Royal Courts of Justice

Wednesday, 5th November 1997

Before:

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-v-

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(As approved by the Court)

This is the sad story of a bitter and apparently irreconcilable dispute between father and son about Hopton Court Farm, which comprises 156 acres at Bromyard, in Worcestershire, including a farmhouse, farm buildings, about 140 acres of farmland, and an orchard.

The farm, with a current value of between about £400,000 and £450,000, is owned by the father, Mr. William John Perry Orgee, aged 67, who is the plaintiff in this action, and to whom I shall refer in future as Mr. Orgee or the father. The farm has been in the family for several generations. Up to the mid 1980's the land was farmed in partnership by Mr. Orgee, his wife Kathleen, the son Mr. William John Neil, aged 42, the defendant in the action, to whom I shall refer in future as either Mr. William or the son, and his younger brother Neville.

From the mid 1980's onwards, following the complete breakdown of the partnership relationship, the farmland has been effectively farmed by Mr. William on his own, though in some years at least Mr. Orgee took the apple crop off the orchard in circumstances which are in dispute.

At the time of the trial the farmland was, as the judge held, being farmed by the son in a reasonable manner, taking into account the fact that it was in a badly run down condition when he took over, but the farm buildings were in an appalling state of disrepair, some having already fallen down, and others being so dangerous that they require demolition and replacement.

Up to about the time of the breakdown of the partnership the farmhouse was shared by Mr. and Mrs. Orgee and Mr. William, but unfortunately at that juncture the marriage broke down, and Mr and Mrs. Orgee were divorced in 1989, though the financial settlement is still outstanding, and its resolution hinges on the outcome of this case, since the farm is Mr. Orgee's only significant asset. Thereafter father and son shared the house until 1996 when the father moved out, he says only temporarily due to the strains caused by the quarrel.

The dispute centres on Mr. William's proprietary status, it being his case, maintained up to and including the trial, that he held the farm (including the farmhouse and the orchard) on an agricultural tenancy pursuant to an agreement with his father. In his judgment in the Worcester County Court on 3 February 1997, after several days trial, Judge Geddes rejected this contention and this decision is not now challenged by Mr. William. However, the judge went on to uphold Mr. William's alternative case that he was entitled under the equitable doctrine of proprietary estoppel to the grant of a full protected agricultural tenancy under the Agricultural Holdings Act 1986 of the farm including the farmhouse and orchard, and the judge so ordered, though as will later become clear, there were great difficulties about fixing the terms of the lease. It is against this decision that Mr. Orgee presently appeals, with subsidiary contentions that if his main appeal fails Mr. Orgee should still retain the farmhouse and the orchard.

Mr. William's case, as it is very important to emphasise, is that the judge was correct in all respects, and there is no question of his seeking in the alternative a right in equity to some more modest grant, e.g. to a grazing licence of the land (which Mr. Orgee at one stage at any rate was in principle willing to grant), or to financial compensation.

Mr. William conducted his case before us in person, and he was also unrepresented during most of the trial, having dispensed with his counsel's services after the second day. Mr. Orgee was represented in the appeal by Mr. Jonathan Brock QC and Mr. Jonathan Small, both of whom, in the best traditions of the bar, made sure that Mr. William should not be under any unfair forensic handicap. Mr. William also conducted his case with fairness and courtesy.

It will be necessary in this judgment to consider the relevant facts, the course of the trial, and the judgment, all in some detail, and of course to review the law of proprietary estoppel.

At the end of the day we have to come to a definitive answer in favour of one party or the other. This is an aspect of the dispute which has caused all independent observers great concern, both throughout earlier negotiations when professional advisers were involved, and through the trial when the judge urged reconciliation, and in this court where we made a similar plea - but all to no avail.

The Facts and the Judgment

The relevant history starts in October 1986 when a meeting of the partners was called, attended by an accountant Mr. Lewer, in order to discuss the dissolution of the partnership and what would happen to the farm thereafter. At that meeting Mr. Lewer advised the partners as to the consequences of dissolution and asked each of them what they wanted. Mr. Orgee said he wanted to stop farming and to sit back, and both Mrs. Orgee and Neville said they did not to wish to continue farming at Hopton Court. However, Mr. William said that he would like to take over the farm. There was then a discussion as to the appropriate rent for a lease of the farm, and legal advice was sought, but no final agreement was ever reached as to either the dissolution of the partnership or as to Mr. William being granted a tenancy.

