Landmark Decision - Guest V Guest: The Latest On Proprietary Estoppel
The Supreme Court has made a helpful decision in a long-awaited farming case about promises as to inheritance of property.
The Case – Guest v Guest[2022] UKSC 27 On appeal from [2020] EWCA Civ 387
David and Josephine Guest owned Tump farm and raised their three children Andrew, Ross and Jan there. Andrew left school aged 16 and worked on Tump Farm for around 33 years until 2015, living on the farm rent-free and receiving only a low wage for his work. Mr and Mrs Guest promised Andrew that he would inherit a significant part of the farm. In 2012, the farming business was split in two and two partnerships were formed, with Andrew running one of the partnerships with Mr and Mrs Guest.
However, in 2015, Mr and Mrs Guest’s relationship with Andrew deteriorated and they dissolved the partnership. They gave Andrew three months to leave the farm cottage and also made new wills disinheriting Andrew completely. Andrew brought a claim in the High Court for an interest in the farm pursuant to proprietary estoppel, saying that his parents had made a promise on which he had relied to his detriment.
At trial the Court agreed with Andrew and awarded a sum of money equal to 50% of the post-tax market value of the farming business and 40% of the post-tax market value of the farm. Mr and Mrs Guest appealed the decision and argued that the remedy should have been calculated based on Andrew’s contribution to the value of the farm or his loss of opportunity to work elsewhere and that any acceleration of his inheritance should be discounted. The Court of Appeal however dismissed Mr and Mrs Guest’s appeal.
Mr and Mrs Guest then appealed to the Supreme Court which allowed the appeal in part and substituted the previous awards with two remedies in the alternative: Mr and Mrs Guest could choose between putting the farm into trust for the ultimate benefit of the children, with a life interest in their favour, or an immediate payment of compensation to Andrew with sufficient discount to reflect the early payment.
Importantly, Lord Briggs held that the starting point should be to fulfil the promise (satisfying the expectation), although considerations of practicality, justice between the parties and fairness to third parties may call for a reduced or different award. A cross-check as to whether the proposed remedy is out of all proportion to the detriment is a useful guard against potential injustice.
Implications on the future
The Guest v Guest Supreme Court ruling emphasises that the aim of the award is to meet the promisee’s expectation raised by the assurance, in order to put right the wrong done, whilst ensuring that the remedy does not place the Claimant in a better position than if the promise had been honoured.
It is unusual for the Court to place the choice of remedy on the parties to decide, which shows that the Courts continue to be very flexible and creative in terms of their awards for these claims. In this instance, the Court determined, in essence, that the Claimant’s expectation should be met but not in a manner which would give him more than if the promise had been fulfilled. This case again emphasises the importance and need for parties, wherever possible, to seek legal advice and document these agreements to clearly set out the interest of each party. Failing to do so can tear families apart and lure in the spectre of long lasting and costly litigation.
James LaycockMargaret Windram and Michael Welsh at Irwin Mitchell all deal with cases of this kind.
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