with gardening and odd jobs. Judge Weeks rejected the claim and (at p.821) criticised Re Basham in two respects. The first criticism was that Mr. Nugee’s judgment omitted the requirement of unconscionability. That criticism seems misplaced: see [1986] 1 WLR at 1504 A-B and 1509 A-C. The second criticism was that

    .... it is not sufficient for A to believe that he is going to be given a right over B’s property if he knows that B has reserved the right to change his mind. In that case, A must show that B created or encouraged a belief on A’s part that B would not exercise that right.

    For that proposition Judge Weeks referred to the decision of the Privy Council in A-G of Hong Kong v Humphreys Estate (Queen’s Gardens) [1987] AC 114.

  45. Taylor v Dickens has itself attracted a good deal of criticism: see for instance [1998] Conveyancer and Property Lawyer 210 (Professor M P Thompson) and [1998] Restitution Law Review 220 (W J Swadling); but compare the contrary view in [1999] Conveyancer and Property Lawyer 46 (M Dixon). Mr. Swadling’s comment is short and pithy:

    This decision is clearly wrong, for the judge seems to have forgotten that the whole point of estoppel claims is that they concern promises which, since they are unsupported by consideration, are initially revocable. What later makes them binding, and therefore irrevocable, is the promisee’s detrimental reliance on them. Once that occurs, there is simply no question of the promisor changing his or her mind.

  46. Mr. McDonnell has added his voice to the criticism. In his skeleton argument he has submitted that Taylor v Dickens is ‘simply wrong’. Mr. Martin, while reminding the court that it is not hearing an appeal in Taylor v Dickens, has not given the case whole-hearted support. He has been inclined to concede that Judge Weeks should have focused on the promise which was made and whether it was of an irrevocable character, instead of looking for a second promise not to revoke a testamentary disposition.

  47. In my judgment these criticisms of Taylor v Dickens are well-founded. The actual result in the case may be justified on the other ground on which it was put (no unconscionability on the facts); or (as Mr. Swadling suggests later in his note) the gardener’s unremunerated services might have merited some modest restitutionary relief. But the inherent revocability of testamentary dispositions (even if well understood by the parties, as Mr. Gillett candidly accepted that it was by him) is irrelevant to a promise or assurance that ‘all this will be yours’ (the sort of language used on the occasion of the Beeches incident in 1975). Even when the promise or assurance is in terms linked to the making of a will (as at the 1974 Golf Hotel dinner) the circumstances may make clear that the assurance is more than a mere statement of present (revocable) intention, and is tantamount to a promise. A-G of Hong Kong v Humphrey Estate (Queen’s Gardens), on which Judge Weeks relied, is essentially an example of a purchaser taking the risk, with his eyes open, of going into possession and spending money while his purchase remains expressly subject to contract.

  48. Carnwath J observed ([1998] 3 AER at p.929) that the advice to the claimant in Taylor v Dickens ‘not to count his chickens before they were hatched’ is

    an apt statement of how, in normal circumstances, and in the absence of a specific promise, any reasonable person would regard - and should be expected by the law to regard - a representation by a living person as to his intentions for his will.

  49. In the generality of cases that is no doubt correct, and it is notorious that some elderly persons of means derive enjoyment from the possession of testamentary power, and from dropping hints as to their intentions, without any question of an estoppel arising. But in this case Mr. Holt’s assurances were repeated over a long period, usually before the assembled company on special family occasions, and some of them (such as ‘it was all going to be ours anyway’ on the occasion of the Beeches incident) were completely unambiguous. With all respect to the judge, I cannot accept the conclusion which he reached on this point ([1998] 3 AER at p.932, a passage which I have already quoted). The judge attached weight to the Beeches incident in reaching his conclusion. To my mind it is highly significant, but its significance goes the other way. I find it wholly understandable that Mr. and Mr.s Gillett, then ten years married and with two young sons, may have been worried about their home and their future depending on no more than oral assurances, however emphatic, from Mr. Holt. The bitterly fought and ruinously expensive litigation which has ensued shows how right they would have been to be worried. But Mr. Gillett, after discussing the matter with his wife and his parents, decided to rely on Mr. Holt’s assurances because ‘Ken was a man of his word’. Plainly the assurances given on this occasion were intended to be relied on, and were in fact relied on. In any event reliance would be presumed (see Greasley v Cooke [1980] 1 WLR 1306; Mr. Martin accepted that while challenging the suggestion that that case also supported any presumption of detriment).

