Proprietary Estoppel in Cowper-Smith V Morgan Rachael Kwan

Be careful what you promise: Proprietary estoppel in Cowper-Smith v Morgan

Rachael Kwan

Garfinkle Biderman LLP

Jason M. Chin

TC Beirne School of Law, University of Queensland

*Forthcoming in the Estates, Trusts and Pensions Journal

I. Introduction

Proprietary estoppel provides one of equity’s most powerful remedies. Estoppel is an equitable doctrine which arises when one party acts on the reliance of the promise of another.

The promise and corresponding reliance creates a quasi-contract with reliance acting as an alternative to the consideration usually required in contracts. By granting a right in property without reliance upon a valid contract, proprietary estoppel is also something of a conceptual oddity. In this manner, proprietary estoppel diverges from specific performance, an equitable remedy that requires the transferee provide valuable consideration, thus binding his or her conscience and avoiding the maxim that equity not assist a volunteer.

For proprietary estoppel to be established, the following elements must be present:

I. a person makes a representation or promise, upon which the claimant expects

some benefit or right over property;

II. relying on that assurance, the claimant does something or refrains from doing

something, and that reliance is reasonable in the circumstances; and

III. the claimant suffers a detriment as a result of that reliance “such that it would be

unfair or unjust for the party responsible for the representation or assurance to go

back on her word."1

Proprietary estoppel is distinct from other equitable estoppels in that a proprietary estoppel can act as a ‘sword’ and form the basis of a cause of action. If all of the parts of proprietary estoppel are made out, a court can modify or create property rights to satisfy the equity.

1 Cowper- Smith v Morgan, 2017 SCC 61 at para. 15 [CS SCC].

With regard to the Canadian experience, the Court of Appeal for Ontario recently noted that proprietary estoppel has received “somewhat uneven treatment in Canada.”2 It is within this context that the Court of Appeal for British Columbia split on the proper scope for the Supreme

Court of Canada. In Cowper-Smith v Morgan, the Supreme Court of Canada has both clarified the test for — and arguably expanded the scope of — proprietary estoppel in the context of promises exchanged between children over their mother’s care during her lifetime.3 The fact that a party lacks an interest in the disputed property at the time of the promise does not negate the obligation of fulfilling the promise. Instead, when the party responsible for the expectation has or acquires sufficient interest in the property, proprietary estoppel will attach to that interest and protect the equity. This article will discuss the law of proprietary estoppel in other jurisdictions and how the Supreme Court of Canada has infused this remedy with greater flexibility to satisfy the equity.

In the following sections, we will first situate Canadian proprietary estoppel doctrine within the Commonwealth by comparing it to English and Australian case law. We will then delve deeper into the facts and trial and appeal decisions in Cowper-Smith v Morgan. The final section will explore the clarifications to proprietary estoppel doctrine provided by the Supreme

Court in its decision to grant the appeal in Cowper-Smith v Morgan.

2 Clarke v Johnson, 2014 ONCA 237 at para 47, 371 DLR (4th) 618. 3 CS SCC, supra footnote 1, at para. 7.

II. Proprietary Estoppel in the Broader Commonwealth Context

1. Proprietary Estoppel in the United Kingdom

In his recent book4 on proprietary estoppel in the United Kingdom, Ben McFarlane separated three “strands” of proprietary estoppel, a distinction that largely flows from the House of Lord’s seminal decision on proprietary estoppel, Thorner v Major.5

The first strand – acquiescence-based proprietary estoppel – is the classic English strand.6

It requires circumstances in which “B adopts a particular course of conduct in reliance on a mistaken belief” as to its rights and A, knowing of this mistaken belief and of its own inconsistent right, “fails to assert that right against B.”7 Acquiescence-based proprietary estoppel may then prevent A from asserting that inconsistent right to the detriment of B.

