B e f o r e :
LORD JUSTICE DILLON
LORD JUSTICE BELDAM
and
LORD JUSTICE ROCH
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EDWARD BAKER
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Respondent(Plaintiff)
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v.
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ALAN PETER BAKER (also known as PETER ALAN BAKER) and JULIE BAKER
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Appellants (Defendants)
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(Transcript of the Shorthand Notes of the Association of Official Shorthandwriters Ltd., Room M104, Royal Courts of Justice, and 2, New Square, Lincoln's Inn, London WC2A 3RU)
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MISS FRANCESCA BLATCH (instructed by Messrs Hooper & Wollen, Torquay) appeared on behalf of the Appellants (Defendants).
MR. W. CLARK (instructed by Messrs Woollcombe Beer & Watts, Torquay) appeared on behalf of the Respondent (Plaintiff).
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HTML VERSION OF JUDGMENT
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LORD JUSTICE DILLON: This is an appeal by the defendants in the action, Mr. and Mrs. Peter Baker, from an order made by His Honour Judge Hywel Moseley Q.C., sitting as a Judge of the High Court in the Chancery Division on 8th July 1992 after the trial of the action. By that order, it was provided that the defendants do pay to the plaintiff the sum of £33,950 with interest thereon from 13th June 1988 to the date of payment at a rate to be determined by the court in default of agreement between the parties. It was also ordered that that sum and interest be charged on the defendants' interest in a property known as 32 Rowley Road, St. Marychurch, Torquay.
Mr. Edward Baker is a man who was at the date of the trial, and is now, 75 years old. The judge described him as in a very frail state of healthy physically, but very articulate. He was, about ten years ago, seriously ill with cancer, and suffered also from chemotherapy in its treatment.
Mr. Peter Baker is in his mid-forties. He is the son of a lady who, at the time of Mr. Peter Baker's birth, was living with Mr. Edward Baker, and he has always called Mr. Edward Baker "Dad", whether or not Mr. Edward Baker is in fact his natural father. Mr. Peter Baker is married to the second defendant, Mrs. Baker, and they have two young children. In the Peter Baker household, Mrs. Baker is the breadwinner and goes out to work in a responsible position as a local government officer, while Mr. Peter Baker stays at home and looks after the house and children.
The present action arises out of an arrangement made between the parties in 1987 and the unfortunate termination of that arrangement on 13th June 1988, the date from which the judge by his order directed that interest should run on the sum which he ordered Mr. and Mrs. Peter Baker to pay Mr. Edward Baker.
In 1987 Mr. Edward Baker was the tenant of a council house in Finchley. He enjoyed security of tenure and lived on his own. Since he was a very abstemious man, he had accumulated substantial savings, and some years before he had intimated to Mr. Peter Baker that under his will Mr. Peter Baker stood to receive about £20,000.
Mr. and Mrs. Peter Baker, and their children, were in 1987 living in rented accommodation in Bath; Mrs. Baker was employed by the Avon County Council, but was contemplating transfer to the employment of the Devon County Council. A little while before an idea had been briefly floated that Mr. Edward Baker might anticipate his testamentary benefaction to Mr. Peter Baker by providing in his lifetime a sum to enable Mr. and Mrs. Peter Baker to buy a suitable house for their family, instead of renting. What finally emerged was an arrangement, which was carried into effect, that Mr. and Mrs. Peter Baker should buy a house in Devonshire, that Mr. Edward Baker should provide money from his savings towards the purchase and that Mr. Edward Baker should have a "granny room" - a small version of a granny flat - rent free in the house for the rest of his life.
The house originally selected was 30 Rowley Road Torquay, next door to 32 Rowley Road which was in the event bought. Mr. Edward Baker provided £4,500 in March 1987, which according to the judge was approximately the deposit required on the house, and he provided a further £26,000 early in April 1987; that was the anticipated balance of the purchase price over and above the sum being raised by Mr. and Mrs. Peter Baker on a first mortgage. In fact the vendor of No. 30 chose to sell elsewhere, presumably at a higher price in a rising market. So Mr. and Mrs. Peter Baker bought the house next door, 32 Rowley Road, which happened to be also on the market. Mr. Edward Baker's money was used, but the price was £3,450 higher, presumably because the market was rising. That £3,450 was initially provided by Mrs. Baker's father as a gift to Mr. and Mrs. Peter Baker, but it was recouped to them by Mr. Edward Baker. The three sums of £4,500, £26,000 and £3,450 make up the £33,950 which the judge ordered Mr. and Mrs. Peter Baker to pay Mr. Edward Baker.