  50. It may be that the judge, having gone deeply and correctly into the law of mutual wills in Re Goodchild [1996] 1 WLR 694 (affirmed by this court [1997] 1 WLR 1216) went too far in seeking a parallel between those principles and those of proprietary estoppel. Mr. Nugee also discerned a parallel in Re Basham: see [1986] 1 WLR at p.1504. But although both doctrines show equity intervening to prevent unconscionable conduct, the special feature of the mutual wills and secret trust cases is that they involve not two parties but three. In mutual wills cases they are (typically) a testator (A), a testatrix (B) and an intended beneficiary or class of beneficiaries (C). In secret trust cases they are the testator (A), the secret trustee (B) and the beneficiary (C). There must be an agreement between A and B as to conferring a benefit on C because it is the agreement (and not C’s moral claims) which would make it unconscionable for B to resile from his agreement. The judge did make clear (at p.929d and again at p.930e) that he was well aware of the differences between mutual wills and proprietary estoppel as regards the need for a binding contract. But whether or not he was influenced in that way, I differ from his conclusion that Mr. Holt’s assurances were incapable of forming the foundation for an enforceable claim based on proprietary estoppel. In my judgment they were well capable of doing so.

  51. Mr. Martin has in two spirited passages of his oral submissions supported the judge’s paragraph headed ‘Conclusion’ ([1998] 3 AER at p.932 d-g) as containing findings of fact which the judge reached after seeing and hearing the witnesses (in particular, Mr. Gillett, who was cross-examined for the best part of three days). Mr. Martin forthrightly submitted that it was not open to this court to disregard or disturb these findings of fact made by the judge. That submission calls for serious consideration and it has led to some close textual analysis of the paragraph in question. When the judge stated,

    What I am unable to find in the representations reviewed above is anything which could reasonably be construed as an irrevocable promise that the Gilletts would inherit, regardless of any change of circumstances.

  52. he must, it seems to be, have been exaggerating the degree to which a promise of this sort must be expressly made irrevocable if it is to found an estoppel. As already noted, it is the other party’s detrimental reliance on the promise which makes it irrevocable. To that extent the judge seems to have misdirected himself as to what he was looking for in the facts.

  53. Mr. Gillett was cross-examined at length about some increasingly improbable eventualities: that Mr. Holt would marry his housekeeper, that he would have children, that his elderly sister would suddenly lose all her investments and turn to him for help. Mr. Gillett naturally enough conceded that in those circumstances Mr. Holt could or would have made some provision for these moral obligations. But he stuck resolutely to the promises made to him (transcript of 27 April 1998, p.24),

    I am aware that promises were made by Mr. Holt to me and I continued through 40 years of my life on the basis of those promises

    and on the next page,

    This was a partnership arrangement effectively between Ken and [me] over many, many years and hypothetical situations like that are inappropriate I would have thought.

  54. The last two sentences of the ‘Conclusion’ paragraph begin "No doubt it was because of this insecurity ...." and "He must have been well aware ...." Neither of these sentences can readily be described as a simple finding of primary fact. Moreover the second sentence does, with great respect to the judge, beg the whole question, because Mr. Gillett was not in the witness box to take part in a seminar on the elements of proprietary estoppel (although parts of his cross-examination suggest otherwise). He was there to give evidence, which was largely unchallenged and which the judge accepted, about the assurances made to him and his detrimental reliance on them. Whether those assurances put his expectations on a legally enforceable foundation was not a question for him. But unfortunately he was right in his instinct that his lack of success in getting Mr. Holt to give him anything more formal might lead to tears.

  55. I would if necessary take the view that these alleged findings of fact in the ‘Conclusions’ paragraph were against the weight of the evidence. But it is not necessary to go that far. They are not simple findings of fact, and they take their colour from the judge having misdirected himself as to what he was looking for.

    MUTUAL UNDERSTANDING AND RELIANCE

  56. The judge’s approach seems also to have been influenced by the need to find what he called (at p.929e)

    a mutual understanding - which may be expressed or inferred from conduct - between promisor and promisee, both as to the content of the promise and as to what the promisee is doing, or may be expected to do, in reliance on it.

