In 1971 Michael Walden purchased a property from his grandmother and as part of the agreement she could live in the property for life.
In 1975 he verbally agreed to sell the property to his uncles Dennis and Maurice Walden for £15,000, with £8,000 of the purchase price left outstanding as an interest free loan repayable on the second of Dennis and Maurice to die. This was less than half the property’s actual value. Dennis and Maurice agreed that on their death the house would revert to Michael or his children if he had already died and in the meantime he would pay for all maintenance.
In 1978 the 1975 agreement was recorded in writing and a restriction placed on the property in respect of Michael’s interest.
After Maurice’s death Dennis removed the restriction in 1993, sold the property and purchased 16 Farm Road Leamington Spa with the proceeds. Dennis also made a will leaving no money to Michael or Michael’s family but rather Brian Atkins. Dennis died in 2010.
Michael argued that he was entitled to the entire beneficial interest in 16 Farm Road under an expressly declared trust or in the alternatives an implied trust, because of proprietary estoppel and/or a constructive trust.
In 1992 Michael became bankrupt. Brian Atkins argued that Michael had no locus standi to pursue the claim as any interest he had in either of the properties vested in his trustee in bankruptcy in 1992 and no equitable interest revested in him on his discharge from bankruptcy.
Michael argued that the agreements were negative personal obligations on the part of Dennis and Maurice giving rise to an expectation on the part of Michael that he would in the future acquire property, and such an expectation was outside the insolvency laws.
Dennis could have made a will leaving Michael the property or alternatively Michael could have predeceased him and his children taken the beneficial interest instead or the promise could have been made good some other way during Dennis’ lifetime.
A key part of Michael’s argument was that equitable estoppel does not look forward to the future, but backwards from when the promise falls due to be performed and asks whether it would be unconscionable for the promisor not to keep the promise.
The equity remained entirely personal until at the earliest Dennis’ execution of an inconsistent will in 1997 or when the will became irrevocable on Dennis’ death. Either way, the relevant event occurred long after his bankruptcy, and prior to his bankruptcy there was nothing that could be classified as property within the insolvency legislation.
Held (striking out the claim):
- (1) An equitable estoppel claim measures or values an equitable interest that already exists or has existed.
- (2) When considering whether the subject matter of an equitable estoppel is property for the purposes of the insolvency laws requires consideration of the circumstances at the time of the bankruptcy.
- (3) The fact that it may not be possible to say, until after the happening of some future contingent event, whether or not an equity has been satisfied does not mean that the equity did not come into existence.
- (4) The equity comes into existence as the result of a promise being made to and relied upon by and a detriment being suffered by a promisee. It is at that point that the promise becomes irrevocable, the equity is recognised, and it is this equity to which the definition of property at s436 IA 1986 is to be applied and therefore this vested in Michael’s trustee when he was made bankrupt and never revested in him when he was discharged.
- (5) Before the death of the survivor of Dennis and Maurice, Michael’s claimed right might have been satisfied, wholly or in part, in some other way, such as Dennis and Maurice taking back the burden of maintenance.
- (6) Michael’s trustee could have obtained an actuarial valuation of the right to receive the house and the £8,000 loan.