Strover & Anor v Strover & Anor

This claim is brought by the personal representatives of the late David Strover (“the deceased”) against the defendants, the deceased’s brother John Strover (“J. Strover”) and John Ironmonger (“Mr Ironmonger”) in respect of the proceeds of a 10 year policy of assurance (issued on 8^th May 1992 and expiring on 5^th August 2002) issued by Friends Provident (“the FP Policy”). The deceased died on 20^th September 2001, and thereupon the £100,000 guaranteed benefit became payable. The defendants have a counterclaim in respect of another policy (“the GA Policy”) which was taken out by the deceased in 1992 assuring payment of £150,000 on his death within 10 years.

From 1988 until about April 1999 the deceased had been a partner with the defendants in the firm of Strover Leader & Co. Chartered Accountants. A firm of that name had originally been founded in 1973 by J. Strover and a Mr Peter Leader. Mr Leader had gone his separate way in 1981 and shortly thereafter J. Strover had been joined by Mr Ironmonger. The deceased joined the practice as a partner in 1988, on the terms that his share in the partnership was 25%. There was no written agreement as to the terms of the partnership, which was at will.

J. Strover and Mr Ironmonger had agreed, in 1986, to take out term policies on their respective lives written under trust to cover the eventuality of one of them dying and the other then being faced with the prospect of having to pay out the deceased partner’s share and hire additional staff in order to carry on the practice. After the deceased joined it was agreed that he should take out a similar policy, and maintain it at his own expense. At the same time it was agreed that J Strover and Mr Ironmonger should re-write the trusts on which their existing policies were written so as to include the deceased within the ambit of their protection.

The employee who dealt with such matters within the firm on behalf of the partners was David Critchfield. Apart from the policy documentation itself the only contemporary evidence of the deceased’s intentions are to be found in a note written by him to Mr Critchfield on 14^th January 1992 in the following terms:

“David

I need to take out a £100k life policy (new policy) quite apart from other policies. The objective is that the other two partners (before I joined) set up policies whereby say if JYRS died £100k was payable into the partnership to assist in the ‘crippling’ effect of ‘buying’/paying out the deceased’s family. My £100k policy would place my partners as beneficiaries rather than my antecedents to my estate. Pls can we discuss/consider/execute?”

The FP Policy was written under trust. A schedule to it identified J. Strover and Mr Ironmonger as “Additional Trustees” and identified those two as “the Beneficiaries” in Box D. Clause 2 of the Trust Provisions gave the Trustees a power of appointment amongst a class consisting of the applicant (i.e. the deceased) his children and widow and any other person nominated by him, exercisable by deed executed before the 2^nd anniversary of the deceased’s death. There was a restriction on the trustees appointing to themselves beneficially, and a power to release the power of appointment. Subject thereto the Trust Fund (defined to include the policy and its proceeds) was to be held on trust for the Beneficiaries, i.e. J. Strover and Mr Ironmonger.

At the same time as the FP Policy was issued, J. Strover and Mr Ironmonger appear to have effected changes to the trusts on which their respective existing policies were issued so as to mirror those provisions (thus the deceased and Mr Ironmonger became additional trustees of and default beneficiaries under J. Strover’s policy, and the deceased and J. Strover became additional trustees of and default beneficiaries under Mr Ironmonger’s policy). Mr Christensen, who appeared before me on behalf of the deceased, submitted that this was mere coincidence. Although there is no direct evidence that the parties at this point had agreed that each of their policies would mirror each other, it seems to me clear that it was no coincidence that they did. According to the unchallenged evidence of J. Strover, the deceased had dragged his feet over taking out his policy and had had to be pressed to do so. It seems inconceivable that the fact that the other two trusts were changed at the same time and in the same way was coincidence. The only sensible inference is that this was agreed to between the partners.

The primary purpose for which the partners had effected and maintained those policies, namely death of the insured while he was a partner, never happened. What happened was that the deceased found, in early 1999 and aged only 55, that his health required him to cease practice. A meeting took place in about May 1999 at which it was agreed that he would be treated as having retired from the partnership with effect from 31^st March 1999 (a convenient date, being one to which under a recent accounting change the annual partnership accounts were to be drawn). There appears to have been agreement in principle as to the basis upon which what was due to him from the partnership was to be calculated although much remained to be worked out and agreed as to the detail.