    Similarly he set out his view (at p.932j) that

    the Basham principle requires some mutual understanding as to the quid pro quo [i.e. the consideration] for the promise.

  57. Here again I think that the judge may have been too influenced by the cases on mutual wills in which a definite agreement is an essential part of the doctrine. There is of course a kernel of truth, indeed a considerable nugget of truth in this approach, because (as Balcombe LJ said in Wayling v Jones, and other distinguished judges said in the earlier cases which he cited) there must be a sufficient link between the promises relied on and the conduct which constitutes the detriment. In cases where the detriment involves the claimant moving house (as in Watts v Story 14 July 1983, 134 NLJ 631, CA) or otherwise taking some particular course of action at the other party’s request, the link is, in the nature of things, going to have some resemblance to the process of offer and acceptance leading to a mutual understanding. But in other cases well within the mainstream of proprietary estoppel, such as Inwards v Baker [1965] 2 QB 29 and the 19th century decisions which this court applied in that case, there is nothing like a bargain as to what particular interest is to be granted, or when it is to be granted, or by what type of disposition it is to be granted. The link is provided by the bare fact of A encouraging B to incur expenditure on A’s land.

  58. The judge seems to have recognised this point when he said (at p.930f),

    It may be easier to infer a fixed intent when the subject matter is a particular property, which the plaintiff has been allowed to enjoy in return for services, than a whole estate.

  59. But when he got to his conclusion he was taking too restricted a view of the first essential element of this very flexible doctrine. If it had been necessary to find a mutual understanding in this case, the judge might readily have found it in Mr. Holt promising to reward Mr. Gillett for his past, present and future loyalty and hard work which (backed up by that of Mr.s Gillett) made Mr. Holt’s life more pleasant and prosperous. That seems to have been the general theme of the speech which Mr. Holt made on the occasion of his 70th birthday party in 1984. It also seems to be reflected in an exchange in Mr. Martin’s cross-examination of Mr. Gillett (transcript of 27 April 1988, p.24),

    Q

    Let us take an example, you say, as I understand it, that Ken’s promises were not a one-way street. You had obligations too. You were obliged to provide companionship and keep on working for him?

    A

    Yes, that’s fair.

  60. But particular findings of that sort were not necessary because Mr. Gillett had abandoned his claim in contract.

    DETRIMENT

  61. It is therefore necessary to go on to consider detriment. The judge would have decided the case against Mr. Gillett on this point also, as he indicated at the end of his judgment in the main action ([1998] 3 AER at pp.932g - 936c). The judge devoted almost all of this part of his judgment to an analysis of whether Mr. Gillett was substantially underpaid between 1965 and 1995. He dealt with the other matters relied on as detriment in a manner which Mr. McDonnell has described as perfunctory.

  62. It is understandable that the judge devoted most attention to the issue of Mr. Gillett being underpaid because that was the issue (affecting detriment) on which most time was spent in cross-examination, and on which Mr. Martin seems to have made most progress. It was therefore particularly expedient for the judge to record his findings about it. Mr. McDonnell called a distinguished expert witness, Professor A K Giles OBE, Emeritus Professor of Farm Management in the University of Reading. Professor Giles had prepared a report the general effect of which was to compare Mr. Gillett’s salary, bonuses and other benefits during his working life (as reported by Mr. Gillett) with those reported by farm managers who participated in surveys conducted (at intervals of four or five years) by the Farm Management Unit of the University of Reading. The results of the comparison are summarised in Appendix 6 and Appendix 7 to Professor Giles report (but those appendices must of course be read subject to all the explanations and qualifications in the body of the report).

  63. Professor Giles concluded that over the whole period from 1964 to 1995 Mr. Gillett had received earnings and benefits amounting to about 80 per cent of the average disclosed by the survey, whereas his above-average level of responsibility would have justified earnings and benefits 5 to 10 per cent above the average. The judge noted and accepted two main criticisms of this conclusion, in addition to the small size of the sample on which the average was based: first, that some of Mr.s Gillett’s earnings from KAHL were in effect a redistribution of those of her husband; and second, that no account was taken of the time which Mr. Gillett was, after 1988, devoting to the business of Countryside Companions. The judge said that he was not persuaded, on the evidence, that Mr. Gillett did in fact receive less than a reasonable wage for his services as a manager, or that he did so as part of an understanding related to his expectations, and that conclusion has not been seriously challenged in this court. The judge then said,