The second strand is representation-based proprietary estoppel. In this second strand, “A makes a representation to B” and “B reasonably believes A intends B to adopt a course of conduct in reliance of the truth of that representation.”8 A is prohibited from denying the truth of that representation to B’s detriment.9

The third strand, which is most clearly engaged in Cowper-Smith v Morgan, is “promise- based” proprietary estoppel. It is also the strand that is more commonly associated with proprietary estoppel in Canada. This strand may be made out on the following facts:10

4 Ben McFarlane, The Law of Proprietary Estoppel (Oxford: Oxford University Press, 2014 [McFarlane]. 5 Thorner v. Major, [2009] UKHL 18, [2009] 1 WLR 776 [Thorner]. 6 McFarlane, supra footnote 4, at 3-4, 20-39. 7 Ibid at para 3. 8 Ibid at para 5. 9 Ibid at para 5-7, 39-47. 10 Ibid at para 7.

A makes a promise that B has or will acquire a right in relation to A’s property and B,

reasonably believing that A’s promise was seriously intended as a promise on which B could

rely, adopts a particular course of conduct in reasonable reliance on A’s promise.

The promise-based strand controlled the outcome in Thorner. In that case, David Thorner worked on his relative’s farm for 30 years, completing substantial work for no pay.11 He did so in reliance on his relative’s promise that David would inherit the farm after the relative passed away.12 The primary issues before the House of Lords were (1) whether there was a sufficiently certain promise to found reasonable reliance upon which proprietary estoppel could be made out and (2) whether the subject matter of the assurance was sufficiently precise to ground a claim for proprietary estoppel.13

With regard to the deceased’s promise to David, the House of Lords ultimately deferred to the finding at first instance. Given the factual context and entire course of conduct between the parties, the deceased had made an unambiguous implied promise that David would inherit the farm. The context informed this conclusion: the deceased was a particularly taciturn man, but had made several indications he planned to give the farm to David.14 On the issue of the subject matter, the House of Lords held that while the farm changed hands over the years through various transactions, there was “no doubt as to what was the subject of the assurance, namely the farm as it existed from time to time.”15 Accordingly, the House of Lords applied the proprietary estoppel doctrine to uphold David’s right to the farm.

11 Thorner, supra footnote 5, at para 1. 12 Ibid at para 77. 13 Ibid at para 73. 14 Ibid at para 80. 15 Ibid at para 95.

2. Australia

Australia has moved in a different direction than the House of Lords in Thorner. Rather than attempting to parse the individual forms of proprietary estoppel, the Australian position has been to fuse promissory and proprietary estoppel into a single substantive doctrine:16

…there is but one doctrine of estoppel, which provides that a court of common law or equity

may do what is required, but not more, to prevent a person who has relied upon an assumption

as to a present, past or future state of affairs (including a legal state of affairs), which

assumption the party estopped has induced him to hold, from suffering detriment in reliance

upon the assumption as a result of the denial of its correctness.

Unfortunately, this fused approach, first proposed by the High Court of Australia in

Walton Stores (Interstate) Ltd v Maher,17 has been read as a suggestion as opposed to a direction by trial courts.18 In particular, the New South Wales courts maintain a distinction between proprietary and promissory estoppel and continue to restrict the enforcement of positive rights in land to proprietary estoppel.19 There does seem to be consensus, however, that the principle underling a fused estoppel doctrine is unconscionability:20

The central principle of the doctrine is that the law will not permit an unconscionable - or,

more accurately, unconscientious - departure by one party from the subject matter of an

assumption which has been adopted by the other party as the basis of some relationship, course

of conduct, act or omission which would operate to that other party's detriment if the

assumption be not adhered to for the purposes of the litigation.

16 Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 413 and see: Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 451 [Waltons]. 17 Waltons, ibid. 18 See G. E. Dal Pont, Equity and Trusts Commentary and Materials, 6th ed (New South Wales: Thomson Reuters, 2016 at 347-348. 19 Saleh v Romanous (2010) 79 NSWLR 453 at para 74: “A promissory estoppel is a restraint on the enforcement of rights, and thus, unlike a proprietary estoppel, it must be negative in substance.” 20 Ibid at para 444. See also Commonwealth v Verwayen (1990) 170 CLR 394 at paras 444-445.

3. Divided Results in Canada

When proprietary estoppel is pled as a cause of action in Canada, it is typically in reference to the promise-based strand in the English jurisprudence. In other words, the plaintiff reasonably relied on a promise made by the defendant, and seeks to have that promise made good. The difficulty, as we noted above, is broad confusion surrounding elements of the claim.