The deceased and his wife had for some years been in very strained financial circumstances. The deceased’s widow in her evidence attributes blame for this and much else to the defendants but I am not in a position (nor is it necessary) to make findings as to the truth of this. The tone of such correspondence as I have between the deceased and his former partners does not suggest that his relationship with them was at all strained on a personal level. What is clear is that following his retirement from the firm the deceased’s circumstances became even more parlous. One of the matters discussed between himself and the defendants at meetings which took place in May 1999 (at his home) and February 2000 (in the office) was as to whether various payments which the partnership had made and was continuing to make on his behalf should continue. He was anxious to reduce them so far as possible. These included payment of the premiums in respect of various policies. One of those policies was a permanent health insurance policy (also with Friends Provident) under which the deceased hoped to claim. Another was the FP Policy. The historic practice within the firm was to pay the premiums of these from the partnership bank account and to debit the payments to the deceased’s drawings. At that stage the deceased wished both policies to continue to be maintained, in the case of the FP Policy because, as he told his partners, he thought it was of value to him because he could not by then obtain life cover because of his state of health. The defendants were content for this to happen and continued thereafter to pay the premiums, in the case of the FP Policy until his death, and in the case of the permanent health policy until in July 2001 he asked for those payments to be stopped. In each case this was on the footing that the payments made would be debited to the sums owing by the firm to the deceased on his capital account.

The state of discussions between the defendants and the deceased can be gauged from correspondence which took place between Mr Ironmonger and the deceased in July 2001. A letter to the deceased from Mr Ironmonger dated 4^th July 2001 read in material part:

“It will I am sure come as no surprise to you, that having continued to pay your standing orders, direct debits since 1 April 1999, we now think it is apparent from the various papers enclosed that your ‘capital’ has been fully repaid by you, and probably over repaid.

We shall continue all standing orders, direct debits and cash payments on your account during July, but will pay only half the total payments in August and September with no further payments after 30 September. This provides us with a space to agree on final numbers with you. (Rather than us simply halving things please suggest which to stop and which to continue).

I am enclosing various papers towards sorting the position out and suggest that as soon as convenient we all get together to sort out the details.”

Included in those papers was a statement of the state of the deceased’s capital account as at 31^st May 2001 after allowing, amongst other things, for drawings made since 31^st March 1999. From an accompanying analysis of drawings as at 31^st May 2001 it is clear that these comprised for the most part various direct debits and standing orders which had continued to be paid by the continuing partners after 31^st March 1999, including premiums payable to Friends Provident both in relation to a permanent health policy and in respect of the FP Policy, there described as “Life Cover in Trust”.

The deceased replied on 7^th July in a letter including the following passages:

“As far I see it we three met in the office on 9^th February 2000 (last year) to resolve as much as we could that was outstanding. Draft accounts made up to the date of my retirement – 31 March 1999 were presented, mainly for information and subject to refinement. The subject of work in progress was generally discussed and such matters as Osborne, Shayler and Maclean etc. were mentioned. We agreed that they should be taken out of the equation and put on a separate collection basis.

No further progress was made or indeed mention made of these accounts until I wrote to you on 29^th July last year on the subject of the unpaid tax on my profit share to 31^st March 1999. I also mentioned that a formal system of repayment should be set up to recognise amounts due to me and also to finalise the 1999 accounts-No reply from you.

In December last year John Strover wrote to me [via the weekly notelet system] warning me to stand by for some accounts imminently. Still nothing received.

At this stage I am now personally involved with hospitals, doctors, specialists and the countdown for a major op. so SL&Co were bottom of my list of priorities. Now-5^th July I receive a most comprehensive pack of schedules and other paperwork through the post with a bald statement that in less than a month repayments are to cease. I cannot accept that this course of action is reasonable or indeed that the firm have gone even halfway to repaying off all the amounts due to me. However to further my original request and take a positive and objective view on the current position I will comment in detail on the contents of your letter.

…

LIST OF DRAWINGS

Thank you for keeping going certain payments on my behalf. Please make sure that no further payments to Friends Provident for sickness policies as you know that they are a load of Shisters, but I obviously need to keep the life policy going. As I may have mentioned nobody will now insure me for life -not even Allied Crow bar!

I was not sure what PP Funding was about. This a fairly substantial amount do I Still need to keep it going?”

Mr Ironmonger replied to this on 27^th July:

“I will tell friends Provident to cancel the sickness policy.”

but not commenting further.

The deceased then died without there having been a final resolution of the position consequent upon his retirement. The defendants had evidently not cancelled the DDs in respect of the FP Policy, which accordingly remained in force at his death. The defendants thereafter sought to reach agreement with the widow on a variety of issues, including as to who was entitled to the benefit of the FP Policy proceeds. At one stage the suggestion seems to have been made by the defendants that the fair thing to do was to split the proceeds three ways but it is not clear that this was ever communicated to the widow. The defendants, as surviving trustees of the policy, seem to have given no thought as to whether they should appoint the proceeds under their power of appointment and if so to whom. They had only become conscious of the existence of that power of appointment and their interest in default of appointment when reviewing the position after the death of the deceased. At all events no appointment was made within the 2 year period. The consequence was that, on the plain terms of the express trust, the policy proceeds are held for the defendants in equal shares.