The purchase of 32 Rowley Road was duly completed with the use of Mr. Edward Baker's money and a mortgage as intended for No. 30, and Mr. Edward Baker moved in in October 1987, giving up his council house in Finchley. His "granny room" in 32 Rowley Road was a bed-sitting room on the ground floor with French windows to the garden. He did not have his own cooking facilities, as he had perhaps originally intended, but lived with the family, paying no rent but contributing to the house-keeping expenses the amount per week which he had spent on his food etc., when he was in Finchley. On the judge's findings the relations between Mr. and Mrs. Baker and Mr. Edward Baker were reasonably harmonious from October 1987 to June 1988.
On 13th June 1988, however, the arrangement came to an abrupt end because Mr. Peter Baker accused Mr. Edward Baker of sexually molesting Mr. and Mrs. Baker's young daughter. As to that accusation, when it was later reported to the police they did not prosecute, and when the girl was medically examined no indication whatever of molestation was found. The judge's clear finding was that "the evidence that I have heard does not remotely suffice to satisfy me, even on a civil burden of proof, that Mr. Edward Baker molested the little girl". The accusation was thus unfounded. It is accepted that Mr. Peter Baker honestly believed that his accusation was true but the judge's finding indicates not only that the accusation was unfounded but also that Mr. Peter Baker, even though he believed it to be true, had no reasonable grounds for making it.
The predictable consequence was that Mr. Edward Baker was deeply hurt, highly offended and furious. The sharing arrangement obviously could not continue, and Mr. Edward Baker left 32 Rowley Road that day. For a while he was provided with bed and breakfast accommodation by the local authority. Then he stayed on a temporary basis with other relatives. Then he was provided with council accommodation, where he now is, by the Plymouth City Council. I infer that the Plymouth City Council provided him with that accommodation because he was a homeless person, not intentionally homeless, with, in view of his age and infirmity, a priority need. He has thus security of tenure for life, and he does not have to pay rent, since he has been granted housing benefit by the council. On his own evidence, which the judge accepted, he is "very happy" in his new accommodation.
He brought this action claiming originally a beneficial interest in 32 Rowley Road, by way of a resulting trust, because of the amount he had contributed to the purchase money. That claim did not succeed, and there is no cross-appeal. But Mr. Edward Baker did succeed on an alternative way of putting his case in reliance on equitable estoppel. The formulation of that which the judge accepted, and which Mr. and Mrs. Peter Baker do not challenge on this appeal, is, in the judge's words, as follows:-
"Put in terms of proprietary estoppel, it appears to me that he established his case in the following terms. He was promised by Mr. and Mrs. Baker that he could have the use of the granny room for the rest of his life. In reliance on that expectation, he did two things; he contributed the payments which he made by way of gift to Mr. and Mrs. Baker to purchase the house and, moreover, he gave up his tenancy of his council house in Finchley and moved to Torquay ... therefore, it appears to me that it would be unjust now to allow Mr. and Mrs. Baker to deny Mr. Baker any relief in consequence of the detriment that he has suffered pursuant to their promise".
It is common ground that in this field of law the court must look at the circumstances in each case to decide in what way the equity can be satisfied - Plimmer v. Mayor of Wellington [1884] 9 App Cas 699. It is equally common ground that in this particular case the only way in which the equity can be satisfied is by a payment of money by Mr. and Mrs. Peter Baker to Mr. Edward Baker. The dispute is over how much that payment should be. The judge held, as I have indicated, that this should be £33,950, the total of the three payments made by Mr. Edward Baker, with interest from 13th June 1988, when he left 32 Rowley Road. It is not in dispute that any sum which Mr. Edward Baker is awarded should be charged on 32 Rowley Road, by an equitable charge which would rank behind the mortgage raised to provide part of the purchase money, as I have mentioned, when 32 Rowley Road was purchased by Mr. and Mrs. Peter Baker, and also behind a smaller second mortgage raised to pay for improvements to the property.
