The case of Guest v Guest [2022] has finally been decided, with the Supreme Court handing down its long-awaited judgment as to the proper approach in granting remedies in certain cases of broken promises, which in legal terminology is termed ‘proprietary estoppel’. At last we have guidance on how the level of relief for a proprietary estoppel claim should be assessed.

What is proprietary estoppel

Proprietary estoppel arises when a person:

• gives a promise or assurance to another person that they have been given or will be given an interest in property; and

• that other person reasonably relies on the promise or assurance; and

• that person suffers detriment as a result. 

The case background

Like so many proprietary estoppel cases, Guest v Guest concerned a family dispute relating to the promised and expected inheritance of the family farm. In summary, the son, Andrew Guest, lived and worked full time on the family farm owned by his parents, David and Josephine Guest. He did so for 33 years and received little financial gain. He was repeatedly promised that he would inherit a significant part of the farm in order that he could continue farming after his parents had died, but after the relationship with his parents broke down in 2015, they dissolved the farming partnership with Andrew and he was forced to leave the farm and find alternative work and accommodation. His parents also rewrote their wills, disinheriting Andrew completely.  

Andrew brought a claim for proprietary estoppel and the High Court found in his favour on the grounds that Andrew’s parents had promised him a significant part of the farm and Andrew had relied on that promise to his detriment. Further, the court said that it was unconscionable that the parents now go back on that promise and accordingly, the court awarded Andrew 50% of the farm business and 40% of the land. In order to satisfy this, the family farm would need to be sold.

Avid readers of our blog will perhaps recall an article back in 2020 regarding this case, at which time the parents, David and Josephine, had gone to the Court of Appeal on the grounds that the award of the High Court:

• had been assessed incorrectly and relief based on Andrew’s expectation was inappropriate;

• went beyond what was necessary to avoid an unconscionable result;

• should not have been granted whilst the parents were still alive.

Although the Court of Appeal dismissed their case the parents did not give up. Instead, they appealed to the Supreme Court asking that the following points be determined:

• whether the appropriate starting point was to enforce the expectation and give effect to the promise, rather than to quantify the detriment suffered; and

• where a lump sum had been awarded in the High Court, whether that went beyond what was necessary in the circumstances.

Andrew’s parents argued that he should only be compensated for the detriment he had suffered. In addition, the promise of his inheritance had been made on the basis that he would receive his share on the death of his second parent and, therefore, he was receiving an additional benefit by obtaining the lump sum now. 

The Supreme Court’s decision

Their appeal was allowed. The Supreme Court ultimately had to consider what the proper approach should be when providing remedies to claimants in successful proprietary estoppel cases.

The Supreme Court decided that the purpose of the doctrine of proprietary estoppel is the prevention or undoing of unconscionable conduct. The starting point when determining the remedy, therefore, should be to hold the promisor to the promise and fulfil the reasonable expectation of the claimant, unless that would be ‘out of all proportion to the detriment suffered’. This is up to the defendant to prove and propose an alternative or reduced award accordingly. In this case, the court detailed two options for remedy:

• putting the farm into a trust, with Andrew’s parents having a life interest and a 40% share passing to Andrew on their death; or

• a clean break, with Andrew receiving compensation but with a discount for early receipt, on the basis that the court does not have the power to award a claimant more than they have been promised or they had expected to receive.

In addition, and unusually, the court said that it was for the parents to decide which of the options for relief they wanted to adopt.

Conclusion

The case of Guest v Guest offers clarity as to the approach required to find a remedy in proprietary estoppel cases. The ‘fulfilment of the promise’ is ‘likely to be the starting point’ in many cases. However, the fact that each case will have its own considerations with regard to practicalities, justice between the parties and fairness to third parties, may mean that a lesser award is in fact required or indeed reasonable to remedy an unconscionable outcome. However, these factors, together with the wide discretion of the court, means that the case has in fact provided little certainty as to the likely outcomes in cases like this.

A large proportion of proprietary estoppel cases centre around disagreements concerning family farms and can have devastating consequences on businesses that most probably have been built up over many generations. It is therefore imperative that farming families are aware of the issues that may give rise to such claims and tackle these through open and honest discussions with each other about the position of the farming business and succession planning. And as a final word of caution: take care when making promises of this nature and document any agreements reached carefully with advice from a solicitor who specialises in this area of law.

If you need assistance with succession planning or advice relating to proprietary estoppel, please contact our specialist Agriculture and Estates team.