Preedy & Anor v Dunne & Ors

Factual and Procedural Background

This appeal was brought directly to the Court of Appeal under CPR PD52A from a judgment delivered by Master Matthews in the Chancery Division following a three-day trial of a CPR Part 7 multi-track claim. The case concerns an alleged estoppel related to a property known as the Albert Arms, a pub in The City. The deceased, Mrs. Jean Montgomery, left the freehold of the property in trust, with income payable to her second husband, Mr. Bruce Montgomery, for life, and ultimately to her three children in equal shares.

After Mrs. Montgomery’s death, Bruce ran the pub business as a sole trader until he sold half the business to one of the children, the Defendant/Appellant ("Appellant"), in or about August 2001. The Appellant and Bruce operated the pub as partners until Bruce’s mental health deteriorated and he was sectioned under the Mental Health Act 1983, later dying in 2013.

The dispute arose from renovations undertaken by the Appellant to the Property in 1999-2000 and 2003, funded by the Appellant on the basis of an alleged understanding with the trustees of the Will ("Trustees") that the Appellant would be entitled to occupy the Property and be repaid for these costs. The Trustees initiated possession proceedings to enforce the trust for sale contained in the Will, leading to this litigation.

At trial, the Appellants alleged proprietary estoppel but failed to establish it. On appeal, they sought to advance a new case based on estoppel by convention, contending that both parties assumed the Trustees were 50% partners in the pub business and thus liable to repay loans made by the Appellants. The Trustees opposed this new case as not having been pleaded or tried and argued that the facts did not support such an estoppel.

Legal Issues Presented

1. Whether the new case of estoppel by convention was open to the Appellants on appeal.
2. If open, whether the estoppel by convention was made out by applying the relevant law to the facts found by the trial judge.
3. Whether one trustee had authority to bind the other trustee in the circumstances.

Arguments of the Parties

Appellants' Arguments

• The Appellants accepted some of the judge’s factual findings but contended that the parties proceeded on the mistaken assumption that the Trustees were 50% partners in the pub business.
• They argued there was an estoppel by convention that the Trustees were jointly and severally liable to repay loans made by the Appellants to the business, and that liability would practically fall on the Trustees due to Bruce’s health and lack of business skills.
• The Appellants submitted that the judge erred in not accepting that the parties made no distinction between the pub business and the Property.
• They contended that the judge was wrong to conclude that the solicitor Trustee did not have ostensible authority to bind the other Trustee.
• They sought an inquiry into the amounts loaned and payment of half that amount by the Trustees, recognizing the Appellant’s 50% ownership of the pub business.

Trustees' Arguments

• The Trustees objected to the Appellants raising a new estoppel by convention argument on appeal, asserting it was not pleaded or argued at trial and would have changed the trial approach significantly.
• They contended that the necessary common assumption was not shared expressly, and that the relevant understanding did not arise until after the renovations were completed.
• The Trustees maintained that the loans were made to the pub business run by Bruce (and later Bruce and the Appellant), not to the Trustees as partners.
• They argued the solicitor Trustee had no ostensible or actual authority to bind the other Trustee to any loan repayment obligation.
• They further submitted that if the claim succeeded, the Appellants would have to account for 50% of profits made in the business over 15 years.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court first addressed whether the Appellants could raise the estoppel by convention argument on appeal. Noting that key elements of the argument had been pleaded, albeit not fully developed, and that permission to amend was granted, the Court allowed the new case to be argued.

The Court then examined the legal requirements for estoppel by convention, emphasizing that a common assumption must be expressly shared, the party estopped must have assumed responsibility for that assumption, reliance must be proven, and detriment or benefit must arise from the assumption.

Reviewing the contemporaneous correspondence and the trial judge’s factual findings, the Court found no evidence of a shared assumption that the Trustees were 50% partners in the pub business or jointly liable for loans. The correspondence consistently indicated that the pub business was run by Bruce and later by Bruce and the Appellant, with the Trustees acting only as trustees of the freehold property, not as business partners.

The Court accepted the trial judge’s conclusion that the loans made by the Appellants were to the pub business, not to the Trustees, and that there was no clear commitment or promise by the Trustees or beneficiaries to repay the Appellants for the renovations.

Regarding authority, the Court found no basis to conclude that the solicitor Trustee had ostensible or actual authority to bind the other Trustee to any loan repayment obligation.

The Court also rejected the Appellants’ wider case based on fairness and common sense, emphasizing that estoppel requires legal foundation and cannot be based on vague or unconfirmed expectations.

Accordingly, the Court held that the Appellants failed to establish the elements of estoppel by convention or any other estoppel claim.

Holding and Implications

The Court dismissed the appeal.

The direct effect of this decision is that the Appellants’ claim for repayment of renovation costs based on estoppel by convention fails, and the Trustees’ position as sole owners of the Property under the Will and not as partners in the pub business is upheld. No new legal precedent was established beyond the application of existing principles concerning estoppel and trustee authority. The decision reinforces the necessity of clear and express agreements when seeking to bind trustees or establish estoppel claims in the context of trusts and family businesses.