Equitable doctrines insofar as informal agreements or assurances may be reached upon for matters dealing with property ownership and the expectations that ensue post any such agreement.

Gabb v Farrokhzad [2022] EWH

Summary

The case of Gabb v Farrokhzad [2022] EWHC 212 (Ch) is a judgment passed in the Chancery Division of the High Court of England and Wales governing complex issues such as property rights, proprietary estoppel, and constructive trusts. This case specifically relates to equitable doctrines insofar as informal agreements or assurances may be reached upon for matters dealing with property ownership and the expectations that ensue post any such agreement.

Facts

This was the case of Mr Gabb (the Claimant) and Mr Farrokhzad (the Defendant) who had a past relationship and had co-habited in a property held in Mr Farrokhzad sole name. During the cohabitation and course of the relationship, Mr Gabb spent some money on the property to improve and maintain it based on Mr Farrokhzad's representation that he would have a beneficial interest in the property, including the payment for substantial renovations and regular maintenance work.

Post the end of the relationship, Mr. Gabb made an attempt at establishing the fact that he had obtained an ownership interest in the property through the application of either the proprietary estoppel doctrine or a constructive trust related to the detrimental act he had relied on because of the benevolent assurances availed by Mr. Farrokhzad.

Issues

The main issues before the court were these –

1. Whether in application was the assurance provided by Mr. Farrokhzad effective for the rise of a proprietary estoppel.

2. Whether, and if so, in what circumstances a constructive trust had arisen and had the effect of vesting Mr. Gabb with a beneficial interest in the property.

3. The quantum of beneficial interest, if any, to which Mr. Gabb was entitled either through his contributions or the assurances of Mr. Farrokhzad.

First Instance

In due course, the case was heard in the county court. The court investigated the relationship between the parties, financial dealings of Mr. Gabb, and the assurances expressed by Mr. Farrokhzad. It was covered by the evidence, which included the statements from the claimant and the defendant and financial records of contributions from Mr. Gabb.

In a bid to grant relief, the county court was convinced by the contention of Mr. Gabb's counsel and held that a beneficial interest was actually clear and easily recognizable on the property, formed from that week of Mengel's death due to proprietary estoppel. The court said Mr. Gabb acted to his detriment based on the assurances of Mr. Farrokhzad and the same, therefore, renders it unconscionable for Mr. Farrokhzad to deny Mr. Gabb a beneficial interest in the property. Consequently, the court awarded him 25% of a beneficial interest in the property.

Decision on Appeal

Mr. Farrokhzad appealed against the county court's decision in the High Court, Chancery Division, based on the fact that the lower court wrongly applied the principles of proprietary estoppel and constructive trust, since the assurances were not strong or unequivocal to lead to a proprietary estoppel, and making financial contributions of Mr. Gabb cannot be logically termed substantial enough to afford a beneficial interest.

The High Court, through the appeal process, therefore scrutinized immeasurably in deep the principles concerning proprietary estoppel and constructive trust. Whether the assurances are to be clear and Mr. Gabb acted to his detriment upon the same assurance. It further inquired whether the proportion of deficit suffered by Mr. Gabb: was it proportional to the claimed beneficial interest in any way?.

The High Court confirmed the judgment of the county court, where it held that the assurances given by Mr. Farrokhzad were express and coherent. It upheld that Mr. Gabb had satisfactorily relied on those said words to his detriment by investing substantial financial contributions in the property in reliance on those reassurances. It was held that  he would be "unconscionable" to now turn around, and deny that Mr. Gabb had a beneficial interest in the property. Hence, Mr. Gabb was duly considered to have been entitled to a beneficial interest in the property by a 25% share, and therefore, it was declared .

Comments

The case of Gabb v Farrokhzad is a classic presentation of the inculcation of equitable principles in the property disputes, in particular to do with proprietary estoppel and constructive trust. Here are some key highlights from the present case:

1. Clarity of Assurances: The case establishes that the assurances have to be clear and unambiguous and unqualified to give rise to proprietary estoppel. The promise given needs to be vague or ambiguous.

2. Detrimental Reliance: It is the point to be noted that for the claim of proprietary estoppel to be successful, firstly detrimental reliance must be proved to be in existence. In simple words, it is the case that the claimant must have acted to his detriment upon the assurances given.

3. Proportionality: Remedy granted by the court must be proportionate to the detriment suffered. In here, 25% beneficial interest in the house that awarded to Mr. Gabb that deemed proportionate to his share on the financial contributions and the assurance.

4. Unconscionability: A paramount consideration behind an application of propriety estoppel would be whether it would be unconscionable for the party having an interest in the property to disallow the other party's contention of an interest therein. In such cases, the court will look at the broad merits and equities of the case.

5. Legal and Equitable Remedies: This case fundamentally involves both legal ownership and equitable interests, showing the court's ability to come to the rescue when equality has to be maintained with regard to informal agreements or understanding.

In conclusion, Gabb v Farrokhzad reinforces the principles on which the law is based upon both proprietary estoppel and constructive trust, with a strong emphasis on clear assurances, detrimental reliance, and proportionality in the determination of beneficial interests in property. The case, then forms a useful precedent in disputes over informal agreements and expectations in property ownership.

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