The general rule is stated in Snell's Equity, 29th Edition, at page 576 as follows:-
"The extent of the equity is to have made good, so far as may fairly be done between the parties, the expectations of A which 0 has encouraged. A's expectation or belief is the maximum extent of the equity".
In support of the latter part of that statement reference is made to Dodsworth v. Dodsworth [1973] 228 E.G. 1117 where Russell L.J. in giving the judgment of the court said:-
"We do not think that it can be right to satisfy such an equity by conferring upon the defendants a greater interest in the property than was envisaged by the parties". In the present case the greatest interest in the property that the parties envisaged Mr. Edward Baker having was the right, living as part of the family, to occupy the granny room rent free for the rest of his life making the contributions to household expenses which I have indicated.
What he was deprived of was that right - and no more - as from 13th June 1988 when owing to a false accusation he had to leave 32 Rowley Road. Therefore what he is entitled to in satisfaction of that equity should not, in my judgment, be more than the value of that right as at 13th June 1988 with interest from that date.
That approach of Russell L.J. is consistent, in my judgment, with a telling phrase used by Scarman L.J. in Crabb v. Arun District Council [1976] 1 Ch. 179 at page 198G-H, where, referring to the extent of the equity, he said that it should be "the minimum equity to do justice to the plaintiff".
Dodsworth v. Dodsworth also shows that in deciding how such an equity should be satisfied so as to do justice to the plaintiff the court must take into account the circumstances of the defendant, so as not to produce an order which would be oppressive to the defendant. There is force, in my judgment, in the submission for Mr. and Mrs. Peter Baker that the judge's order on them to pay Mr. Edward Baker £33,950 with interest is oppressive to them, since they could only satisfy the order by selling 32 Rowley Road, and it was the original intention of all three parties that 32 Rowley Road should be bought as a family home for Mr. and Mrs. Peter Baker and their children, albeit with a granny room to be occupied rent free by Mr. Edward Baker for life.
In some cases of equitable estoppel, the course taken by the court to satisfy the equity has been to order the defendant to repay the plaintiff's expenditure. That was the course adopted in Dodsworth v. Dodsworth and the course considered in Chalmers v. Pardoe [1963] 1 W.L.R. 677. It is the course the judge followed in a sense in the present case. He considered that there was no distinction of any particular importance between the loss that he thought Mr. Edward Baker had suffered, and the loss of that which he had been promised, and he concluded that what Mr. Edward Baker had lost was the gift - of the £33,950 - that he made to Mr. and Mrs. Peter Baker in reliance on the understanding that he would be able to live in the property for the rest of his life.
But the gift in the present case was directed to achieving two aims - the provision of a family home for Mr. and Mrs. Peter Baker and their children, as well as the rent free occupation of the granny room for life by Mr. Edward Baker. In Dodsworth v. Dodsworth the expenditure had the one aim only of adapting the property in question for shared occupation by the original owner and the party who incurred the expenditure and in whose favour the equity arose. In the present case the correct appreciation is, in my judgment, that what Mr. Edward Baker has lost is not the whole £33,950 but merely the right to rent free occupation of the granny room in a family home from 13th June 1988 for the rest of his life.
The judge's award was therefore excessive and wrong in principle and I would set it aside.
The starting point for calculating the sum to be paid to Mr. Edward Baker should therefore be the value as at 13th June 1988 of his right to occupy the granny room rent free for life.
The question then arises whether any award on that basis should be reduced, for the benefit of Mr. and Mrs. Peter Baker, because for some time past, from a date before the trial, he has had accommodation, in which he has security of tenure, from the Plymouth County Council under the statutory obligation of local authorities to house the homeless. Moreover, and for present purposes more importantly, that accommodation is rent free because his means are sufficiently low for him to be entitled to housing benefit - i.e. to have his rent paid for him by the Plymouth Council.
