Equitable Principles
Equitable Principles
A binding contract may override wills and Succession Act rights. In the family context, the requirements for a contract, in particular the requirements for writing in many cases, will not be met, even where promises are made and acted on.
The Irish courts have been willing to find that equitable rights may arise in a succession context, which overrides a will or the rights of the parties on intestacy. Legal rights are subordinated to equitable rights, which take priority.
In the context of property, estoppel may be used to assert a right positively. In contrast, promissory estoppel generally works as a defence only.
See our separate chapters on equitable estoppel and constructive trusts in our section on trusts. See also our section on contract law and promissory estoppel.
Scope
Property rights may arise in particular situations where the courts grant equitable remedies to do justice between the parties. This is far from a general jurisdiction allowing a court to transfer property on the basis of doing justice and avoiding injustice. It is only available in a limited number of scenarios and situations.
There are different views as to the scope for equity to intervene. Some cases have proceeded on the basis that there is a wider jurisdiction than others. The majority view is that equitable relief is available in a relatively limited number of cases. The higher courts have consistently rejected the alleged wider jurisdiction.
The scope of the equitable principle of proprietary estoppel is the subject of different opinions in different cases. A view that no longer holds is that money must be spent by the person who acts to his detriment. If the person provides labour or services on the land of another, it is now established that this may be sufficient grounds for raising an equity.
Proprietary Estoppel
The general principle of proprietary estoppel applies where a person acts to his detriment, such as by spending money or making a substantial commitment by way of time and effort on the basis of an expectation created by another that he would give an interest in a property.
Where that other encourages him to spend money and make an equivalent commitment on the basis of an expectation of this interest, equity will require that the expectation is met. Equity may require that the interest be granted.
The remedy is flexible and discretionary. Equitable remedies are discretionary, so there is no automatic right.
Expectation of Benefit
The concept of proprietary estoppel has been applied in many cases in Ireland where persons have been encouraged to believe that they will receive a gift by will, and based upon and relying on that encouragement, they act to their detriment in a significant and material way. They may, for example, sell their existing property and move in, for example, and care for the deceased.
The encouragement and expectation that they will receive the promised benefit, and their detrimental reliance on it, is the basis on which the court may afford them the benefit that they have been led to believe they will receive.
The hope and expectation must be created by the person against whom the right is claimed. It may be enough that the hope or expectation is encouraged by silence. There must be, at least, some acquiescence or implication by the person affected in the creation of that expectation.
Unjust to Resile
The person concerned must have incurred expenditure or acted to his detriment. Acting to one’s detriment might involve a person taking a deliberate course of action that prejudices him or where he foregoes a significant opportunity.
The action must have been undertaken on the basis of an expectation or belief that an interest in the property would be granted. Such expectation or belief must have been encouraged by the other person, in this case, the deceased.
It must be unjust and inequitable for the person who has encouraged the other to act to his detriment to resile from the promise and assurance made. It is not enough for a person to act to his detriment, incur expenditure or make some chosen commitment in the hope or expectation that a benefit will be given or made available to him.
A classic instance is where a person gives up a career or sells a property to look after another person in the expectation of receiving a gift or benefit encouraged or even promised by that other person. In several cases, the person has come to work on a farm for little or no wages.
Another type of case may involve a person building a house on the land of another. The general principle in this situation is that the house being a fixture, comes into the ownership of the landowner.
If a landowner has encouraged the person to build a house or even if he has stood by where he could easily contradict the position and has led the other to believe that he had or would acquire an interest in the land, he may be estopped from denying the benefit.
Promise to make Will
A contract to make a will can, in principle, be valid. However, in most cases where a person acts on the expectation of a benefit, it will be difficult to find a legally binding contract.
Usually, a promise to make a gift during life or by will is not enforced by a court of law or equity. An agreement to make a gift without any contract (with consideration or by deed) is not enforceable even by a court of equity. A lifetime gift will be upheld only if the property is actually transferred.
A court of equity may, however, intervene where it finds a basis for estoppel such as in those scenarios set out above. If the person promising the gift has induced the person promised to act to his or her detriment in the expectation or encouragement of receiving a gift, he may be estopped from denying the legal effect of the promise.
Override Formality Requirements
Even if a contract can be found in relation to the transfer of an interest in land, the Conveyancing Act requires that the contract be evidenced in writing and signed by the donor. A will must be executed with two witnesses and in compliance with the statutory formalities.
However, where the principle of estoppel applies, no written contract is required. This reflects the principle that equity will not allow a statute and, in particular, a statute providing a technical requirement, such as writing for the transfer of land, to be used to interfere as to cause injustice or have an unconscionable effect in the circumstances.
Nature of Equitable Relief
Where a deceased has either contracted or is bound by way of the above principle of estoppel to give an interest in land, then this overrides his will or intestacy. It effectively binds his estate and beneficiaries in the same way as a contract. They may take legal title to the assets but must hold them in trust for the person entitled under the equitable principles.
Equitable remedies are not available as a right. If equity arises and there is no ground to bar relief, then the court will grant a remedy that is just and fair in the circumstances.
The interest granted is tailored to the expectation created. A court order is required unless the parties concerned agree on the position.
Wider Concept
A broader concept, the so-called new model constructive trust, was proposed in some cases. Under this broader approach, where a person holds property in circumstances in which, in equity and in good conscience, he should not hold and which should be held by another, he may be compelled to hold the property on trust for that other.
There have been a number of Irish cases over the years in which equitable principles have been applied in order to prevent injustice. This seems to be in contrast to a narrower approach taken in England.
Under this approach, a trust may be imposed by a court of equity to restore a benefit of which the claimant has been deprived. Under the broader view, the new model concept of trust may be imposed whenever justice and good conscience so requires.
On this view, a “constructive” trust it may be imposed to prevent unjust enrichment. The constructive trustee is required to restore to the claimant the benefit, which it would be unjust for him to retain.
In one case where a person intended to transfer properties to his wife so that a third person would not benefit, a trust in favour of the third property was held to apply.
In another case, where some parts of the property were omitted in error from a transfer, it was regarded as clearly unjust that a person who was intended not to be benefited would benefit from an unintended error.
Lifetime Advances
The principle of advancement is an equitable principle, where a gift is intended to make permanent provision for a child. Under the principle, the lifetime provision is added to the benefit/money passing on death, and the person who has received the investment is deemed to have already received this amount.
Where such a permanent provision has been made, the advance may be taken into account in satisfaction of the share of the child under a will or intestacy. However, this is subject to a contrary intention being shown.
Many wills specifically provide that no advancement is to be taken into account in the distribution of the estate. This ensures that no argument can be made that a permanent lifetime provision already made counts in satisfaction of the entitlement under the will.
Secret Trusts
Under the principle of secret trust, a person may be given a benefit on the basis of a prior agreement with the deceased that he will hold the benefit for another. In this case, the trust will not be apparent on the face of the will.
Where an agreement has been made (which need not be a contract), equity will require the person who holds the benefit in accordance with the agreement and understanding with the deceased. This is a so-called fully secret trust.
A half-secret trust is where it is apparent on the face of the will that the benefit is to be held on trust, but it is not apparent who the trustee is. The same principle applies. It will usually be easier to prove the promise in this type of case.