Key points
- Is going back on the promise unconscionable in the circumstances?
- If so, the simplest remedy is to enforce the promise
- Some limitation may be necessary if strict enforcement is disproportionate
- Earlier-than-anticipated receipt requires a discount
Proprietary estoppel arises when a person gives a promise or assurance to another that they have or will be given an interest in property and that person reasonably relies on the assurance to their detriment.
In Guest and another v Guest [2022] UKSC 27; [2022] PLSCS 169, the Supreme Court has considered for the first time the principles applicable to proprietary estoppel and provided guidance in determining an appropriate remedy.
The background
The case concerned a dispute between members of a farming family over the future of the family farm near Chepstow. After leaving school in 1982, Andrew lived and worked on the farm with his parents, with increasing responsibilities, for 33 years. He was paid for his work but at low rates. He had been promised by his parents, David and Josephine, that he would inherit a substantial but unspecified share of the farm, sufficient to enable him to continue a viable farming business after David’s death.
David and Josephine had made wills in 1981 providing for him and their other son Ross, to inherit the farm in equal shares, subject to financial provision for their daughter Jan.
From around 2008, the relationship between Andrew and his parents began to deteriorate. In May 2014 David and Josephine made new wills removing Andrew’s inheritance. In April 2015 they dissolved their farming partnership with Andrew and gave him notice to quit the property on the farm in which he lived with his family. Andrew then issued proceedings claiming a share in the farm or its monetary equivalent on the grounds of proprietary estoppel.
The claim
The trial judge decided Andrew had continued to work on the farm for little financial reward because he reasonably relied, to his detriment, on assurances made by his parents as to his inheritance. The parents were ordered to make him an immediate payment of around £1.3m – 50% of the value of the business and 40% of the value of the land and farm buildings – to satisfy his expectation of what he would have inherited.
The parents appealed arguing that the judge should have fashioned the remedy not on Andrew’s expected inheritance, but on his contribution to the value of the farm or his loss of opportunity to work elsewhere. The Court of Appeal dismissed the appeal deciding that it was appropriate to order a remedy by reference to Andrew’s expectation. The parents appealed to the Supreme Court.
The law
Lord Briggs gave the majority judgment. He concluded, from a review of the authorities, that the aim of the development of an estoppel-based remedy by the courts of equity from the 1860s was to prevent or compensate for the unconscionability of a person going back on a promise which another has relied on to their detriment.
The natural remedy was to enforce the promise as the simplest way to remedy the unconscionability but it was always discretionary. The court could substitute a payment based on the value that the promisee expected to receive if strict enforcement was unjust.
While reliant detriment was a necessary condition for the equity to arise, the court’s focus on holding the promisor to their promise was aimed at preventing or remedying the unconscionability, not compensating for the detriment. Lord Briggs rejected the idea that the aim of a remedy had ever been – or should be – based on compensating for the detriment suffered by the promisee. The starting point was for the court to determine whether going back on the promise in light of the detrimental reliance was unconscionable at all. If it was, the court should proceed on the basis that the simplest remedy is to enforce the promise. Where the property has been sold or its transfer would cause injustice to others, alternatives would need to
be considered, such as providing a monetary equivalent.
If the enforcement of the promise would be out of all proportion to the detriment suffered, the court may need to limit the remedy to put right a disproportionality rather than compensate for the detriment. A discount may be required if the remedy involves acceleration of a future promised benefit. The court should consider in the round whether a particular remedy will do justice by asking if the promisor would be acting unconscionably if they conferred the proposed benefit on the promisee.
The decision
The trial judge was right to adopt an approach based on Andrew’s expected inheritance. An offer to pay a wage differential, after more than 25 years working towards the inheritance of a viable farm, would be unconscionable and difficult to value. However, the judge did not adequately discount the sum awarded to reflect that Andrew would receive compensation earlier than he had expected to inherit an interest in the farm.
The parents could choose between putting the farm in trust in favour of their children, subject to their life interest, or paying Andrew compensation now but with a reduction – based on the value of their life interest – to reflect his earlier-than-anticipated receipt.
Debate continues
Lord Leggatt disagreed with Lord Briggs. He considered the remedy to be aimed at preventing a party going back on a promise without ensuring that the promisee who relied on it will not suffer a detriment from that reliance. He would have awarded Andrew £610,000 – the estimated additional amount he would have earned by working elsewhere – to compensate for his detriment.
Louise Clark is a property law consultant and mediator