In my judgment, the award should be so reduced. He should not be awarded compensation to enable him to pay rent for the rest of his life, if, as a result of statutory schemes rather than private charity, he will in fact be living rent free in secure accommodation. I find a helpful analogy in the cases which have decided that an injured person is not to be awarded medical expenses as a head of damages when it is known that he will be treated free under the National Health Service. However, the reduction to reflect his right to rent free accommodation in Plymouth must be mitigated for the possibility that when he receives his award he will lose his housing benefit; but that in turn will involve considering the effect of the Legal Aid Board's charge on the total award.
I differ, with hesitation, from the judgment of Beldam L.J. on this point, but, in my judgment, the Social Security Act 1989 does not apply to Mr. Edward Baker's entitlement to housing benefit. Moreover, I do not derive assistance from the case of Tanner v. Tanner [1975] 3 All ER 776, to which Beldam L.J. has referred since in that case the court's attention was not directed to whether the defendant's new accommodation from the local authority was secure or whether it was rent free by virtue of housing benefit. The court therefore carried out a valuation exercise - see per Brightman J. at page 781H -without considering the further points that arise in the present case.
Mr. Edward Baker will be entitled to compensation for the period when he was staying with relatives. Also he may be able to argue that he should be compensated because his accommodation from the Plymouth Council is not as satisfactory as his occupation of the granny room at 32 Rowley Road since it does not have the amenity of living in a family home, rather than on his own, which prompted him to move from Finchley to Torquay; the implications of that and other possible differences have not yet been explored. His time in bed and breakfast accommodation will also have to be considered.
Is it none the less possible for this court to fix the amount of the compensation to be paid to Mr. Edward Baker, without reference back to the court below for a further inquiry? If it were possible, it would be highly desirable that we should fix the figure, since this is a case in which both parties have legal aid and had legal aid in the court below. It would seem therefore that the more the proceedings are protracted the worse it will be for all parties, in view of the rights of the Legal Aid Board.
However, in his skeleton argument, counsel for Mr. and Mrs. Peter Baker sought an order that the case be remitted to the District Registry for an assessment of the amount due to Mr. Edward Baker, and counsel for Mr. Edward Baker conceded that, if the judge's award of the £33,950 did not stand, there would have to be an inquiry. We do not, in my judgment, have the necessary material to make an informed assessment of the amount that should be paid: any figure I put forward would be a mere guess, based on a feeling that the amount should not be large because of the rent free accommodation Mr. Edward Baker now has.
Accordingly I would allow this appeal and set aside the order of the judge. In lieu, I would direct an inquiry, to be taken by Judge Hywel Moseley Q.C., to determine the amount of compensation to which Mr. Edward Baker is entitled because of the termination on 13th June 1988 of his rights of occupation in respect of 32 Rowley Road. Subject to any further procedural directions which we can give to assist the parties, I would remit the case to the District Registry for any further directions to be given which are needed before there can be a further hearing before the judge.
LORD JUSTICE BELDAM: In the circumstances set out in the judgment of Dillon L.J., His Honour Judge Hywel Moseley Q.C. held that the plaintiff, Mr. Edward Baker, had established a right to relief in equity to compensate him for the loss of his expectation that during his lifetime he would be able to enjoy, without payment, the use of a room of his own and to share the amenities of living in the house which the gift of his savings to the defendants had enabled them to buy. The question in this appeal is how the court is to satisfy the equity in the circumstances of this unusual case. It is conceded that it can only be done by making a monetary award. The judge considered that the plaintiff should recover the whole of the money he had given to the defendants. He did so because he thought that the value of the gift was equivalent to the value which the plaintiff set upon the benefit he was to obtain by making the gift. In assessing the equitable satisfaction of the plaintiff's interest in this manner, I think the learned judge overlooked the important fact that the plaintiff intended to make a gift of the whole of the amount to the defendants. In return he was promised the use of a room of his own, rent free, for the rest of his life. In my view the plaintiff's equity did not merit repayment of the whole of the money he had given to the defendants and the award made by the learned judge should be set aside.