This confusion was evident in the 2-1 split at the British Columbia Court of Appeal in Cowper-

Smith v Morgan.

III. Analysis of Cowper-Smith v Morgan

1. The Background

Cowper-Smith v Morgan is a dispute between siblings over their deceased mother’s house and investments.21 Elizabeth Cowper-Smith passed away in 2010, leaving behind assets totalling approximately $1.6 million: a house in Victoria, British Columbia worth $670,000 (the “House”) and investments worth $969,000 (the “Investments”).22 She had three children, all three of whom were in their late fifties to early sixties when she passed away. Her two sons, the plaintiffs Max and Nathan Cowper-Smith, brought the action against their sister, Gloria Morgan.

Max and Nathan sought a declaration that the House and Investments be divided equally amongst the siblings according to a will signed by Elizabeth in 2002 (the “2002 Will”). The issue arose as a consequence of a series of events that occurred in 2000 and 2001.23 These events culminated in Elizabeth, at Gloria’s suggestion, transferring the House to Gloria (the “Land

Transfer”) and signing a Declaration of Trust (the “Declaration”) making Gloria trustee over the

21 Cowper-Smith v Morgan, 2015 BCSC 1170, 255 ACWS (3d) 798 [CS Trial]. 22 Ibid at para 2. 23 Ibid at paras 15-38.

House and Investments for Elizabeth’s benefit. Further, Gloria would become absolute owner of both on Elizabeth’s death.24 Various transfers between 2004 and 2010 also put the Investments in the joint names of Elizabeth and Gloria. Gloria remained close to Elizabeth throughout her life and lived in Victoria walking distance from her mother.25 However, the relationship between

Gloria and her brother, Max, grew increasingly fraught during Elizabeth’s lifetime.26

Nathan and Max claimed the Declaration and Land Transfer were products of undue influence and the transfers were gratuitous. Therefore, they argued that Gloria held the assets in resulting trust for Elizabeth’s estate (the “Estate”) to be distributed in accordance with the 2002

Will.

Relying on proprietary estoppel, Max sought a declaration that he was entitled to purchase Gloria’s remaining one-third interest in the house.27 This claim was based on Gloria’s assurance she would sell him her future beneficial interest in the House if he moved home from

England to help care for their mother, which he did.

2. The Land Transfer, Declaration of Trust, and 2001 Will

In late 2000, Nathan, who had been working in Edmonton, separated from his common law partner, quit his job, and moved back home and lived with Elizabeth in the House.28 During this time, Nathan performed renovations on the House but there was some tension between he and his mother, which appeared to flow from Nathan’s homosexuality.29 At trial, evidence was led that Nathan received a letter – in Gloria’s handwriting – providing new house rules, such as

24 Ibid at paras 35-36. 25 Ibid at para. 13. 26 CS SCC, supra footnote 1, at para. 6. 27 CS Trial, supra footnote 21, at paras 111-119. 28 Ibid at para 15. 29 Ibid.

“No entertaining Gay Males in the house at all.”30 This culminated with Gloria offering Nathan a ticket to England, which he accepted. When Nathan returned in June 2001, Gloria had changed the locks to the House.31

While Nathan was out of the country, Gloria executed the Declaration and Land

Transfer.32 Gloria and Elizabeth retained a lawyer (the “First Lawyer”) to draw up the documents. The First Lawyer met with Gloria and Elizabeth and then Elizabeth individually. It is not clear from the trial decision whether Gloria and Elizabeth jointly retained the First Lawyer or whether the First Lawyer was solely retained by Gloria. When Elizabeth was asked whether she understood the full implications of the Declaration, Elizabeth said she trusted Gloria would do the right thing.33 The First Lawyer referred Elizabeth to another lawyer (the “Second Lawyer”) to obtain independent legal advice. The Second Lawyer did not remember the meeting and did not keep specific enough notes to comment on the meeting. The Second Lawyer testified that in keeping with his general practice, the meeting must not have raised any concerns about undue influence.34 Shortly thereafter, Elizabeth signed the Land Transfer and Declaration. She also signed a will that simply provided that all previous wills and codicils were revoked.35

After the incidents of 2001-2002, Nathan and Elizabeth’s relationship appeared to improve.36 Nathan returned to Edmonton for work and Elizabeth signed the 2002 Will. The 2002

Will was drafted by the First Lawyer and would divide the Estate equally among the three children. The First Lawyer’s notes did not indicate whether she explained to Elizabeth that the

30 Ibid at para 16. 31 Ibid at paras 18-22. 32 Ibid at paras 26-38. 33 Ibid at para 31. 34 Ibid at para 38. 35 Ibid at para 37. 36 Ibid at paras 24 and 39.

