Guest v Guest [2022] UKSC 27

Guest v Guest [2022] UKSC 27

On appeal from [2020] EWCA Civ 387

The legal principles governing the question of whether or not an equity has arisen in a proprietary estoppel claim are clear. What is required is a (non-legally binding) promise to transfer (or grant) an interest in property, reasonable reliance on the promise and detriment: see Thorner v Major [2009] 1 WLR 776. What is less clear is what principles apply when identifying the appropriate relief necessary to satisfy the equity, if established. What is the nature of this equity and what ‘wrong’ is the law seeking to give relief from?

For many years there has existed a “fundamental divergence of view about which, as between satisfying the expectation and compensating for the detriment, is or rather should be the true underlying aim of the remedy”: Lord Briggs in Guest at [7]. In Jenning v Rice [2002] EWCA 159 Robert Walker LJ famously posed the question of whether the fundamental aim of this form of estoppel was to fulfil the claimant’s expectations or to compensate the claimant for detrimental reliance. In Cobb v Yeoman’s Row [2008] 1 WLR 1752 Dyson LJ referred to the two theoretical bases of relief, noting that the two approaches were fundamentally different. By 2016 the law was no clearer and in Davies v Davies [2016] EWCIV 463 Lewison LJ referred to this “lively controversy”, saying:

“One line of authority takes the view that [the] essential aim of the discretion is to give effect to the claimant’s expectation unless it would be disproportionate to do so. The other takes the view that the essential aim of the discretion is to endure that the claimant’s reliance interest is protected, so that she is compensated for such detriment as she has suffered. The two approaches, in their starkest form, are fundamentally different.”

This absence of principle to guide judges as to an appropriate remedy led to complaints that practitioners could not advise their clients as to likely outcome, resulting in cases going to court at great expense and family bitterness where otherwise they would settle. Lord Briggs was not persuaded that the unpredictability in the law was a bar to settlement of claims, and insofar as his scepticism extended to the difficulty of giving advice to clients we cannot agree. Lord Leggett was more sympathetic to this concern, recognising, at [109]:

“Why, when the elements of a “proprietary estoppel” claim are proved, does or may the law afford the claimant a remedy of any kind? Without an answer to that question, it is impossible for a court to decide in a way that is rational and not merely arbitrary what remedy should be awarded in any particular case. If the court is to award a remedy which is capable of being justified, it is necessary to know what the remedy is for.”

This is the first time that the Supreme Court has had to consider the principles underpinning the question of relief in a proprietary estoppel claim. In Cobbe v Yeoman’s Row and Thorner v Major the House of Lords considered the doctrine but not the question of the nature of the equity nor the fundamental aim of the remedy. This was the issue before the Supreme Court in Guest v Guest.

The Answer ?

This “lively controversy” evidently continued in the Supreme Court’s deliberations, resulting in a split, 3-2 decision. Lord Briggs, with whom Lady Arden and Lady Rose agreed, gave the majority judgment. Lord Leggatt, with whom Lord Stephens agreed, took a very different view a view which no doubt many will prefer.

The view of the majority was that “[n]either expectation fulfilment nor detriment compensation is the aim of the remedy. The aim remains what it has always been, namely the prevention or undoing of unconscionable conduct”: Lord Briggs at [93].

The Facts

The fact of the case were similar to many farming family proprietary estoppel disputes. The Claimant was the eldest child of the Defendants. He claimed that his father had over many years orally promised (though without ever saying so explicitly and in terms) that he would inherit a substantial but unspecified share of the family farm, which would allow him to continue a farming business after his father’s death. Both parents made wills to that effect in 1981. These were later revoked in 2014 when the relationship between the parties deteriorated, by which time the Claimant had worked full-time on the farm for 32 years for low wages. The farming partnership between father and son was dissolved in April 2015; the Claimant moved off the farm and found employment as an employed herdsman elsewhere, and then issuing proceedings claiming, on the basis of proprietary estoppel, a share in the?

family farm or its monetary equivalent. The Defendants, though advanced in years, continued on the farm, and the Claimant’s brother, who had a similar expectation of inheritance in due course, farmed a nearby holding.