    Various other matters were relied on by Mr. Gillett in support of his case of ‘detriment’: for example, his refusal of enquiries from other employers, the limited provision made for his pension, the domestic tasks undertaken by him and Sally for Mr. Holt, and the money spent by him on improving the Beeches. Against that, he acknowledges that Mr. Holt was generous with gifts to the family, in paying Robert’s school fees, and in other ways. It is impossible and inappropriate to attempt to weigh the balance of advantage and disadvantage. The Gilletts decided at an early stage that their future lay with Mr. Holt, and as with most human relationships that involved obligations and compensations. I cannot find in them such a balance of ‘detriment’ as to support the case for a legally enforceable obligation.

  64. Both sides agree that the element of detriment is an essential ingredient of proprietary estoppel. There is one passage in the judgment of Lord Denning MR in Greasley v Cooke [1980] 1 WLR 1306, 1311 which suggests that any action in reliance on an assurance is sufficient, whether or not the action is detrimental. In Watts v Story (14 July 1983, 134 NLJ 631) Dunn LJ (who was a party to the decision in Greasley v Cooke) explained Lord Denning’s observations as follows:

    Nor, if that passage from Lord Denning’s judgment is read as a whole, was he stating any new proposition of law. As the judge said, it matters not whether one talks in terms of detriment or whether one talks in terms of it being unjust or inequitable for the party giving the assurance to go back on it. It is difficult to envisage circumstances in which it would be inequitable for the party giving an assurance alleged to give rise to a proprietary estoppel, i.e. an estoppel concerned with the positive acquisition of rights and interests in the land of another, unless the person to whom the assurance was given had suffered some prejudice or detriment.

  65. The overwhelming weight of authority shows that detriment is required. But the authorities also show that it is not a narrow or technical concept. The detriment need not consist of the expenditure of money or other quantifiable financial detriment, so long as it is something substantial. The requirement must be approached as part of a broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances.

  66. There are some helpful observations about the requirement for detriment in the judgment of Slade LJ in Jones v Watkins. There must be sufficient causal link between the assurance relied on and the detriment asserted. The issue of detriment must be judged at the moment when the person who has given the assurance seeks to go back on it. Whether the detriment is sufficiently substantial is to be tested by whether it would be unjust or inequitable to allow the assurance to be disregarded - that is, again, the essential test of unconscionability. The detriment alleged must be pleaded and proved.

  67. As authority for the second of these observations Slade LJ referred to Spencer Bower & Turner on Estoppel by Representation, 3rd ed. p.110, which in turn cites the judgment of Dixon J in Grundt v The Great Boulder Pty Gold Mines (1938) 59 CLR 641, 674-5 (High Court of Australia):

    One condition appears always to be indispensable. That other must have so acted or abstained from acting upon the footing of the state of affairs assumed that he would suffer a detriment if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption. In stating this essential condition, particularly where the estoppel flows from representation it is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment. His action or inaction must be such that, if the assumption upon which he proceeded were shown to be wrong, and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite party, the consequence would be to make his original act or failure to act a source of prejudice.

  68. This passage was not directed specifically to proprietary estoppel, but Slade LJ was right, in my respectful view, to treat it as applicable to proprietary estoppel as well as to other forms of estoppel.

  69. The point made in the passage may be thought obvious, but sometimes it is useful to spell out even basic points. If in a situation like that in Inwards v Baker, a man is encouraged to build a bungalow on his father’s land and does so, the question of detriment is, so long as no dispute arises, equivocal. Viewed from one angle (which ignores the assurance implicit in the encouragement) the son suffers the detriment of spending his own money in improving land which he does not own. But viewed from another angle (which takes account of the assurance) he is getting the benefit of a free building plot. If and when the father (or his personal representative) decides to go back on the assurance and assert an adverse claim then (as Dixon J put it)

    if [the assertion] is allowed, his own original change of position will operate as a detriment.