Declaration of Trust would divert the majority of her assets to Gloria, and thus not form part of the Estate. Nathan visited Elizabeth and stayed with her several times from 2006 to 2008. He helped out around the house as he used to. During this time, all of the Investments were transferred into Elizabeth and Gloria’s joint names in a series of transactions.37

3. Elizabeth’s failing health

In 2005, Elizabeth’s health took a turn for the worse, which raised the spectre of her moving out of the House and into an assisted living facility.38 Gloria suggested that Max return home to care for their mother, in part, because Gloria was adamant that Nathan not take on the responsibility again.39 Max, who was a barrister in England, agreed to return home subject to several conditions: he would live in the House and be able to purchase Gloria’s one third interest in it, receive funds to care for Elizabeth and his day-to-day expenses, and receive funds to fly back to England yearly.40 Significantly, it was a finding of fact that “Max would [not] have moved to Victoria and left his life in England without Gloria's agreement to his terms.”41 In

November 2007, Max moved into the House where he assumed full-time care of Elizabeth. In this capacity, Max assumed responsibility for buying Elizabeth’s food and cooking her meals, as well as cleaning and maintaining the House.42 By 2008, Max was also taking care of Elizabeth’s personal hygiene.43

37 Ibid at para 40. 38 Ibid at para 50. 39 Ibid. 40 And several other conditions, see ibid. 41 Ibid at para 114. 42 Ibid at para 51. 43 Ibid.

4. The Trial Decision

Justice Brown found that the nature of the relationship between Elizabeth and Gloria introduced the potential for domination, thus giving rise to a presumption of undue influence.44

He relied on several facts in coming to this conclusion: Gloria and Elizabeth were extremely close, many communications from Elizabeth were either signed by Gloria or were in Gloria’s handwriting, and witnesses generally agreed that Elizabeth deferred to Gloria as a matter of course.45 Gloria was unable to rebut the presumption. As a result, the Land Transfer and

Declaration were set aside.

Max was also successful in his claim of proprietary estoppel and Justice Brown declared that he was entitled to purchase Gloria’s one-third interest in the House. Justice Brown applied the following test:

1. Is an equity established? An equity will be established where:

a) There was an assurance or representation, attributable to the owner, that the claimant has or will have some right to the property, and

b) The claimant relied on this assurance to his or her detriment so that it would be unconscionable for the owner to go back on that assurance.

2. If an equity is established, the court must determine the extent of the equity and the remedy appropriate to satisfy the equity.46

44 Ibid at para 83. 45 Ibid at paras 87-90. 46 Ibid at para 115.

In finding that an equity was established, Justice Brown noted that Gloria agreed that she would sell her interest in the House if Max moved home to help their mother.47 Max reasonably relied on that assurance to his detriment, giving up employment income, contact with his children in England, and his social life. The right to purchase Gloria’s interest in the House was

“the minimum required to satisfy the equity.”48

5. The Appeal

The British Columbia Court of Appeal upheld Justice Brown’s decision with respect to the Declaration of Trust and concluded that the House and Investments were held by Gloria in trust for the Estate.49 However, the appeal court split on whether proprietary estoppel was established providing Max with a right to purchase Gloria’s one-third interest in the House.

(a) The Majority Decision of Justice Willcock

In the opinion of the majority, Gloria’s assurances to Max were too uncertain to found proprietary estoppel. The right that Gloria promised to Max was the right to buy her expected inheritance in the House. Gloria did not own an interest in the House at the time of the promise and there was no guarantee that Gloria would ultimately receive an interest in the House from

Elizabeth as this was entirely conditional on Elizabeth’s actions which were outside of Gloria’s control.50 In the circumstances, Max could not have been reasonably certain that Gloria would follow through on her representations to him.51 Gloria’s use of undue influence to obtain de

47 Ibid at paras 116-118. 48 Ibid at para 119. 49Cowper-Smith v Morgan, 2016 BCCA 200 at paras 8, 66 [CS Appeal]. 50 Ibid. 51 Ibid.