At first instance the judge ordered the Defendants to make an immediate payment of ￡1.3m which was broadly intended to satisfy their son’s expectation as to his future inheritance. This represented a 50% share in the family farming business and 40% share in the value of the farmland and buildings, net of tax, and valued on the assumption of the Defendants being entitled to occupy the farmhouse for the remainder of their life.

Before the Court of Appeal the parents argued that the trial judge had been wrong to give the Claimant a remedy which was based on his expectations. Instead, it was said that the judge ought to have awarded a remedy based on the Claimant’s contribution to the increase in value of the farm or the detriment that he had suffered in the form of the lost opportunity to work elsewhere. ?The Court of Appeal dismissed the appeal, holding that the first instance judge was entitled to order a remedy principally by reference to the Claimant’s expectations, and did not exceed his discretion in devising a “clean break” solution that would, almost inevitably, require the farm to be sold before the Defendants’ deaths.

The Majority Decision: The Law as it now is

?“One of the principal functions of equity is to put right injustice to which the law is otherwise blind, by restraining the rigid application of legal rules where their implementation would be unconscionable”, said Lord Briggs at [4], placing the notion of unconscionability at the forefront of the majority decision.

Before examining some of the many relevant authorities,?Lord Briggs looked at the problem from first principles. He said that the purpose of the remedy afforded under the label of proprietary estoppel was “ … to eliminate, or at least mitigate, the affront to conscience constituted by a decision by the maker of a non-contractual promise or assurance about property upon which the recipient has relied to their detriment to go back on it”: [8]. The making of the promise was not the ‘equitable wrong’, nor was it the detrimental reliance; rather, it was the “unconscionability inherent in the repudiation of the promise” that had?been detrimentally relied upon which justified equitable intervention: [10]. Without reliant detriment there would be no equity, but the harm caused by the repudiation of a promise was not the same as the detriment, and it was that harm which the remedy sought to mitigate. As Lord Briggs said, at [11]:

“In a case like the present, the harm consists of the soul-destroying, gut-wrenching realisation of being deprived, and then actually being deprived over the rest of a lifetime, of an expected inheritance of land upon which the promisee has spent the whole of his life and work to date and which, in due course, he expected to be able to pass on to one or more of his own children …”.

Thus, the true purpose of the remedy was held to be dealing with the unconscionability constituted by the promisor repudiating his promise.?

After an extensive review of the authorities Lord Briggs concluded that the law had never sought to compensate for the detriment which had already been suffered by the promisee at the time that the promisor sought to resile from his or her assurances. At [61] he concluded:

“Drawing together this lengthy review of the authorities and looking at the matter historically, I suggest that what has happened may be summarised in this way. For over a century, starting in the 1860s, the courts of equity developed an equitable estoppel-based remedy, the aim of which was to prevent the unconscionable repudiation of promises or assurances about property (usually land) upon which the promisee had relied to his detriment. The normal and natural remedy was to hold the promisor to his promise, because that was the simplest way to prevent the unconscionability inherent in repudiating it, but it was always discretionary, and liable to be tempered by circumstances which might make strict enforcement of the promise unjust, either between the parties or because of its effect on third parties. While reliant detriment was a necessary condition for the equity to arise, the court’s focus on holding the promisor to his promise was not aimed at “protecting” the promisee from the detriment, still less compensating for it. It was aimed at preventing or remedying the unconscionability of the actual or threatened conduct of the promisor, with the effect, but not the aim, that it tended to satisfy the expectations of the promisee.”?

He went on to explain that the difficulties of needing to frame an appropriate remedy to “the infinitely variable exigencies of real life” created practical problems to which the courts devised practical, rather than doctrinaire, solutions. Particulars problems arose where full enforcement of a promise would leave warring parties in cohabitation with each other or, as Guest v Guest itself, where the repudiation of the promise occurred long before it was due to be performed.??

Lord Briggs acknowledged that, faced with such problems, the court would sometimes opt to substitute payment of the value of the expectation rather than enforcement of the promise. In other instances, repudiation of the promise (in whole or in part) might found not to be unconscionable at all, justifying some smaller monetary payment. But, in none of the cases, until the last 25 years, had there been a perception that the aim of the exercise was to protect from or compensate for detriment, nor that there needed to be a relationship of “proportionality” between the detriment and the remedy.