The claimants seek to avoid that result by a variety of arguments. All those arguments are based on one or other of the following propositions:

So far as the facts are concerned, it seems to me that the second proposition and part of the first are sound. As to the first, the fact is that, on the evidence before me, the partners did not consider at the time at which the policy trusts were written, what the position would be in the event of a dissolution of the partnership during their joint lifetimes or an agreed retirement. It seems to me clear that the policy trusts were written without giving thought to this scenario. I would repeat that I do not accept Mr Christensen’s contention that the re-writing of the defendants’ policy trusts so as to mirror those of the FP Policy was coincidental. The only sensible inference is that there was an agreement that each would have a policy written on the same trusts, mutatis mutandis. The part of the first proposition with which I disagree is the contention as to what the parties actually intended or should be taken as having intended from the outset in the event of the retirement of an insured partner. Mr Christensen submitted that there was evidence that, from the outset, the partners had intended that in the event of a retirement the retiree would have the benefit of his policy if he chose to continue to pay the premiums. He was able in cross-examination to obtain an answer from J. Strover to the effect that, as I noted it:

“We were trying to achieve a situation in which the retiring partner would be able to take the policy benefit for himself if he chose to maintain the policy.”

This answer was given in connection with questions he had been asked, first about the circumstances in which he and Peter Leader had dissolved their partnership (when similar policies, not written in trust, had been so dealt with) and, secondly, as to the background against which he and Mr Ironmonger had originally effected policies written under trust. However that does not, in my judgment, lead to the conclusion that when the three partners declared the trusts which they did in 1992 they had the specific intention contended for. Because those trusts included a power of appointment they were flexible enough to achieve the result which J. Strover in his evidence envisaged as and when the need arose to consider the position. The contemporary evidence does not justify the conclusion that those trusts did not reflect that intention if indeed it existed in 1992. I was not persuaded on the evidence that it did. I do not in fact think that any real consideration was given to the point at that time.

As to the second proposition, it is clear that the deceased wanted to keep the FP Policy alive after his retirement because he thought it was of potential value to him, and because he was by that time uninsurable. The defendants were not in a position (and never claimed to be) to insist that, after he had ceased to be a partner, he continue to pay the premiums for their potential benefit. The whole post-retirement discussion between the deceased and his former partners is, in my judgment, consistent with that position.

In their evidence the defendants went a considerable way to accepting this position. As already mentioned, neither in fact appreciated until after the death of the deceased that the combined effect of the trusts and of the fact that the deceased had kept the policy going was that, unless they appointed to the contrary, they would be able to scoop the whole of what they clearly then regarded as a windfall benefit. What they then persuaded themselves was that the true nature of the understanding between themselves and the deceased was, and had been right from the outset in 1992, that, on the deceased’s retirement, the policy trusts would continue to apply unless and until all financial issues resulting from the retirement had been resolved between themselves and the deceased, whereupon (and I quote from Mr Ironmonger’s evidence before me):

“it would then have been the common assumption that the policy and its benefits were then his whatever the trusts actually said without anything further needing to be done.”

I confess to finding strange the idea of the deceased’s beneficial entitlement to the policy being subject to a pre-condition that all financial issues be first resolved. As an abstract matter the existence of the policy had no connection with the retirement of a partner and the payment out of his entitlements. It was not suggested that this pre-condition to what was otherwise the common (albeit mistaken) assumption was ever the subject of any express communication between the defendants and the deceased. The proposition that the deceased shared such an assumption posits that the deceased was willing to maintain the policy at his own expense following his retirement out of the hope either that the consequences of his retirement would finally have been worked out before his death before August 2002, or that if he died before such a resolution the defendants would nevertheless make some appointment in favour of his estate or dependants. This is thoroughly implausible. There is no reason to suppose that the deceased had any better knowledge than the defendants of the content of the policy trusts when he asked them to continue debiting the premiums to his account rather than to allow the policy to lapse. I find that at that stage both the deceased and the defendants were proceeding on the assumption that if he continued so to maintain the policy it was on the footing that he had the benefit of the policy and that his having that benefit was not subject to any pre-condition that there should be final agreement as to every financial issue arising out of the retirement. I do not accept the evidence of J. Strover or Mr Ironmonger that they themselves believed at the time of the deceased’s retirement that the deceased’s entitlement was subject to any such pre-condition. That is not because they were other than sincere in their evidence. I did not find them to be untruthful witnesses. However I think that their evidence as to what they believed at the time has been coloured sub-consciously by what they now believe to be a correct analysis and a fair result. Indications of such a sub-conscious process at work was apparent in J. Strover’s initial (but subsequently withdrawn) evidence as to the nature of his original agreement with Mr Leader. Mr Ironmonger in his evidence pointed out that in his letter of 7^th July 2001 the deceased had not quarrelled with the description of the policy as being “in trust”, but Mr Ironmonger did not at that point have a clear idea of what this meant, nor did he correct in his subsequent letter the assumption which the deceased was clearly making. The fact is that neither of them really knew, and nor did J. Strover, what was meant by the policy being “in trust”, nor did any of them think that it mattered.