  70. The matters which Mr. Gillett pleaded as detriment, and on which he adduced evidence of detriment, included, apart from the level of his remuneration,

    1. his continuing in Mr. Holt’s employment (through KAHL) and not seeking or accepting offers of employment elsewhere, or going into business on his own account;

    2. carrying out tasks and spending time beyond the normal scope of an employee’s duty;

    3. taking no substantial steps to secure his future wealth, either by larger pension contributions or otherwise; and

    4. expenditure on improving the Beeches farmhouse which was, Mr. Gillett said, barely habitable when it was first acquired by KAHL in 1971.

    That company paid for some structural work, with a local authority improvement grant, but Mr. Gillett paid for new fittings and materials and carried out a good deal of the work himself. The details are set out in Part 3 and Appendix 1 of Mr. Gillett’s witness statement.

  71. I have to say that I see some force in Mr. McDonnell’s criticism of the judge’s approach to this part of the evidence (although the judge, having decided the main action on the issue of assurances, was not obliged to cover the issue of detriment in great detail). After listening to lengthy submissions about the judgment, and after reading much of Mr. Gillett’s evidence both in his witness statement and under cross-examination, I am left with the feeling that the judge, despite his very clear and careful judgment, did not stand back and look at the matter in the round. Had he done so I think he would have recognised that Mr. Gillett’s case on detriment (on the facts found by the judge, and on Mr. Gillett’s uncontradicted evidence) was an unusually compelling one.

  72. In my judgment the cumulative effect of the judge’s findings and of the undisputed evidence is that by 1975 (the year of the Beeches incident) Mr. Gillett had an exceptionally strong claim on Mr. Holt’s conscience. Mr. Gillett was then 35. He had left school before he was 16, without taking any of the examinations which might otherwise have given him academic qualifications, against the advice of his headmaster and in the face of his parents’ doubts, in order to work for and live with a 42 year-old bachelor who was socially superior to, and very much wealthier than, his own parents. Mr. Holt seriously raised the possibility of adopting him. Mr. Holt’s influence extended to Mr. Gillett’s social and private life and it seems to have been only through the diplomacy of Miss Sally Wingate (as she then was) that Mr. Holt came to tolerate, and then accept, the notion of Mr. Gillett having a girlfriend. Mr. Holt had said that he would arrange for Mr. Gillett to go to agricultural college but then did not arrange it, and it was only through Mr. Gillett’s own hard work and determination that he learned additional skills at evening classes. He proved himself by getting in the harvest in 1964 when Mr. Holt was away fishing. All these matters preceded the first of the seven assurances on which Mr. Gillett relied, so they are in a sense no more than background. But they are very important background because they refute Mr. Martin’s suggestion (placed in the forefront of his skeleton argument) that Mr. Gillett’s claim should be regarded as a ‘startling’ claim by someone who was no more than an employee. On the contrary, Mr. McDonnell was not putting it too high when he said that for thirty years Mr. and Mr.s Gillett and their sons provided Mr. Holt with a sort of surrogate family.

  73. However a surrogate family of that sort is not the same as a birth family, and it is clear that Mr. Gillett and his wife must often have been aware of the ambivalence of their position. Mr. Holt was generous but it was the generosity of the patron; his will prevailed; Mr. and Mr.s Gillett were expected to, and did, subordinate their wishes to his (compare Re Basham [1986] 1 WLR 1498, 1505H). One telling example of this was over the education of their sons. Mr. Holt decided that he would like to pay for the Gilletts’ elder son, Robert, to go to Mr. Holt’s old school (Greshams in Norfolk). The offer did not extend to their younger son, Andrew, and the Gilletts not unnaturally felt that if one boy was to go to boarding school then both should go. In the end Robert went to Greshams and Andrew to a less well-known boarding school at Grimsby, and Mr. and Mr.s Gillett used some maturing short-term endowment policies and increased their overdraft in order to bear half the combined cost of the school fees and extras.

  74. Mr. Gillett also incurred substantial expenditure on the farmhouse at The Beeches, most of it after the clear assurance which Mr. Holt gave him when, in 1975, he ventured to ask for something in writing: "that was not necessary as it was all going to be ours anyway". This was after the Gilletts had sold their own small house at Thimbleby and so had stepped off the property-owning ladder which they had got on to in 1964.

