Proprietary estoppel: My word is my bond (or is it?)

In the recent case of Liden v Burton, the Court of Appeal upheld the trial judge’s decision to award a former partner (Liden) a 10% interest in her partner’s property after she contributed to the household costs on the understanding that she would acquire an interest in the property. This case is an important warning for cohabitees – if you persuade someone to make a contribution towards household expenditure for a property they do not own, on the basis that they will acquire an interest in the property, the court is likely to hold you to your word.

After living together in rented property in Sweden, Liden and Burton moved into a UK property that was in Mr Burton’s sole name. The property was previously in the joint names of Mr Burton and his former wife but following a financial order, it was transferred into his sole name in return for a lump sum of £37,500 to his former wife, which he funded by raising a further mortgage against the property.

The trial judge accepted Ms Liden’s evidence that

• her income was from a pension paid by the Swedish authorities after she suffered an injury
• during Mr Burton’s divorce, Ms Liden agreed to help him financially to ensure he kept the property
• Mr Burton told Ms Liden that the property was expensive to run and that they could only afford to live there if she made some payments
• she contributed £500 per month towards the property, which was approximately half of all her pension
• Ms Liden was initially unaware of the mortgage. When she asked Mr Burton how the money was spent he described it as rent and other outgoings. She challenged this description and ‘he apportioned it in response to that challenge as “£200 towards the house”‘
• when she found out about the mortgage he again agreed that her contributions were “towards the house”
• Mr Burton proposed to Ms Liden in 2003; Mr Burton denied this but his evidence was rejected.

The judge found that the requirements of proprietary estoppel were established; Mr Burton had “induced, encouraged, or allowed Ms Liden to believe she was obtaining an interest in the property”, the monthly payments were made in reliance of what he had said and it would be unconscionable to deny her an interest in the property. Had Ms Liden known the true position, she would not have made the payments and would have invested her money elsewhere.

Mr Burton’s appeal was dismissed on the basis that the judge had correctly applied the law on the facts found and that he had not erred in the exercise of his discretion giving effect to the equity. The Court of Appeal applied a 2009 decision of the Supreme Court which emphasised that whether an assurance is sufficiently clear to amount to proprietary estoppel is “hugely dependent on context”.

The judge agreed equity payment to Ms Liden of £33,522 which comprised a partial refund of her monthly contributions and interest at 3%.