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Guest v Guest proprietary estoppel test case: Supreme Court allows appeal in part

Posted: 19/10/2022

The Supreme Court this morning allowed an appeal in part in a long running dispute between two parents and their son about promises made by the parents that their son would inherit a significant share of the family farm and farm business which they later reneged on.

The case has highlighted the problems that can arise when informal arrangements are made within families and when promises of future inheritance are made only for there later to be a breakdown in the family relationship. Whilst this case (and many others) relates to agricultural land and a farming business, the same principles apply to any asset such as a holiday home or buy-to-let that a family member manages on behalf of someone else. The principles are also not confined to family members but can apply in any situation where a party has promised something to someone and has then gone back on that promise.

The case, Guest v Guest (read our earlier background article here) concerned a family run farm owned by David and Josephine Guest. Their son, Andrew, worked on the farm for over 30 years, living rent free in one of the cottages and receiving a basic wage. He was assured by his parents that he would inherit a significant proportion of the farm as a reflection of the work he did on the farm. Sadly, there was a family fall-out. Andrew left the farm, and his parents changed their wills to exclude him. 

Andrew brought a claim of proprietary estoppel against his parents whilst they were still living. An estoppel is a function of the law that 'estops', or in other words, stops, a party from going back on a promise made. A proprietary estoppel is an estoppel that relates to property, including objects, chattels, and land. The requirements for a proprietary estoppel to arise are that the promise made by one party (the Promisor) to another party (the Promisee) is relied upon by the Promisee to their detriment, in such a way that results in an unacceptable or unconscionable outcome.

The judge at first instance found in Andrew’s favour and awarded him a lump sum of £1.3 million which was calculated based on 50% after tax of the market value of the farming business and 40% after tax of the market value of the farmland and buildings (which was effectively what he was due to receive under his parents’ earlier wills). Given the family breakdown the judge decided that a 'clean break' was necessary. The effect of the award was that the farm would have to be sold and Andrew would receive his share during his parents’ lifetimes and not as an inheritance.

The parents appealed and the Court of Appeal upheld the decision.

The parents then appealed to the Supreme Court. The Supreme Court was asked to decide:

  • whether a successful claimant’s expectation was an appropriate starting point when considering remedy; and
  • whether the remedy granted went beyond what was necessary in the circumstances.

The court had to consider whether, as Andrew’s claim was successful, they should enforce the promise made by his parents or whether a different remedy was appropriate and instead should compensate him for the detriment he suffered working on the farm for a basic wage for three decades.

The court was divided but allowed the appeal in part. The key factor was that the court does not have the power to award a claimant any more than they have been promised.

In this case, Andrew had received more because his inheritance was effectively being accelerated such that he received it during his parents’ lifetimes. Any award should have been significantly discounted to reflect that. There was already a clean break as Andrew had moved out of the farm and therefore the court found that the parents should have been able to choose whether to put the farm into trust so that Andrew would inherit it on their deaths or whether it was sold during their lifetimes. Whilst a discount for accelerated receipt had been awarded for the farm, it had not for the farm business and the court held that the award did need to reflect that as well.

The decision of the Supreme Court does not provide very much clarity. It simply highlights how flexible the principles of equitable relief can be and how every case will be judged on its facts. Ultimately the remedy could be to enforce the promise, or it may be met in other ways depending on the circumstances.

The case underlines the importance of the care needed, particularly in relatively informal family arrangements, when promises are made, and it is always best to take legal advice and put any such arrangements in writing to avoid disputes in the future.

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