The court in these circumstances has to assess what sum of money will satisfy the plaintiff's expectation that during his lifetime he would have a room of his own, rent free, sharing the comfort and amenities of home surroundings. It has to value his interest on 13th June 1988 when, owing to a false accusation made by the first defendant, he had to leave that accommodation in circumstances which made it impossible for him to return. As I read the judge's findings, the accusation made was without substance though believed by the first defendant to be justified. It was this action by the first defendant which effectively made it impossible for the plaintiff to continue to enjoy the accommodation he had been promised. It was therefore no fault of the plaintiff that the expectation induced by the defendants' promise was frustrated. The principle laid down by Sir A. Hobhouse in Plimmer v. Mayor of Wellington [1884] 9 App Cas 699 at pages 713-714 is that the court's object is to look at the circumstances in each case to decide in what way it can satisfy the equity. As Russell L.J. pointed out in Dodsworth v. Dodsworth [1973] 228 E.G. 1117, the court must not award the plaintiff "a greater interest in law than was within the induced expectation". When Lord Scarman in Crabb v. Arun District Council [1976] 1 Ch. 179 at page 198 applied these principles, and referred to "the minimum equity to do justice to the plaintiff", it was in the context of analysing the way in which in the circumstances of that case the court could satisfy the plaintiff's interest. Of the options open to the court, he considered that the least the court could do, to do justice to the plaintiff, was to grant either an easement or a licence on terms to be agreed; and without payment because the delay induced by the defendants and their high-handed action had sterilised the plaintiff's hand and his loss greatly exceeded any reasonable sum which otherwise the defendants could have expected the plaintiff to pay for an enforceable legal right. I would not interpret Lord Scarman's remarks as suggesting that in a case in which a plaintiff's equity could only be satisfied by a monetary award, that the court necessarily had to place the minimum value on the disappointed interest.
A practical starting point for the valuation of the plaintiff's interest is the annual value of the accommodation he enjoyed capitalised for the remainder of his life,. In 1988 he was 70 years of age and, had his health been normal, he could have looked forward to living in the promised accommodation for about 11 years. But, as the judge found, he was frail and had about ten years earlier suffered from a serious illness. He had survived from the effects of this illness and its treatment and, as events have shown, has survived for a further five years. Some reduction in the normal expectation should be made for his frail state of health and the sum awarded should be discounted as an award of a capital sum but I would think it difficult to justify a valuation of his interest based on a figure of less than seven times the annual value of the accommodation. Such a method of evaluation seems similar to that adopted by this court in Tanner v. Tanner [1975] 3 All ER 776. The court had there to consider on an equitable basis the value of a licence granted to the appellant to occupy a ground floor flat in a house until her children attained school age, a period of eight or nine years after she had been required to leave. The court assessed the value to her of her interest as an amount which she might have requested for a surrender of the licence. In that case the appellant had not contributed to the purchase of the house and had no equitable interest beyond the licence. In the county court an order for possession had been made in the licensor's favour and the appellant had moved out in pursuance of the order. She appealed against the order but in the meantime had been rehoused by the local authority and did not seek to be put back in possession.
The court assessed the compensation payable to the appellant on the basis of a reasonable sum for the loss of the licence. It awarded £2,000 which in that case represented approximately one-third of the value of the house. At present day values, the award would be equivalent to approximately £10,000.
Further, such a method of valuing this plaintiff's equity seems to me compatible with the approach of the court in other cases in refusing to make an order for possession until a loan made in reliance upon a promise of accommodation had been repaid: see, for example, In re Sharp [1980] 1 W.L.R. 219 and the cases referred to at page 223 by Browne-Wilkinson J. (as he then was).