What are the legal consequences of these findings of fact? The claimants’ primary case is that the policy trusts should be rectified, it being submitted that Box D ought to be reformed by inserting the words:

“if the settlor shall die whilst a partner in the firm of Strover Leader & Co. or otherwise for the settlor absolutely..”

I do not think that this is a case for rectification at all. The fact of the matter is that the trusts on which each partner caused his policy to be written were precisely the trusts on which each intended to write them. The problem was that they, neither collectively nor individually, had directed their minds to what was to happen in the event of a retirement. Had they done so it is entirely possible, even probable, that they would have accepted the amendment which the proposed rectification seeks to contrive, and which neatly achieves a result which was otherwise achievable only by the relatively cumbersome (and non-compellable) route of an exercise of the power of appointment. That does not, however, in my judgment entitle the court to rectify the policy trusts, whether one views the document being rectified as the implementation of a tri-lateral agreement or (as Mr Christensen submitted it was) a purely unilateral instrument in relation to which the intention of the deceased alone had to be considered. In fact I consider the former to be the correct analysis since I have found that all the parties were agreed on the form which their respective policy trusts should take.

The alternative case, introduced by amendment in the course of the trial, is that the policy proceeds in the hands of the defendants are subject to a constructive trust “for such partnership purposes as had been intended by the settlor” and that the partnership having been dissolved the purposes (to provide death in service protection) had come to an end. There is then a pleading that the trusts having failed there is a resulting trust to the deceased.

That is not an approach which, expressed in that way, I am able to share. As I understood it, it depended on establishing a shared understanding from the outset as to what was to happen on retirement, and I have rejected the submission that there was such a shared understanding.

The findings of fact which I have made in the course of considering the claimants’ pleaded case do, however, expose the possibility of putting the claimants’ case in a different way. This, unfortunately, did not occur to me until after the argument had concluded on 13^th April 2005 and I had retired to consider my judgment to be delivered the following day. It having occurred to me, I invited the parties overnight to consider the point. The point as expressed by me in my note to counsel was:

“If I were to find that the basis on which the deceased kept up the payments of premium (or consented to his being debited with their cost) following his retirement was, to the knowledge of the defendants, that the policy and its benefits were wholly for his benefit, a possible line of argument seems to me to be that the defendants should not be allowed to contend to the contrary following his death. The argument might be put on the basis of an estoppel by (implied) representation, an estoppel by convention, or constructive trust/proprietary estoppel (the latter doctrines having a considerable overlap in the light of Oxley v Hiscock [2004] EWCA Civ 546).

The question upon which I wish to hear further argument is whether any of these arguments is, or can be, relied on by the claimant.”

In the light of that, when the court sat on the following day, Mr Christensen submitted that the correct analysis on those findings would be that there was an estoppel by convention, relying on the well-known passage in the judgment of Brandon LJ in Amalgamated Investment & Property Company Ltd v. Texas Commerce International Bank [1982] 1 QB 84 at p. 130G-131A which cites with approval the relevant passage in the 1977 edition of Spencer Bower & Turner, Estoppel by Representation. Alternatively, he submitted that the doctrine of proprietary estoppel applied: the deceased had expended money (or incurred a liability) in a mistaken belief as to his rights, while the defendants had stood by and encouraged that expenditure. That raised an equity in favour of the deceased, which the court should satisfy by fulfilling the common expectation, namely that the FP Policy proceeds should be treated as his. He referred me to the passage in the judgment of Browne-Wilkinson V-C in the Court of Appeal in Grant v. Edwards [1986] 1 Ch. 638 at 657G-H as containing the applicable statement of principle. He was not inclined to put forward any argument for a constructive trust. As to that he confined his constructive trust argument to the situation where a common intention had been established at the outset. He did not seek to argue that either of the estoppel arguments were open to him on his existing pleading (indeed he conceded that they were not). He did not seek permission to amend his pleading.

