by Or Regev
The loss of a loved one is a difficult experience fraught with grief. This reality can become even more challenging when an issue arises regarding the distribution of a loved one’s estate. Consider the following case:
In Cowper-Smith v Morgan (2017), the deceased, Elizabeth, had three children, Gloria, Max and Nathan. Gloria and Max had understood, prior to their mother’s death, that their mother’s estate would be divided equally between her three children upon her death. As the mother’s health deteriorated, Gloria and Max reached an agreement whereby Max would move from England to Victoria to live with their mother permanently in her home in order to assist her. In doing so, Max would give up his employment, cottage lease, contacts with his children and social life. In exchange, Gloria promised Max that he could eventually purchase Gloria’s one-third interest in their mother’s home after their mother passed away. However, after their mother passed away, Gloria refused to honour the agreement with Max and sell him her one-third share.
In the ensuing litigation, Max relied on the remedy of proprietary estoppel to try and enforce the agreement and ultimately make Gloria sell her one-third interest in the home to him. Proprietary estoppel is a remedy that protects an equity, or in this situation, the claimant’s reasonable reliance.
An equity arises when: a representation or assurance, either expressly or impliedly, is made to the claimant, on the basis of which the claimant expects that he will enjoy some right or benefit over property; the claimant relies on that expectation by doing or refraining from doing something and his reliance is reasonable in all of the circumstances; and the claimant suffers a detriment as a result of his reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on his word and insist on his strict legal rights.
The BC Supreme Court and Court of Appeal came to different conclusions on whether Max could successfully rely on proprietary estoppel in these circumstances. The primary issue was with respect to the latter part of the second factor, whether Max’s reliance was reasonable in all of the circumstances. Specifically, the Court of Appeal questioned whether there can be reasonable reliance upon a promise to convey an interest in property made by one who does not have such an interest. In other words, was it reasonable for Max to rely on Gloria’s assurance given that Gloria didn’t have an interest in the home at the time she made the assurance?
A majority of the Court of Appeal held that it was not reasonable, and since Gloria owned no interest in the property at the time she made assurances to Max, proprietary estoppel could not arise. Leave to appeal to the Supreme Court of Canada was granted. In its decision, the Supreme Court of Canada concluded that reasonableness is circumstantial and therefore turns on the facts of each case. In this case, the Court found that Max’s reliance was reasonable and he is entitled to rely on the remedy of proprietary estoppel despite the fact that Gloria did not have an interest in the home at the time Max relied on her assurance.
This decision arguably broadens the scope and applicability of proprietary estoppel, a rare but effective remedy that may be applicable in your estate litigation matter.