Lord Briggs concluded that the law had got into a tangle because of the misapplication of?Scarman LJ’s famous dicta?in Crabb v Arun District Council [1976] Ch 179 suggesting that the court’s task was to identify the “minimum equity [necessary] to do justice” between the parties, together with the application of a minority dictum relating to a different estoppel in the Australian case of Commonwealth v Verwayen (1990) 170 CLR 394. This had led to the law in England developing two themes, which were not easily reconciled.

The notion that the aim of the remedy was detriment-based had, since Commonwealth v Verwayen, been comprehensively rejected in Australia.??Of Scarman’s dictum Lord Briggs said, at [13]:

?“His dictum was 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 first theme, which was judicially developed, was that the remedy ought not to be disproportionate to the detriment. This concept of a proportionality test had taken root in England, by the time of the Court of Appeal decision in Jennings v Rice [2003] 1 P&CR 8 as part of the assessment of whether a proposed remedy worked “substantial justice” between the parties. But its role was no more than a useful cross-check for potential injustice.

The second, more radical theme (developed by some academics) was that the aim of the remedy ought to be recognised as detriment-based. Lord Briggs concluded from the authorities that, in contrast to the proportionality test, the notion that the aim of the remedy is detriment-based had not taken root in England, and that it was fundamentally wrong in principle to take this approach. The wrong was the repudiation of the promise and the harm the loss that would be suffered thereafter as a result of its repudiation (as opposed to the detriment already suffered by relying upon the promise in the first place). To treat it as harm caused by the wrong was incoherent. ?He concluded, at [71]:

“In my view therefore this court should firmly reject the theory that the aim of the remedy for proprietary estoppel is detriment-based forms any part of the law of England. I acknowledge that the common law (and perhaps even equity) could have based itself on such a theory, and I accept that the concept that the remedy compensates for detriment is one which will appeal to some minds. But the cases show that equity did not take that course, and there is no good reason for doing so now, by a reversal of over 150 years’ careful development of the remedy upon a different foundation.”

The Correct Approach

At paragraphs [74] and [75] Lord Briggs said:

“I consider that, in principle, the court’s normal approach should be as follows. 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 detrimental reliance upon it, unconscionable at all. It usually will be, but there may be circumstances (such as the promisor falling on hard times and needing to sell the property to pay his creditors, or to pay for expensive medical treatment or social care for himself or his wife) when it may not be. Or the promisor may have announced or carried out only a partial repudiation of the promise, which may or may not have been unconscionable, depending on the circumstances.

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. The promisee cannot (and probably would not) complain, for example, that his detrimental reliance had cost him more than the value of the promise, were it to be fully performed. But the court may have to listen to many other reasons from the promisor (or his executors) why something less than full performance will negate the unconscionability and therefore satisfy the equity. They may be based on one or more of the real-life problems already outlined. The court may be invited by the promisor to consider one or more proxies for performance of??the promise, such as the transfer of less property than promised or the provision of a monetary equivalent in place of it, or a combination of the two.”

The Court added that the burden will be on the promisor to show that specific enforcement of the full promise, or its monetary equivalent, would be out of all proportion to the cost of the detriment to the promisee. Where this is the case, the court may limit the extent of the remedy; but it does not follow that what the court is doing then is seeking to precisely compensate for the detriment. As Lord Briggs said, at [77]:

“There is in my view real merit in Lord Walker’s spectrum (as he would now prefer to call it) between on the one hand a case where both the promise and the detriment are reasonably precisely defined by the time when the promise is repudiated, where the one is in a sense the quid pro quo of the other although falling short of contract, and on the other hand where either or both are left much less certain. The “almost contractual” end of the spectrum is likely to generate the strongest equitable reason for the full specific enforcement of the promise if the reliant detriment has been undertaken in full, regardless of a disparity in value between the two. At the other end there may be much greater scope for a departure from full enforcement, even if there are no other problems making it just to do so.”

A particular instance where departure from enforcement of the full promise may be merited are cases where, at the time of repudiation of the promise, the date of performance lies in the future. These are likely to be the most difficult in terms of remedy, since acceding to the promisee’s expectation in full in such a case necessarily involves in an acceleration of the promised benefit: the promise receives it sooner than he or she ever expected to do so. In such cases it is likely to be appropriate to discount for accelerated receipt.