For the next three years, in the judge's words derived from Mrs. Orgee's evidence, the partnership staggered on, until a further meeting between the partners was held in February 1989 when it was agreed between the four partners that the partnership should be dissolved as from 1 April 1989. The assets were divided up, and Mr. William purchased the livestock on the farm together with some of the farm machinery. Furthermore at an early stage of his judgment the judge found that the outcome of this meeting was that "it was clearly understood by all partners that (Mr. Williams) would continue to farm the land on the basis of an agricultural tenancy, as had been discussed and agreed in principle 3 years earlier, and that he purchased the stock and farm implements on that basis: however, no terms were agreed, and in particular, nothing was agreed as to what rent Mr. Williams should pay". (emphasis added).

From that time onwards Mr. William ran the farm working virtually full time, and paid all the outgoings both in respect of the land and the buildings. It was also his case that he spent considerable sums on it both of a revenue and capital nature, though the nature and significance of this expenditure is in dispute.

In about October 1989 the father asked the son for payment, and this request was reiterated on a number of occasions subsequently; the judge held that Mr. William offered to pay something, but that no sum was agreed, with the result that he never paid anything for his use and occupation of the farm.

In 1992 and 1993 there were more negotiations, in which an auctioneer and estate agent Mr. Pugh (originally instructed by Mr. Orgee) acted as an intermediary, and I shall have to refer to his evidence in more detail later: there were discussions about a possible grazing licence and also about an agricultural tenancy, but they came to nothing, and thereafter the relationship between father and son deteriorated further, culminating in a solicitor's letter written on the father's behalf in October 1993 in effect giving notice to quit, followed by the present action which was begun four months later.

Towards the conclusion of his judgment the judge summarised all this evidence as follows:-

"On that evidence I am satisfied that no agreement was ever concluded between the plaintiff and the defendant, either that he should be granted an agricultural tenancy or that he should be granted a licence to occupy the land. However, I am equally satisfied that the plaintiff by his words and actions in these circumstances encouraged the defendant to believe that he would grant him an agricultural tenancy of the farm in 1989 and that the defendant, relying on that encouragement, acted to his detriment. (emphasis added).

That matter was specifically discussed and agreed in principle at the meeting in 1986, and although the partnership continued until April 1989 nothing had occurred in the intervening period to change that situation. That arrangement was entirely consistent with what had happened in the family in the past. And in the light of the plaintiff's expressed intention to retire, I doubt it occurred to anyone that that agreement would not be carried into effect when the partnership was dissolved.

I have no doubt, therefore, that even if the matter was not expressly referred to during the 1989 meeting, that was what was in everyone's mind. Nor did any party subsequently act inconsistently with that assumption. The defendant purchased the stock and machinery from the partnership, and immediately (and with the plaintiff's at least tacit consent) started to run the farm. The plaintiff ceased to work on the farm, although he occasionally helped the defendant out. And even in October 1989 when he first started to demand rent, such demands were in my view entirely consistent with the understanding that the defendant was now a tenant.

Relying on that understanding, the defendant (as I have said) purchased the stock and machinery. He spent considerable sums on the farm, both of a revenue and capital nature, and he worked long hours running the farm without any payment from the plaintiff.

The plaintiff was well aware of the work the defendant was carrying out on the farm, and he must have been aware that he was spending substantial sums on it, even if he was not aware of the precise amounts."

The judge then proceeded:-

"In my judgment, the friction which grew between father and son after October 1989, culminating in the Notice to Quit in October 1993 arose primarily out of the dispute as to the rent payable rather than because the plaintiff was asserting that his son had no right to occupy the land; and that therefore, at least until that latter date, the defendant's reliance on the understanding that he would be granted a tenancy was reasonable. But even if I am wrong about that, his equity had arisen in my judgment by February 1991, and by that date it would have been unconscionable for the plaintiff to insist on his strict legal rights."