13 facto control over the House and Investments had no impact on the Court’s determination regarding Max’s ability to make out proprietary estoppel.52

Given the facts of the case, the appeal majority was unwilling to expand the class of persons who will be considered a promisor for the purposes of proprietary estoppel to a potential beneficiary who gives an assurance to another, years before the death of the testator, with respect to an inheritance that she anticipates receiving. Whether there is uncertainty as to a promisor’s ability to fulfil their promise to the party claiming promissory estoppel is closely related to whether reliance is established.53 Justice Willcock questioned how detrimental reliance can be made out based on a promise to transfer an interest in property when the person making the promise lacks or has an uncertain interest in the property.54

The appeal majority acknowledged that the principles of proprietary estoppel are not immutable criteria but maintained that the jurisprudence does not suggest that a right can be found without a party’s reliance on a representation.55 In addition, the doctrine of proprietary estoppel should not be taken as a “generalized remedial doctrine for unfairness” and unfairness in and of itself does not warrant the application of estoppel where the general requirements are not satisfied.56 In the view of the appeal majority, expanding the cause of action to permit a person to acquire an interest in property by reliance upon the assurances of a non‑owner would disconnect the estoppel from the property.57 This would be highly problematic as proprietary estoppel is the only estoppel that can be used as a sword.

52 Ibid at para 118. 53 Ibid at para 100. 54 Ibid at para 111. 55 Ibid at para 117. 56 Ibid at para 115. 57 Ibid at para 117.

(b) The Minority Decision of Justice Smith

Justice Smith agreed with Justice Brown that the elements of proprietary estoppel had been established.58 Specifically, she found that Max’s reliance on Gloria’s promise with respect to the House was reasonable because there was no possibility that Elizabeth would have changed or rescinded the transactions before her death due to Gloria’s undue influence over Elizabeth.59

Justice Smith noted that the law with respect to proprietary estoppel had evolved to a more flexible approach which focuses on the equities rather that a set of rigid requirements. She relied on Bruce MacDougall’s text for the proposition that an orthodox approach to proprietary estoppel will not apply where the owner has no existing rights with respect to the property at the time of the detrimental reliance.60 In other words, proprietary estoppel may apply if the property is certain though not yet owned by the owner or subject to some other property interest of the owner, so long as the owner can be said to have some claim to the property at the time of the court order.61 Justice Smith also noted:62

The law of proprietary estoppel has undergone a number of iterations since its classic articulation….[T]he law of proprietary estoppel has evolved towards ‘a broader and less literal approach’ as described in the oft-cited passage from Halsbury’s Law of England…:

The real test is said to be whether upon the facts of the particular case the situation has become such that it would be dishonest or unconscionable for the plaintiff, or the person having the right sought to be enforced, to continue to seek to enforce it.

58 Ibid at para 86. 59 Ibid at para 86. 60 B. MacDougall, Estoppel (Markham, ON: LexisNexis Canada Inc., 2012) at 449. 61 Ibid at 456, 458-459. 62 CS Appeal, supra footnote 49, at para 67

Justice Smith held that Gloria exercised undue influence over Elizabeth, which continued as Elizabeth’s cognitive functioning deteriorated and rendered the transactions concerning the

House and Investments invalid. Elizabeth would not have been able to change or rescind the transactions before her death. Gloria’s ownership of the House by the right of survivorship and the Declaration of Trust was certain even though it was not actually owned by Gloria at the time of her promise to Max. The fact that the House was readily identifiable and there was no third party who had a certain or definitive claim to the House other than Max, Nathan and Gloria was also relevant to Justice Smith’s determination.63 In these circumstances, Justice Smith held that it was reasonable for Max to rely on Gloria’s promises concerning her one-third interest in the

House and it would be unconscionable to allow Gloria to renege on assurances that Max had relied upon to his detriment.64

IV. The Supreme Court of Canada Decision

The only issue before the Supreme Court was whether Justice Brown erred in concluding that proprietary estoppel operates to enforce Gloria’s promise to Max. Specifically, the Supreme

