Guest v Guest: Supreme Court on Proprietary Estoppel

GUEST v GUEST [2022] UKSC 27

The approach to remedy in proprietary estoppel expectation cases

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Tump Farm (“the Farm”) had been farmed by the Guest family since 1938. DG and JG were the parents of AG.?AG had left school in 1982, aged 16 and worked full time on the Farm for 33 years until 2015. In 2014, relations between AG and DG and JG had broken down.?DG and AG made wills excluding any entitlement for AG to the Farm.?They had, in 2015, offered AG terms for continuing to work the Farm on foot of a farming business tenancy.?AG had refused the offer on grounds of affordability and had ceased working on the Farm in that year.?AG brought proceedings in 2017 claiming a beneficial interest in the Farm?on the basis of proprietary estoppel. At first instance, AG succeeded, obtaining a finding that an assurance had been made to AG over many years – on which he had relied - ?that he would inherit a substantial share of the Farm, and that he had ?worked hard on the Farm for comparatively little in return. ?The judge at first instance ordered DG and JG to pay AG a lump sum representing (a) 50% of the market value of the farming business and (b) 40% of the market value of the Farm. ?The result of the order was that the Farm would have had to be have been sold in order for DG and JG to realise the lump sum payable to AG.

DG and JG had appealed to the Court of Appeal where their appeal was dismissed. Their further appeal to the Supreme Court - which proceeded on the basis that AG was entitled to the declaratory relief which he had achieved at first instance - raised the following questions:

(1)?Whether a successful claimant’s expectation, in this case of inheritance of the Farm, was an appropriate starting point when considering a remedy; and

(2)?Whether the remedy granted, namely payment of a lump sum which would in effect result in the sale of the Farm, went beyond what was necessary in the circumstances to do justice to the claimant.

The Supreme Court this morning (by a majority – Lord Briggs, Lady Arden and Lady Rose, Lords Leggatt and Stephens dissenting) allowed DG and JG’s appeal in part.?Lord Briggs wrote the majority judgement, in which he rejected the proposition that remedies in proprietary estoppel had ever been (or should be) based on providing compensation for the detriment undergone by the promisee.?Whilst the remedy should not be out of all proportion to the detriment without good reason, this is no more than a useful cross-check for potential injustice.?In proprietary estoppel cases the appropriate remedy was and always had been the prevention or undoing of unconscionable conduct, and that in many cases, once the equity is established, then the fulfilment of the promise was likely to be the starting point.?Lord Briggs made the following further points:

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·?????The court might have to look at alternative remedies, such as a financial equivalent, if property had been sold, or third parties would suffer injustice if the promise were simply enforced;

·?????The court might have to limit the remedy if enforcement of the promise would be out of all proportion to the detriment suffered by the promisee, although this might not require precise compensation for the promisee’s detriment;

·?????Acceleration of a benefit promised in the future should usually (if it is the appropriate remedy in a particular case) require a discount for accelerated receipt;

·?????The task of the court is to look in the round at whether or not a particular remedy will achieve justice in the circumstances, examining whether the promisor would be acting unconscionably by conferring the proposed benefit on the promisee;

·?????Lord Briggs, Lady Arden and Lady Rose therefore held that the appeal of DG and JG would be allowed in part, in that whilst the trial judge had been justified in adopting an approach to remedy based on AG’s expectation of inheritance, he had erred in failing adequately to discount the sum he awarded to AG, given that AG would thereby receive compensation earlier than he had expected to inherit an interest in the Farm;

·?????The correct approach in this case would be to allow DG and JG to elect between putting the Farm into trust for their children (including AG) subject to a life interest in favour of DG and JG, or making an immediate lump sum payment of compensation to AG in accordance with the trial judge’s approach, but sufficiently discounted to take account of accelerated receipt.?If the second route were to be chosen, and the amount of the payment could not be agreed between the parties, that matter would have to be remitted to the Chancery Division for determination.

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Lords Leggatt and Stephens (Lord Leggatt wrote the dissenting opinion, with which Lord Stephens agreed) took a significantly different view of the basis of relief in proprietary estoppel, and would have allowed the appeal in full, awarding AG a lump sum of ￡610,000 to compensate him for the detriment he had suffered as a result of working on the Farm in reliance on the assurances from DG and JG, reflective of what AG could have earned elsewhere.