  75. It is entirely a matter of conjecture what the future might have held for the Gilletts if in 1975 Mr. Holt had (instead of what he actually said) told the Gilletts frankly that his present intention was to make a will in their favour, but that he was not bound by that and that they should not count their chickens before they were hatched. Had they decided to move on, they might have done no better. They might, as Mr. Martin urged on us, have found themselves working for a less generous employer. The fact is that they relied on Mr. Holt’s assurance, because they thought he was a man of his word, and so they deprived themselves of the opportunity of trying to better themselves in other ways. Although the judge’s view, after seeing and hearing Mr. and Mr.s Gillett, was that detriment was not established, I find myself driven to the conclusion that it was amply established. I think that the judge must have taken too narrowly financial a view of the requirement for detriment, as his reference to "the balance of advantage and disadvantage" ([1998] 3 AER at p.936) suggests. Mr. Gillett and his wife devoted the best years of their lives to working for Mr. Holt and his company, showing loyalty and devotion to his business interests, his social life and his personal wishes, on the strength of clear and repeated assurances of testamentary benefits. They received (in 1983) 20 per cent of the shares in KAHL, which must be regarded as received in anticipation of, and on account of, such benefits. Then in 1995 they had the bitter humiliation of summary dismissal and a police investigation of alleged dishonesty which the defendants called no evidence to justify at trial. I do not find Mr. Gillett’s claim startling. Like Hoffmann LJ in Walton v Walton (14 April 1994, CA) I would find it startling if the law did not give a remedy in such circumstances.

    SATISFYING THE EQUITY

  76. Since Mr. Gillett has established his claim to equitable relief, this court must decide what is the most appropriate form for the relief to take. The aim is (as Sir Arthur Hobhouse said in Plimmer v Mayor of Wellington (1884) 9 App Cas 699, 714) to "look at the circumstances in each case to decide in what way the equity can be satisfied". The court approaches this task in a cautious way, in order to achieve what Scarman LJ (in Crabb v Arun DC [1976] Ch 179, 198) called "the minimum equity to do justice to the plaintiff". The wide range of possible relief appears from Snell’s Equity 30th ed. pp.641-3.

  77. In this case the satisfaction of the equity presents unusually difficult problems. Often (as in Inwards v Baker or Re Basham) the property in dispute is a small house or a small house and some modest savings and the litigants are not wealthy enough to be much troubled by inheritance tax, capital gains tax or Schedule E tax on ‘golden handshakes’. In this case, by contrast, it is necessary to take account of taxes and the constraints of company law. Since the litigation began Mr. Holt has made some very substantial gifts in favour of Mr. Wood. These have involved some complex manoeuvres (although these seem to have been inspired by legitimate tax-planning considerations, and not by a desire to put assets beyond Mr. Gillett’s reach). It is therefore necessary to summarize the present position (as it was explained to this court on instructions).

  78. In April 1997 the freehold in the Limes was acquired from Merton College for £1,251,000. The purchase price originated from Mr. Holt, but the transactions were structured with the use of a nominee company so as to keep Mr. Holt’s tenancy in existence until Mr. Holt had completed other dispositions which he wished to make in favour of Mr. Wood. The position on the ground is now as follows:

    The Limes farmhouse (with about 19 acres and two cottages in Baumber)

  79. Mr. Wood is now legal and beneficial owner with vacant possession. A minor complication (but an important one from the Gilletts’ point of view) is that on part of the 19 acres there are polytunnels (prefabricated polythene greenhouses) in which Mr. Gillett has started off trees and shrubs for the business of Countryside Companions. It has recently been decided that Countryside Companions does not have an agricultural tenancy of these structures and the land which they occupy.

    White House Farm (235 acres)

  80. Mr. Wood has been legal and beneficial owner since April 1996. The land is in hand and farmed under a contract farming agreement by Aubourn Farming Ltd (Aubourn).

    The Limes farmland (520 acres)

  81. The freehold is held by KAHL as legal and beneficial owner, but KAHL owes £1m to Edgescan Ltd (Edgescan), its controlling shareholder (see below). This borrowing is unsecured. The tenancy has come to an end. The land is in hand and farmed by Aubourn.

    The Beeches ( 105 acres)

  82. This land has the most complicated pattern of ownership and occupation. The freehold belongs to KAHL, as it has since 1971, subject to a bank mortgage. The farmhouse is occupied by Mr. and Mr.s Gillett under a tenancy to Mr. Gillett which has limited protection under the Rent (Agriculture) Act 1976. The rent is £70 a week. The central area of the land and a small area at the east end (in all about 39 acres) are occupied by Countryside Companions under a tenancy protected by the Agricultural Holdings Act 1986. The rest of the land is in hand and farmed by Aubourn; this year’s crop is wheat.

