Be our Guest - Supreme Court offers choice of remedies in proprietary estoppel case

Guest v Guest [2022] UKSC 27 – Key points from the judgment

The long-awaited Supreme Court decision in the case of Guest v Guest has finally been handed down. It is hoped that the decision will offer clarity to practitioners as to the approach taken by the court when assessing the value of detriment in proprietary estoppel cases.

The brief facts are that David Guest, a dairy farmer, was found to have made a promise to his son Andrew that he would one day inherit a significant proportion of the farm on the deaths of David and his wife Josephine.  Andrew relied upon this promise to his detriment, working hard on the farm for over 30 years for modest reward.

At first instance, the judge decided that there needed to be a 'clean break' and that Andrew should receive an award during his parents' lifetimes.  The Judge awarded Andrew 50% of the farming business and 40% of the proceeds of sale (or value) of the farm.  The award was made net of tax and reduced by making provision for David and Josephine to have a life interest in the farmhouse. Nevertheless, the farm would have had to be sold during David and Josephine's lifetimes in order to give effect to the Court's order.

The questions for the Supreme Court were:

  • How the value of Andrew's detriment should be assessed, and specifically whether his expectation was the appropriate starting point.
  • Whether the trial judge, and the Court of Appeal, had gone too far in awarding a payment to Andrew during his parents' lifetimes.

There has for some time been a lack of clarity as to whether the approach taken by the courts in order to satisfy detriment should be one of satisfying an expectation, for example by fulfilling a promise, or compensating for detriment, which will often be in the form of a monetary payment to make up for loss of earnings over many years.

Assessment of detriment: the trial judge's award was greater than equity provided for

Lord Briggs (supported by Lady Arden and Lady Rose) agreed with David and his wife, Josephine, that they had never promised to sell the farm during their lifetime.  Lord Briggs referred to the decision reached at first instance as “expectation plus”, confirming that the remedy provided to Andrew went beyond any promise his parents had ever made to him. This was compounded by the fact that the parties had already reached a clean break, with Andrew and his family ceasing work at the farm, moving in to rented accommodation and taking up employment elsewhere long before the trial, in 2015.

Remedies in these cases may not be the fulfilment of a promise versus the valuation of detrimental reliance, but perhaps a hybrid of both

Previous cases have often concerned the question of whether the appropriate remedy in proprietary estoppel cases should be the fulfilment of a promise, or whether the person who has relied on that promise should be compensated with a monetary award of equivalent value to their detriment.

Lord Briggs says that once an equity is established, fulfilment of the promise made will be the starting point, “although considerations of practicality, justice between the parties and fairness to third parties may call for a reduced or different award”.

This case is somewhat different from many proprietary estoppel cases, in that the promisors are still alive. The case perhaps raises the question as to whether we may now have moved more permanently towards a position where the Court will take care to consider whether fulfilling a promise through the transfer of land may be disproportionate to the detriment incurred.

Nature of award: the court allowed the parents to choose one of two alternative remedies

The Supreme Court held that David and Josephine could choose either to:

  • Place the farm in trust for the benefit of their children (including Andrew).
  • Pay equitable compensation to Andrew, but with a discount for advanced receipt.

While Lord Briggs did not provide any guidance as to the amount of compensation that should be paid to Andrew, he at least offered a guide as to what may be seen in order to correct unconscionable conduct on the part of a promisor.

The dissenters

While Lord Briggs, Lady Arden and Lady Rose all agreed with David and Josephine that there should be some divergence from the decision reached at first instance and accepted by the Court of Appeal, Lords Leggatt and Stephens dissented from that view. The dissenting judgment is interesting in itself, and the mere fact that there were two dissenters highlights the difficulty surrounding this area of the law.

Lord Leggatt went further than the trial judge, by attempting to value Andrew's loss, and confirming that he would have awarded Andrew a lump sum of £610,000, representing less than a quarter of the value of the farm.

Although it may take time for the effect of this Supreme Court judgment to filter through the courts, it does at least offer a degree of much needed clarification in this area of the law.

If you have any queries about proprietary estoppel claims, you would like to discuss representation or any of the issues mentioned above, please get in touch with the team below.