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Davies v Davies: the Court of Appeal quashes the award of £1.3 million and substitutes it with £500,000

In a previous post on 15 July 2015 I referred to the judgment of HHJ Jarman QC in this on-going saga in which he had awarded the claimant, aka “the Cowshed Cinderella” £1.3 million. This was following an unsuccessful appeal by her parents against the finding that an equity had arisen in their daughter’s favour in respect of the work she had carried out at their farm over many years. Her parents appealed again to the Court of Appeal and judgment was given on 19 May 2016, reported at [2016] EWCA Civ 463.

Lord Justice Lewison referred to the “lively controversy” about the essential aim of the exercise of the broad judgmental discretion in deciding how to satisfy the equity: one line of authority taking the view that the essential aim is to give effect to the claimant’s expectation unless it would be disproportionate to do so and the other taking the view that the essential aim is to protect the claimant’s reliance interest so that he/she is compensated for the detriment suffered. Lewison LJ stated that logically, there is much to be said for the second approach, although he did not think it necessary to resolve this controversy on this appeal. Nevertheless, he referred to Jennings v. Rice in which Robert Walker LJ had referred to a class of case in which the assurances and reliance had a consensual character not far short of a contract. In such a case “both the claimant’s expectations and the element of detriment will have been defined with reasonable clarity and in that kind of case the court is likely to vindicate the claimant’s expectations. Robert Walker LJ referred to another class of case in which the claimant’s expectations are uncertain – in these circumstances, the claimant’s expectations would be “no more than a starting point.” In Davies, Lewison LJ stated that it was not entirely clear what the court is to do with the expectation even if it is only a starting point. He agreed with counsel for the respondent that a useful working hypothesis is to adopt a:

“sliding scale by which the clearer the expectation, the greater the detriment and (emphasis added) the longer the passage of time during which the expectation was reasonably held, the greater would be the weight that should be given to the expectation.”

On the particular facts of the case, it was found that the judge at first instance had taken far too broad a brush and failed to analyse the facts that he found with sufficient vigour in deciding to award the claimant £1.3 million. That decision was overturned and substituted with a total award of £500,000. Lewison LJ identified a series of “different (and sometimes mutually incompatible) expectations” over time, some of which were repudiated by the claimant herself, others of which were superseded by later expectations. Nor, he found, was this a case in which the claimant had positioned her whole life on the basis of her parents’ assurances. His Lordship referred to the position of the respondents before the judge, in which they had argued that the equity would be satisfied by a payment of £350,000 calculated as follows:

  1. i) An accommodation element of £180,000. This would enable her to pay off the mortgage on her other property at Ludchurch, with the consequence that she would have had free accommodation for her lifetime, and also a capital asset. ii) A partnership element of £22,000. This represented the profits to which she would have been entitled between 1998 and 2001 if she had been made a partner as she had expected. iii) A company element of £120,000. This represented a one half share of the profits made by the company from mid-2008 to mid-2012. iv) The balance of £28,000 represented underpayment for the work Eirian had carried out on the farm in the early years.

In terms of the “non-financial” aspects of the claim, which included the disappointment of the claimant’s expectation of inheriting the land and that she gave up the ability to work shorter hours in a working environment of her choosing and freedom from the difficult working relationship she had with her parents, Lewison LJ rejected the figure of about £1 million which had apparently been attached to this by the judge at first instance. Whilst accepting that some award must be made in respect of non-financial aspects of the claim, Lewison LJ found that the appropriate award was £150,000, giving a total award of £500,000.