Finally, Lord Briggs said, at [80]:

“In the end the court will have to consider its provisional remedy in the round, against all the relevant circumstances, and ask itself whether it would do justice between the parties, and whether it would cause injustice to third parties. The yardstick for that justice assessment will always be whether, if the promisor was to confer that proposed remedy upon the promisee, he would be acting unconscionably. “Minimum equity to do justice” means, in that context, a remedy which will be sufficient to enable that unconscionability question to be answered in the negative.”

The Minority View??

The view taken by Lord Leggatt, with whom Lord Stephens agreed, in his minority judgment differs fundamentally from that of the majority. It is clearly animated by a different moral philosophy that sees a less compelling justification for the enforcement of non-legally binding promises according to their terms. In particular, whereas the majority see mitigating unconscionability as the touchstone justifying the grant and nature of the remedy, importing an inherently large measure of judicial discretion on the facts of any particular case, Lord Leggatt views unconscionability through a narrower lens. At [191]:

“Expressed in terms of unconscionability, what the law regards as unconscionable is not A’s failure to keep a non-binding promise. It is A’s failure to accept responsibility for the consequences of B’s reasonable reliance on the promise and for ensuring that B does not suffer detriment as a result of such reliance “

Lord Leggatt’s conclusion is arrived at, like Lord Briggs’s, from an analysis of how the doctrine of “proprietary estoppel” developed. His Lordship noted that it was only in its promissory form, where the relevant “assurance” consisted of a promise (in contrast to a representation or acquiescence), that the doctrine had “taken on a life of its own and emerged as an independent basis for acquiring property rights.” He said, at [155]:

“To avoid confusion, it seems to me that, where the doctrine operates this way, it would be better to shed the label “estoppel” and adopt a name which reflects, at least broadly, the nature of the claim. Without pre-judging the controversy to which I am about to turn, I would suggest the description “property expectation claim”.?

Lord Leggatt was firmly of the view that detrimental reliance does not justify enforcing non-contractual promises. If this were the case, what he preferred to call a ‘property expectation claim’ would be based on the same foundational principle as the law of contract that promises should be kept. Yet for a promise to give rise to a legally binding contract, it must be supported by consideration. In Lord Leggatt’s view, treating detrimental reliance as essentially an alternative to consideration was not consistent with either legal principle or with precedent; nor did it justify sidestepping the additional requirements of contractual certainty, an intention to create legal relations, and the formalities required to create or dispose of an interest in land – “a realm in which legal certainty is particularly important”. As his Lordship remarked crisply, at [178]:?????

“the statutory provisions which require a valid disposition of an interest in land or authority to transfer property on death to be in writing and comply with other formal conditions of validity contain no exception for informal promises on which detrimental reliance has been placed. Describing failure to keep such a promise as “unconscionable” cannot justify disregarding law laid down by Parliament.

The minority’s approach drew notably on a number of Australian authorities which were not favoured by the majority, as well as citing numerous English appellate decisions as instances in which the remedy awarded had clearly not reflected, nor been intended to reflect, the value of what the claimant was promised (see [179]). In such cases, Lord Leggatt regarded the notion of it being unconscionable not to keep an informal promise to make a gift of property to someone if they had acted to their detriment as simply not being an adequate basis by which to tailor the remedy. At [181]:

“If the remedial aim is to prevent or put right the “unconscionability” of breaking a non-binding but detrimentally relied on promise, then the law provides no yardstick for deciding when it is appropriate to award something other than what was promised (or its value) or for deciding what that something else should be. The decision whether to enforce the promise and, if not, what alternative remedy to grant is arbitrary. Legal principle has been replaced by the portable palm tree.”

?Lord Leggett did not consider that what was promised had no role to play, but that:

“The doctrine does not and could not sensibly have as its aim the enforcement of promises which do not satisfy the requirements for the creation of legal obligations. A property expectation claim is not a form of contract lite.” [183]

So what did Lord Leggatt regard as the true nature of the equity??Like Lord Briggs in the majority, he thought the answer was that the equity was to intended to protect the promisee from detriment that the promisee would suffer as a result of the promisor’s failure to perform the promise. In his view, the “basal purpose” of reliance-based estoppel was to protect B (the promisee) against detriment which would flow from B’s change of position in reasonable reliance on an assumption induced by A (the promisor), if A did not adhere to the assumption. This remained the basal purpose of proprietary estoppel notwithstanding that the doctrine had been transported from a defensive doctrine to an affirmative cause of action: [190].

