Equitable Estoppel and Constructive Trusts in Estate Disputes
If a loved one dies and leaves you out of a Will, there are a variety of legal claims that may grant you a portion of the Estate you feel you were entitled to.
The most conventional approach is to make an application to the Court under family provision legislation, arguing that as an eligible person the deceased had a moral duty to provide for your proper maintenance and support which they failed to do.
The second avenue is to make an ‘equitable’ claim. These claims are usually based on estoppel and/or a constructive trust and importantly are available even if were you were barred from making a family provision claim because you were not classified as an eligible applicant under the legislation.
The main difference between the two avenues is that in a family provision claim, the Court will order that the claimant receives a portion of the deceased’s Estate that they deem appropriate and necessary for their proper maintenance and support. However, in a successful equitable action, a claimant will receive whatever they were promised before the person died.
The word ‘estopped’ means precluded or prevented. Thus, it follows that estoppel is a legal principle which ‘prevents’ or stops a party from acting in a way that in inconsistent with their prior action of conduct.
By way of example, a person may be prevented from leaving someone out of their will, if the claimant can prove that they were induced by that person into believing that they would be provided for in some way, and that person has relied on this to their detriment.
This is a form of promissory estoppel, where equity binds the promisor to deliver on the promise, even if the promise was not supported by consideration from the promisee. The key question therefore is whether it would be unconscionable if the promise is not kept by the promisor.
Proprietary estoppel restricts the legal rights of landowners if they have encouraged the belief in another, or at least acquiesced in that other’s belief that he or she has some entitlement over the property, and that belief has been acted upon, usually by some alteration or improvement having been made on the land.
A prime example of a successful proprietary estoppel claim is in the Victorian case of Rasmussen. In this case, the son of a farmer was promised that when he passed, he would receive a large parcel of land. The son worked on his father’s farm without wages in reliance of this promise for a number of years. When the father died, he failed to adhere to this promise within his Will, so the son brought about an equitable estoppel claim and was awarded the parcel of land.
Similarly, a constructive trust will arise where it can be shown that there was a mutual intention of the deceased and the claimant, that the claimant would have some interest in the deceased’s property (whether real property, money, a car, a bank account, a cabinet – basically any kind of property you can think of) and the claimant has relied upon this to their detriment.
The main features of a constructive trust are that the trust is implied by a Court, the Court determines that the owner of the asset is a constructive trustee for the benefit of the true owner, and there is no formal trust document or agreement.
A prime example of a successful constructive trust case is the NSW case of Ogilvie v Ryan. Here there was an agreement between a testator and his housekeeper to grant her a life interest in his house in his Will, in return for her services. In reliance of the promise the woman sold her house and cared for the man without pay until his death. The testator failed to do as he had promised, and in response the woman successfully challenged the Will through a constructive trust claim and was granted the life interest.
However, it is important to note that a constructive trust can be hard to establish. The Courts will always try to look at other remedies before finding that a constructive trust exists, the same applies for equitable estoppel scenarios.
Nevertheless, as discussed above, successful equitable estoppel and constructive trust cases do occur, so if you think you have a potential claim – please do not hesitate to contact Hentys Estate Lawyers today for all of your Estate Dispute needs.