Mr Dumont, while pointing out that the concession that the arguments were not open to the claimants on their pleading meant that strictly he did not need to deal with those arguments, took a number of points which he had very helpfully reduced to written form overnight. In summary they were:

The further observations on the facts which Mr Dumont made were, first, that it was wrong to say that the deceased had kept up the payment of the premiums: they had in fact been kept up by the defendants. That submission is correct. However, as I find, the defendants owed no obligation to him, and he owed none to them, to keep up those payments. It is clear that they did so as the result of the discussions which had taken place in May 1999 and February 2000 as to which payments “the partnership” would continue to make at the deceased’s expense. It is clear that the continued payment was on the basis that they would be debited to the deceased in the final accounts.

Secondly it was submitted that the accounting, post retirement, for these premiums was exactly the same as it always had been, namely as drawings on capital account: the continuing partners did not need the consent of the deceased to continue that accounting practice. I do not accept this submission. While the partnership continued the deceased was bound, by agreement with his partners, to maintain the policy at his own expense. This was reflected (and secured) by the practice of paying them out of partnership funds and treating them as drawings by the individual partners. Following the deceased’s retirement his obligation to pay them ceased. The defendants would not in my judgment have been justified in continuing to pay them at his expense without his consent. In fact all the evidence was that it was the deceased who asked the defendants to keep up the payments on his behalf because he could not now get life cover. It was accepted by J. Strover in his oral evidence that words to that effect had been used by the deceased at one or other of the May 1999 or February 2000 meetings, and were what was being referred to by him in the conversation alluded to by Mr Fairbrass in a letter he wrote to Mr Ironmonger in March 2002.

Thirdly, he relied on the deceased not having demurred at the description of the policy as “Life Cover in Trust” in Mr Ironmonger’s letter to him of 4^th July 2001. However, as I have found, neither Mr Ironmonger nor he in fact appreciated what this meant.

Fourthly, he pointed out that the payments of premiums after July 2001 amounted at most to £134.76. To my riposte that the date to look at was either May 1999 or February 2000 (when the continued maintenance of the policy was discussed) Mr Dumont replied (and I agree) that even on that basis the amounts paid were relatively small (the premium was some £40.00 per month).

Finally he submitted that, the point not having been pleaded, relevant facts had not been canvassed with the witnesses. I return to this point below.

In support of the submission that there had been no detriment to, or change of position on the part of the deceased sufficient to raise an estoppel, Mr Dumont submitted that the deceased had not been prejudiced in any way. He had not himself paid anything. All that had happened was that book entries had been made for the purposes of settling a final partnership account. No such account had ever been settled and he had been, and his estate was, free to withdraw his consent to the debiting which had taken place. Moreover, it was submitted, there had been no change of position on the deceased’s part since, by 7^th July 2001, his capital account was already overdrawn yet the defendants confirmed thereafter, notwithstanding their earlier threat, to make the payments.

There is much force in those submissions. However, I do not think it possible to say that there was no detriment to the deceased. One has in my judgment to consider what the position would have been had the parties in fact appreciated what the true position was. Had they appreciated it, it would not have affected the deceased’s wish that the policy be maintained as his expense for his benefit. Except as a negotiating tool, there was no obvious reason why his former partners should not have acceded to that wish without more ado. Since, as I find, they assumed that the policy was already for his benefit, I think that this is what they would have done. As a negotiating tool it would have been a double pointed dagger. As matters in fact stood, the defendants’ own mirror policies suffered from the mirror vice that their benefits were in each case payable, as to half, to the deceased, unless (as a trustee) he could be prevailed on to join in an exercise of the power of appointment to alter that destination. I do not think that in reality the parties to the imaginary negotiation would have spent much time in arguing over who was the better life. I think that they would quite quickly have agreed to re-organise all the policies so that the “correct” default beneficiaries were put in place.

Accordingly the deceased’s mistaken assumption (which as I have found was shared) did cause him detriment.

Mr Dumont’s third proposition assumed that I was against him in relation to the principle of an application in those circumstances of the doctrine of proprietary estoppel. This proposition was that that doctrine gave rise to the “minimum equity to do justice”: Crabbe v. Arun D.C. [1976] Ch. 179, per Scarman LJ at 198, approved in Gillett v. Holt [2001] Ch. 210. Mr Dumont took me to the recent decision of the Court of Appeal in Jennings v. Rice [2003] 1 P&CR 100 where the judgments of Aldous LJ and Robert Walker LJ (with both of which Mantell LJ agreed) stress the need for proportionality between the expectation and the detriment in fashioning the remedy to be given. Mr Dumont submitted that the minimum equity, which would do justice in the present case, was the re-crediting of the payments.