As a result, as already noted, applying the equitable doctrine of proprietary estoppel, the judge held that the defendant was entitled to a tenancy of the entire farm including the farmhouse and the orchards, under the Agriculture Holdings Act 1986, commencing on 1 April 1997.

Following the judgment there was a discussion concerning the terms of the agricultural tenancy, and the judge fixed a rent of "something like £45 an acre" inviting the parties to work it out, with a rent review every three years at a full market rent. He also ordered that Mr. William should pay his father a sum in respect of his use and occupation of the farm from 1 April 1989, with allowance for the father's occupation of the farmhouse and his income from the apple crop, again leaving it to the parties to work it out.

He then came to the thorny question of repairs and dilapidations. The judge commented to start off with that "the clauses in relation to repairs will have to be very carefully drafted, because I do not think that (Mr. William) should have to put in repair buildings which are very badly dilapidated as they clearly are; clearly he must not allow them to get into further disrepair". Mr. William then sought clarification, and the judge said that "the lease is not to require you to put into repair anything which is out of repair; all you are going to be required to do is to ensure that the buildings do not fall into any further disrepair".

The judge then addressed a further question as to the financial settlement between Mr. and Mrs. Orgee, which he observed was "still perfectly possible by means of the transfer of the land which was apparently discussed". He said that he was not going to make any order in respect of that, but that "of course any land transferred to her would be subject to the (son's) tenancy ..." and that "the effect of that would be that he would then pay a portion of the rent to her".

It goes without saying, of course, that the value of the father's freehold in the farm, (including of course any portion to be subsequently transferred to Mrs. Orgee) would be very substantially less when subject to Mr. William's agricultural tenancy as ordered by the judge than it would have been free of encumbrance. 

Proprietary Estoppel

The doctrine is described in Snell on Equity 29th Edition at page 573 as follows:-

"Proprietary estoppel is one of the qualifications to the general rule that a person who spends money on improving the property of another has no claim to reimbursement or to any proprietary interest in the property. Proprietary estoppel is older than promissory estoppel. It is permanent in its effect, and it is also capable of operating positively so as to confer a right of action. The term `estoppel', though often used, is thus not altogether appropriate. Yet the equity is based on estoppel in that one (A) is encouraged to act to his detriment by the representations or encouragement of another (O) so that it would be unconscionable for O to insist on his strict legal rights."

Snell then proceeds to consider the topic under three headings comprising the conditions giving rise to the equity:-

(i) Detriment i.e. by the claimant acting to his detriment by incurring expenditure or otherwise prejudicing himself.

(ii) Expectation or Belief, i.e. the claimant must have acted in the belief either that he already owned a sufficient interest in the property to justify the expenditure or that he would obtain such an interest.

(iii) Encouragement i.e. the claimant's expectation or belief must have been encouraged by the owner or his agent by some active means e.g. where a father persuaded his son to build a bungalow on the father's land (Inwards v. Baker [1965] 2 QB 29 cited below).

Snell also makes it clear that the extent of the equity is to have made good, so far as may fairly be done between the parties, the expectations of the claimant which the owner has encouraged; thus the former's expectation or belief is the maximum extent of the equity, and the court's task is to search for "the minimum equity to do justice with equity being displayed at its most flexible".

However, flexibility does not enter into the picture in the present case, since as already noted, Mr. William is not interested in a licence, or indeed in any form of tenure or compensation short of a full agricultural tenancy. The question here is thus whether on the evidence Mr. William's expectation or belief measured that high.

The leading modern authority is Crabb v.Arun D.C. [1976] Ch. 179 in which the Court of Appeal (Lord Denning MR, Lawton and Scarman LJJ) upheld a plaintiff's claim that he was entitled to a right of access to the defendant's land and a right of way along a road after he had been led to believe that he would be granted such a right of access, and had been encouraged to act to his detriment in selling part of his own land without any reservation over it of a right of way.

