Great Expectations: Guest v Guest [2022]
Proprietary estoppel is an equitable remedy available if you can prove the following elements:
- Assurance – a promise was made to you (which created an expectation on your part)
- Reliance – you must have relied on that promise
- Detriment – in reliance of that promise you did something to your detriment
Typically proprietary estoppel is raised in farming cases where someone is promised a farm (usually on a statement as general as “one day, all this will be yours”) in return for unpaid labour and this is then renegaded on when the farmer dies. Given the increasing value of land as a commodity it is not surprising that cases involving land is making law time and time again, and despite the growing importance of having everything recorded in writing.
As proprietary estoppel is an equitable remedy, the courts will try and do what is just. On the one hand the court will try and give effect to the expectations of the party relying on the promise and on the other hand the court will try to compensate the party to extent of the detriment that they have actually suffered.
This balance between expectation and detriment was called into question in the recent case of Guest v Guest [2022] where the Supreme Court was asked for the first time to provide guidance in this area. Prior to this only two cases have ever made it way to the previous House of Lords.
The Facts
Tump Farm is a working dairy farm of some 150 acres, in Sedbury, near Chepstow in Monmouthshire and the subject matter in dispute. It had been farmed by the Guest family for three generations since 1938. Initially it was leased to the parents of David Guest, but when his father died in 1964, David and his mother bought it and farmed it in partnership until 1992. David married Josephine, in 1964, and by 1992 Josephine was also a member of the farming partnership.
The freehold of all the buildings and land was valued at £2,855,000 as at August 2018. Tump Farm was valued as an agricultural business at around £3,350,000 – the dairy farm business worth just under £500,000.
David and Josephine had three children. Andrew, being the eldest, followed by his sister Jan and younger brother, Ross.
In October 1981, David and Josephine each made wills, to ensure that Andrew and Ross would inherit Tump Farm and its business in equal shares (once they reached the age of 25) but on terms that they would have to raise monies to pay a pecuniary legacy to Jan equal to one fifth of the value of the residuary estate.
Andrew left school in 1982 at the age of 16 and worked full time at Tump Farm until 2015, a period of some 33 years. From 1989 he and his wife Tracey lived in Granary Cottage, which is situated on Tump Farm, and is located in close proximity to the main farmhouse (Stone Cottage) occupied by his parents. In the course of the 15 years during which Andrew worked on the Farm up to 1997, David would shut down disagreements with Andrew over farming decisions by saying “It’s my farm, when you take over you can do what you want”, or words to similar effect.
In 2015 relations between Andrew and his parents deteriorated and Andrew left Granary Cottage and stopped working on Tump Farm. In the year prior, David and Josephine had changed their Wills to effectively cut Andrew out of his inheritance, save for a right to reside in Granary Cottage.
The Initial Judgments
In 2017 Andrew brought proceedings against David and Josephine, seeking a declaration of entitlement under the principles of proprietary estoppel to a beneficial interest in Tump Farm, together with a declaration of entitlement to reside in Granary Cottage.
After a trial spreading over some 6 court days in November and December 2018, HHJ Russen QC (sitting as a High Court Judge) gave judgment in favour of Andrew as it was found that there was clear enough assurance made by David, during conversations over a number of years that Andrew would inherit a substantial share of Tump Farm.
The judge felt that it was obvious that Andrew had reasonably relied on David’s assurance. This could be seen from the fact that Andrew worked hard on the Farm for many years for little financial reward, even taking into account the provision of accommodation at Granary Cottage and the payment of certain living expenses. He would not have done so if David had not encouraged the idea of an inheritance.
The judge ordered David and Josephine to make a lump sum payment to Andrew composed of 50% after tax of the market value of the farming business, and 40% after tax of the market value of Tump Farm (subject to a life interest in favour of David and Josephine in the farmhouse). This was to achieve a clean break between the parties but clearly Tump Farm would have to be sold in order to raise the lump sum payable to Andrew.
David and Josephine appealed and the Court of Appeal were called upon to decide the question of appropriate remedy. Unfortunately they loss the appeal and so made a further appeal to the Supreme Court
The Decision of the Supreme Court
Lord Briggs gave the main judgment.
Firstly, the court felt that the true purpose of an appropriate remedy in proprietary estoppel cases was not to identify either compensation for detriment or fulfilment of expectation. Rather the true purpose, is dealing with the unconscionability constituted by the promisor repudiating his promise. The issue is not minimum equity, but minimum equity to do justice. In this context justice means remedying the unconscionability identified in the promisor’s repudiation of his promise.
The court went to great lengths to review all the relevant authorities in the previous cases. The court identified the relevant tests:
- The first stage (which is not in issue in this case) is to determine whether the promisor’s repudiation of his promise is, in the light of the promisee’s.
- The second (remedy) stage will normally start with the assumption (not presumption) that the simplest way to remedy the unconscionability constituted by the repudiation is to hold the promisor to the promise detrimental reliance upon it, unconscionable at all.
Lord Briggs decided that the parents should be entitled to choose between
a) putting the farm into trust for the children subject to a life interest in the parents’ favour; or
b) making an immediate payment of compensation on the lines the judge ordered but with sufficient discount to reflect the early receipt.
He left it for the parties to agree the remedy and failing which it would be sent back to the Chancery Division for determination if no agreement could be reached.
Lord Leggatt also allowed the appeal but for different reasons. He considered the core principle underpinning relief for proprietary estoppel is to prevent a party going back on a promise without ensuring that the party who relied on that promise will not suffer a detriment as a result of that reliance. To achieve this a court may either: (1) compel performance of the promise (or order equivalent payment to put the promisee in the position they would have been if the promised had been performed); or (2) award compensation to put the promisee into as good a position as if they had not relied on the promise. The court should adopt whichever method results in the minimum award necessary to meet the aim.
Final Words
The court were creative in how they approached the appropriate remedy in this case by allowing the promisor to decide how they should make good on their promise.
Each case turns on its own fact but this case has illustrated some of the things a court will need to consider including what was actually promised, whether a discount should be applied for acceleration, the proportionality of the remedy to the detriment actually suffered, etc.
Clearly the lesson to be learnt here is to be careful what you promise and not make assurances you don’t intend to keep. Having everything documented (for example, in a Will and partnership agreement and/or employment contract) will clearly assist in avoiding disputes arising from relationship breakdowns and costly litigation later down the line.
If you are in need of specialist legal advice relating to inheritance disputes call our highly experienced Dispute Resolution experts on 0330 822 3451 who will be able to assist. Alternatively, you can request a call back or get in touch online.