    KAHL

  83. This company has an issued capital of 2500 £1 shares 1,999 (80 per cent) of which are held by Edgescan, 251 (10 per cent) by Mr. Gillett and 250 (10 per cent) by Mr.s Gillett. It has an unsecured liability of £1m to Edgescan and a further liability (secured on The Beeches) of an unknown amount to the bank. The court was not told about any other assets which it owns, or of the precise terms of its contract farming arrangement with Aubourn.

    Edgescan

  84. This company is owned as to 70 per cent by Mr. Holt and as to 30 per cent by Mr. Wood. Mr. Holt and Mr. Wood do therefore have complete control of Edgescan and (through Edgescan) they have voting control of KAHL, including control on questions which require a 75 per cent majority.

  85. In my judgment the extent of Mr. Holt’s property in respect of which the equity is established is Mr. Holt’s farming business as the parties would have contemplated it during the period when the assurances were given and down to the time when those assurances were repudiated. That is a long period and a broad approach is necessary. The property extended to the tenancy of The Limes, to the freehold of The Beeches and to the freehold of White House Farm. It did not extend to the tenancy of Greenfield Farm (which had come and gone in the ordinary course of events) or to the freehold of The Limes (acquired only in 1997). Nor did it extend to the rest of Mr. Holt’s assets, even though he did between 1976 and 1991 plan to leave almost his entire estate to the Gilletts. During the late 1970’s there were prolonged discussions about tax planning (in which Mr. Gillett had some involvement) and it was at that time contemplated that most of Mr. Holt’s other assets might be required in order to pay capital transfer tax on the farming assets. Since then the relevant agricultural and business reliefs have become more extensive (although how long they will remain in their present form is of course unpredictable).

  86. That is in my view the maximum extent of the equity. The court’s aim is, having identified the maximum, to form a view as to what is the minimum required to satisfy it and do justice between the parties. The court must look at all the circumstances, including the need to achieve a ‘clean break’ so far as possible and avoid or minimise future friction (see Pascoe v Hayward [1979] 1 WLR 431, 438-9).

  87. In satisfying the equity it is not necessary to resort to the court’s special jurisdiction under ss 459 and 461 of the Companies Act 1985, since Mr. Holt and Mr. Wood are before the court and they have completed control (subject to the constraints of company law and tax law) of Edgescan and its 80 per cent subsidiary, KAHL. Nor would it be appropriate to exercise that statutory jurisdiction unless the case for its exercise is made out, on the principles explained by the House of Lords in O’Neill v Phillips [1999] 1 WLR 1092. The judge did not have the benefit of that decision but it confirms his view that the case was not made out in relation to KAHL, in which Mr. Gillett did not have any significant holding until 1983 (he was given a single share much earlier, in 1964, when he became company secretary). The judge said ([1998] 3 AER 917, 940),

    Any hopes Mr. Gillett may have had of becoming the owner of the company were in his personal capacity as a potential heir to Mr. Holt. They were not expectations on which he was entitled to rely in his capacity as a shareholder of KAHL. Indeed, they predated his becoming a shareholder.

  88. Apart from the formality of the single share, I agree with that; and I agree with the judge’s conclusion that Mr. Gillett’s s 459 petition should be dismissed.

  89. Nevertheless it is most desirable that the Gilletts should be disentangled from KAHL, just as Mr. Holt has (as part of the terms of settlement of another part of the litigation) been disentangled from G&H. I think that the court should therefore take on itself the responsibility for directing the general machinery to be adopted in order to satisfy the equity, while leaving the parties and their advisers some room for discussion and manoeuvre (which they will, I hope, use constructively in the knowledge that they may still be neighbours for some years to come). One decision (for Mr. Gillett and his advisers alone) will be whether he and his wife, as (virtually) equal shareholders in KAHL, should participate equally in the satisfaction of the equity, or whether Mr. Gillett as sole claimant should take the whole benefit of his success in the appeal.

  90. I would dispose of the appeal in the main action by allowing it and substituting for the judge’s order directions on the following lines.

