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Proprietary estoppel under the spotlight in Supreme Court decision

Posted on 20 October 2022

Supreme Court

The Supreme Court's judgment this week in Guest v Guest [2022] UKSC 27 represents the latest in a slew of proprietary estoppel cases, which are most often (but not always) in the farming context. The legal issues the case gives rise to are, however, of much wider applicability, including in the commercial arena in the context of partnership disputes.

The case concerned a dispute between members of a farming family over the future of the family farm. The claimant was the eldest child of the defendants. He believed that he had been promised by his parents that he would inherit a substantial share of the farm after his father's death. The claimant's case was that he had positioned his entire life around these promises, eschewing other more lucrative opportunities in the hope that one day the farm would be his.

At first instance, he was awarded a gross sum of £1.3m. This represented 50% of the share of the farming partnership business and 40% of the value of the freehold land and buildings. The defendants appealed on the basis that the remedy granted was disproportionate to the detriment suffered by the claimant and argued that the award should instead be calculated based on their son's contribution to the value of the farm, or alternatively his loss of opportunity. The Court of Appeal disagreed, holding that it was appropriate to order a remedy by reference to the claimant’s expectations. That judgment gave rise to the present appeal to the Supreme Court.

Proprietary estoppel – what is it and how does it work?

Proprietary estoppel is an equitable remedy, which arises where a person gives a promise or assurance to another person that they will have or will be given an interest in property and that other person relies on the promise or assurance to their detriment.

The typical example in a farming context is where a child works on the family farm during his life, often working long hours for meagre pay (if any) because their parents told them that the farm will pass to the child on the death of the parents. These cases are often family affairs, due to the lack of documentation, and uncertainty around promises made.

One of the key problems with proprietary estoppel claims, is that the courts have struggled to consistently to determine the outcome to which a claimant in such a claim should be entitled. Is the outcome:

  1. the satisfaction of the promises or assurances made (even where this can lead to circumstances in which the beneficiary receives more than initially anticipated) or, in other words "expectation fulfilment'; or
  2. to provide the "minimum equity" to satisfy the detriment suffered by the claimant (even where this may be inadequate) or, in other words, "detriment compensation".

The uncertain nature of proprietary estoppel claims has doubtless lead to a disproportionate number of cases being brought to trial (often at considerable expense and time investment to the parties involved).

Supreme Court judgment

In his 3:2 majority decision, Lord Briggs states that neither expectation fulfilment nor detriment compensation is the aim of the remedy of proprietary estoppel. In essence, a balancing act is required that involves considerations of practicality, justice, and fairness between the parties.

That being the case, the Supreme Court substituted a different remedy to the Court of Appeal, which comprised alternate remedies of either putting the farm in trust or paying a sum of money now to the claimant.

The court was of the view that where the benefiting party is to receive an early receipt (i.e. in this case a payment to the claimant in lieu of an interest in the farm and business in advance of the death of his father), it must build in an appropriate discount to reflect this.

Lord Leggatt, dissenting, advocated for a less holistic approach. His view (one of two dissenting judgments) is that the court may either compel performance of the promise (where the conditions of that promise have been met), or, where it has not been met, award the minimum compensation necessary to properly compensate the claimant for the detriment suffered.

The fact two dissenting judgments, each with different reasoning, were given means that debate regarding the aim of proprietary estoppel is unlikely to go away any time soon. The fact specific nature of such cases also gives rise to difficulties in terms of the applicability of the principles derived from one case to another. All this is likely to mean that further cases are likely to come before the courts again in the not distant future.

That being the case, if there is an opportunity for those in similar circumstances (whether in an agricultural, commercial or context), to document matters now then this should be seized promptly in order to avoid the time, effort and cost of a potential proprietary estoppel claim down the line.

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