"One day, my son, all this will be yours."

Judgment handed down by the Supreme Court in Guest v Guest [2022] UKSC 27, on appeal from [2020] EWCA Civ 387.

On 19 October 2022, the Supreme Court handed down its long-awaited judgment in the matter of Guest v Guest. In this case, the court was asked to consider the proper basis for awarding remedies in cases of proprietary estoppel. 

What is proprietary estoppel? 

Proprietary estoppel is an equitable remedy, used to prevent one party going back on promises made to another. Proprietary estoppel can arise if: 

(1) The legal owner of land encourages or allows the claimant to believe that they have, or will enjoy, some right over the owner’s property; 

(2) In reliance upon  this belief, the claimant acts to their detriment, to the knowledge of the owner; and

(3) The owner then attempts or plans to take unconscionable advantage of the claimant by denying them the right or benefit they expected to receive. 

The background to Guest

The case of Guest is the first time the principles of proprietary estoppel have been before the Supreme Court . The case centred around a dispute between members of a farming family, Andrew and his parents, over the future of the farm.  

Throughout his life, Andrew’s father had promised that one day, the farm would belong to him.  In reliance upon this promise, Andrew had spent most of his adult life (in the region of 33 years) working and living on the farm for relatively low wages. He and his family lived in a cottage on the farm until Andrew and his parents fell out. 

It is not clear why the relationship between the parties broke down so permanently and the cause, or who was to blame, is not something the court considered in the various judgments. What is clear is that the argument left Andrew feeling that he had no alternative but to leave the farm, finding work and accommodation elsewhere. Andrew’s father also changed his will so that Andrew would not receive any benefit from his estate (including any share of the farm). 

The Judge reported that, as Andrew has two siblings, he never expected to inherit the entirety of the farm - but enough of it to continue a viable farming business after the death of his parents. The trial judge, at first instance, found that Andrew did have a claim for proprietary estoppel against his parents, stating that the courts should approach the question of remedy in two stages: 

1. By considering the claimant’s expectation based upon the nature of the promise made to them, and 

2. Cross check that by granting a remedy that would satisfy the claimants expectation, this would not produce a result out of proportion to the detriment suffered. 

As a result, the trial judge ordered that Andrew should receive 50% of the farming business and 40% of the sale proceeds (or valuation) of the farm after tax, reduced by crediting to his parents a life interest in the farmhouse, equating to a payment of roughly £1.3 million. This decision was based on an earlier will made by Andrew’s father. 

On appeal…

Andrew’s parents appealed the decision of the trial judge. They felt the judge had made a mistake by granting a remedy based on Andrew’s expected inheritance. Instead, they argued the remedy should have been based on compensating Andrew for his contributions to the value of the farm, that went over and above the requirements of his employment (with some additional amount to reflect Andrew’s loss of opportunity to save and purchase a property elsewhere). 

Floyd LJ, giving the lead judgment in the Court of Appeal, dismissed the appeal. He maintained that it was correct for the trial judge to calculate the award based on Andrew’s expectation of future inheritance. He felt the analysis of the trial judge fell within the wide scope of the judge’s discretion. In the Supreme Court judgement (more on this below), it was also noted that the parents did not put forward any specific case about remedy at trial, beyond a general reference to authority about the need for proportionality. 

The parents did not agree with the decision of the Court of Appeal and asked to appeal to the Supreme Court. 

Supreme Court Judgment

The Supreme Court heard the appeal on 2 December 2021 and the long-awaited judgment was published on 19 October 2022. 

Overall, the Supreme Court allowed the parents’ appeal in part. Three justices (Lord Briggs, with whom Lady Arden and Lady Rose agreed) reached the same conclusion about the appropriate remedy that should be awarded. 

Lord Briggs considered that, when calculating the appropriate remedy in cases of proprietary estoppel, the remedy should be based on the claimant’s expectation. This contrasts with the case advanced by Andrew’s parents which was based on compensation. So, the trial judge was right to make an award based on Andrew’s expectation that he would, one day, inherit at least some of the farm which would allow him to continue running it as a viable business. 

Lord Briggs summarised that the court should approach these cases, by following a two-stage test (p.74 of the Supreme Court judgment): 

• In stage one, the court should consider whether going back on the promise is truly unfair (unconscionable), based on the claimant’s detrimental reliance on it. If going back on the promise is found to be unconscionable, the court will then consider the appropriate remedy. 
• In stage two, the court will usually start with the assumption that the simplest way to resolve the unfairness in equity, is to hold the person making the promise to their word. Lord Briggs went on to say that the court may, in some cases, need to listen to other reasons why something less than fulfilling the original promise would compensate for the unfairness, such as a monetary remedy. 

Lord Briggs was clear in his judgment that Andrew working on the farm full time for 33 years was ”plainly a form of reliance” on his father’s promise “with whole-life consequences, starting when he left school at 16 and lasting until he was almost 50”. 

However, he noted that the trial judge did not specify why achieving a clean break now (rather than holding the parents to their promise) made it necessary to give Andrew an outright interest in the farm now, rather than a reversionary interest. The judge also hadn’t specified why the farm should be sold now to give Andrew his full entitlement, as Andrew’s parents were still living there, and he had never expected to inherit the land during his parent’s lifetime. 

So, allowing the appeal in part, Lord Briggs suggested substituting the remedy awarded at trial for one of two alternative options. He made a somewhat unusual decision, by deciding that the parents should be able to choose their preference of the two options.

Lord Briggs concluded that the 40% share of the farm awarded to Andrew at trial was an appropriate starting point. In light of that, he gave Andrew’s parents two options:  

(1) Andrew has a reversionary interest in the farm, with his parents having a life interest in the meantime, or 

(2) The farm is sold and Andrew receives his 40% share now, but with an appropriate discount to reflect that Andrew would be receiving his share early. In essence, the amount would be discounted to reflect a continuing notional life interest for Andrew’s parents in both the farmhouse and the working farm. 

Finally, it is worth mentioning that Lord Legatt (with whom Lord Stephens agreed) did not agree with Lord Briggs’s approach to remedy. He commented within the Supreme Court judgment that he would also have allowed the appeal, but with a different remedy. 

Lord Legatt’s remedy would have been based on either making the parents stick to their original promise, or an award compensating Andrew for the potential losses he suffered working on the farm because of his parents’ promise. 

A tricky area

The Guest judgment shows just how difficult it is to decide on and quantify an appropriate remedy in cases of proprietary estoppel. Parties can potentially spend thousands on litigation if they can’t settle the case. 

Clearly, the relationship between Andrew and his parents was already very damaged if they felt costly, drawn-out litigation was the only route to resolution. 

In other cases, parties can explore forms of alternative dispute resolution (ADR), such as mediation, settlement conferences, or even arbitration. These options often give parties more flexibility to structure discussions and negotiations. It can also avoid further polarising parties in what is already a terribly sad situation - not just for the parties involved, but no doubt the wider family as well. 

[1] The House of Lords have considered proprietary estoppel twice in recent times in Cobbe v Yeoman’s Row [2008] 1 WLR 1752 and Thorner v Major [2009] 1 WLR 776 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2022. Specific advice should be sought for specific cases. For more information see our terms & conditions.