Proper Remedy for Proprietary Estoppel
19 October 2022
Is the proper remedy in a case of proprietary estoppel (i) to enforce the promise to remedy the unconscionability, or (ii) to compensate for the detriment suffered as a reliance placed upon the promise? It is a question which has divided academic opinion for many years and therefore unsurprising that when the issue came before the Supreme Court, their Lordships divided 3-2: Guest & Anor v Guest [2022] UKSC 27 : Lord Briggs, Lady Arden, Lady Rose (the majority); Lord Leggatt, Lord Stephens (the minority).
Andrew spent many years of his working life on the family farm, working at very low wages and accommodated in a farm cottage, on the promised expectation that he would inherit a defined part of the farm, to be able to continue operating a viable farming business there and, in due course, to pass on the farm to his own children.
Many years later father and son fell out and the son had no alternative but to leave and find alternative work and rented accommodation for himself and family elsewhere. Father cut him out of his will.
At first instance, the judge ordered the parents to make an immediate payment of £1.3 million to Andrew to satisfy his expectation as to what he would have inherited, calculated as 50 per cent of the value of the dairy farming business plus 40 per cent of the value of the freehold land and buildings at the farm. The Court of Appeal upheld that judgment.
For the majority, allowing the appeal in part, Lord Briggs rejected the parents’ argument that the trial judge was wrong to adopt an approach based on Andrew’s expected inheritance but held that the judge did not adequately discount the sum awarded to reflect the fact that Andrew would receive compensation earlier than he had expected to inherit an interest in the farm.
Instead he ordered that the parents should be entitled to choose between putting the farm into trust for the children subject to a life interest in the parents’ favour or to make an immediate payment of compensation on the lines the judge ordered but with sufficient discount to reflect the early receipt. If valuation could not be agreed it would be remitted to the Chancery Division to determine.
In a powerful dissenting judgment on behalf of the minority, Lord Leggatt said that the court had a flexible discretion to fashion a remedy which did justice in the circumstances of the particular case. But in exercising that discretion the aim was to award a remedy which did all that was necessary, but not more than was necessary, to prevent B suffering detriment as a result of having relied on a promise of a gift of property which A no longer intended to make.
Although the judge made impeccable findings of fact to justify his conclusion that the necessary elements of a property expectation claim had been established, he did not say why he had chosen to award the percentages of 50% and 40% respectively. This should not have been left to inference. Neither did he make any allowance for acceleration.
Key questions which needed to be addressed were: whether or to what extent it was in fact possible to fulfil Andrew’s expectation; what detriment he would suffer in so far as his expectation was not fulfilled; and what was the minimum equitable remedy necessary to protect Andrew from such detriment. Attention ought to have turned to considering what harm Andrew had suffered by relying on promises of succession that were not now on any view going to be fulfilled, but no attempt was made to do this.
As enforcing the promises was not an option, the only practicable remedy was to make an award of compensation calculated to put Andrew, so far as money could do it, in as good a position as if he had not built his career on those promises. The appropriate course was to estimate his reliance loss. Although the remedial approach had not found favour with the majority of the court, Lord Leggatt and Lord Stephens would have allowed the appeal and substituted an order requiring the parents to pay Andrew the sum of £610,000 as equitable compensation.