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Asset protection: careful what you promise…

Threats to wealth come in many guises.   Mr Southwell was described by the judge in Southwell v Blackburn at the Court of Appeal as ‘shrewd, cautious and guarded’.  He knew that if he married Ms Blackburn, who had two children from a previous marriage, she would have a financial claim against his assets in the event of divorce.  He also knew that, when he bought a property for her and her teenager children to live in with him, putting her on the title with him would be risky too, so he made sure that didn’t happen either.  He bought the property with the help of a repayment mortgage and he made all the repayments.  Exemplary thus far.    
However, he did want Ms Blackburn to live with him.  The case records that there was a significant disparity in their income and assets.  At the time, she had recently divorced and of the £25,000 she received as part of the divorce settlement, she spent £15,000 fitting out a rented house secured from a housing association in which she and her children lived and then £5,000 or so setting up her new home with Mr Blackburn.  A lot of capital, financial and emotional, had gone into her house and so she needed some persuading to ditch it and move to a new home with Mr Southwell, even though she would go from having to pay rent to rent-free accommodation.

Mr Southwell’s mistake was that, to convince her to move, he promised her that she would always have security of occupation in a home with him.  He expected their relationship to last for life and it was found that he assured her that she would be secure for life (not just for as long as their relationship lasted).  He further evidenced his commitment to her by showing her papers demonstrating that she would receive a lump sum and pension in the event of his death, which reassured her further. 
Ms Blackburn’s proprietary estoppel claim succeeded.  Proprietary estoppel is an equitable remedy, requiring an assurance from A in relation to an identifiable asset (such as a property), which is relied on by B, who acts to his detriment as a result of that assurance and A knows it.  Equity steps in to remedy the situation if B’s position is worsened as a result of A’s assurance, which A reneges upon, and it would be unconscionable for A to ‘get away with it’. 
It was accepted that both parties benefited from living together ‘as husband and wife’.   However, the fact remained that Ms Blackburn had suffered detriment in giving up the home that she had spent money on.  To put her back in the position that she would have been in but for the assurances, Mr Southwell was ordered  by the County Court to pay her today’s money equivalent of £20,000 (£28,500) and the Court of Appeal upheld that order.  Perhaps, given that the home he bought had increased in value by £80,000 over the years and her additional claim for a share of the equity failed, he should have considered himself lucky and not appealed. 

Equity rights can upset property rights.  This case confirms that not giving a cohabitee formal equity rights in a property, or not allowing them to pay outgoings, will not offer complete protection if security of occupation assurances have been made.  The detriment suffered need not be entirely financial.  Cohabitees beware.