Those submissions did not in terms deal with an analysis based on estoppel by convention. As it seems to me an estoppel by convention might have a different effect so far as remedy is concerned from a proprietary estoppel. The submissions did however accept that, subject to the point about detriment, if I made the findings contemplated by my note to counsel, there would prima facie be a proprietary estoppel. In my judgment this is, if anything a case of proprietary estoppel rather than estoppel by convention. The latter doctrine applies in the context of a transaction between the parties made on a common assumption. Here it is difficult to identify that transaction.

On the findings I have made I conclude, therefore, that there was a proprietary estoppel, and that that is the only route by which the claimants can in theory succeed in their claim to any relief in respect of the policy or the premiums paid to maintain it. The question which has given me real anxiety is whether the court should grant such relief in the light of the concession that the relief was not available on the basis of the pleadings. With much doubt I have concluded that it can and should for the following reasons.

To have raised the point, a pleading would have had to assert that it was the common belief of the parties following the retirement that the benefit of the policy would be the deceased’s if he chose to maintain the premiums. It would also have had to plead that he had paid the premiums following the retirement on the basis of that assumption. Neither of those allegations was pleaded. However both allegations formed central planks in the evidence relied on by the claimants in support of their original plea that “it was implicit in the [oral agreement made in 1992] that any policy of assurance taken out for [the] purpose [of providing financial protection for the continuation of a Partner in practice]” (see paragraph 3 of the Amended Particulars of Claim) and their plea (in paragraph 7) that it had not been the deceased’s intention to gift the proceeds to the defendants. The only evidence upon which the claimants could and did rely to support these pleas was, apart from the nature of the policy itself, the inference to be drawn from the conduct of the deceased in paying the premiums. The answer given by J. Strover in his witness statement in relation to this was:

“It was our understanding and still is that in the event of one or other of us retiring from the partnership for whatever reason the policies would remain in force until both the terms on which either of us were to retire had been agreed and any monies due had been paid.”

Accordingly, on the rectification claim one of the central issues was as to the basis on which the premiums had continued to be paid following the retirement. This was fully canvassed in the oral evidence. I am not persuaded that Mr Dumont would have conducted his re-examination of his witnesses in any different manner had he appreciated that this argument would be made.

So far as detriment and/or change of position is concerned, it can I think fairly be said that the failure to plead the point meant that the defendants were never proofed, or otherwise given the opportunity to give evidence either in chief or in re-examination, on what would have happened had the common assumption not been made. Such evidence, necessarily of a counter-factual nature, would however in reality have been of more of an argumentative than truly evidential character. Given my finding, on the evidence which they did give and which I was not able to accept in its totality, that their assumption was that the policy and its proceeds belonged to the deceased if he chose to continue the payments, I do not think that they have been deprived of anything of substance in not having the opportunity to argue about what would have happened had the incorrect assumption not been made.

Following the conclusion of that further argument, and after I had once more reserved my judgment, Mr Christensen wrote to me supplying a form of amendment with further written submissions in favour of its being allowed. Mr Dumont responded (at my invitation) with some further short written submissions of his own. This further passage of submissions did not cause me to alter the view at which I had by then provisionally arrived and which is expressed in paragraphs 37 to 39 above.

I have accordingly considered it appropriate to go on to consider what the consequences of the proprietary estoppel should be in terms of remedy. I do not think that the just solution is obvious. In his discussion of the question in Jennings v. Rice [2003] 1 P&CR 100, Robert Walker LJ said at paragraph 44:

“The need to search for the right principles cannot be avoided. But it is unlikely to be a short or simple search, because (as appears from both the English and Australian authorities) proprietary estoppel can apply in a wide variety of factual situations, and any summary formula is likely to prove to be an over-simplification. The cases show a wide range of variation in both of the main elements, that is the quality of the assurances which give rise to the claimant’s expectations and the extent of the claimant’s detrimental reliance on the assurances. The doctrine applies only if these elements, in combination, make it unconscionable for the person giving the assurances (whom I will call the benefactor, although that may not always be an appropriate label) to go back on them.”

and, after a review of the authorities and discussion of the issues, summarised the position at paragraph 50 in the following words:

“To recapitulate: there is a category of case in which the benefactor and the claimant have reached a mutual understanding which is in reasonably clear terms but does not amount to a contract. I have already referred to the typical case of a carer who has the expectation of coming into the benefactor’s house, either outright or for life. In such a case the court’s natural response is to fulfil the claimant’s expectations. But if the claimant’s expectations are uncertain, or extravagant, or out of all proportion to the detriment which the claimant has suffered, the court can and should recognise that the claimant’s equity should be satisfied in another (and generally more limited) way.”

