25th October, 2022

Richard Selwyn Sharpe comments on the Supreme Court's decision on Guest and Guest

For the first time the Supreme Court has reviewed the doctrine of proprietary estoppel, a doctrine which first caught the court’s attention with the case of Loffus v Maw in 1862. More recently it has been often used to found a claim by a child of a farming family who works for little or no wages for his parents induced by a promise that “one day everything will be yours”. Either through death and the parents not honouring that promise by will, or a breakdown in relations whilst the parents are living (as an example see Habberfield v Habberfield [2019] EWCA Civ 890), the child is left high and dry. The doctrine can then be applied to found a claim for relief, usually for the transfer of the freehold interest in the farm. The key elements of a claim are a promise or assurance that the claimant will receive an interest in property followed by detrimental reliance on that promise. The promisor then resiles from the promise. The court then has to chose the appropriate form of relief, whether it is to grant what is promised (“full expectation relief”) or something less.

Other examples include where someone promises to look after an elderly relative in return for a promise to leave them their house (see as an example Lothian v Dixon [2014] Ch D (promise to leave a hotel in Scarborough), in which I appeared for the successful Claimants, and the court granted “full expectation relief”.

The doctrine can also be used to establish a right to an easement such as a right of way.

In Guest the claimant Andrew had spent 25 years working for his father for minimal wages, giving up whole life opportunities to pursue a career elsewhere and to own his own home, in reliance on a promise that the family farm would one day be his. There was then a falling out with his parents.

The judge at first instance awarded Andrew 50% of the value of the farming business, and 40% after tax of the market value of the farm, subject to the parents having a life interest in the farmhouse.

The parents appealed to the Court of Appeal but lost. They then appealed to the Supreme Court and requested guidance as to resolving the controversy between “reliance-based” and “expectation-based” approaches to the grant of relief and form of remedy.

However for the past 25 years there has been a divergence of opinion as to which, as between satisfying the expectation and compensating for detriment, should be the true underlying aim of the remedy. Whether to award “expectation relief” and make good the promise of the farm, or to do “minimum equity to do justice between the parties”, and, for instance, to award compensation based on the amount of detriment suffered in reliance on the promise.

An example given by the court, was a promise by a disabled 50 year old person to her carer that she will inherit her large mansion if she worked for low wages. She dies three months later without making a will to that effect. The court would likely award compensation less that the mansion to remedy the unconscionability.

The court rejected the idea of remedy being detriment based but accepted that “proportionality” has a role to play as part of the assessment of whether a proposed remedy based on satisfying a claimant’s expectation works substantial justice between the parties, but it should just be regarded as “useful cross-check for potential injustice”. But proportionality should not be looked at in purely financial terms by for instance comparing, in the farming cases, the value of the farm against the net present value of the wages differential. It would still be proportionate to honour the promise by awarding the claimant the whole value of the farm because the child has fulfilled their side of the bargain.

The court’s approach (per Lord Briggs (Lady Arden and Lady Rose concurring, Lords Leggatt and Stephens dissenting on the reasoning but concurring in the result) should be as follows:

  1. To determine whether the promisor’s repudiation of the promise was in the light of the promisee’s detrimental reliance, “unconscionable”. It might not be if there were a change of circumstances justifying it, like the need to pay creditors or for expensive medical treatment or social care;
  2. At the remedy stage, to start on the basis that the promise should be honoured, but then to listen to arguments as to why “something less than full performance” will negate the unconscionability and therefore satisfy the equity. The court may consider whether a transfer of less property than promised or a monetary equivalent would be sufficient;
  3. If the promisor asserts and proves that specific performance of the promise would be out of all proportion to the cost of detriment then the court may be constrained to limit the extent of the remedy, but only where grant full enforcement would not do justice to the parties, but this type of case would be rare. An example given was where the promisor died after two months following a promise to a carer to leave them a generous inheritance.
  4. The quasi-contractual type of case where the terms of the promise and the detriment are reasonably precisely defined is likely to generate the strongest equitable reason for full specific enforcement of the promise, if the reliant detriment has been undertaken in full, regardless of a disparity in value between the two.
  5. Cases of repudiation during the lifetime of the promisor may result in more objection to strict enforcement of the promise. In the farming case it may lead to the grant of a reversionary interest or to achieve a clean break between the parties, compensation based on a discount for an acceleration of that interest.
  6.  The yardstick should be to consider the provisional remedy in the round and ask whether in all the relevant circumstances it would do justice between the parties (and injustice to third parties). The court should also ask whether if the promisor was to confer that proposed remedy upon the promise “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.

Applying those principles to the facts of the case, the court decided that Andrew’s parents should have the choice of granting Andrew a reversionary interest in 50% of the farming business and 40% of the farm until his father’s death, or a financial award to compensate him for that but giving credit for early receipt, assessed by expert evidence on the value of a notional life interest of the parents in the farm.

The Supreme Court’s decision is to be welcomed in providing much needed clarity to the law of proprietary estoppel. Whilst there will still be room for argument by those representing promisors that “full expectation relief” is not appropriate the court has provided an extensive review of past decisions and given many useful examples of how the doctrine should be applied in particular circumstances.

Richard Selwyn Sharpe is a senior junior specialising in Business and Property work and has extensive experience of proprietary estoppel claims. He has particular specialisation in property law, rights of way and easements.

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