Court was asked to decide whether Gloria’s lack of ownership in the House defeated Max’s claims and if it did not, what the appropriate remedy would be.65 The Supreme Court was unanimous in finding that Justice Brown did not err in concluding that proprietary estoppel operates to enforce Gloria’s promise.66 However, Justices Brown and Côté dissented from the

63 Ibid at para 85. 64 Ibid at para 86. 65 CS SCC, supra footnote 1, at para. 15. 66 Ibid at paras 45, 61 and 73.

16 majority on its determination that the court-ordered sale of Gloria’s interest in the House to Max was required to satisfy the equity.

1. The Majority Decision of Chief Justice McLachlin

Chief Justice McLachlin (as she then was), writing for the majority, held that the three- part test for establishing proprietary estoppel is as follows:

1. A representation or assurance is made to the claimant, on the basis of which the claimant

expects that he will enjoy some right or benefit over the property;

2. The claimant relies on that expectation by doing or refraining from doing something, and

his reliance is reasonable in all the circumstances; and

3. The claimant suffers 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

her word.67

When addressing the test for proprietary estoppel, the Supreme Court declined to decide whether proprietary estoppel may attach to an interest in property other than land. One might argue that by leaving the question open there is support for the suggestion that it could apply.68

(a) Representation and Detriment

The Supreme Court held that Gloria’s promise and Max’s expectation that he would receive Gloria’s eventual one-third interest in the House satisfied the first part of the test. It was also not disputed that Max suffered a detriment fulfilling the third part of the test. The Supreme

Court agreed with the Justice Brown’s findings that Max acted to his detriment in relocating from England to Victoria to look after Elizabeth and in the process making a number of

67 Ibid at para 15. 68 Ibid at para. 22.

17 concessions, including forfeiting employment income, the long-term lease of a cottage, regular contact with his children and social circle.69

(b) Reasonable Reliance

The main issue before the Supreme Court was whether Max had satisfied the second part of the test - namely, whether Max’s expectation that he would receive Gloria’s eventual one- third interest in the House was reasonable. While Justice Brown found that Max’s reliance was reasonable in the circumstances, the Court of Appeal agreed with Gloria’s argument that Max's reliance could not have been reasonable since she did not own an interest in the House at the time when she made the assurance.70 The Supreme Court departed from the Court of Appeal by holding that when considering whether a party's reliance is reasonable, the overriding consideration is what one party has induced the other party to expect as opposed to the actual ownership of the property at issue at the time of the promise.71

Relying on the House of Lords decision in Thorner, the Supreme Court held that rather than the existence of an actual interest in the property at issue, reasonable reliance depends on the assurance, which “must be unambiguous and must appear to have been intended to be taken seriously,” and whose meaning “would reasonably have been understood as intended to be taken seriously as an assurance which could be relied upon.”72 At its crux, equity protects a claimant's reasonable reliance on a promise. To illustrate this point, Chief Justice McLachlin compared contract, which is subject to the doctrine of frustration and must be performed “come what may,” with equity which looks backwards from the time when the promise is to be performed and asks

69 Ibid at para 24. 70 CS Appeal, supra footnote 49 at para 35. 71 CS SCC, supra footnote 1 at para. 26. 72 Ibid at para 26, quoting Thorner.

“whether, in the circumstances which have actually happened, it would be unconscionable for the promise not to be kept.”73 The majority accepted the trial judge’s findings that Elizabeth’s children believed for over a decade that she desired to split the Estate equally amongst them and held that Gloria and Max both had this belief at the time of the promise. Therefore, Max could take Gloria's assurance of the right to purchase her one-third interest in the House seriously and

Max’s reliance on Gloria's assurance was reasonable.74

Significantly, the Supreme Court did not decide whether proprietary estoppel may attach to an interest in property other than land or whether equity more broadly enforces non- contractual promises on which claimants have detrimentally relied. Importantly, however, the

Supreme Court held that proprietary estoppel may prevent an inequity where a claimant has reasonably relied on an expectation that he or she will enjoy a right or benefit over property, even in circumstances where the party responsible for that expectation did not own an interest in the property at the time of the claimant’s reliance.75 In so doing, the Supreme Court reversed the