The law was very clearly spelt out by Scarman LJ as then was at page 193:-

"I come now to consider the first of the three questions which I think in a case such as t his the court have to consider. What is needed to establish an equity? In the course of an interesting addition to his submissions this morning, Mr. Lightman cited Ramsden v. Dyson L.R. 1 H.L. 129, 142, to support his proposition that in order to establish an equity by estoppel there must be a belief by the plaintiff in the existence of a right created or encouraged by the words or actions of the defendant. With respect, I do not think that that is today a correct statement of the law. I think the law has developed so that today it is to be considered as correctly stated by Lord Kingsdown in his dissenting speech in Ramsden v. Dyson. Like Lord Denning MR, I think that the point of dissent in Ramsden v. Dyson was not on the law but on the facts. Lord Kingsdown's speech, in so far as it dealt with propositions of law, has been often considered, and recently followed by this court in Inwards v. Baker [1965] 2 QB 29. So what is the effect of looking to Lord Kingsdown's speech for a statement of the law? Lord Kingsdown said, L.R. 1 H.L. 129, 170:

"The rule of law applicable to the case appears to me to be this; If a man, under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation, created or encouraged by the landlord" - my italics - "that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a court of equity will compel the landlord to give effect to such promise or expectation."

That statement of the law is put into the language of landlord and tenant because it was a landlord and tenant situation with which Lord Kingsdown was concerned; but it has been accepted as of general application. While Ramsden v. Dyson may properly be considered as the modern starting-point of the law of equitable estoppel, it was analysed and spelt out in a judgment of Fry J. in 1880 in Willmott v. Barber (1880) 15 Ch.D 96, a decision to which Pennycuick V.-C. referred in his judgment. I agree with Pennycuick V.-C. in thinking that the passage from Fry J's judgment, from p.105, is a valuable guide as to the matters of fact which have to be established in order that a plaintiff may establish this particular equity. Moreover, Mr. Lightman for the defendants sought to make a submission in reliance upon the judgment. Fry J. said at pp. 105-106:

"It has been said that the acquiescence which will deprive a man of his legal rights must amount to fraud, and in my view that is an abbreviated statement of a very true proposition. A man is not to be deprived of his legal rights unless he has acted in such a way as would make it fraudulent for him to set up those rights. What, then, are the elements or requisites necessary to constitute fraud of that description? In the first place the plaintiff must have made a mistake as to his legal rights. Secondly, the plaintiff must have expended some money or must have done some act (not necessarily upon the defendant's land) on the faith of his mistaken belief. Thirdly, the defendant, the possessor of the legal right, must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff. If he does not know of it he is in the same position as the plaintiff, and the doctrine of acquiescence is founded upon conduct with a knowledge of your legal rights. Fourthly, the defendant, the possessor of the legal right, must know of the plaintiff's mistaken belief of his rights. If he does not, there is nothing which calls upon him to assert his own rights. Lastly," - if I may digress, this is the important element as far as this appeal is concerned - "the defendant, the possessor of the legal right, must have encouraged the plaintiff in his expenditure of money or in the other acts which he has done, either directly or by abstaining from asserting his legal right."

In the case of Inwards v. Baker (supra), cited by Lord Scarman, the Court of Appeal (Lord Denning MR, Danckwerts and Salmon LJJ) formulated the principle on the footing that where a person has expended money on the land of another with the expectation, induced or encouraged by the owner of the land, that he would be allowed to remain in occupation, an equity is created such that the court would protect his occupation of the land; and that the court has power to determine in what way the equity so arising would be satisfied (per Lord Denning MR at page 37 and per Danckwerts L.J. at page 38). They therefore refused the plaintiff an order for possession of the bungalow which his son had built on the land, and held that the son was entitled to stay there as long as he wanted.

Finally, in the recent case of Matharu v. Matharu [1994] P & CR 93, the majority (Roch L.J. and myself, Dillon L.J. dissenting) upheld the plaintiff's right to a licence for life of a house owned by her father-in -law as a permanent home for herself and her children. In the leading judgment Roch L.J., having cited Crabb v. Arun DC, recited and specifically applied the five criteria laid down by Fry J. in Willmott v. Barber, held that each of them was met on the evidence in the case, but that, contrary to the trial judge's view, the plaintiff had not made good a claim to a beneficial interest in the property.