In the course of argument it was suggested that, as the plaintiff had since 13th June 1988 been provided with accommodation by the Plymouth City Council which he finds congenial and in which he is happy, that fact should be taken into account. It was assumed that the cost of this accommodation has been and is continuing to be borne from public housing benefit. I find it difficult to see how his present accommodation or the fact that its cost is borne by public funds can validly be taken into account in assessing on equitable principles the value of his frustrated interest. If the value of his interest is to be assessed at the date when he left the accommodation, the fact that he has since obtained other accommodation, whether paid for out of his own means, by other relatives or by public finds, seems to me to be immaterial. I think it wrong in principle to take account of public benefit to reduce the satisfaction of a private equitable right, and I note that the court in Tanner v. Tanner (supra) made no reference to the fact that the appellant had been given a public sector tenancy or to its terms.
Whilst it is true that in the assessment of compensation for tortious injury the incidence of public benefits has in some cases been taken into account, popular sentiment has recently swung decisively away from such a principle where the public benefits paid are linked to the events giving rise to the claim. Since the Social Security Act 1989 (as amended by the Social Security Act 1990) relevant benefits paid during a period of five years have, with minor exceptions, to be repaid in full from compensation payments. In general the repayable benefits are those linked to the events giving rise to the claim for compensation and include family credit and income support, two of the three benefits payable under the Social Security Act 1986 providing certain criteria of need are met. The third, housing benefit, is excluded from the provisions of the Social Security Act 1989 because it is not considered to be linked to a claimant's injury or disease.
So, in principle, benefits paid at public expense have to be repaid in full so that they do not inure as a windfall to the benefit of either of the parties. Moreover, the fact that accommodation and maintenance has been provided for an injured plaintiff after an accident by relatives or others is not to be taken into account where loss of free accommodation forms part of the injured party's loss (see Liffen v. Watson [1940] 1 K.B. 556).
Thus, in my judgment, the court ought to have regard to a public policy evidenced by recent legislation that payments out of scarce public resources which become necessary due to a private wrong should not be taken to reduce a private liability for that wrong. The plaintiff has only been provided with accommodation at the public expense because, in expectation of living rent free in the accommodation to be provided by the defendants in their home, he parted with his savings as a gift to the defendants. These savings substantially exceeded the capital limit (currently £16,000) laid down in regulations under section 134(1) of the Social Security Contributions and Benefits Act 1992. Had he retained the savings, he would not have been entitled to housing benefit. In my view, his receipt of housing benefit is therefore as closely linked with his lost expectation as are the relevant benefits under the Social Security Act 1989 to the circumstances of injury. The principle on which equity proceeds is that it would be unconscionable for the defendants not to satisfy, so far as a money payment can do so, the interest that they had promised the plaintiff. I see no reason in conscience why that interest should in part be satisfied at the public expense from housing benefit. As I have remarked, there is no evidence before the court of the amount of the benefit or the value of the accommodation; or whether it is provided by a rent rebate and, if so, at what rate. Moreover, before the court can consider the question of principle, the stance of Plymouth City Council and its position under the Social Security Administration Act 1992 would have to be explored.
Regrettable though it is, if the parties are unable to agree upon a figure, this matter must be remitted to His Honour Judge Hywel Moseley Q.C., for him to determine the value of the accommodation and other facts relevant to the question of housing benefit.
In the course of the hearing of the appeal reference was made to a letter written on behalf of the defendants stating the maximum amount which could be paid by the defendants without putting in jeopardy their continued enjoyment of the home purchased with the plaintiff's savings. This too, I feel, is an irrelevant consideration but obviously the court, after deciding the sum necessary to satisfy the plaintiff's equity, has power to order how and in what manner this should be paid. One way of avoiding an immediate sale of the property would be for the sum awarded to remain as a second charge on the property on payment of interest until the defendants are in a position to make payment, a solution which would not be incompatible with the cases referred to in In re Sharp (supra) and which would provide that some part of the housing benefit expended on the plaintiff was available for a case deserving of public housing benefit. LORD JUSTICE ROCH: Of the three questions that the court had to decide in this case there is no dispute as to the first, namely was an equity established? Having decided that question, the judge at page 57D of his judgment said:
"In my view, Mr. Baker [the plaintiff] is entitled to relief from the court to compensate him for the loss that he has suffered. I put it that way although I have had drawn to my attention from a text book the case of Dodsworth v. Dodsworth, which puts it in terms of compensating him for the loss of that which he has been promised. In my view, the distinction is not of any particular importance in the present case".