    THE SUBSTANCE OF THE RESULT TO BE ACHIEVED

  91. Mr. and Mr.s Gillett are to be entitled to the freehold of the whole of The Beeches (that is the farmhouse, the land occupied by Countryside Companions and the land farmed under contract by Aubourn) together with the sum of £100,000 to compensate for the exclusion of Mr. Gillett from all the rest of the farming business. That figure represents an overall assessment of what the justice of the case requires, taking account of numerous matters large and small, including Mr. Gillett’s exceptionally long and devoted service on the one hand and the element of acceleration on the other hand. Liability for rent in respect of The Beeches will cease at once but Aubourn will be entitled to get in this year’s harvest unless the parties agree otherwise. The bank mortgage must be discharged or shifted to other assets of KAHL. The £100,000 will carry interest at 5 per cent per annum from today. I do not exclude the possibility of some or all of that sum being satisfied (by agreement between the parties) by the transfer of other assets in specie, but I recognise that the layout of the properties, and the need for a clean break, may make such an agreement unlikely. It seems clear that the freehold of The Beeches plus £100,000 must exceed the net assets value of the Gilletts’ 20 per cent shareholdings in KAHL; but to the extent that it does not exceed that value, the distribution must be made either in satisfaction of (or otherwise in consideration of) their shareholdings.

    THE GENERAL MACHINERY TO ACHIEVE THAT RESULT

  92. Since there will also be liabilities for costs, it seems almost inevitable that KAHL will have to be put into liquidation to enable some or all of its assets to be sold or distributed in specie to its shareholders (Edgescan also being a substantial unsecured creditor). It may be that the requisite distribution in specie will require some preliminary action by Mr. Holt and Mr. Wood, as controllers of Edgescan, so as to bring the Gilletts’ combined shareholdings in KAHL up to a level proportionate to what they are to receive (a deeply discounted rights issue of new KAHL shares, not taken up by Edgescan, might be one possibility). Alternatively Mr. Holt and Mr. Wood might prefer to make up some or all of the disparity by transfers of assets not held within the Edgescan group. They and their advisers must have the opportunity to consider the possibilities. The aim is not to inflict penal consequences on them, but to satisfy Mr. Gillett’s equity, end Mr. and Mr.s Gillett’s minority shareholdings in KAHL, and give both sides the freedom to lead their own lives for the future.

  93. I would therefore allow the appeal in the main action but dismiss the appeal in the s 459 petition relating to KAHL.

    Lord Justice Waller

  94. I agree.

    Lord Justice Beldam

  95. I also agree.


Cases

Re Basham [1986] 1 WLR 1498; Taylors Fashions v Liverpool Victoria Trustees (1979) [1982] QB 133; Layton v Martin [1986] 2 FLR 227; Jones v Watkins (26 November 1987, [1987] CAT 1200); Wayling v Jones (1993) 69 P&CR 170; Taylor v Dickens [1998] 1 FLR 806; A-G of Hong Kong v Humphreys Estate (Queen’s Gardens) [1987] AC 114; Greasley v Cooke [1980] 1 WLR 1306; Re Goodchild [1996] 1 WLR 694; Watts v Story 14 July 1983, 134 NLJ 631, CA; Inwards v Baker [1965] 2 QB 29; Grundt v The Great Boulder Pty Gold Mines (1938) 59 CLR 641; Walton v Walton (14 April 1994, CA); Plimmer v Mayor of Wellington (1884) 9 App Cas 699; Crabb v Arun DC [1976] Ch 179; Pascoe v Hayward [1979] 1 WLR 431; O’Neill v Phillips [1999] 1 WLR 1092

Legislations

Companies Act 1985: s.459

Authors and other references

Gray, Elements of Land Law, 2nd ed

Professor M P Thompson, Conveyancer and Property Lawyer 210 [1998]

W J Swadling, Restitution Law Review 220 [1998]

M Dixon, Conveyancer and Property Lawyer 46 [1999]

Spencer Bower & Turner on Estoppel by Representation, 3rd ed.

Snell’s Equity 30th ed.

Representations

Mr. J McDonnell QC and Mr. J Aldridge (instructed by Chattertons, Harncastle, Linconshire) for the Appellant.

Mr. John Martin QC and Mr. K Rouley (instructed by Roythorne & Co, Spalding) for the Respondent.


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