But unlike the majority, Lord Leggatt’s view of detriment was backwards-looking: preventing detriment meant “awarding compensation which puts B into as good a position, as best money can do it, as if B had not relied on A’s promise: in other words, to grant a remedy which compensates B’s reliance loss”: [193]. This is not the same as the view held by Lord Briggs, since it is not directly concerned with mitigating the harm that the promisee would suffer in the future as a result of the promise not being kept.

Lord Leggatt recognised that the most obvious way of preventing detriment was to compel performance of the promise. Indeed, he recognised that both remedial approaches – vindicating expectations versus compensating for reliance loss – could be seen as ways of preventing B from suffering detriment as a result of reasonably relying on A’s promise. Detriment is avoided if either A performs the promise or if A pays an amount which makes B as well off as if B had not acted in reliance on the promise. Once either the expectation is fulfilled or the reliance loss prevented there is no further reason for the court to intervene.

The minority then fundamentally parted company with the majority in reasoning that, given there is more than one means of avoiding detriment to the claimant, the court should in principle adopt whichever remedial approach imposes the least burden on the defendant i.e. the court should do what is required but no more than what is required to prevent detriment. This gives effect to the “minimum equity to do justice” principle which, in the view of the majority, had been misinterpreted. Lord Leggatt recognised that it may therefore sometimes be difficult to quantify reliance loss (and indeed he did so for Andrew Guest himself), but he did not see it as being as significant a problem as Lord Briggs. At [202] Lord Leggatt said:

“… where a property expectation claim has been made out and the court is faced with a choice between preventing detriment by compelling the defendant to perform his promise or by awarding financial compensation to the claimant for her reliance loss. Difficulty of quantifying the reliance loss may be a good reason to prefer the remedy of compelling the defendant to grant the property right which the claimant was promised. Granting the property right ensures that the claimant receives a remedy which is adequate and not one which is inadequate to prevent the claimant from suffering harm as a result of reasonably relying on the defendant’s promise.

In deciding which remedy to grant a distinction is to be made between cases where the promise has already fallen due for performance and cases where performance was conditional on an event which has not yet occurred (such as the promisor’s death). In?the former case, a remedy designed to give effect to the promise is likely to be appropriate.”

The role of expectation in the minority’s approach is therefore residual: it is likely to come to the fore only in cases of a “transactional” or “bargain”-type character, where the court can fairly infer that the parties considered the expectation and anticipated detriment to be roughly equal: [221]. The present case was not such a case. It will also be the destination that the court should arrive at in the unusual case in which the reliance loss exceeds the expectation rather than falling short of it.

Applying those principles to the facts, the minority saw it necessary to re-exercise the trial judge’s remedial discretion afresh. In doing so, Lord Leggatt placed particular weight upon the need to do justice to both parties in a case where the promisor’s assurances of an inheritance on death had been reneged upon whilst the promisor was still living, and so might need to draw upon the contested resources unexpectedly in later life (for instance to fund personal care): [268]. In an appendix to his judgment, Lord Leggatt undertook a fairly complex calculation of the sum of money that would put the claimant, Andrew, in as good a position as he would have been in had he not built his farming career on the strength of his father’s promises. He arrives at an award of ￡610,000 if equitable compensation, based on loss of earnings from 1990 in the sum of ￡267,748, plus interest (compounded annually) at 2% above base rate, totalling ￡342,162. The submission that the sum should be increased to reflect the non-pecuniary emotional harm or distress suffered by Andrew as a result of his father reneging upon his assurances was rejected.

Conclusion

The “lively controversy” which was the subject of such a fundamental division of opinion in Guest will no doubt continue, but whether we agree with the majority or the minority, the point must now be regarded as settled at the highest judicial level. The fundamental purpose of proprietary estoppel is to compensate for the unconscionability inherent in a person going back on a promise on which another has reasonable relied on to their detriment, and the starting point for the exercise of the court’s remedial discretion should be the expectation generated (objectively and subjectively) by that promise.

Elizabeth Fitzgerald

Gavin Bennison