And then at page 58 the judge continued:
"... ny conclusions are that what Mr. Edward Baker has lost is a gift that he made to Mr. and Mrs. Baker in reliance upon the understanding which he had with them that he would be able to live in the property for the rest of his life. He has also lost the tenancy of the house in Finchley although, as Mr. Buswell [counsel for the defendants] has quite correctly pointed out, he is now enjoying local authority accommodation in Plymouth, where he says he is very happy. He does not seek to go back into possession, and that therefore is not a remedy that I need consider.
In my view, what he is entitled to is the recovery of the money which he gave to Mr. and Mrs. Baker".
In my opinion, neither of the principles contained in the first extract from the judge's judgment was on its own the correct principle for the judge to apply, although it may be that the second would have lead the court to the maximum relief to which a plaintiff is entitled to compensate for the loss of an equity arising from proprietary estoppel.
The questions which should be asked and answered are those set out by Scarman L.J. at the beginning of his judgment in Crabb v. Arun District Council [1976] 1 Ch. 179 at page 193A, namely: "What is the extent of the equity?" And when that has been determined, "What is the relief appropriate to satisfy the equity in the circumstances which have arisen?" On this last question, the courts adopt an approach which is flexible but at the same time cautious in the giving of relief, in that the courts look for the minimum equity to do justice: see Scarman L.J.'s judgment at page 193C-D and page 198G-H.
The first question is, what is the extent of the equity?
In time the equity was to last for the remainder of Mr. Edward Baker's life. He is now 75 years of age and approaching his 76th birthday, and he is a man who has a serious medical condition. At the time the arrangement was made between him and the defendants Mr. Edward Baker did not expect to live many years. In the event, Mr. Edward Baker has survived for over four years, and is still fit enough to live alone in his present accommodation in Plymouth.
What were the physical attributes of the equity? Mr. Edward Baker had given up secure accommodation in Finchley, but that was accommodation from which he had ceased to derive enjoyment. It is clear that he believed Finchley had changed and that he had become isolated there. The accommodation he was to have with the defendants was to include a room sufficient to act as a granny room or bed sitter on the ground floor of the house purchased by the defendants. In addition, he was to have shared use of other parts of the property, namely the kitchen, the bathroom, the garden and the sitting or television room. Further, although the plaintiff was to have his own room, he was to live as a member of the family: for example, he was to have a Sunday meal with the family, to be able to watch their television when he desired and was to have contact with the defendants and their children. Importantly, the arrangement would ensure a constant supervision of his health and welfare, an advantage he had not enjoyed at Finchley, where on one occasion he had lain for many hours on the floor having fallen and broken some ribs. Another advantage was that he would not have the worry or responsibility of the upkeep of the property or of discharging outgoings on the property.
On the other hand, the plaintiff intended that part of the money was to be the first defendant's "inheritance" and he intended that the defendants were to be the owners of the house and to enjoy the whole of the property without encumbrance in favour of his estate on his death. None of the parties to the arrangement contemplated that the plaintiff's enjoyment of the property would be commensurate with his contribution to the purchase price of the house. That contribution, as the judge found, was to be a gift and was to represent at least in part the money he would have left to the first defendant in his will.
Having determined the extent of the equity, what is the relief appropriate to satisfy the equity in the circumstances which have arisen in the present case? In many of the decided cases the court has been able to make an order in the nature of an injunction which has satisfied the equity in the circumstances which have arisen. Here in this case there can be no question of the court ordering the defendants to allow the plaintiff to continue to occupy his room and enjoy the other advantages which he and they contemplated he would enjoy when the arrangement was made in 1987. The plaintiff would not return to live in the defendants' house nor would the defendants agree to his returning. The first has been brought about by the honest but mistaken and unfounded belief on the part of the defendants that the plaintiff had indecently assaulted their little girl. In those circumstances the plaintiff is fully justified in his attitude that he cannot be expected to return to the property. At the same time, the defendants are exonerated from any suggestion that they have wilfully made it impossible for the plaintiff to live in the house because they desired to have the advantage of his money without the obligations which they assumed under the arrangement.