This is not really a case involving an “assurance” at all, except to the extent that the common assumption implied one. The mistake, which was made, was not one which could be blamed more on the defendants than on the deceased himself. They were all three trustees of the policy and ought to have known what the policy trusts provided. It is probable that the defendants were in a better position to know since they had the documentation and the deceased did not (an inference I draw from the correspondence between Mr Ironmonger and Mr Fairbrass after the death). That fact by itself is not, however, what makes it unconscionable for the defendants now to assert their strict rights under the policy trusts. What in my judgment makes it unconscionable for them to do so is my conviction that, but for the mistake having been made, they would not have insisted on those strict rights during the period while the deceased’s entitlements were under review following his retirement. The common mistake deprived the deceased of the opportunity to invite the defendants to take the corrective action which was necessary to be taken if the consequences of that mistake were to be avoided.

My conclusion is that the equity in these circumstances is best valued by assessing the probabilities of the defendants, had they been so invited, of taking those corrective steps. For the reasons given above, those seem to me to have been very high. Although the deceased’s health was poor, he was aged only 55 when he retired. J. Strover told me that the possibility that he might return to work in the practice as a consultant was actively contemplated in the post-retirement period. There was no evidence that anyone contemplated that he would actually die during the remaining term of the policy. The most obvious use for the policy in the intervening period would have been if such a policy had been required to support some short term borrowing during that period. In the nature of things that would only have been a borrowing by the deceased himself. The beneficial ownership of the policy would therefore not have likely to have been a matter of much controversy between the parties. On the defendant’s case as to their beliefs as to its purpose, their only interest in retaining their beneficial interest was as a carrot to encourage the deceased to agree the final terms of the dissolution but, for the reasons given in paragraph 32 above, this would not have been a very powerful tool.

Although a very high one, the probabilities of the corrective steps being taken were not 100%. In order to allow for the possibility that they would not have been taken, either at all or in time, some discount must be allowed. I would assess it as 20%.

That result is certainly disproportionate to the amount of premiums debited to the deceased’s account. That however is simply the result of the nature of the property in which respect of which estoppel arises, namely a term assurance yielding a relatively substantial sum for a relatively modest monthly premium.

This concerns a policy (the GA Policy) taken out by the deceased in 1992 assuring payment of £150,000 on his death within 10 years. Each of the partners took out a similar policy at the time.

These policies were required in connection with a loan raised by the partners from a commercial financier, NWS Trust Limited (“NWS”), for partnership purposes. It had originally been envisaged that the loan would be for £150,000 but the loan in fact made was for £120,000 and was structured by NWS as a loan to each partner of £40,000.

In applying for the policies each of the partners had asked that the policies be written “in Partnership Trust” (see J. Strover’s letter dated 13^th September 1991) and had accordingly been supplied with and had completed forms of declaration of trust. The trusts contemplated by these forms were different from those contained in the FP Policy trusts: in this case the default beneficiaries (the partners other than the insured) were given shares corresponding to their relative interests in the partnership assets. In the case of the deceased’s policy this meant that J. Strover took 57% and Mr Ironmonger 43%, and the class of appointees under the discretionary power of appointment was limited to any partner for the time being in the firm of Strover Leader & Co.

NWS wanted the policies to be charged in support of the borrowing. It did not want the policies to be written in trust. In the case of J. Strover and Mr Ironmonger this meant that steps had to be taken to nullify the effect of the trusts (this involved all three partners executing documentation making appropriate appointments and assignments). No such documentation exists in the case of the deceased’s policy, but a letter exists on the firm’s file from the broker to Mr Critchfield returning “the trust form” in relation to the deceased’s policy and saying, “be advised that this policy is no longer in trust”.

J. Strover’s recollection was that there had been some delay in getting the deceased’s policy issued because of the need for a medical. The likely explanation for the absence of documentation taking the deceased’s policy out of trust is, I think, that all the partners had filled in appropriate declaration of trust forms when they originally applied for the policies. The first two policies had been processed and issued on that basis before NWS had insisted on the “removal” of the trusts. Because of the delay in issuing the deceased’s policy it was possible to remove his “trust form” from the final application made to the insurer. That will explain why the insurer has no record on file of any application for his policy to be written in trust.

It was, nevertheless, the understanding of the defendants (as they told me and I find) that, although at the request of NWS not written under express trusts, each policy was nevertheless regarded as a partnership asset at all times. That corresponds with the way in which the partners over the ensuing 9 years or so dealt both with the loans and the policies in their agreed partnership accounts. The loans, although made individually to each partner by NWS, were shown as a liability of the partnership. The premiums, although payable individually vis-à-vis the insurer, were treated as deductions in arriving at the profits of the partnership.

