Proprietary Estoppel – Supreme Court Decision In Guest v Guest

The Supreme Court has recently handed down the much-anticipated judgment in the case of Guest v Guest [2022] UKSC 27, a case concerning a son suing his parents over their broken promise to let him inherit the family farm, following a breakdown in the relationship and the resultant change of Wills by the parents disinheriting the son.

The issue central to the case is the application of the legal doctrine of proprietary estoppel. In the context of family farms, the common theme involves parents promising their children, or leading them to expect, that if they work on the family farm, one day they will inherit it. The children then, relying on this promise, stay on to run the family farm and forgo alternative pursuits, only to discover on their parents’ death that their promised inheritance is not forthcoming.

Whilst this type of dispute usually surfaces when the parents have passed away and their Wills’ contents are revealed, a challenge can also take place during the parents’ lifetime when the children discover that they have been written out of their parents’ Wills. This is the case in Guest v Guest.

Guest v Guest [2022]

Background

In the early 80s, Mr and Mrs Guest made Wills for their two sons to inherit the family farm and its business in equal shares and for their daughter to receive financial provisions.

The eldest son Andrew began working on the family farm full-time as soon as he left school at the age of 16, receiving minimum wage. He also completed various courses on agricultural techniques and management for the purpose of running the farm business. He expected that he would inherit a significant portion of the farm.

However, following a family dispute, Mr and Mrs Guest executed new Wills to exclude Andrew from inheriting any interest in the farm, including his right to live in the farm cottage. Therefore, Andrew brought a claim against his parents based on proprietary estoppel, that his parents had promised him a substantial inheritance of the family farm and he had relied on it to his detriment, devoting over 30 years of his life to the running of the farm at a basic wage at the expense of alternative careers for a higher income, and it would now be unconscionable for them to go back on their promise.

The decision of the Court’s below

In the first instance, the High Court ruled in Andrew’s favour on the proprietary estoppel argument. The issue then became what remedy to award to address the unconscionability.

Since the doctrine of proprietary estoppel lies in equity, the Court has the discretion to decide on the appropriate remedy. The judge awarded an immediate lump sum payment to satisfy Andrew’s expectation of what he would have inherited; it was calculated as 50% of the value of the farming business plus 40% of the value of the freehold land and buildings at the farm.

The parents appealed to the Court of Appeal which upheld the High Court’s decision. The parents thus further appealed to the Supreme Court.

Supreme Court’s decision

The main issue before the Supreme Court was that of remedy: whether the appropriate starting point was to give effect to Andrew’s expectation, and whether the lump sum payment awarded by the Courts below went beyond what was necessary to compensate for the unconscionable result.

Lord Briggs, giving the majority judgment, confirmed that the starting point for remedy is to fulfil the promise. There, however, could be factors that limit the full realisation of the promise, such as whether it may be unfair to other beneficiaries or claimants of the estate, whether it may be unfair to those who made the promise and whether the claimant in question would be placed in a better position than if the promise had been honoured.

In this case, the majority found that while the first instance judge was not wrong to award a remedy based on Andrew’s expected inheritance, as opposed to the actual detriment he suffered, the lump sum awarded failed to reflect the fact that Andrew would receive his promised interest earlier than he expected, i.e. immediate entitlement rather than inheritance after his parents’ death. An immediate payment of a lump sum would also require the parents to sell the farm and business in their lifetime, which goes beyond what they had promised.

Therefore, the majority of the Supreme Court decided that the appropriate remedy should be for the parents to choose between putting the farm into a trust for the children subject to a life interest in the parents’ favour, or making an immediate payment of compensation to Andrew but with a discount adequate to reflect Andrew’s earlier receipt of the benefit of what was promised. The parties were left to come to an agreement on this matter.

Comments

This case illustrates the wide discretion the Court has to formulate equitable remedies in the context of proprietary estoppel. The central principle is that the remedy should not go beyond what is necessary to address the unconscionable outcome of a broken promise.

The Court, in coming to its conclusion, may look at a range of factors to assess the appropriateness of the remedy. This process may arguably add uncertainty to the outcome of disputes of this kind which may result in substantial legal costs and years of battle in Courtrooms. The end result is a much-reduced pool of family assets to the detriment of the whole family. It is therefore important that such disputes are resolved early on, and with expert legal advice.

It is also important to note that, while the Supreme Court unanimously allowed the appeal by the parents, two judges held very different views from the majority. Lord Leggatt considered that the right remedy should either put the claimant in the position he would have been if the promised had been performed by the compelling performance of the promise, or put the claimant in the position as if he had not relied on that promise by awarding compensation for the detriment he has suffered, whichever is the minimum necessary to address the unconscionability. Therefore, in his Lordship’s opinion, Andrew should be awarded monetary compensation to reflect the additional amount he would have additionally earned had he not relied on his parents’ promise to work on the farm. This divergence of opinions may, in the future, become a point of further legal discourse.