In determining the relief appropriate the court must look at the conduct of the parties as well as the extent of the equity: see Crabb v. Arun District Council (supra) where the high-handed behaviour of the district council was taken into account by this court in reaching their decision as to the appropriate relief.
In this case the relief appropriate to satisfy the equity in the circumstances that have arisen is the ordering that the defendants pay to the plaintiff a sum of money commensurate with the extent of the plaintiff's equity, subject to adjustment appropriate in the light of the behaviour of the parties and other material circumstances of the case. The starting point, in my judgment, must be an assessment of the value of the occupation of the room and the other incidents of the plaintiff's equity, in the light of the plaintiff's life expectancy. The fact that the plaintiff now has suitable accommodation where he has good neighbours and is very happy should not deprive him of relief, but is a factor which should be taken into account by the court in seeking the minimum equity to do justice in this case. Some compensation for disturbance and the removal first from the defendants' house to temporary accommodation and then from the temporary accommodation to the plaintiff's permanent accommodation in Plymouth should, in my opinion, be included.
There is then the question whether the court should take into account the fact that the plaintiff's present accommodation is paid for by the local authority under a housing benefit scheme and is therefore "rent free" as far as the plaintiff is concerned or should the court say that that should not be taken into account as a deduction from the financial value of the equity which the plaintiff would have enjoyed but for the events of 13th June 1988.
In my judgment, no account should be taken of this when answering the second question for the reasons given by my Lord, Beldam L.J., The qualification I would offer is that this could become a factor for the court when answering the last of the three questions posed by Scarman L.J. because the task of the court here is not to assess loss as though it were awarding damages, but to maintain a more flexible approach designed to achieve justice between the parties; to make good the equity "so far as may fairly be done between the parties". In that exercise the court must bear in mind the needs of the plaintiff and the capacity of the defendants to pay compensation.
The evidence on the second matter indicates that any sum much in excess of £7,000 would involve the house having to be sold and the defendants and their children being turned out of the house which has been their home for some five years. The defendants purchased this house in the expectation that the arrangements would be successful and that they would be able to commit themselves financially in the certainty that after the plaintiff's days the house would be theirs, that is to say that the house would provide a long term and secure home for themselves and their children.
The choice for this court is either to try to assess the sum which would represent the minimum relief for the plaintiff in the light of the extent of his equity and of the circumstances which have arisen or to send the case back to the judge for him to assess this sum, applying the principles which this court has endeavoured to set out.
The second course would allow the parties to obtain expert evidence as to the value of the accommodation enjoyed by Mr. Edward Baker at the defendants' home.
The disadvantage of the second course is that it would involve further substantial cost and increase the chances of the plaintiff's judgment ending as a hollow one, and the risk of the defendants being put out of their home because of the amount of the judgment and legal costs.
Reluctantly, I agree that this court does not have any evidence on which it could found an answer to the question "What is the extent of the equity?", that is to say, in the circumstances of this case, "What would Mr. Edward Baker have had to pay for such accommodation?"
Consequently, I too would order that the case go back to the judge.
In my judgment, the court should not take into account the fact that the plaintiff has alternative accommodation and enjoys that alternative accommodation rent free when assessing the value of the equity. A person deprived of an equity arising by way of proprietary estoppel will normally have obtained alternative accommodation. Nevertheless, in my opinion, the court can take account of the alternative accommodation at the stage of answering the third question. It could affect whether the court orders that the representee be allowed to go back into the property in respect of which he has an equity by proprietary estoppel. The nature of the accommodation and the representee's view of it, whether he is unhappy or happy, will be relevant. So too will the rent he has to pay or, if it be so, the fact that he does not pay rent. If the representee does not pay rent, then the court will need to inquire, when considering ordering a money payment, whether an obligation to pay rent will arise if the representee recovers a substantial sum.
Order: Appeal allowed, award below set aside; case remitted to judge to re-calculate amount of compensation due to plaintiff; order for costs of appeal against the plaintiff not to be enforced without leave of the court; order as to costs below to stand; legal aid taxation.
