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The Supreme Court has recently visited the world of proprietary estoppel in Guest v Guest (2022).
Proprietary estoppel is an area where unique circumstances from case to case strictly dictate the outcome. They often relate to family disputes concerning promises over lifetime gifts or inheritance and often involve farms. In simply terms involve:
Fact of life - sometimes promises are not kept.
But one of the difficulties with such claims are that the events on which they are based often take place over many years, if not decades. Typically, in the farming arena, a child of the promisor will work on the farm for little or no pay but safe in the knowledge that “one day all this will be yours”. Fast forward years or several decades (and many early starts and late finishes separated by hard physical work) a family dispute erupts and the promisee son or daughter walks away from the farm (or is evicted) and thereafter commences a proprietary estoppel claim. The difficulty can be gathering contemporaneous evidence and clear recollections and that can be quite a mountain to climb. It can be difficult for a Court presiding over the dispute when events concerning promises over many years begin to evaporate in the mind by the passage of time. Be that as it may the Supreme Court have now visited this arena and have tried to lay out what the parties might be expected to prove but more importantly what outcome should be – is it to meet promisee’s expectation of what they were promised or whether that expectation should be based upon the detriment they suffered.
Andrew Guest was the eldest child of his parents who were the owners of the farm. Andrew worked on the farm for some 32 years. As if often the case in proprietary estoppel claims involving farms, Andrew worked very hard for little pay. However, he was comforted by the fact that he had been promised by his parents that he would inherit a large part of the farm and the farming business although it was never set out formally or informally what that inheritance would amount to. His parents did execute Wills in the early 1980’s whereby Andrew and his younger brother Ross would inherit the farm in equal shares with further provision made to their sister.
As is the way of these things, a dispute arose and Andrew left the farm and farming business. The dispute was of such a serious nature that Andrew’s parents changed the terms of their Will and promptly kicked Andrew out of his accommodation with his family. Unsurprisingly, Andrew issued a proprietary estoppel claim against his parents. Little did Andrew or his parents know that when he commenced this claim they would end up in the Supreme Court seven or eight years later.
At first instance Andrew was successful and his parents were ordered to make a payment of £1,300,000 (subject to certain deductions). The first instance judge said this was the figure to satisfy Andrew’s expectation of what he might have inherited. In essence he was getting an advance on his inheritance even though his parents were alive and kicking. This was calculated on the basis that he should receive 50% of the value of the farming business and 40% of the freehold land and buildings at the farm. His parents were naturally upset at this outcome and subsequently appealed.
Court of Appeal
Andrew’s parents appealed on the basis the remedy awarded by the lower Court was incorrect. They argued Andrew’s expectation - which was based on his inheritance (i.e. after they had died) - should not be applied. Furthermore, Andrew’s contribution to the farm and his loss of opportunity to work elsewhere should be the basis of the calculation, not his expectation. Effectively Andrew was receiving an advance on his inheritance and that was not the correct method to calculate the remedy. Unfortunately, the Court of Appeal dismissed their argument stating the remedy Andrew sought was based not upon reliance and detriment but upon his expectation. The parents appealed to the Supreme Court.
The appeal was heard by five Justices, and it was a split decision, 3/2. The majority tried to balance the interests of both parties. Whilst there appeared to be an acknowledgement an effective advance on inheritance would not be fair, the Supreme Court wanted to find a way that would allow a flexible resolution in light of the competing interests of the parties. Andrew had succeeded in his proprietary estoppel claim but what was not clear was how his remedy should be applied. The usual remedy would be for the promisor to be made to keep their promise. In applying their reasoning:
Taken together, the majority found the first instance judge did not apply an adequate discount on the advance inheritance. The Supreme Court allowed the appeal in part and substituted alternate remedies of either putting the farm into trust in favour of their children or paying compensation to Andrew now but with a reduction properly to reflect his earlier-than-anticipated receipt of his inheritance. The parents were allowed to choose between these options.
The outcome appears to strike a balance between meeting Andrew’s expectations and ensuring equity does justice in this case but ensuring that it is only his expectation that is fulfilled and that he is not placed in a better position. Andrew’s expectation was of inheritance and therefore to receive a lump sum during his parents’ lifetime and forcing the sale of the farm would result in him receiving more than what was promised.
So where does this take us? Family disputes of this nature tend to invoke strong emotions. The events complained of over decades are sometimes set against other matters which probably have no bearing on the claim itself. Claimants must be careful gathering of evidence to try and establish what the claim should be about and the extent of the detriment suffered. Guest v Guest has confirmed the expectation of any claimant in a proprietary estoppel claim will be the primary consideration but that does not mean that the detriment will not have to be carefully considered too. For defendants, a clear understanding of what the ramifications of any promise might be further down the line would be useful, but it is difficult to know precisely what this will amount to because nobody can see with any sufficient clarity what the future might hold. Proprietary Estoppel claims only come about when there has been a change in relations between the parties. That is the nature of families everywhere and these claims will continue to arise in the future.