Court of Appeal’s proposition of a bright line rule that reliance on a promise by a party with no present interest in the property at issue can never be reasonable.76 Instead, the Supreme Court held that the bright line rule is out of step with equity’s purpose, which is to lessen the harsh impact of applying strict legal rules.77

Chief Justice McLachlin found that the Court of Appeal had conflated “proprietary estoppel with the equity to which it gives effect” by holding that there cannot be proprietary

73 Ibid at para 28, quoting Thorner. 74 Ibid at para 29. 75 Ibid. 76 Ibid. 77 Ibid.

19 estoppel when the promisor does not own an interest in the property at the time of assurance.78

Instead, the majority held that an equity arises at the time of detrimental reliance, and that as soon as the promisor acquires interest in the property, proprietary estoppel attaches to the interest in order to protect the equity.79 In Max’s case, the equity arose when Max, moved to Victoria thus suffering a detriment, but the proprietary estoppel only attached after Gloria received her interest in the House from the Estate following Elizabeth’s death.80 In order to fulfill her promise to Max, the majority ordered Gloria, as executor, to divide the Estate into equal one-thirds, and that as soon as she does, proprietary estoppel attaches to her third which she must sell to Max.

The majority further ruled that Max could purchase Gloria’s interest at the fair market value “as of the approximate date on which he would reasonably have expected to be able to do so in the first place,” being when Gloria should have administered the Estate after Elizabeth's death, rather than the value of her share at the time of the court’s decision.81 Chief Justice

McLachlin reasoned that when the assurance and detriment occurred, Max's expectation was that he would be able to purchase Gloria's interest in the House following the administration of the

Estate, which neither Max nor Gloria could not have expected would take years to complete.82 In the majority’s view, the minimum necessary to satisfy the equity in Max's favour was an order entitling him to purchase Gloria's interest at its fair market value as of the approximate date on when he would reasonably have expected to be able to do so in the first place, namely, at some point in early 2011.83 The majority took the view of considering Max’s reasonable expectations

78 Ibid at para 35. 79 Ibid. 80 Ibid at para 3. 81 Ibid at para 55. 82 Ibid. 83 Ibid.

20 broadly and in fashioning a remedy that took into account the circumstances surrounding the expectation and the detriment at issue.84

(d) Remedy

The majority of the Supreme Court found that as executor of the Estate, Gloria was bound to transfer a one-third interest in the House to each of the three beneficiaries so that her promise to Max could be fulfilled.85 Despite the fact that Elizabeth’s children held an interest in the residue of the Estate and not a specific interest in the House, the majority reasoned that an in specie distribution of shares in the House was not contrary to the Deceased’s intent as the outcome was contemplated by the Deceased.86 The Supreme Court ordered an in specie distribution and required Gloria to sell her interest in the House to Max. In support of this position, Chief Justice McLachlin held that Gloria had acted in bad faith and expressed the concern that without an in specie distribution Gloria would continue to thwart Max’s interests using her powers as executor.87

When determining the value of Gloria’s one third interest in the House, Gloria’s position was that, if she was ordered to sell her interest to Max, it should be for its current fair market value after settlement of the litigation. In contrast, Max’s position was that the value of Gloria’s interest should be calculated based on the fair market value of the House in the year of

Elizabeth’s death which amounted to $233,333.88 The parties agreed that the Supreme Court’s adoption of Gloria’s approach would result in a much larger payment by Max to Gloria due to

84 Ibid at para 56. 85 Ibid at para 35. 86 Ibid at para 39. 87 Ibid para 43. 88 Ibid para 51.

21 appreciation in the value of the House between 2011 and 2017.89 The majority determined that the appropriate valuation was the fair market value of the House as of early 2011, which was the approximate date on which Gloria could reasonably have expected to be able to transfer her interest in the first place.90 In the view of the majority, their chosen remedy was required as the minimum necessary to satisfy the equity in Max’s favour.91

Although not explicitly stated in the majority’s decision, the Court appears to have fashioned a remedy that satisfied the practical equities imposed by the rising the real estate market in British Columbia from 2011 to 2018. The effect of adopting Gloria’s valuation of her interest in the House would have the effect of allowing her to financially benefit from reneging on her promise to Max. Such an outcome would have resulted in a hollow victory for Max.