Analysis and Conclusions

Mr. Brock, while accepting the judge's finding on encouragement, submitted that, on a proper analysis of the evidence and of the judgment, Mr. William failed to meet both the test of detriment, and the test of expectation and belief. I will consider the latter first.

At the high water mark of his argument, Mr. Brock submitted that we should adhere literally to the five criteria enunciated by Fry J. in Willmott v. Barber, especially in the light of the express approval accorded to this formulation by the majority of the Court of Appeal in Matharu v. Matharu; and on that footing, as he rightly contended, Mr. William would undoubtedly fail, since on the judge's findings he was unable strictly to satisfy the first two criteria. However Mr. Brock did not press this argument very hard, and in my judgment it is too strict an approach; I prefer to adopt the test of expectation or belief as formulated by Snell, which seems to me to be in line with Lord Kingsdown's dictum in Ramsden v. Dyson, and with the formulation adopted by the Court of Appeal in Inwards v. Baker, both of which were cited with approval by Lord Scarman in Crabbe v. Arun DC. This was clearly the judge's approach.

Mr. Brock then went on to submit that since the measure of expectation or belief is the maximum extent of the equity, it is incumbent on Mr. William, in order to satisfy the test, not only to establish an expectation or belief that he would be granted a full agricultural tenancy, but also to show that such expectation or belief was of sufficiently concrete character to enable the court to give effect to it when fixing the rent and the rent review regime, and making provision for dilapidations, for the repairing covenant, and for other crucial terms.

Mr. William did not seriously contest these submissions, but contended that the judge's findings satisfied the former requirement, and that the latter aspect caused no difficulty here, in view of the judge's order.

Turning to the judge's conclusions, Mr. Brock contrasted the two findings at different stages of the judgment to which I have added emphasis in the above quotations, and submitted that the less categorical finding in the latter passage reflected the judge's true ratio, and that the former went too far. In support of this submission he relied on the evidence of Mr. Pugh, from which the judge quoted extensively verbatim in his judgment, thus showing that he clearly accepted Mr. Pugh's evidence.

In his written statement of evidence, Mr. Pugh stated that he was asked by Mr. Orgee as an honest broker to try to resolve the differences between father and son, and that in the course of his discussions Mr. William was not asserting that he already had a tenancy of the farm, but rather that he was hoping that his father would grant him one. In evidence, when cross-examined by Mr. William's counsel prior to his withdrawal from the case, it was put to Mr. Pugh in terms that "the son was clear that he had a tenancy or thought that he had got a tenancy", which Mr. Pugh answered in the negative. When the question was further pursued, Mr. Pugh answered that William "was concerned that if he had a tenancy he might have too many liabilities in fact". Mr. William denied the accuracy of Mr.Pugh's evidence, but I am bound to say that not only does the judge appear to have accepted it for the reasons that I have already given, but it is also closely in line with Mr. Pugh's contemporaneous letters, and the last quoted answer has a ring of credibility, since the potential liabilities in relation to the farm buildings were indeed extremely formidable.

I would therefore feel disposed to accept Mr. Brock's submission on this point. I should none the less be reluctant to decide this case solely on a disputed interpretation of the judgment. Fortunately the case does not end there, because even if one were to assume that the first of the judge's two findings stood intact, and that Mr. William did have a firm expectation based on a clear understanding in 1989 that Mr. William would continue to farm the land on the basis of an agricultural tenancy, one asks inevitably, an expectation of such a tenancy on what terms?

In seeking to answer that question I think that unfortunately Mr. William runs into insuperable difficulties, since, as the judge recognised in the same passage in the first part of his judgment, the matter was not discussed in any detail, whereas here to my mind the detail was all important, yet so many potentially insoluble problems were left up in the air. Let me illustrate the main instances, leaving to the end the questions of rent and rent review clauses:-

This was an acute problem in view of the state of the farm buildings. As many had already fallen down, and many of the others were so dangerous that they had to be pulled down, it seems to me essential that any understanding which could found a realistic expectation or belief must include an allocation of responsibility for putting them in order, and for future repairs.