The loans were in fact paid off early, in September 1999, and the policies then re-assigned by NWS to the respective policy holders. Their continued existence (and in particular the continued existence of the deceased’s policy) seems not to have been the subject of any discussion with the deceased following his retirement: the continuing partners continued to pay the premiums on all three policies at their own expense as an outgoing of the business of the firm of which they were the only two partners.

Following the deceased’s death his widow sought the assistance of a trusted friend and advisor, Mr Fairbrass, to help her with problems in connection with the estate and its entitlement vis-à-vis the firm or its continuing members. J. Strover, by a letter dated 8^th February 2002 wrote:

“…As you are aware, at 20 September 2001 we had not finally agreed and settled matters arising from David’s retirement. Taken together with the lack of a Will and the absence of a written Partnership Agreement we now together have to agree how to deal with the “Windfall” monies arising from these two policies.”

He proposed that, although there was an argument “that all the proceeds belong to Strover Leader & Co”, both the FP Policy and the GA Policy proceeds should be split between the three partners in their profit-sharing ratios.

Mr Fairbrass replied, rejecting the suggestion in the case of the FP Policy but saying in reference to the GA Policy:

“The position here is not quite so clear cut in that, as you say, premiums on this policy have always been fully paid by the partnership and at no direct cost to David. There still exists the moral issue, however, of the practice profiting from the death of an ex-partner long after his “retirement”. You have obviously taken this aspect on board in the final paragraph of item 3 of your letter by suggesting that the proceeds of “Partnership policies” should be split in profit sharing ratios. I can confirm that Dee [the widow] will accept that approach.”

The defendants’ position before me was that the strict position was that this represented a contract by the widow which they would have honoured had not the widow subsequently claimed that the whole of the proceeds belonged to the estate. But for that contract, they submitted that the strict position was that they were entitled to the whole of the proceeds.

In the defence to the counter-claim any such contract was denied. One of the points taken was that Mr Fairbrass did not have the authority of the claimants, and in particular the second claimant (the widow’s co-administrator), to make such a contract, and in the case of the second claimant did not purport to be making it on his behalf. This point was not the subject of any argument before me, but seems to me in principle a good one. Such offer as was made was to the widow rather than to the estate. It seems to me, however, that I need not decide whether or not there was a contract or, if so, whom it bound. Neither of the parties to this litigation relies on the contract to found its claim for positive relief.

The defendants’ case rests primarily on the assertion of the express written trust which they believe was originally declared in relation to the deceased’s GA policy. However, for the reasons I have given, I think it unlikely that the policy ever became subject to those written trusts. If it did, it was nevertheless treated as having come out of those trusts in the same way as the other two policies. This way of putting the defendants’ case therefore fails.

The alternative basis was that there was a constructive trust arising from the common intention of the parties when the policy was taken out that all the policies should be held as partnership assets, and/or a resulting trust arising from the payment of the premiums “out of Partnership funds as a Partnership expense”. It was submitted that as continuing partners they were therefore entitled to the entire proceeds, although prepared to allow the deceased’s estate 25% to avoid any dispute.

It seems to me that there is a hiatus in the reasoning of this claim. If the policies were all assets of the partnership, they have in some way to be brought into account on the dissolution of the partnership with the deceased: they would not, without more, become assets of the new partnership constituted between J Strover and Mr Ironmonger following that dissolution. I think that this was accepted by Mr Dumont in his closing speech and that he further accepted that the policy monies had to be so accounted for even though the policy monies had only become payable after the retirement and as a result of the continuing partners having kept up the premiums at their own expense.

The claimants by contrast deny that the policies were ever partnership assets. They submitted that the whole structure of the arrangement with NWS showed that the parties were undertaking individual liabilities against which the policies were designed for their individual protection. Once, therefore, the question of an express written trust was out of the way, all one was left with was a policy taken out by the deceased for his own benefit. The fact that the premiums had been charged to profit and loss account rather than to drawings had simply been the wrong way in which to draw the accounts and did not justify the inference that the parties had agreed, between themselves, to treat the policies as a partnership asset.

I do not agree with those submissions. In my judgment they confuse the way in which NWS agreed to make the loans with the way in which the partners, as between themselves, agreed to treat the loans as partnership rather than individual liabilities, and the premiums on the policies likewise. Given the partners’ different profit shares the accounting treatment cannot have been anything other than a deliberate and agreed treatment. There was, in my judgment, agreement between the parties that all three policies should be maintained at partnership expense for the benefit of the partnership with the contemplation that, if monies became payable thereunder, they should enure to the partnership.

I would accordingly hold that the policy monies are so held by the deceased’s estate, the partnership being that between the deceased and the defendants the affairs of which have not yet been fully wound up.