2. Minority Decision of Justice Brown

Justices Brown and Côté agreed with the majority’s findings on proprietary estoppel and concurred with the Chief Justice that a claim in proprietary estoppel is possible where the promisor does not, in fact, hold the right or benefit at issue when the promise is made.92

However, both Justice Brown and Justice Côté disagreed with the remedy fashioned by the majority to satisfy the equity. Justice Brown disagreed on the time at which equity arises finding that it does so “only if and when the promisor obtains the right or benefit that was promised to the claimant.”93 Therefore, the equity did not arise at the time of Max’s detriment, but only at the moment Gloria obtained the interest she promised Max. In Justice Brown’s view, this moment

89 Ibid para 51. 90 Ibid at para 52. 91 Ibid at para 55. 92 Ibid at para 65. 93 Ibid.

22 would arise as of the date that the Court ordered Gloria to sell her interest in the House to Max.94

Therefore, Justice Brown would have allowed Max to purchase Gloria’s third interest at the fair market value as of the date of the Court’s order.

3. Minority Decision of Justice Côté

Justice Côté parted ways with both the majority and Justice Brown as to the scope of the

Supreme Court’s remedial power in this case. In her view, a court could not order an executor to distribute shares of an estate in a manner contrary to a testator’s express intent for the sole purpose of enabling a beneficiary to make good on her promise to a third party.95 This principle holds true even where the promisor was named as executor.96 The 2002 Will named Gloria as the executor with the discretion to administer the Estate and directed that Gloria may “may convert

[the] estate . . . into money, and decide how, when, and on what terms”, or that she “may keep

[the] estate, or any part of it, in the form it is in at [Elizabeth’s] death.”97 On this basis, Justice

Côté viewed the majority's remedy as an improper substitute for Gloria’s discretion and powers as the executor. Although the 2002 Will had expressed a desire that the Estate be divided equally among the three children, a court-ordered distribution was inconsistent with Elizabeth’s wish that

Gloria administer the Estate.98 To illustrate her point, Justice Côté noted that if Elizabeth had named someone other than Gloria as the executor, the Court would not have the jurisdiction to order the executor to distribute the shares in the manner directed by the majority.99 However,

Justice Côté’s criticism of the majority’s decision is belied by the fact that in the event that

Gloria was not named as Elizabeth’s executor, Max would have been required to include the

94 Ibid at para 71. 95 Ibid at para 74 96 Ibid. 97 Ibid at para 75. 98 Ibid at para 77. 99 Ibid at para 78.

23 executor as a party to the litigation. As a named party, the Court would have had the jurisdiction to direct the executor with respect to the distribution of the parties’ respective interests in the

House.

V. Conclusion

The Supreme Court’s guidance in Cowper-Smith v Morgan with respect to proprietary estoppel has significant implications. Foremost, this decision arguably expands the scope of proprietary estoppel. It appears that proprietary estoppel may prevent an inequity where a claimant has reasonably relied on an expectation that he or she will enjoy a right or benefit over property, even in circumstances where the party responsible for that expectation did not own an interest in the property at the time of the claimant’s reliance. The Supreme Court declined to decide whether proprietary estoppel may attach to an interest in property other than land.

Arguably, the Supreme Court’s decision to leave the question open is support for the suggestion that it may.100 In this respect, Canada’s propriety estoppel law generally aligns with the current de facto approach in Australia – the door is open for parties to attempt to enforce non-land promises, but it is unclear how expansively lower courts will interpret Cowper-Smith v.

Morgan.101

The Supreme Court is also clear that once the elements of proprietary estoppel are established, there is wide judicial discretion to affect an appropriate remedy in the circumstances of the particular case. In this case, the majority ordered a beneficiary, who was also an executor, to sell her one-third interest in the House to another beneficiary at a valuation prescribed by the

Court. This remedy was chosen even though the beneficiaries held only an interest in the residue

100 Ibid at para 22. 101 Ibid at para 26.

24 of the Estate, rather than a specific interest in the House. It remains to be seen whether the same remedy would have been selected had the malfeasant party not also been the executor.