Mr. William frankly recognised the scale of the problem in his argument before us, and stated that it involved very large sums of money, which he could not provide, though he said that he hoped gradually to be able to finance some work out of future farm profits, and he also said that he would be able to do some of the work himself.

The judge's imposed solution (i.e. no obligation to restore or reinstate the buildings, but a continuing repairing covenant) seems to me with respect completely unworkable, when the remaining buildings in their present state are not worth repairing.

It is quite plain from the evidence, and vividly illustrated by the exchange following the judgment, that there was never any understanding whatsoever between the parties as to the method of solution of this intractable problem, either on the basis imposed by the judge, or on any other basis.

As the judge noted, it was anticipated that Mrs. Orgee would receive a portion of the farm as part of the outstanding financial settlement following the divorce, though of course how the land would be divided, and the extent and precise nature of her share, could only be decided when the financial provision proceedings were finally disposed of. How, one asks, was her position to be accommodated, and what was to be the basis of Mr.William's tenure viz a viz her once she obtained her grant on the terms and to the extent eventually decided?

The judge recognised this problem but did not attempt to solve it. Mr. William said in the hearing before us that there would be no difficulty since his mother was on his side, as she showed at the trial when she gave evidence for him. But he did not suggest that there had been any discussion in 1989 or 1992 of this aspect of the case, nor is there any evidence of such a discussion, let alone any understanding arrived between them as to the future mother/son relationship, which to my mind is also fatal to Mr. William's case.

This was something the judge did not comment on, but in his submissions before us Mr. William said that it would be necessary in fairness to give his brother some interest in the farm, and not to cut him out entirely from any participation in the family's only asset. Here again there is no evidence of any discussion let alone an understanding on this point, which to my mind is equally fatal.

The parties have been, and remain, completely at odds about both these parts of the property, and the destiny of the former is critical as Mr. William was at pains to stress in his argument, on the basis that it is indispensable for his farming enterprise.

The judge fixed a figure for rent based on the expert evidence before him as to market value, and ordered triennial rent reviews at a full market rent. Had these been the only outstanding matters, I think that might not well not have been insuperable, since they could well be regulated by implying a term along the lines adopted by the judge, subject to arbitration in default of agreement. But in this case the fixing of the rent, and the basis for future rent reviews, could not be settled in isolation, since the proper level of the former and the basis of the latter was inevitably bound up with the other outstanding points listed above, and in particular repairs and dilapidations, where the allocation of the ultimate responsibility for re-instatement and subsequent repair of the farm buildings would have a major impact on both.

It follows that I am satisfied, for the reasons which I have developed at considerable length since I am differing from the judge, that Mr. William's case on expectation or belief fails.

I can therefore deal with the question of detriment very briefly. As already noted, the judge held that the plaintiff bought stock and machinery, and "spent considerable sums on the farm, both of a revenue and a capital nature". This was based on a somewhat vague schedule of expenses produced by Mr. William, the vast majority of which were ordinary running expenses, which would have been incurred irrespective of any expectation of an agricultural tenancy, as would be any purchases of stock and machinery. The remainder are expenses on fencing, and comparatively modest amounts on unspecified building materials. Here again, fencing is a necessary incident of stock farming which Mr. William had to incur irrespective of any expectation of a tenancy, and so far as building materials were concerned, while building expenditure might in theory constitute detriment, Mr. William's case was extremely weak in the absence of any detail. He in his argument recognised that this evidence was lacking in particularity, and blamed this on his legal advisers.

However on the evidence as it stands, I am not satisfied that Mr. William overcame the burden of proof resting on him to establish detriment.

Consequently I would allow this appeal.

I would only add, as Mr. Brock recognised at the conclusion of his argument, that it would not be appropriate that Mr. William should be required to vacate the farm with immediate effect, and I for my part would propose that there should be an interval of six months from today's date, and I wish to hear submissions as to the appropriate order to effect this.

I agree.

I also agree.